International Finance Agreements Amendment Bill

on behalf of the Minister of Finance: I move, That the International Finance Agreements Amendment Bill be now read a second time. Following the first reading, the bill was examined by the Foreign Affairs, Defence and Trade Committee, which recommended that it be passed with one amendment. There were no submissions on the bill.

The purpose of the bill is to amend the International Finance Agreements Act 1961 in order to enable the Government of New Zealand to become a member of the Asian Infrastructure Investment Bank. The bank is a multilateral investment bank established to address the gap in infrastructure investment across the Asian region. Its purpose is to foster sustainable economic development and to promote regional cooperation and partnership, including by working in partnership with other multilateral and bilateral development institutions.

New Zealand is joining the Asian Infrastructure Investment Bank as a founding member to contribute to strong and sustained regional growth, consolidate New Zealand’s economic and political relationships in Asia, and participate in an institution that will further regional economic cooperation and integration. Through our involvement in the negotiations, we have seen emerge a genuinely multilateral 21st century institution. We have an opportunity to play our part in this important new institution in our region.

The bill gives certain articles of the Asian Infrastructure Investment Bank articles of agreement force of law in New Zealand. The bill provides for extending various privileges and immunities to the bank. It provides an exemption from taxation for the bank, and it provides for permanent legislative authority to meet payments due under the agreement. These provisions are consistent with the treatment New Zealand provides to other international financial institutions in the Act.

The Government accepts the committee’s recommendation to delete clause 9(1) and (1A) of the bill. Clause 9(1) of the bill as introduced would give article 19(1) of the Asian Infrastructure Investment Bank articles of agreement force of law in New Zealand. Article 19(1) prohibits members of the Asian Infrastructure Investment Bank from imposing restrictions on currencies held or used by the bank or a recipient of the bank for payment. Officials have recognised that it is not necessary to give article 19(1) force of law in New Zealand for the following reasons. The obligations in article 19(1) do not need to have effect domestically and would be inconsistent with New Zealand’s treatment of other international financial institutions in the Act.

I want to thank the Foreign Affairs, Defence and Trade Committee and officials for their work. I commend this bill to the House.

This bill, as the Minister has suggested, allows New Zealand to join a new international investment bank, the Asian Infrastructure Investment Bank, and it serves to implement New Zealand’s obligations under the articles of agreement.

I want to say that Labour supports this bill because it supports New Zealand’s involvement in the Asian Infrastructure Investment Bank, and we think that it is the right decision to do so, and for the right reason. I say that because you, Mr Deputy Speaker, will know that Labour does not support every Government investment decision. In fact, if I contrast this decision, which is soundly based, with the decision to make facilitation payments to a Saudi businessman to enable New Zealand to try to get a free-trade agreement—an agreement that was a disaster and a bribe—I can say that this agreement, by contrast, is a paragon of virtue.

Labour believes that the Asian Infrastructure Investment Bank is a positive move, and that the investment that we will make in it will be soundly based. I have to say that the issue was initially controversial. The United States made no secret of its opposition to this bank being established. It was opposed to the idea and directly and indirectly sought to influence other countries not to participate. The grounds for the United States doing that were, first of all, that it said the International Monetary Fund, the World Bank, and the Asian Development Bank adequately met the needs of investment in Asia. That is patently incorrect. In fact, I can quote the former Secretary to the Treasury Alan Bollard, who is now in the APEC secretariat. He made the point quite clearly that there is absolutely huge demand for investment in infrastructure in Asia and that it was not being met by the established Bretton Woods institutions.

Secondly, the United States seemed to argue that support for the bank would allow China to expand its influence. It may do, but it also has to be seen as incredibly naïve to think that the world’s second-largest economy and a financial superpower in its own right does not have the ability and the right to expand its influence. In fact, the United States, to some degree, has brought this on itself because the US Congress stood in the way of China exercising influence commensurate with its size in the IMF and the World Bank. That is not a prejudiced comment from me; that is something that our Minister of Trade, Tim Groser, acknowledged some months ago. Will China expand its influence? Well, China has 25 to 30 percent of the voting rights in this bank, but it is only one of 50 countries that currently will be a member of the bank. It sits alongside other large countries, both developed and developing, like Britain, Germany, France, Italy, the Republic of Korea, Russia, and India.

We, I think, made the right decision in becoming involved early in the negotiation of how this bank would be set up. We were the 24th country to join. That does not sound like we rushed into it, but we were in fact the world’s first developed country to join those negotiations, and, as a result, we were able to influence the outcome of the negotiations. I want to pay a particular tribute here to John Whitehead, known in this House as a former Secretary to the Treasury, a person I have known for the best part of 40 years. He is a person of incredible skill, experience, and integrity, and I know from the feedback I have got that John Whitehead did an extraordinarily good job in making sure that this institution follows international best practice for financial institutions. We should be proud of the contribution that he has made, and the bank is better for that.

As the Minister said, the select committee was not exactly swamped with submissions on this bill. In fact, we received no submissions. Maybe there is a subtle message to the Government there—if it wants to cut down on submissions it should use the words “international financial agreement” in the title of a bill, and the average layperson will say: “This is altogether too complex and we shouldn’t go near it.” It is not hugely complex, but it is very important. And it is important to know what this bank will do. It is a multilateral investment bank, and what it is designed to do is to address the gap in infrastructure investment that exists in the Asian region. It seeks to foster sustainable economic development and to work with other multinational institutions to promote regional cooperation and partnership. Although the United States said that it was not really necessary, it was interesting that a former Minister of Trade, whom I got to know and is now head of the International Monetary Fund, Christine Lagarde, has welcomed the establishment of this bank.

Why should New Zealand be supporting it? Well, I think there is scarcely a member in this House who would not acknowledge that our future as a country is tied up very closely with the future of the Asia-Pacific region. It is our geographic location, it is where most of our largest trading partners are based, and it is a region that is important to us economically and politically and we need to be seen to be involved in and making a constructive contribution to that region. The contribution that New Zealand is making is relatively small. We are putting forward capital of NZ$145 million over 5 years, and we have callable capital of something like US$461 million. I hasten to add that, I think, in our entire history of putting up callable capital, that capital has never been called up and there has never been a financial collapse of an international institution that we have put capital towards. So I do not think there is a huge amount of risk in that regard.

