International Finance Agreements Amendment Bill

I move, That the International Finance Agreements Amendment Bill be now read a third time. Just to remind ourselves what this bill is, it amends the International Finance Agreements Act 1961 in order to enable the New Zealand Government to become a founding member of the Asian Infrastructure Investment Bank. The Foreign Affairs, Defence and Trade Committee proposed one amendment to the bill, and the Government has accepted that amendment. Through a number of amicable discussions about this bill it has become pretty clear that there is broad parliamentary support for it.

The New Zealand Government was the first developed country to participate in discussions with the Chinese Government about setting up the Asian Infrastructure Investment Bank, and, as has been acknowledged in the debate and in the select committee, New Zealand’s role in bringing about what is now a very high-quality multilateral institution is something we should be proud of. It was certainly effective, and in that context I want to thank John Whitehead, former Secretary to the Treasury, who acted as New Zealand’s principal negotiator on this bank. I am sure he found it much more time-consuming than he expected, with meetings held all over the globe and the level of intensity that was required to get this Asian Infrastructure Investment Bank up and running in record time.

Our interest in it has been largely strategic. We are in the Asia-Pacific region. We have the opportunity now, because of our range of free-trade agreements, to trade with the faster-growing economies in the world, some of which have quite large populations and, as yet, a relatively small penetration by New Zealand trade—the Philippines, Viet Nam, and Indonesia. These countries will grow faster if they can finance high-quality infrastructure; this bank is one of the ways by which we can influence that process, and we have done so constructively.

The form of the bill is that it gives the Asian Infrastructure Investment Bank Articles of Agreement the force of law in New Zealand. The bill extends various privileges and immunities to the Asian Infrastructure Investment Bank and its employees, exempts it from taxation, and provides for permanent legislative authority to meet the capital contributions under the agreement. Our capital contribution will be small relative to others because we are a small economy, but it will amount to over $100 million in order for New Zealand to take up its prorated shareholding.

I want to thank the Opposition parties and the members of the select committee for the constructive way in which they have dealt with this issue. Increasingly, our fortunes are tied to those of the Asia-Pacific region. As free-trade agreements multiply and global supply chains become more normal even for quite small New Zealand businesses, and as we increasingly see an Asian flavour to the investment that is coming to New Zealand, this is just one more plank in the bridge between us and Asia. That has been, I think, acknowledged by all the parties in Parliament and by the work of the select committee.

The national interest assessment that was done by the select committee showed that it was in the interests of New Zealand, so if we get the third reading of this bill done then the Asian Infrastructure Investment Bank will be up and running in the first half of next year, and I want to thank Parliament for allowing that to occur.

It is my pleasure to confirm, as has been said in earlier contributions from the Labour Party and mentioned in the Foreign Affairs, Defence and Trade Committee report, that the Labour Party is in favour of this legislation. We think it is a very good advance in world affairs that China is leading, using some of its financial wherewithal—which is very substantial these days—to improve the lot of people in countries that are not quite as fortunate by funding through the Asian Infrastructure Investment Bank things that would not otherwise occur.

I want to mention one level of detail where we do not agree with the Government before coming back to our agreement with the general provisions that we are enacting. Under this agreement, New Zealand subscribes for 4,615 shares in the Asian Infrastructure Investment Bank. That is given effect to in the articles of association of this new organisation, which are included as a schedule to the bill. For every one of those shares New Zealand commits a million dollars of capital to the fund. Not all of it has to be paid across, but we are liable for it to be called on if things went wrong and we agree for a certain proportion of it to be paid in cash. So every time New Zealand’s shareholding goes up or down in one of these organisations in the future, there is a considerable economic cost to the country. This is true of every one of these international finance agreements.

I think it was just last year we changed the proportions held by New Zealand in the IMF and also increased the amount that was due in respect of each IMF member per share. So the effect of that in respect of the IMF was to increase the total amount of capital available through the IMF in the various things that the IMF does but to decrease the proportion held by New Zealand of that increased total.

These things only happen occasionally, but when they happen relatively small changes in shareholding have a big impact on the amount of money that the Government is required, under the international agreement, which is changed, to commit to that organisation. The Labour Party is of the view that those sorts of changes, which are spending taxpayers’ money in a way that is not generally contemplated in a Budget—those sorts of things should be overseen by Parliament rather than be done by the executive. As a consequence, in respect of the last amendment to the International Finance Agreements Act, the Government conferred upon itself the regulation-making power to agree to changes in the amounts of capital that New Zealand is required to be responsible for in these international organisations by statutory regulation. I thought at the time that that was wrong, that that sort of change to international financial agreements ought to have the approval of Parliament. It actually does not happen that often. I think the number of times that that sort of change would have been before Parliament—it has only been on a few occasions since the IMF was founded all those years ago.

