International Finance Agreements Amendment Bill

The debate on this part includes the schedule.

I will take a brief call just to highlight one or two of the articles in the convention in new Schedule 7 of the principal Act that I think are quite interesting in terms of the overriding objective of helping developing countries attract—given the risk premiums involved here—greater flows of funding from the members of this agency. So if we start by looking at article 2, we see the statement very clearly that the objective is indeed to encourage the flow of investments for productive purposes amongst member countries. Later on, in article 2(a), we see a very clear statement that the real objective is to insure against, as is described, non-commercial risks. So it is not intended to cover normal operating insurance needs, but very much the non-commercial risks.

If we turn to article 11, a little more definition is given to the covered risks there. They are obviously, as my colleagues have just pointed out, not the sorts of risks that any New Zealand investing company would expect to meet in Australia, in any OECD country, or, indeed, in many developing countries with reasonably robust institutions, but in certain markets these become possibly a complete disincentive to investment. They are listed in article 11 as, first, “Currency Transfer”, which is defined as “any introduction attributable to the host government of restrictions on the transfer outside the host country of its currency into a freely usable currency”.

One would note in passing that this was a massive problem around the 1930s and right into the early 1950s, when currency convertibility was more or less achieved in a very rapid period of time amongst the then major industrialised countries. It is still a fundamental problem in a few developing countries, so if this were to be reintroduced it is one of the risks that is covered.

The second one is certainly familiar. My colleague Dr Mapp referred to his own doctoral dissertation on the Iranian situation, expropriation, and similar measures. There is a very precise definition in article 11(a)(iii) in relation to breach of contract by the host Government. Finally, article 11(a)(iv) refers to war and civil disturbance. These are risks that any prudent investor would have to take into account in certain developing country situations. This is an agency that will essentially take out those risks, for a fee, and deal with that risk, allowing the private investor to handle only the more traditional insurance risks that would be apparent.

Various other clauses deal with membership and capital. During the examination by the select committee, which as my colleagues have pointed out was non-contentious, we noted that New Zealand’s liability is encompassed in holding 513 shares. From memory, there is a contingent liability of around US$5.5 million and we pay 10 percent upfront in cash. So the opportunity cost of that is not very high from New Zealand’s point of view, and it is playing our part in the overall multilateral economic cooperation process.

As I think I might have said in the first reading, the only surprise to me was to find we were not already members of this agency. Clearly it is important that the guarantees are done in a cooperative way with the host Government. As everyone in this House knows, there are acute issues of sensitivity about sovereignty. One would almost say there is an inverse relationship between the stage of development people have and the sensitivity they feel about sovereignty, so it is important that article 15 makes it clear that this proceeds only with the host country’s approval. There are fairly standard subrogation provisions—and I understand it is a very technical issue—in article 18. The agency is also allowed, through article 21, to offset some of its risks by using in certain circumstances reinsurance facilities to spread the risk.

In terms of looking at the overall risk of the agency as a whole, there is a provision that limits the total amount of contingent liability to 150 percent of the subscribed capital. Elsewhere in the bill—I cannot recall the article, but I remember it from the time of the examination—there is a cap per project of, from memory, $110 million. This is a carefully designed agreement. It has obviously been worked through by technical experts from the World Bank who are well placed to do this. We are very pleased to support the bill at this stage. Thank you.

I will take just a brief call on this part. It is really the core of the agreement and refers essentially to the principal schedule, new schedule 7, which sets out the agreement, which is the convention itself. It sets out the calls that each country has to make in terms of share capital, and it sets out the membership. The membership is in two lists, if you will—category 1 and category 2. The category 1 nations are essentially what we would call the developed nations, ranging from Australia, Austria, Belgium, etc., right through to the United States. They have a total shareholding of 59,000 shares. New Zealand’s share of that is 513, so it is slightly under 1 percent. It is a very small level of shareholding in this instance, and we have to subscribe to approximately $5 million. But, as Mr Groser has said, we in fact pay only 10 percent of that in any event.

The category 2 States are the developing countries. Clearly, it is a much longer list, and its total share capital is 100,000 shares. So the developing States have almost 60 percent more shareholding than the developed nations, and I suppose to some extent that reflects the allocation of wealth around the world. It is not even, and it is not intended to be even. The developed countries have a weighted voting system, reflecting the fact that they are the major investors. But I want to emphasise this point: it is, nevertheless, a minority.

The reason I emphasise that point is that I am making it to the Māori Party, and I do that quite deliberately. It was the only party that voted against this agreement. It was the only party that raised its voice to vote against Part 1. The Māori Party is always saying that it is there to protect the interests of developing nations. It talks about the importance of various UN conventions that do that. We have to ask ourselves the simple question: why, therefore, would one vote against an agreement that has been put in place to assist developing countries and, moreover, gives the developing countries the majority of the votes by a substantial margin?

Do members know what the Māori Party will do? It will revert to its ideological stance and simply cast a reflexive vote against. I can understand that of a party that has just arrived in this Parliament. I recall seeing the Green Party always operating like that. These days the Green Party takes a somewhat more sophisticated view of things and it does a more careful evaluation of what it will do in terms of its votes. The Greens still vote like a left-wing party; I do not doubt that. But I do say to the Māori Party not to take just a reflexive approach on these things, but to analyse the issue. Surely it is significant that almost every nation in the world—indeed, the vast majority of the Pasifika nations, as was clearly pointed out by Mr John Hayes—is a member of this convention. The Pasifika nations, which I presume the Māori Party has a certain camaraderie with, have said this is an agreement that is good for them, because it will assist them to get development capital. Surely that is a good thing and is the pathway to growth and development.

I say to political parties that when they are elected to this Parliament, one of their responsibilities is to look more broadly. I know that takes a little bit of time, and so forth. I have seen the Green Party go through this evolution. I would hope the Māori Party does not just vote reflexively on this, and takes note that the Pasifika nations have seen the merit in and the value of this agreement. That is clearly indicated in the membership of this convention. Thank you.

The Māori Party is not against development per se, but we are not of a mind to be blindly supportive of international developments that lead to the kind of scenario we had in Bougainville or the kind of scenario where New Zealand supported the Indonesian Government and the Indonesian army to continue to plunder West Papua and other places. Although I hear the kōrero that Pasifika countries have signed up to this agreement, I am not so dumb as to believe that they signed up to it because they love it. Often, they sign a deal because it is the only deal going. It is a bit like the Multilateral Agreement on Investment.

I am prepared, as is the Māori Party, to be convinced of the rightfulness of this, but we will not be voting for it simply on the basis that somebody from the National Party thinks we should. We are independently minded enough about what happens in our country, and we are mindful also of what happens in other countries.

I look again to the Northern Territory. I know, for example, that although John Howard was talking about child abuse, etc., and saying he had a 5-year plan to turn it round, for some strange reason he slipped in a deal to get his hands on land in the Northern Territory for the next 95 years. Why? He did it so that those so-called resource development companies—people who will come in and help all those poor people—can go in there and get access to all the minerals out of that place, so that the other companies that might say nice things about what they will do in the Northern Territory, can actually dump all their nuclear waste from the reactor down in Sydney. No, I say to Mr Mapp.

I am happy to say the Māori Party is open-minded to development but we are not about to be dragged into development that is not consistent with the needs of indigenous people. We are more than happy to take it up with representatives of some of those Pacific countries—and we will—to see whether, in fact, this is the kind of deal that is beneficial to them, on their terms, or beneficial to them because that is the only deal they can possibly get.