What are the drivers of our involvement in the bank? They are, first of all, economic. As I said, our future is linked with the Asia region, and Asian growth is constrained by limited infrastructure investment. If Asia develops its infrastructure and grows economically, that is of direct benefit to us because that is the predominant region into which we are trading.

Secondly, it is important because of our connectivity to the market. New Zealand is a small country and its influence is commensurately small, you would think, but we can develop that influence by the relationships that we develop. The free-trade agreement with China is a classic example. The Chinese, repeatedly in those negotiations, quoted back to us New Zealand’s “four firsts” because we had developed the relationship with China and they valued the effort that we made. And as a result of that, New Zealand became the first developed country to get a free-trade agreement with China, 10 years ahead of our mates across the Tasman. Well, just as relationship-building was important in that, the relationship-building that is implicit in our involvement and our constructive contribution to the Asian Infrastructure Investment Bank is equally important.

Thirdly, just to develop a point I made a moment ago, it was important to commit because we could influence in the negotiations the way in which the bank was set up. We made sure that the bank’s membership is broad and open; we made sure that it followed sound governance and appointment processes; we ensured, working with others, that environmental and social issues were to be taken into account by decisions made by the investment bank; and we ensured, working, again, with others, that it will operate according to sustainable economic and financial principles. As a result, this is an institution that will have proper oversight for investment decisions and for development outcomes. Both of those things are important in a decision to be part of it, and it will follow international best practice.

This is a soundly based decision. This bill is appropriate in committing us to membership of that bank and allowing us to meet the requirements for that membership to happen as soon as the bank comes into existence.

I am very pleased to take a call on this, the International Finance Agreements Amendment Bill. As the previous speaker, Phil Goff, highlighted and Minister Goldsmith spoke about, it is just a change, really, to the International Finance Agreements Act to allow us to become a member of the Asian Infrastructure Investment Bank.

I just want to acknowledge the Foreign Affairs, Defence and Trade Committee and I want to acknowledge Phil Goff and David Shearer. As Mr Goff just stated, they were early supporters of this investment into what is going to be critically important as a bank that is going to continue to invest in infrastructure that is going to have a tangible gain and benefit for New Zealand. I am not sure of what the Green Party’s position is on this bill, but I am sure, if Kennedy Graham is taking the call, we will hear its position on it shortly.

Asia is driving global growth and it is full of opportunities for New Zealand—six of our top 10 export markets are now in Asia and 11 of the top 20 are in Asia. Some of the free-trade agreements that we currently have are with China, Thailand, Singapore, Malaysia, Hong Kong, Taiwan, and, of course, our recently signed agreement is with Korea. The New Zealand contribution, in US dollars, is going to be about $92 million, and that has been determined relative to the share of countries in relation to our GDP. Some of the benefits that we have seen from the Asian Infrastructure Investment Bank—I think that Mr Goff made a very good point. I just want to highlight the fact that we were the first Western nation to actually get involved with talks and negotiations around the formation of this bank, and that is actually quite significant. What it will allow us to do is it will allow us to retain a fair bit of influence in terms of the direction that the bank takes and where the focus will be on the investment in infrastructure in the coming years.

I was recently up in the Pacific Islands for a forum up there, and one of the real big driving issues that was raised there is the investment into information and communications technology, and the need for a submarine cable. We are becoming huge, voracious users of data, and information and communications technology is important for any country that wants to engage in global business. This is going to be one of the focuses of the Asian Infrastructure Investment Bank: upgrades on things like our information and communications technology infrastructure.

The bank is also going to look at improved infrastructure in logistics hubs, which, of course, will have a very positive spin-off for New Zealand products in terms of being transported more easily and cheaply internationally, which is significant for us as a trading nation down at the bottom of the world. Having an efficient supply chain and being able to upgrade the infrastructure that is supporting our logistics operations are going to have a positive and tangible benefit for us.

Improved infrastructure in airports will help New Zealanders to trade globally using Asian airports and hubs. I guess this is just an extension of the overall supply chain and logistics networks that we have to be able to access to get our products and services and goods to market. The sharing of knowledge between the investment banks such as the IMF, the World Bank, etc., allows for improved processes and activities. So being a member of the Asian Infrastructure Investment Bank is going to allow us to form even closer relationships and lines of communication in terms of the holistic view of growing our markets globally.

I would just like to highlight the fact that, and I often speak about this, we are great little nation down at the bottom of the world. We are obviously very proud of the way our All Blacks performed in London. Not only are they the world’s best sporting team but they were also fantastic ambassadors for us as a country. But we are a small nation down at the bottom of the world, and, actually, it is really important for us to continue to engage and be part of initiatives like the Asian Infrastructure Investment Bank in terms of continuing to grow our own exports, promote our own services and our own products, and secure a future for New Zealand.

I am very happy to support the International Finance Agreements Amendment Bill. Thank you.

It gives me pleasure to join the outbreak of violent agreement across the House on this bill. I certainly do support New Zealand’s involvement in the Asian Infrastructure Investment Bank. The Foreign Affairs, Defence and Trade Committee obviously had the onerous task of wading its way through the public’s voluminous submissions on this matter and has managed to bring it back to the House in one piece, and it is to be thanked for that.

As other speakers have noted, what the Asian Infrastructure Investment Bank essentially offers for New Zealand is the opportunity to be at the table when big infrastructure decisions are being made in our region—and this is our region. Certainly, in the early days of the process of establishing this bank, there was and has been criticism of the World Bank. Others might say that the World Bank and others who lend into the IMF, and others who lend into the region, should be undertaking this work, and ask why you would need an additional investment bank in the region. Certainly, when the bank was first being suggested there was a lot of talk from some very large friends of ours involved in the World Bank that perhaps we did not need this kind of investment bank. But I think having a bank based out of Asia that is specifically focused on the core infrastructure needs—and Mr Mitchell mentioned one of those in his speech—in the region, no doubt, to my mind, will be best served by having a bank that is based in the region, and which has as its contributors the leading economies of that region.