In respect of the Asian Infrastructure Investment Bank, I am also confident that those changes in capital subscription will not occur very often. One of the reasons you can be confident in that is partly that they have got so much room to move, in that the capital subscribed for is so much more than the capital that is called. So if there is a need for some more capital in the fund, they have got quite a bit of room to move in terms of calling capital that has already been subscribed upon rather than increasing the capital that is subscribed for and, therefore, the total liability of the Government. So I think it is wrong that, through this amendment legislation, we are actually extending the right of the executive to change the obligation of New Zealand in the future by way of statutory regulation, rather than having to come back to Parliament for a new authorisation if they want to subscribe for more capital to one of these international organisations.

That said, I want to agree with the Minister of Finance, the Hon Bill English, in respect of a number of his comments. I think it is very good that New Zealand embraced the concept of the Asian Infrastructure Investment Bank early on. There is a long history in New Zealand of New Zealand engaging with China, both economically and politically, in advance of a lot of other countries. I think it has been of credit to New Zealand that we have done that. I think it has also been to New Zealand’s benefit in our international reputation, and I think it has also been to our economic benefit. I think it has also benefited China. China, as a consequence of its exposure to New Zealand earlier than would otherwise have been the case, changed its system, I am sure, in some ways to reflect the sorts of things that New Zealand advocated it should do. I am sure that, just as China gives us advice at times and we look to it sometimes for examples where it might do things well, it also looks to New Zealand and respects the advice that we tender at times.

That is certainly true in respect of the Asian Infrastructure Investment Bank. Through the former Secretary to the Treasury John Whitehead the New Zealand Government was able to influence the shape of the provisions under which this new Asian Infrastructure Investment Bank will operate. One of the concerns that was mentioned in the media by some of the countries that were less enamoured, initially, of the Asian Infrastructure Investment Bank, was based on the concern that this bank might be used as a primarily political tool driven by the Chinese Government to pursue its international ambitions in a way that was not neutral and to pursue political objectives rather than being focused on what are the most pressing infrastructure needs in this region that need to be met.

I think it is fair to say that those criticisms have waned as a consequence of the fact that when the detail has been provided as to how the Asian Infrastructure Investment Bank board will act—those concerns have waned, and there is now widespread recognition, across not just the countries that are in the Asian Infrastructure Investment Bank but across other developed countries as well, that the earlier concerns were not valid. I think that reflects well upon both China and New Zealand.

Those operating principles are set out in article 13 of the agreement set out in schedule 8. It says that the operating principles are, firstly, that “The Bank shall be guided by sound banking principles in its operations.”, and secondly, that “The operations of the Bank shall provide principally for the financing of specific projects or specific investment programmes”—there is some more detail, which I will not read out there. It “shall not finance any undertaking in the territory of a member if that member objects to such financing.”—so they have got to have the cooperation of the local government. “The Bank shall ensure that each of its operations complies with the Bank’s operational and financial policies, including without limitation, policies addressing environmental and social impacts.”—it is pleasing to see that.

There were some earlier projects of the IMF, and other development projects elsewhere in the world, where there was the assertion that some of the projects that were funded by international banks like the IMF inappropriately ignored some of the adverse environmental consequences. Indeed, my understanding is that some of the projects that were criticised were mining projects—actually, not so much mining projects as big power projects, including hydro-projects in parts of the world that had serious environmental concerns, including the displacement of local people, who were not treated fairly when they were displaced and perhaps should not have been displaced in the first place because the projects might not have been that wise. So it is good to see that that sort of thing has been guarded against through part 4 of article 13.

There are other parts of this agreement that will ensure that New Zealand’s reputation for pursuing good governance in the world is adhered to. I think that is very important—that New Zealand lends our weight and our ethic, which is that we ought not to be embarking on corrupt practices and we ought not to be assisting in corrupt practices. I am sure that New Zealand’s influence on the Asian Infrastructure Investment Bank will ensure that it is less likely that this bank gets tied up through those investments in the propping-up of corrupt practices in the countries that this Asian Infrastructure Investment Bank will be assisting. With those comments, I will take my seat and record my thanks to the Minister of Finance for shepherding this legislation through.

It is a pleasure to speak in the third reading of the International Finance Agreements Amendment Bill. This is an excellent bill. The Asian Infrastructure Investment Bank is definitely a bank that we want to be a part of. If we look at the definition of “Asia” in this agreement, it is actually the United Nations definition of Asia and Pacific, which indicates the breadth of reach that this agreement will actually have, because that definition includes North Asia, South-east Asia, South Asia, central Asia, parts of the Middle East, Australasia, and the Pacific—so quite a lot of breadth.

💬 Chris Bishop: Quite lot of Asia.