That was the first hurdle, I think, to get past in terms of whether or not this was justified. I note in the select committee’s earlier report that it did on the national interest analysis, that it asked about the attitude of the World Bank to this and was told that the World Bank was—I think the phrase used was—“pleased”. I find that a little difficult to believe, to be honest with you. I do not think it was probably pleased, but I think it probably has accepted that this is now going to happen and that New Zealand should continue to be both a player in the World Bank and the Asian Infrastructure Investment Bank.

So having got over that first hurdle there are really three areas of value, I think, to New Zealand here. The first is the one that has been covered by all of the speakers, which is the importance economically of the Asian region to New Zealand. This is unquestioned. This is not just about China, where we have been able to make huge strides under the free-trade agreement negotiated by my colleague Mr Goff, but also in the emerging economies in that region. I am thinking here, particularly, about countries like Viet Nam, where there is a huge opportunity for New Zealand to be involved. Mr Mitchell, I understand, is off to observe an election in Myanmar very shortly—there is a country with infrastructure deficits caused by what has happened in the governing of that country in recent years, and where a bank like this could have a big say, but where there are huge trading opportunities for New Zealand as democracy grows in Myanmar.

💬 Chris Bishop: That’s right. Viet Nam’s part of the Trans-Pacific Partnership.

Mr Bishop is a big fan of democracy, I know that. And so there is the opportunity for New Zealand to be there, to be supporting the growth of these countries that will become large economic players in the Asian region, to sit alongside China and those with which we already have very good relationships.

The second factor is around connectivity to those markets. How do we ensure that we know what is happening, that we are involved in the decision making around the regional structures? And there are a large number of those Asian regional structures that New Zealand is either an observer at, or has participated in. This adds another level to that. The bank will be making some pretty significant decisions about how economic growth works in the Asian region, and New Zealand is able to be at the table, albeit with a modest contribution, but a contribution that is relative to our GDP and the entire membership of the bank.

The third reason, which is related to that, is that question about the ability to influence. This should not be understated in terms of New Zealand’s involvement in the bank: our willingness to be there right at the beginning. So we have had the “four firsts”, but this was important for New Zealand to be there right at the beginning and be a part of how the bank was established.

I note that when we look at some of the concerns and issues that New Zealand raised early on in the process, it was New Zealand officials and negotiators who were able, during those discussions, to talk about what kind of governance mechanisms should be used. In fact, New Zealand pushed for open, transparent, and merit-based appointments to the board of the bank. That phrase “open, transparent, and merit-based appointments to organisations” is one the Government might like to consider in a wider context with some of its other boards that it appoints people to, but the fact that New Zealand was pushing for this and succeeded in getting that process shows how useful it is for us to be at the table at an early stage.

Related to that, Mr Goff mentioned the inclusion of the safeguards around environment, social, and procurement matters for the bank. This is actually very significant, and, again, builds on something that New Zealand has pioneered in trade negotiations, which is that alongside those negotiations we actually have meaningful environmental and labour standards, and standards that support good governance. These were not always part of trade agreements, and they were forced through, particularly under the last Labour Government, to say that we are not going to sit down in these trade negotiations and pretend that the economic activity takes place, somehow or other, independently of environmental and social considerations.

So the draft environmental and social framework for the Asian Infrastructure Investment Bank is actually a comprehensive document, in terms of the topics that it covers. Under the environmental areas that the bank has to take into account, in terms of infrastructure, we have got biodiversity, critical habitats, natural habitats, protected areas, climate change—a precautionary approach—and pollution prevention. These are actually very important ideas about what is important in future investments, and they are now a core part of what the bank has to take into consideration in those investments. That is in large part because New Zealand has been part of pushing for those. Similarly, in social coverage there are gender-specific impacts of investments and cultural impacts of investments. In terms of working conditions: health and safety, child labour, forced labour, and minimum labour standards.

So these are now part of what the bank has to consider when it is making its infrastructure investments. They are there, in part, because New Zealand was successful in pushing them. And just to give a further example, New Zealand was successful in having the word “sustainable” added before “economic development”. That would not have happened if we were not at the table, and I acknowledge that this has happened under this Government’s watch. I think it builds on the kind of approach that we have tried to take with our broader trade and economic investment ideas.

I do not have an awful lot more to add than that, other than to endorse the fact that the bill is a good piece of legislation. Perhaps in the Committee stage of the bill, when we come to it—because we need to find something to talk about when we get to that—we can discuss the Foreign Affairs, Defence and Trade Committee’s decision to delete clause 9(1) of the bill, which was the decision that the committee made to get rid of the part that said that the articles of agreement for the bank would have force of law in New Zealand. I cannot see why they would be needed, and I suspect that is the point—they do not actually apply to New Zealand, and therefore there is no need to give them force of law. So it is probably a sensible decision all round. It is interesting to note that a decision was taken not to give them force of law in New Zealand, given other agreements we might discuss in this House in the coming weeks. So with that, I commend the bill to the House.

It is a pleasure to speak to this bill. This bill, effectively, amends the legislation and lets us become a member of the Asian Infrastructure Investment Bank. More specifically, it amends the International Finance Agreements Act 1961.

It has already been commented to us how important Asia is. A number of figures—of course, Asia buys 43 percent of our export merchandise. It is significant; it is important. There is certainly need for development of infrastructure in Asia, and New Zealand can help with that. I think that also talks to some of the advantages, some of which we have heard, about being a part of this bank. New Zealand businesses will be able to compete for infrastructure contracts under the open procurement agreement. Being a founding member, as we have heard, has let us play a role at the development table initially. This let us assist with direction and transparency, and we have been able to bring some of the best practices that New Zealand has—which we are good at—to that table. We have also been told that our relationships with our Asian neighbours have been strengthened through our engagement. We remain a steady hand and open for business.

This is the second reading of this bill, and the Foreign Affairs, Defence and Trade Committee—as has been commented—received no submissions on this bill. To address the question that the member Grant Robertson raised a moment ago, what the committee did agree to was to delete clause 9(1) from this bill. What that clause would have done was enable article 19(1) of the International Finance Agreements Act, which talks to prohibiting currency restrictions for members and recipients. The case was made to us by officials, and we agreed, that we did not need that clause, which answers the member Grant Robertson’s question, because it is already covered by domestic policy and it is inconsistent with our existing international finance agreements.