Clearly quite a lot of Asia. Clearly the need is great. The World Bank tells us that $1 trillion is needed in infrastructure in Asia, so there is no question that the need is there. There are a lot of benefits to being a member, to being a part of this bank. The three obvious ones that have been commented on are the benefit of being a founding member—that is, our ability to influence the direction and best practices that the bank has been able to start with; secondly, economically, our ability to compete for contracts; and, thirdly, the strategic relationship.

The cost that has been mentioned is $125 million in paid-up capital. We inquired as to the benefits of that and we were told, amongst other things, that for what is, effectively, a 0.6 percent shareholding we have already received disproportionate benefits. We are also interested in the security—how secure is that $125 million? We were told that we have a favourable risk rating and we have preferred creditor status. On the ratio of paid-up to on-call capital this looks very favourable to parameters that, say, the World Bank has. So we are quite reassured that that paid-up capital is secure. The $500 million on-call—I take the point that my colleague Mr Parker was making when he was looking at a cost per unit share. Effectively, he took the $125 million paid-up and put it together with the $500 million on-call. I do not think that is an accurate metric to take, because the likelihood of the on-call being called up is very, very small. Officials were very clear on that. Secondly, it does not take into account the time value of money—more specifically, the paid-up capital is paid over 5 years. So I do not think it is quite accurate, but I take the point he was making.

The case has been made that membership of this bank is almost to the exclusion of other banks—the World Bank and the Asian Development Bank. I do not think that is a correct representation either, because we remain engaged and active shareholders in both of those other banks. So I just want to comment that that is not to their exclusion. We focused on the economic, the founding member benefits, and the strategic benefits to being a part of this agreement, but let us talk about the quality of life impact for people in Asia that this bank will have. This is an infrastructure bank. We are not building cars, we are not building ships or planes; it is an infrastructure bank. That means reliable electricity for many people in Asia. This means reliable and clean water. This means roads and telecommunications. And I think that lifting these people or helping them lift from poverty of course is a good thing. So I think there is some mission around this bank that is a good thing for us to be a part of.

Furthermore, as a founding member, New Zealand has used its founding member status to inject principles of sustainability and some sense of the environment in that. More specifically, we are able to have the word “sustainable” placed before the words “economic development”, so it reads “sustainable economic development”. The Foreign Affairs, Defence and Trade Committee made only one change: to delete clause 9(1), which enabled article 19(1) in the agreement, which was around foreign currency restrictions. That was really about the only discussion we needed to have around core principles towards this agreement within the select committee. So I would like to acknowledge the committee chair, Mark Mitchell, for his guidance in this, and other committee members who bring the bill here today for the third reading, and I commend it to the House.

As my colleague David Parker said earlier, Labour is supporting this bill and commending the Government for pushing this through—the acceptance of the amendment to the International Finance Agreements Act 1961—so that New Zealand will be one of the founding members of the Asian Infrastructure Investment Bank. Being a founding member obviously has some advantages, and those advantages have been spoken about at some length earlier. Perhaps more important and more strategic is that New Zealand is a member of the Asia-Pacific region. We have huge and growing interests in this area. Six out of our 10 top markets are located in this area, and with the expansion obviously of China and of Japan too, but also of Viet Nam and Malaysia, we are seeing growth here that is very important for our economic welfare into the future as well. So being part of this agreement is important. I think that getting in and being one of the first countries, the first Western country, to be part of this sent a very good signal and a strong signal about our commitment to the region and the way that we see our future.

As the last speaker, Dr Shane Reti, was talking about, the real demand for infrastructure development in the region is huge. Even the Asian Development Bank put the needs at around about $8 trillion, and the IMF talked about it as being about $1 trillion per year. Most of that—51 percent, in fact—was estimated to be needed in the electricity sector, but the need is not only in that but in rail, in road, and in a whole range of other infrastructure areas as well. So there is a real demand within the Asia region, which underpins its further development and the welfare of its people, to be able to provide those basic services that enable them to develop and, by rights, create the markets for our goods as well. So it is a beneficial cycle that we are trying to create here. As I say, it helps and it enhances the welfare and the prosperity of those people living in many of those countries, but at the same time there is a benefit to New Zealand as well.

That demand and the way that this bank is going to be able to meet that demand were well set out by Alan Bollard, a very well-respected former official from New Zealand who now serves in the APEC secretariat. He spoke of the real advantages of this bank coming into operation. It did not have the easiest of births. There was some push-back, particularly from the United States, which—I think rather unwisely—looked at this as being an extension of China’s influence in the region, which to some degree we admit to, in the sense that China is one of the big stakeholders in this bank and is putting billions in. It is by far the biggest shareholder in the bank and is putting billions into it. But, actually, why should it not be? If you look at the other big Bretton Woods institutions—the IMF, the World Bank, the Asian Development Bank—they are products of the Second World War. This is a changed world now where China does hold a greater degree of influence around the world and greater economic clout as well.

The important thing, I think, about the bank, and particularly China’s involvement, is being in on the ground floor as we have been, and particularly the influence of John Whitehead, another of our excellent officials—extraordinarily well qualified and respected. His being there has enabled us to be at the table when the principles and the values and the working procedures of the bank have been set up, so that we can be confident that the bank is going to be seen to both be transparent and have best practice. That has been perhaps one of New Zealand’s greatest contributions to the future of this bank.

So although China will have 20 to 30 percent of the voting rights in the bank, alongside it will sit at least 50 other countries. As Dr Shane Reti just mentioned, New Zealand will be there with a very modest input into the bank—a very modest voting right—yet it will actually have quite a lot of influence in the way that the bank operates and benefits New Zealand as well. We put in, as has been said, about $145 million, putting up capital over the next 5 years—so it is a relatively modest amount. We also put forward about NZ$461 million as callable capital, although we have to acknowledge, as far as I am aware anyway, that with the various shareholdings we have had in international operations and institutions around the world I do not think we have ever been asked—our contribution has never been called up in the past. I think that is a pretty rare possibility.

The other thing that I want to touch on, and that David Parker mentioned as well, is the fact that environmental and social impacts are in the bank’s operation as well, so that the rather disastrous big power projects and environmental projects that have taken place in the past will at least be mitigated against. We will be able to see some of those large, inappropriate types of projects having to address the environmental and social impacts before they will be funded by this bank.

There were no submissions from the public to the select committee on this. In some ways I am not quite sure why that was. Perhaps because it looked like it was a bank, a financial institution, people were not interested. But I think it is a very significant part of New Zealand’s contribution, standing alongside China, which was the main proponent of the bank. It stands alongside our other firsts with China, starting off in 1972 with our formal recognition of China and, most recently, in 2008 with the first free-trade agreement, well before the Australians across the ditch. We actually got in there well before them and had our first trade agreement, which, of course, happened under Phil Goff’s reign as the trade Minister.

There is no doubt that the bank is responding to a need and a demand. As I have said, the infrastructure demands from right across Asia are enormous, they are immense, and we need to be able to be sure that they are met. To repeat one more time, there are certainly countries across Asia—and I was in one this week, in Myanmar. Looking at its infrastructure, the demands that Asia has for infrastructure are immense. Meeting those demands—by meeting electricity, transport, railway, and all of those types of infrastructure demands—will mean that people’s lives will be significantly uplifted or provide the basis for further economic development. That economic development will trigger more demand for goods that New Zealand is able to produce. So I see that this is a positive step for New Zealand. I was pleased that the Government moved quickly in support of the bank, that it got in on the ground floor, and that it got somebody as illustrious as John Whitehead to be there at the table to make sure that this bank upholds the best practices that it is possible to have.

I think this is a good investment, and something that New Zealanders will recoup in terms of both our influence and our economic ability and potential into the future. So I commend the Government and once again congratulate them on moving ahead in this and obtaining Labour’s support. Thank you.

I do not think there was anything in that last speech from David Shearer that you would have any contrary views to. I think the last speaker summed it up pretty well and made some very good points around what this bank is about. I would like to thank the Labour Party for its support of this bill. It is being rational and reasonable and looking at it from a New Zealand perspective, and I think that is good to see.

We all know what this is about. The speakers have all talked about it. There are basically three infrastructure banks that are operating in this part of the world: the Asian Development Bank, which is the Japanese bank; this bank, which is the Chinese bank; and the American bank, which is the World Bank. Basically, they have a role in providing infrastructure for our region. There are two crucial parts of that infrastructure development that are important. The last speaker mentioned them considerably in regard to the Asian economies, the big economies of Asia, that basically are adding a city the size of Tauranga, with that standard of living, every week into those communities. That is a market that is expanding quite considerably, and they need infrastructure for those communities. So these three banks, and especially this bank, will provide in that area.

The other area that has not been touched on by speakers is the Pacific itself. The Pacific Islands are probably our main area of interest. When we are engaged with these kinds of banks, we push the Pacific. It is easy for the Asian Development Bank and for this bank to forget about the Pacific, when that is actually where we want that infrastructure to be spent as well. Our Pacific Island neighbours are our closest neighbours and, along with the Australians, we would have to provide that infrastructure if they do not have sources of capital. These banks are vital for the Pacific Islands. They provide a lot of capital for projects on those islands, and that is something that we need to keep on pushing, so that it has not only one tier—which is the development of those major Asian cities that will provide economic consumers for us—but also there is the development of our Pacific Island neighbours who are important for us as a country, going forward, as we have a special relationship there in the sense of that economic development.