Really, this is a piece of legislation that lets us be a part of the Asian Infrastructure Investment Bank. We know that it is good for New Zealand. We know that the opportunities for our exporters will increase. We know that the contracts will be let out with best practice and that we will be able to compete for those contracts. We have been able to be part of the founding group and, therefore, influence it and have a say. I think that all of those are good things, and I commend this bill to the House.

I rise to speak on the International Finance Agreements Amendment Bill in its second reading. To answer the question posed by my colleague Mark Mitchell earlier in this debate, the Green Party is supporting this bill. The Green Party does support banks, and infrastructure banks, particularly if they are oriented towards solving our urgent need to invest in infrastructure that will respond to both climate change and inequality—the two biggest challenges our world is facing.

In fact, before the last election the Green Party had a policy of having a Green Investment Bank here in New Zealand. That was going to be a commercially run bank that would facilitate investment in clean technology and energy here in New Zealand, because we feel there is a bit of a gap in the market here in New Zealand. The cost of setting up that bank would have actually been slightly less than the costs that we are donating to the Asian Infrastructure Investment Bank—about $120 million over a period of time—and it would have been run on commercial grounds. We still think that is a good policy, and we would love it if the Government picked that policy up.

When it comes to the Asian Infrastructure Investment Bank, we can see why New Zealand would want to be involved in such an endeavour. It is about being a good neighbour in Asia. It is about ensuring that we are at the table and, hopefully, influencing decisions in a way that is going to result in the type of infrastructure being built being infrastructure that is going to benefit the region in the long term, not just benefit it in the short term and not just benefit the people procuring the infrastructure or building the infrastructure.

I think it is really important that we note at this point our concern. I think there is every indication that the Asian Infrastructure Investment Bank is going to be run on principles that take into account the reality of climate change and that have a focus on environmental sustainability as well as poverty reduction, because it is impossible to respond to one of those challenges without responding to the other. As my colleague Marama Davidson said in her maiden statement to the House yesterday, it is impossible to address either climate change or inequality without addressing both.

There was recently a report from the Global Commission on the Economy and Climate project, the New Climate Economy. It is putting out a lot of really helpful reports. These are big global players, including Deutsche Bank AG, and they say in their report that it is urgent now that we get collaboration, not only between Governments but between communities, between businesses, and between investors on addressing the risk of catastrophic climate change. They say that it is urgent that all players, public sector and private sector, are working together to ensure that we seize the opportunity presented by climate change to ensure that the infrastructure we invest in now is actively reducing our carbon pollution.

Unfortunately, for the past 50 or 60 years much of our investment in infrastructure has actually aggravated climate change by increasing pollution and increasing carbon emissions, and it has not actually done as much as we would have liked to reduce inequality. Although we have seen global incomes rise in some developing countries, that growth has not been equally shared by all people in those communities, and we have seen a real concentration of capital in the hands of a few, which is driving ongoing challenges—social challenges, environmental challenges, and, actually, economic challenges. Arguably, the reason the global economy has failed to bounce back from the global financial crisis is that there is such growth in inequality and such concentration of capital in the hands of very, very few people. So it is essential that when we assess the types of infrastructure projects that we are investing in, in Asia through the Asian Infrastructure Investment Bank or here in New Zealand, we assess that infrastructure in terms of its ability to reduce pollution and to reduce inequality.

Unfortunately, at the moment the current Government has an infrastructure programme that is not really going to do anything to reduce pollution and, arguably, is not going to do anything to improve economic efficiency, which is a real shame, because there is that opportunity. The Green Party would like nothing more than to see the National Government seize this economic opportunity, because there is not a trade-off. It is not the case that we have to sacrifice our pristine natural environment and the future stability of our climate in order to get richer and have economic growth. Actually, there are many opportunities where the economy will function better by doing the things that actually restrict pollution and reduce pollution.

A perfect example is in the transport infrastructure being invested in in this country right now. There is a real priority on a few big projects that will do nothing to reduce congestion, even though that is their purported purpose. They will do nothing to reduce the cost of moving goods and people around the country, and they will do nothing to reduce carbon pollution or inequality. So here we have the opportunity, and I, as a former transportation planner and urban planner, am very passionate about the opportunities that exist to create infrastructure that is much smarter, that costs less money, and that enables people and households to live in great places, to live close to where they work, and to do so in a way that reduces both the personal cost to them and also the environmental impact. So we have got these win-wins.

I can see in the language around the Asian Infrastructure Investment Bank that that idea, which is really gathering a whole lot of steam globally, is included in the principles upon which the bank was set up, and that is why the Green Party is happy to support this bill. But we would like to see more of that type of thinking here in New Zealand, and we have the opportunity to do so. Particularly coming up to the climate talks at the end of this year, there is a real momentum gathering, not just amongst Governments—of course, not with our Government, but other Governments—but also in the business community. I note today that Business New Zealand has announced that it is going carbon neutral, because it sees the risks and opportunities presented by the new climate economy. I put the question to our Government, the National Government: when is it going to take the challenges and opportunities of climate change and inequality seriously, and start applying that logic to policies here in this country? We all stand to benefit from smarter policy that results in a cleaner environment and a fairer society.

It has been wonderful to listen to the naivety, almost, of some of the contributions of the speakers this afternoon. They speak as if this were the only way to build relationships and to get into the good books of China. It is just wonderfully one-eyed and focused on—I do not know—something that suits them. It is a very focused narrative.

I acknowledge that this is a very simple piece of legislation, which changes a few lines in the International Finance Agreements Act 1961 in order to facilitate New Zealand’s participation in this Asian Infrastructure Investment Bank, but New Zealand First continues to oppose this legislation. There are two main reasons for our opposition. They have not changed since the first reading, mainly because the Government has not addressed the first issue that we raised, and it is in no position to change it; it is too late. The second reason is actually based on the realities of international infrastructure and investment banks around the world, and, especially, the realities of investing in China and the broader region that this bank presumes to represent.

On the first point, I say to those on the opposite side of this House that the New Zealand Prime Minister needs to look New Zealanders in the eye, along with some of those National bankbenchers. They need to look their constituents in the eye and talk to them about their broken promises and explain how selling off New Zealand assets and essentially giving our money to this investment bank could possibly be any better than spending it in New Zealand—rather than giving it away. The Prime Minister and that National Party broke a promise to every New Zealander. New Zealanders opposed the sale of our assets. All who were opposed to the sales, including New Zealand First, were told that the resulting funds would be spent on hospitals, schools, and infrastructure in New Zealand.

We were all told it would be spent on paying off this Government’s debt, which continues to balloon out of control. We were told it would be spent on rebuilding Christchurch. That was the promise made to all New Zealanders, and it comforted many. It comforted many who thought it was our only choice, because that was the line given to them by this National Government.

With the claimed mandate that it clearly did not have, and does not have now, the Government sold off large chunks of New Zealand assets. Despite promises to the contrary, in fact, as it turns out, it sold them mainly to foreign investors. There will be hospitals, there will be schools, and there will be roads built, but not in New Zealand. That is the reality of this investment. The Government has agreed to put US$92 million upfront into this investment bank. It has agreed to commit more than half a billion dollars to be set aside to be what is termed “on call”, should the investment bank be so desirous as to call upon it. Actually, as the New Zealand dollar devalues, and because these discussions were had in United States dollars, our commitment grows and grows daily as our dollar falls. We are talking about a NZ$145 million commitment, and $560 million for the “on call” commitment, totalling well over $650 million of commitment.

I do not think that anyone could dispute that this is a vast sum of money, which could have been invested in New Zealand infrastructure—this is our main argument—into cell towers, broadband infrastructure, roads, schools, hospitals, or rail, all of which are sorely needed now. We could have set up a regional growth fund, for example, and used our regions and that money to rejuvenate our New Zealand economy through our regions. What a dream, what an aspiration—but no, this money goes overseas.

Firstly, New Zealand First insists that infrastructure development, just like charity, actually should begin at home, especially as this Government’s debt spirals out of control and unemployment rises and business confidence falls. If New Zealanders were not already suffering, if our regions were not already missing out, if our exports were not actually declining, if real unemployment in New Zealand was not actually on the increase, and if money used to buy into this club was not in fact sourced from a broken promise given by the Prime Minister, New Zealand First would actually welcome a discussion on this Chinese initiative.

Now to my second point, around the opposition to this legislation. I will quote some experts on infrastructure investment from around the world. Kent Kedl, of the company Control Risks, has stated of investment into China that “you don’t become successful in China as a purely private entity, you need a powerful connection.” He was speaking to words from another investment business adviser, who noted: “There are no genuinely private companies in China.” He is, of course, quite correct. And, to quote The Economist, “The state and the party are omnipresent and their role is enshrined in law.” Let us be mindful that Japan and the United States have refused to participate in this bank, citing issues with the bank’s governance among many other issues. “Peter Williamson of Cambridge University’s Judge Business School argues that the [Chinese] government will always meddle with firms in industries it sees as strategic, even if they are multinationals.”

What consideration has been given to these issues? This problem is not unique to China, and those members of this House who have worked in this space will appreciate that developing countries with weak institutions and poor governance are often far bigger obstacles to growth than actual lack of funds. I acknowledge that China is searching desperately for investment dollars, as it switches its economy from infrastructure development to a consumerist one. New Zealand First would point out, however, that this infrastructure bank is not the whole answer and will provide little or no benefit to New Zealand. We must consider the realities that history has shown us again and again. A project presented to this type of investment bank will often look good on paper; practical implementation, on the other hand, is often a frustrating and sobering experience. Costs provided to investment bank projects historically far exceed initial estimates, and planners bidding for funds often woefully underestimate the skills and funds needed to ensure the maintenance and repairs of these big infrastructure problems.

It has been interesting to note the contributions from members today, as well. They have been speaking as if our participation in the Asian Infrastructure Investment Bank has been a matter for this Parliament, or the Foreign Affairs, Defence and Trade Committee. Actually, there was no discussion of our participation in the details, as such, in the select committee. I will remind this House that, actually, this Parliament did not make any decision to participate. The details of the Government’s participation in this investment fund came to the select committee after the fact. All decisions had already been made in relation to our participation in the infrastructure bank itself. Our consideration and discussion is after the fact. It had already been signed.

This Government has bitten off more than it can chew. It has committed far too much of New Zealanders’ money that was supposed to be used for New Zealanders. The advantage of being an early adopter has perhaps compromised our negotiation power in the Trans-Pacific Partnership, as we undermined our relationship with the US. We will not have a say on how the money will be invested, and, to the Minister of Finance, I say again: we will grow strong with Asia, but the benefits arising from this bank alone are highly questionable. Without doubt, New Zealanders would have preferred to see over $650 million invested directly into the New Zealand economy. Perhaps then, we as an economy could have better contributed to our immediate region’s growth. The Minister’s logic is backward, at the least, and flawed in reality. Thank you.

It will come as no surprise to members in this House that the New Zealand First Party stands as the only party in this Parliament opposed to greater infrastructure development in Asia. It stands opposed to New Zealand expanding its ties with other countries in the world, and it opposes other countries in the world trading with New Zealand. And that speech, where Mr Tabuteau used the word “naïve”, did not apply to the Government or the Labour Party or the Green Party; it applied to the New Zealand First Party.

Asia is a huge part of the future opportunity for New Zealand. Six of our top 10 export markets are now in Asia, and 11 of the top 20 are in Asia as well. Asia accounts for a huge amount of our future opportunity and our trading opportunities as a nation. New Zealand’s participation in the Asian Infrastructure Investment Bank will mean that we are at the table helping to make decisions about how infrastructure and development and economic opportunities in Asia are developed into the future. As Asia continues to develop, we in turn will see greater economic prosperity through greater trade with Asia, and that is good for New Zealanders.