We know that some other parties will not support this bill. It is disappointing that New Zealand First will not support it. That is on the grounds that we can assume for New Zealand First would be the normal grounds; they would not support something like this. The disappointing one is the Greens not supporting this bill. To grow the Asian communities and to get economic growth through there actually means that those communities have got the best potential to have the best environmental outcomes for their communities. It is disappointing the Green Party will not allow or support the development of Asia so that it can achieve good environmental outcomes for their people. I think that is a very short-sighted approach from the Green Party. We will get a whole lot of arguments from the Green speaker, which will not make any sense, trying to confirm its position.

It is good to see the Labour Party is supporting the bill. We look forward to this bill passing through the House. It is a good bill for New Zealand and for our regions.

This is just to confirm that the Green Party will be supporting this bill, as was explained in the first and second readings. We support the general view of the Minister of Finance that the Asian Infrastructure Investment Bank represents an advance in the region and an advance in world affairs, and that there are strong strategic reasons, which I think both the Hon David Parker and David Shearer pointed out as well, as did many of the esteemed National colleagues. There is a strong strategic reason for New Zealand to be involved in this, and to support China’s initiative and to support the general promotion of poverty reduction and the spread of wealth in Asia and the Pacific.

I think the only political party that is opposing this bill is New Zealand First. We always give respect to New Zealand First members when they produce reasons. We find, from their argumentation, three reasons that they have articulated to not support the bill. With respect, we do not agree with them. The first reason, in the second reading at least, was that the NZ$145 million should be spent in New Zealand and not in Asia. Second was that the Chinese economy is not a completely open and free-market economy, and that you need personal connections to get anything done successfully in the Chinese economy. And the third was that joining the bank would undermine New Zealand’s relationship and ties with the United States.

We disagree with each of those reasons. We think the money should be spent in Asia; it is both in New Zealand’s interests and in Asia’s interests that that is the case. You probably have to have connections to do anything in any country, in any economy, including New Zealand. You just have to understand the culture properly. Thirdly, undermining the relationship with the United States is a distorted view, I think, of the 21st century perception. I think the Green Party would take this moment to call on the United States and Japan to shed the 20th century perception of strategic rivalry and, in fact, get up to speed with the 21st century, recognise China for what it is and what its potential is, assist in the peaceful ascendancy of China and a general regional cooperation and harmony, and get involved in the bank. We would encourage New Zealand First, at this last moment, to reflect on that and to actually change its vote to one in support.

I do not want to take up further time of the House, because the bill has been well canvassed in the previous readings, but there is just one point that does need to be made, and made strongly. That is the imbalance that this Government continues to show in terms of its perception of what economic sustainability is all about in the 21st century. It is not just about economic growth, which is essentially—if you read the preamble to the articles of the agreement in schedule 8 of the bill, and you listen to the peroration of National colleagues, you tend to think it is still all about economic growth. It is not. It is about sustainability and the increasing quality of life and prosperity within the context of sustainability. If that fundamental principle is not well established, both in the constitutional foundations of this bank and in the day-to-day operations of it, then we are doomed.

The New Zealand Government has done nothing to allay concerns in that respect, when it provides NZ$145 million to the bank and—how much to the United Nations Green Climate Fund? It is NZ$4 million. That is $145 million for economic growth, and $4 million for climate control. That is wrong. Run them together and it is NZ$150 million. Split them in two, and it is $75 million to the Asian Infrastructure Investment Bank and $75 million to the United Nations Green Climate Fund. That would bring New Zealand up to a respectable level per capita with all the other contributors to the UN Green Climate Fund. They range from $60 to $8 per person, from Norway down to Australia—and New Zealand is 60 cents. So given our priorities, as we convey them to the world in this respect and in the context of full support for New Zealand to be a member of the Asian Infrastructure Investment Bank, we call on the Government to reassess the actual financial quantum in terms of its contributions to the bank on the one hand and to the climate fund on the other. Thank you.

I am pleased to rise on behalf of New Zealand First to take a call in this third reading of the International Finance Agreements Amendment Bill. New Zealand First does not support this bill. Our opposition to this legislation, and indeed to New Zealand’s membership of the bank to which it relates, was summed up by my colleague Fletcher Tabuteau during the Committee of the whole House, which I recall turned into a somewhat livelier debate than one might otherwise expect from what is essentially a fairly pedestrian piece of lawmaking.

Our opposition is not actually about the Asian Infrastructure Investment Development Bank itself, or even about New Zealand’s involvement in international financial agreements of this type in general. Indeed, as the Minister of Finance himself said during the first reading, the New Zealand Government already has shareholdings in the World Bank and its various manifestations and the Asian Development Bank. That is well and good and very probably as it should be. Rather, our opposition centres on two things.