When the New Zealand First Party members stand in this House and oppose trade agreements, they are opposing future opportunities for exporters in this country, and future investment into this country. When the New Zealand First Party members stand in this House and oppose agreements like this, they are opposing future opportunities for New Zealanders to see Asian countries trading with New Zealand and helping to bring more money to this country. They might like to stand in this House and say, for example, that Koreans should go back to Korea, but we in this Parliament, and on this side of the House, actually welcome greater economic and international opportunities for New Zealanders because that benefits the very people that we are here to represent.

I want to correct Mr Tabuteau when he talks about supposedly broken promises around investment, because he is absolutely wrong about the Future Investment Fund. When he says we are not investing in infrastructure in New Zealand and we are diverting money elsewhere, he is wrong. In Budget 2014 the Future Investment Fund saw $200 million going into health, $172 million going into education, and $75 million going into Canterbury housing contingency, amongst other things. In Budget 2015 we saw $244 million going into education, $210 million into ultra-fast broadband, $210 million into KiwiRail—the list goes on.

Mr Tabuteau and New Zealand First are wrong again about international opportunities for New Zealanders. They are wrong again about the Future Investment Fund. And it is not the Government that is naïve; it is Mr Tabuteau and New Zealand First. They should be supporting this—like other parties in this House—because it is good for New Zealanders, it is good for our economic prosperity, and it is good for everyday Kiwis who want to see greater economic opportunities through trade and through investment in New Zealand.

I call Kennedy Graham—a 5-minute speech on behalf of the Green Party.

The Green Party tends to agree in general terms with what the previous speaker, Jami-Lee Ross, has just said. There is, on balance, a net reason to join the Asian Infrastructure Investment Bank. The reasons that have been identified both by our Labour colleagues and National are essentially twofold: one is that it is in our interest to get engaged with Asia’s future, and, secondly, if that is the case, then it makes sense for New Zealand to get involved early on and have some influence in the creation and early development of the bank. So those are the reasons that the Green Party agrees with, and is prepared to support, the International Finance Agreements Amendment Bill accordingly.

That said, there are caveats that we need to have regard to. Jami-Lee Ross and, I think, others identified the primary objective of the bank as increasing growth in Asia, and said that is in New Zealand’s interests. Yes and no. It depends on what we mean by growth in Asia, because we tend—and it is there is the articles of agreement of the bank—to throw these words around with fair gay abandon, without a really deep understanding of what these words mean. The essential purpose of the bank, under article 1, is to “foster sustainable economic development, create wealth and improve infrastructure connectivity in Asia”—three subsidiary purposes in the one. We can tick each of those, but the critical phrase is “sustainable economic development”. If that economic development is not sustainable, it is not in Asia’s interest, it is not in New Zealand’s interest, and it is not in the world’s interests. And yet we tack on and we throw in that adjective “sustainable” as if it is the veil for anything that we wish to do.

The enthusiasm with which some of our colleagues here in this House today have struck up on Asian growth and Asian economic development gives us pause here in the Green Party. We support it but only on the very strict understanding that that growth is sustainable economic development. The faith in the ability of the bank or even of New Zealand to encourage the bank to achieve that goal is not increased when you look at the preamble in the way it was drafted. The first preambular paragraph talks about “to sustain growth”. It does not say “sustainable economic development”; it says “sustain growth”. Sustained growth is not necessarily, and may well not be, sustainable economic development. Yet we identify it in the first preambular. We think, in the first preambular, that sustained growth will help us contribute to “regional resilience against potential financial crises and other external shocks in the context of globalisation.” The biggest external shock for Asia, New Zealand, and the world is going to be the hit back from the ecological deficit and the global ecological crisis if we do not engage in sustainable growth.

We are prepared, New Zealand, to contribute US$92.3 million to this—US$92.3 million. What are we prepared to do for the UN Green Climate Fund? That is $2.6 million—$92 million versus $2.6 million. How much are we contributing to the Green Climate Fund per capita? Sixty cents. How much is Luxembourg contributing? It is contributing $6.70, Norway—this is per capita—$50.60, Denmark $12.80, and Australia $7.90 per capita. New Zealand is contributing 60 cents—US$2.6 million. The Green Party’s enthusiasm for membership of this bank would increase proportionally to the way in which we divided our contribution of $92 million to the bank and to the Green Climate Fund. If it was $46 million each, then we would have sustainable growth. Thank you.

I call David Seymour—a 5-minute call for the ACT Party.

I rise on behalf of the ACT Party in support of this bill. I think it is a very positive initiative for New Zealand to be involved in promoting investment in core public good infrastructure within countries that will make up an increasing proportion of our trading partnerships, as they have over the last period of time.

I might take a moment to reflect on some of the earlier contributions and the inherent contradictions within them. It was enormously surprising to me that the New Zealand First contribution we have had today was in opposition to New Zealanders investing in overseas infrastructure projects. The reason that this surprised me is that every time any foreigner invests within New Zealand, that party says that the profits are all going overseas and New Zealand is all the poorer. If one was to follow the logic of that argument, one would have to think that we should be promoting as much investment by the New Zealand Government in infrastructure projects overseas as possible in order that New Zealanders might be able to benefit from skimming back so many profits from overseas, as we are told happens when one country invests in another. But, of course, that sort of contradiction is not the kind of contradiction that the New Zealand First Party generally has the intellectual horsepower to address, so we will go no further.

I certainly hope that when this legislation is enacted and when this bank begins investment it will focus on high-quality investment. I think a number of contributors have raised their concerns about the quality of the investment and what sorts of projects will be funded with the kind of capital that is being provided. I think it is extremely important, for the growth of any regional economy, that Government funding—and this is Government funding; this is transnational Government funding—is put towards goods and, in some cases, services that are not readily available on the private market. Much of the frustration that Aucklanders presently have with the Auckland Council, for instance, relates to the fact that the council has become confused about whether it is providing public goods that are not readily available on private markets or whether it is providing a wider basket of goods that are competing with the private sector.

I would certainly hope that through this treaty we will find that New Zealand capital, to the extent that it goes overseas to be used for investment overseas, is used in order to provide public goods. It is a pity that the economics professor is not here, but we should put on record that public goods are those that have the quality that—

💬 David Bennett: He’s never here, mate.

—he is absent in many senses—

The ASSISTANT SPEAKER (Lindsay Tisch): No. Order! You cannot mention the absence of a member, even by inference.

My apologies, Mr Assistant Speaker.

💬 David Bennett: How about his presence? Mention his presence?

His presence I could mention, perhaps, but not in this instance. Public goods are those that are non-rivalrous and that are non-excludable, meaning that everybody benefits from the presence of the good and that nobody can be explicitly excluded from its benefits. That is when we have cause for taxpayers to have their capital taken to provide a good that will benefit all. It is also useful to spend public money on assets that have a network effect—that is, that they have constantly increasing returns to scale and that the market place is most efficient with only one provider, and, therefore, it makes sense, again, for Governments to be involved. But it would be a great shame if we were to see New Zealand capital going offshore to compete with the private sector in those countries. I am assured by the honourable Minister that that is not the case and that this capital will be going to build infrastructure overseas to enhance the economies and the productivity of our trading partners and therefore increase the effective market size faced by New Zealanders. On balance, that sounds like a very noble deployment of capital, and I wholeheartedly support this bill on behalf of the ACT Party. Thank you.

This is a somewhat unusual type of bill for me to be speaking on, but it is a bit of a pleasure—

💬 Hon David Cunliffe: It’s not about cows.

I will get to that. It is a pleasure to speak on the International Finance Agreements Amendment Bill. I always find it quite interesting listening to the member for Epsom, David Seymour. He has a slightly different view, I guess, of benefit and market than my view, but, none the less, that is what happens in Epsom.

I want to very briefly talk about this. I spent last week in Asia, interestingly. I think it is hugely important for New Zealand that we maintain our reputation. We have a great reputation in that part of the world, and it is increasing all the time. So I think for us to be playing a role in a place that is very significant for us as a market is really important. I am very pleased to support the bill because I think it gives us a further opportunity to reinforce our presence in Asia.

On the matter that Kennedy Graham raised, about the type of development that is taking place in Asia, I think we can be pretty sure that the modern infrastructure build in that part of the world is certainly more sustainable than some of the early infrastructure build that took place in that part of the world. So I think that making a contribution to this is also going to assist the development to become much more sustainable in the future, which I think is really important.

From New Zealand’s perspective, to be able to put money into a fund that is going to certainly help countries in Asia that we will definitely have trading relationships with in the future, and at a much greater rate than we do now, is certainly very good use of New Zealand money. I think that to suggest that New Zealand money should not be invested in Asia and that it is better used for New Zealand—this money is certainly being used for the benefit of New Zealanders, and I think it is a very appropriate use of it. So I have got no problems supporting this bill. I think the whole idea behind it is very sensible for New Zealand. I have got great pleasure in supporting the bill. Thank you.

I rise to take a call in this second reading to express the Labour Party’s support for the bill. It is part of our ongoing commitment to an open and an internationalist engagement with the world and to build good, strong, multilateral institutions that allow for the economic and social and governance development of our region.

Having said that, there has been an enormous amount of naivety expressed around the House in this debate so far, and it behoves us, I think, to lift the bonnet on this and just look underneath at what the engine really is. Can I just pick up a couple of the arguments that have been used by the last two speakers from the National Party. The last speaker but one used arguments of such subtlety and meaning as: “Asia’s got six out of our top 10 markets; therefore, we must support this development bank.”

Well, there are one or two steps between acknowledging that there are a lot of countries in Asia with whom we trade and that a particular investment in a particular bank is in New Zealand’s national interest. What, for example, is the role of that bank? Exactly what type of infrastructure does it seek to promote? What role would there be for New Zealand in the governance of that bank, and what economic or geopolitical benefits would flow to New Zealand from membership, as opposed to not being in it? Those are valid questions. The point is that they are somewhat deeper than just saying “Well, six out of our top 10 markets are in Asia.”, as if that is a lay down misère. It is not, and I think the House deserves a better quality of debate. Likewise with Mr McKelvie’s saying: “I have no problem putting money in Asia”—he has got plenty—“rather than New Zealand.” Well, yes, that is good. It is internationalist, it is outward-looking—you know, tick that box—but that is not a sufficient answer either. What is the role of this bank? Why is New Zealand investing in it? It is a substantial amount of money: $US92 million, about $NZ140 million on today’s exchange rate. Goodness me! That is more than four times the amount the Government is spending on the flag referendum.

That is a lot of money—it is a lot of money—and it is coming out of that thing called the Future Investment Fund. Remember that when the Government sold down New Zealand’s sovereign State assets, it created a fund which it euphemistically called the Future Investment Fund, which was to be spent on things like schools and hospitals and Chinese or Asian investment banks—ah, no. That was never in the press release. This is the most abused, overused fund in the history of public relations propaganda. It is a ridiculous overstatement.

💬 Jami-Lee Ross: Remember when he lost an election on it?

There is “Tony Soprano - lite”—“Tony Soprano - lite” has picked up out of his slumber and he could not resist the opportunity to have a jab. He just did not say anything useful.

Let us see what the international commentators are saying about the Asian Infrastructure Investment Bank before we try to confirm that joining it is in New Zealand’s national interest. Here is a very, I think, useful article by a Hong Kong - based economic strategist, which makes the following several points: firstly, that the United States resisted the idea of the Asian Infrastructure Investment Bank, which is very clearly the creature of the Government of the People’s Republic of China. That does not make it a bad thing to do. As I say, Labour supports joining it and supports the bank, and a former head of the New Zealand Treasury, Mr John Whitehead, was, I understand, materially involved in setting up the governance arrangements for the bank, and that is a good thing.

But the point is that the United States was the primary sponsor of the Bretton Woods international financial institutions—the IMF, the World Bank, and the Asian Development Bank—and a perception has, on the one hand, grown up that perhaps they have not invested sufficiently in the infrastructure of some parts of Asia, particularly South-east Asia, and that there is therefore a gap in the infrastructure market. The political take on that is that there are some powers in the Asia region that would be very happy if that gap was not filled by what they see as American-backed mechanisms. They would rather have a Beijing-backed mechanism.