Firstly, there is the undeniably questionable worth of New Zealand’s participation in an infrastructure development bank from which the Government openly acknowledges it will gain little to no tangible benefit. The departmental disclosure statement is unambiguous in this regard. It states: “The direct economic consequences of the investment in AIIB for New Zealand are likely to be modest.” It also says: “The practical effect on revenue for New Zealand, which will not be borrowing from the Infrastructure Bank or be a destination for investment, is likely to be minimal.” So we will neither be benefiting from being able to borrow from the bank nor benefiting from having the bank invest in New Zealand, but we are committing nearly half a billion US dollars to it over the next 5 years, with almost a hundred million US dollars being the upfront payment. So that is half a billion dollars for membership essentially of a club from which we will derive almost nothing in terms of material benefit.

We get what the Government has argued in terms of the fact that there are intangible benefits—and, in fact, tangible benefits that are not able to be directly or immediately linked to involvement in the international institutions such as this proposed bank. But we struggle to accept that these will be—or even could be, in this case—worth anywhere near as much as the investment is costing us, let alone that they could come to represent some sort of net return on that investment.

We understand that other countries are more ready to deal and trade and treat with nations when there is wider involvement, when multiple associations are entered into, when nations are able to meet one another in a greater number of forums, and when nations demonstrate that they are prepared to commit tangibly to institutions that they rely on and that they regard as having value. We get that. We understand that the projects that this bank will fund are necessary, are going to be valuable to nations across the region that it covers, and that that will increase economic activity in those countries, and that down the track New Zealand firms and businesses will be able to benefit from that. But those things will happen anyway, with us or without us. We are such a minuscule contribution to what is such a vast area of the earth and such a vast area of economic activity that these things would go ahead anyway, whether we are involved are not.

New Zealand First questions whether having a mere 0.66 percent of the voting power within the proposed bank’s governance, based on our contribution of just 0.4 percent of the total subscribed capital, can be regarded as having any practical worth at all, let alone any great value for New Zealand when measured against the need to allocate or commit nearly half a billion dollars to it in real terms.

We do get that institutions of this type garner more credibility when they are endorsed by nations that are perceived as being stable and advanced and reliable and largely free from corruption. We are pleased that New Zealand continues to be acknowledged as such a country by the other mostly much larger nations in our region, and indeed the wider world. In fact, as Minister English said during the first reading: “New Zealand took something of a brave step early on, partly with the encouragement and assistance of Singapore, to be the first developed country that put up its hand to engage developing countries and that put up its hand to engage in discussion with the Chinese Government about the possibility of the Asian Infrastructure Investment Bank being a true multilateral institution”.

I know these things are calculated according to some differing criteria, but I have to ask how much longer China is going to be regarded as a developing country relative to New Zealand. I mean, here we have a country that has nearly one and a half billion people and is the second largest economy in the world, a nuclear power, and an active participant in the space race, compared with New Zealand, which is essentially a small agrarian economy with a tiny population sitting quietly in an unassuming backwater of world affairs. There is “developing” and there is “developing”.

Our second cause for concern—the other grounds on which we primarily oppose this legislation and New Zealand’s participation in the bank—is the source of funds that New Zealand will be putting into it and the disingenuous nature of the Government’s proclamations with regard to that source. The Future Investment Fund was supposed to be about reinvesting in New Zealand, and no amount of Government spin can change that fact. It was meant to be about schools and hospitals in New Zealand, not schools and hospitals in other countries. It was meant to be about roads and bridges in New Zealand, not roads and bridges in Asia and the Pacific.

It is bad enough that the power companies and the other assets were sold off against the wishes of the majority of New Zealand voters, but completely inexcusable that the proceeds are then to be used for other than their stated purpose. It is bad enough that we lose half the ownership and half the revenue stream from our wealth-generating assets, but incomprehensible that we should then lose part of the proceeds as well, sending them instead to be locked up in a foreign-focused development bank from which the Government itself admits we will receive little to no benefit.

The Government has been completely dishonest about this part of the legislation, and it continues to be completely dishonest. For those reasons New Zealand First cannot and does not support this bill. Thank you.

I stand to support the International Finance Agreements Amendment Bill, as have others in this House—many parties in this House, in fact, apart from New Zealand First. It is a very good piece of legislation supporting the articles of agreement for the Asian Infrastructure Investment Bank—something that New Zealand must be a part of.

The reason why New Zealand must be a part of this is that our economic future and our economic opportunities as a country are linked very much to Asia. New Zealand is continuing to increase its trade more and more with Asia, and going forward into the future I foresee that that will only continue to increase and it will increase to the benefit of New Zealanders.

But one of the constraints that is in place in Asia is a lack of infrastructure, and the purpose of this bank is to try to invest in greater infrastructure improvements in Asia so Asia can grow faster. Faster growth in Asia will lead to greater demand for goods around the world, and as we continue to improve our free-trade agreements and increase the number of free-trade agreements with Asian countries, that will only see New Zealand benefit from a bank such as this.