That may or may not be the right thing. How does New Zealand align itself or take a position on that issue? That is a serious geo-strategic question, but let us go into that debate understanding the underlying international political significance of this institution. This is one of the first—if not the first—major international financial institutions to be created since Bretton Woods was set up many decades ago. This is a major development. It signifies the rise of a new global economic power in Asia, and New Zealand is confronted with a significant decision about whether to join or not. If it was not significant, we would not be putting 140 million hard-earned dollars into it. That is a significant investment by New Zealand.

The Hong Kong strategist goes on to note that China, which is backing the Asian Infrastructure Investment Bank, had sought to participate more actively in the Asia Development Bank, but the largest shareholder in that is Japan, and it always has a Japanese president and a high level of Japanese influence on its governance. So China, understandably enough, wanted to create another vehicle, in which it had a higher level of influence. The strategist goes on to make the point that the counterfactual is that a lot of China’s existing resource and investment flows to develop the infrastructure of resource-providing partners in the region—and it mentions in particular a railway line in Laos as one example—have been done bilaterally rather than multilaterally, and are often a little murky in their governance, says the article.

So the counterfactual is that we can be part of creating a new institution, which has more transparent governance, which is regional rather than bilateral, and at which New Zealand has a seat at the table. Those are reasonable arguments to weigh up, and the Labour Party has come to the view that, in fact, it is probably in our national interest to be part of that, given that New Zealand former officials have been instrumental in the design.

However, I now want to turn to the select committee report and to the national interest analysis—so-called—that has been provided by our diplomats at the Ministry of Foreign Affairs and Trade. It is remarkable because there are no numbers in it. This is not the first time I have risen in this House and complained about the qualitative nature of a so-called analysis piece that should contain hard estimates on the return on the investment of $140 million of New Zealand taxpayers’ money. The kinds of lines that have been given out by the Government are that the main benefits to New Zealand include increased economic development in the Asian region—tick; with flow-on benefits for New Zealand—question mark. What are they? What are the transmission mechanisms? Has anyone done any kind of sensitivity analysis on the impact of trade flows or even mapped out which sectors they are likely to be in? There is no evidence of that kind of analysis. It supports increased economic integration in the Asian region—yes, by definition it does, but with a particular geopolitical slant. It augments our existing relationships. It most certainly does.

Here is the key point: by signing up to the Asian Infrastructure Investment Bank, New Zealand will be building its relationship with the People’s Republic of China. That is a good thing. At the same time New Zealand is busily, according to the Government, negotiating to be a party to the Trans-Pacific Partnership agreement, thus ingratiating itself with the United States Government. So heaven, it seems, in an era of emerging superpower competition in the Asia-Pacific region, is to be in good with both. That is not an illogical position for New Zealand. I just want New Zealanders to understand what is going on when we are spending $140 million of their money. That is what this is about. So this is about keeping a foot in the camp of an emerging institution that is Beijing-driven while also being part of a negotiation, according to the Government, of a Washington-driven Trans-Pacific Partnership agreement—thus keeping both sides happy. That is why we are spending $140 million here today. That does not mean it is wrong as long as we know why we are doing it and as long as we are well informed.

I believe—and Labour believes—that New Zealand’s contribution is as an honest broker—as a country that is no threat to anybody, a country with a reputation for integrity and transparency that has in the development of this proposal been able to contribute to the good governance of the bank, with the transparency that that brings. Labour supports this bill but we do want New Zealanders to understand why our country is investing in it. Thank you.

That last speaker, David Cunliffe, came to a completely erroneous conclusion, as we expect from him. But let us go back to some fundamentals of what happens in this area. There are three development banks that you really have in the Asia-Pacific region: the IMF, which the Americans set up; the Asian Development Bank, which is the Japanese set-up; and then you have this one, which is the Chinese set-up—

💬 Hon David Cunliffe: ADB’s Bretton Woods.

What did you say, member?

💬 Hon David Cunliffe: The ADB was Bretton Woods—American sponsors.

Yes, but the Japanese are the main shareholders in it, as you would see from your speech if you actually understood what you were saying when you read that quote from somebody in Hong Kong, where it said that it was controlled by the Japanese. That is because it is the Japanese equivalent of the IMF. So it would be helpful if that member actually understood what he was reading—but that is another day.

The thing is that in the world of trade we are a trading country. And what do you need as a trading country? You need customers. It is often seen through the development of whatever we do in this world that if you can bring other people up in their standard of living, that increases the standard of living of your country because there are more people to trade with. Look what happens in Africa. The UN is completely about building trade by building the people’s ability to become middle-class citizens in the world. It is what has happened in Asia. It is what will happen in Africa in the next 50 years, and that is the important part of lifting people out of poverty. It gives them the ability to get an education, and it gives them the ability to then buy our products and goods and services, and that is what we want.

These banks are designed to provide infrastructure so that those countries can develop further. I went to the Asian Development Bank meeting this year, and at that meeting it was really interesting. They said that a city the size of—basically—Tauranga or Dunedin is being produced in that Asia-Pacific region every week. So every week you get a city that size coming on board, with over 100,000 people with your standard of living. So that is the reality of what these projects deliver. They deliver the connections through the Asia-Pacific region to enable that to happen, and they are consumers. They are consumers who can buy our goods and services. That is the important thing. It lifts those people out of poverty, so that they can make the right decisions around the environment. They can make the right decisions around their economy, and they can make the right decisions around their personal and human rights.

Those are fundamental things that I thought the Labour Party would have stood up and understood—not try to look at the finance of the Asian Infrastructure Investment Bank. The New Zealand First Party will never support this, because that party is anti-Asian. It is a party that is against having New Zealand in the world order. It is a party that has demonstrated in this House this week how disgusting and trivial its members are. I would like to thank David Seymour for his time at question time for standing up for members of our party, and I would like to apologise to the New Zealand public on behalf of the New Zealand First—

The ASSISTANT SPEAKER (Lindsay Tisch): Order! [Interruption] Order! We are not on that debate.

So it is important that we look at this bill, because it is creating something that will create more markets for New Zealand products. It is about building that relationship with our region that we live in, and this is a good bill.