New Zealand First members are, unfortunately, very much isolated in their view on this particular matter. They have a view that New Zealand should be isolated from the rest of the world. It is a view that is detrimental to New Zealand. It is a view that is out of line with economic opportunities for New Zealand. It is a view that is very poor, and if it was ever adopted by Governments in the future it would lead New Zealand to slipping further and further down the ranking tables, and I do not think that the voters of New Zealand First would actually want to see that happen. The argument that Richard Prosser put on the table was that this is going to go ahead anyway so New Zealand should not be part of it. The reality is that if other nations took the view that it is going to go ahead anyway and they should not be a part of it, then nothing would actually happen.

We have a proud tradition as a country of standing up on the international stage. We have a proud tradition as a country of getting involved in supporting greater growth around the world. We have a proud tradition as a country that stands up for good things, and this is one of them. If we took the view that trade agreements were going to go ahead, whether or not we got involved, then we would be left out of the pack.

I guess New Zealand First members do not care about that, because they are actually opposed to free trade. They are opposed to greater infrastructure investment in Asia. They are opposed to New Zealand being involved on the world stage. I do not know what they are for, other than New Zealand locking itself off from the rest of the world. This bill will aid New Zealand’s international opportunities. It will aid future growth for New Zealanders, and it will aid future trade for New Zealand firms. That is why many parties in this House are supporting this bill.

This is a 5-minute call on behalf of the Labour Party—the Hon Clayton Cosgrove.

Like other Labour members I reiterate that we are supporting the International Finance Agreements Amendment Bill. I do find myself, unusually, in agreement with some of what the speaker who has just resumed his seat, Jami-Lee Ross, has said in respect of the need for New Zealand to be at the table in the great international institutions. We have always been at the forefront of the formation of international institutions, whether it be the UN, the World Trade Organization, and on it goes. I respect New Zealand First’s view, but I say it was a bit like the contribution last night: “What’s in it for New Zealand?”. I do agree that there has to be something in it for us, and what is in it for us is the ability to influence, the ability to take our place in the Asian region, and the ability also, in a very pragmatic and practical way, I would hope, to be recipients of work and goods and services that are provided to the Asian region as they move to fill the gap in infrastructure that they have. That creates jobs for New Zealand.

We have highly skilled people in this country. We provide world-class goods and services, and world-class infrastructure and engineering services. I would have thought that being part of this, and putting up a very modest $126 million, I think it is, as the first hit, and possibly $504 million going forward, is an investment in respect of being a recipient of that work and those projects and of being around that table. If you are not in the ring you are out of the ring and you do not have influence.

The Asian Infrastructure Investment Bank is part of that, and I think the Government has made the right move in being a plank-owner, a foundation member, of this new international institution, as we are in respect of the World Bank, the IMF, the ILO, the World Intellectual Property Organization, and a whole series of other international institutions. It is appropriate, and being at the forefront of it we have influenced the governance arrangements, the structure, and the level of transparency so that this is a proper and world-class institution. I do not believe that we can throw the cone over New Zealand and somehow divorce ourselves from the rest of the world. The world is an interlocked place, an interconnected place, and we have a duty to our citizenry in growing our economies to ensure that we are advantaged off the back of the growth in economies around the world; otherwise, we do not survive.

I want to take issue, though, with one thing that Mr Ross said. He is right that in the past New Zealand had an extremely proud track record of leading the charge on key issues around the world. That is absolute, and I believe that New Zealanders and Governments of all shades up until recently could be extremely proud of the “New Zealand Inc.” philosophy that is exhibited, generally, by political parties. When we go overseas we are for New Zealand. We are absolutely for New Zealanders, and we are for the growth of our nation, and we are proud of that. I have to say to Mr Ross, with all due respect, that in the last 72 hours that has taken a real kick in the guts—an absolute kick in the guts—in terms of our profile around the world. It is has taken a hit, I think, before the UN. I think it has taken a hit in respect of media around the world. Many of those, and many political commentators and actors around the globe, are scratching their heads wondering what on earth is going on, obviously in Australia, and what on earth is going on in respect of the leadership, both internationally and domestically, in respect of our Prime Minister and our Government over the issue, of course, of the detainees on Christmas Island.

As we celebrate the success of being a foundation member in this international institution, and as we move to take our place in other international institutions, the Security Council and others, I think the Government really needs to reflect on the potential damage that it does to New Zealand’s international reputation by both its conduct in respect of this trans-Tasman issue and its conduct within this Chamber. People watch what happens in this Chamber. Ambassadors and others monitor what happens in this Chamber, and they report back to capitals. I think that every member would agree that we want to maintain and enhance New Zealand’s reputation on all fronts: economically, socially, and geopolitically, and in terms of trade, etc., but that starts at home with domestic matters. I would ask the Government to reflect on that, because this is a very germane debate as we look at our international reputation.

The Labour Party supports this bill. We think it is a good piece of legislation. We look forward to Governments of all shades being active participants in this institution as we move in as part of the Asian region.

I call David Seymour; a 5-minute call.

I rise on behalf of the ACT Party in support of this bill. May I just chime in in support of what the previous member, Clayton Cosgrove, said—that our international reputation does matter, people do watch what happens in this Chamber, and charity does begin at home. And the member may very well take those words on board: charity does begin at home. And as the Speaker said just yesterday, it is not just what happens in this Chamber that people watch, but what happens outside this Chamber. And I may remind the member that the proper place for debate in this Parliament is within this Chamber and the select committee rooms, not out there on the tiles harassing the Prime Minister, as his member did.

💬 Mr DEPUTY SPEAKER: Talk to the bill.

I am addressing the bill and the debate on the bill.

This bill is a positive step for New Zealand. And to those who oppose it, I say there is a very simple thought experiment into which we can enter, and it is this. There are a number of jurisdictions around the world of similar size to New Zealand, and I would say that, for instance, Denmark is one of those, British Columbia in Canada is one of those, and Colorado in the United States is one of those. All of those jurisdictions of 4 million or 5 million people are deeply integrated with the rest of the region that they are part of: with the United States on the part of Colorado, with the European Union on the part of Denmark, and with Canada and the wider North America Free Trade Agreement area in the case of British Columbia.

To say that we do not have interest beyond our borders, that it is somehow an abrogation of our sovereignty to be involved in institutions such as this bank, is to close yourself off from reality in a way that none of those jurisdictions would have done. Public policy must be politically sustainable if it is to endure and achieve its purposes. And it is interesting to reflect, by extension, on some of the political views on this bill, and, in particular, on the one exception party that opposes the bill, which is, in this case, New Zealand First. New Zealand First is a party traditionally opposed to foreign investment in New Zealand. Their argument is that large profits are taken out of New Zealand when foreigners invest here. Quid pro quo, one may have thought that they would be in favour of New Zealanders investing overseas so that we can make such large profits from those other jurisdictions.

But it gets more interesting. It is also a party that is typically interested in the Government taxing taxpayers to fund a lot of enterprises and infrastructure and, quid pro quo, you may have thought that the best possible policy for New Zealand First would be to support a policy where New Zealanders are taxed by the New Zealand Government to provide capital for investments that may become profitable and make a return in foreign countries. One may have thought that this was the ideal policy for the New Zealand First Party, but, of course, what I have just done is laid out a coherent and logical series of premises and conclusions, and that is a process completely alien to the New Zealand First Party.

This matters for this particular bill and this particular initiative because public policies, if they are to be sustainable, must be politically accepted, and New Zealand First claims that it may one day have the balance of power in this House. It is critical for this policy and our reputation abroad and our interests in having solid, high-quality infrastructure developed outside of our borders in our region of influence—which any of those other jurisdictions I mentioned would view as important—that such an incoherent party, whose only true point of reference is a resentment of outsiders and a resentment of foreigners who come here, such as telling them to go home, does not hold the balance of power in this House so that this policy can remain sustainable. Not only will that help in this particular policy but, I dare say, it would also increase the average IQ of this House. I commend this bill to the House. Thank you.

I rise to support New Zealand’s involvement in the Asian Infrastructure Investment Bank. In 1978, when China opened up and started to have economic reforms, the most important thing to realise for the Chinese Government was that it needed to have much better infrastructure. There was a saying in China in those years, when I was still in China. It was “Yao zhi fu, xian xiu lu.” It means that if you want to get wealthy, you need to have good roads. So that is basically the principle: that is, to have better infrastructure if you want to be wealthy or you want to be economically developed. For that reason, the Chinese Government opened the market and attracted a lot of foreign investment in Chinese infrastructure. So that is why today, when you look at Chinese infrastructure, railways or highways, it is very well developed.

In Asia generally there is a strong demand for investment in infrastructure. According to a widely cited report—and many people have mentioned this—there will be a need of about US$8 trillion for infrastructure in Asia between 2010 and 2020. So there is genuine need there. Well, this bank—the Asian Infrastructure Investment Bank—has a capital base of US$100 billion, which is not a huge amount of money. However, it can be a catalyst to attract more funding into this particular project.

New Zealand is one of 57 founding members. I am very proud that we are now a founding member. New Zealand is the first Western, developed country to become a founding member of the bank. Our contribution is small, NZ$145 million is a small contribution, but the return is huge, mainly because our relations with Asia have grown so fast and so deep, particularly economically—at the moment, six out of the top 10 trading partners are in Asia—and also in terms of exports. In the 1970s about 10 percent of our exports would go to Asia; now 43 percent of our merchandise exports will go to Asia. So, if you look at ASEAN—the Association of South-east Asian Nations, the 10 countries in South-east Asia—you will find that today our trade with those countries in 1 week accounts for about 1 year of our trade volume with those countries in the 1970s. You will find that our trade with the region has grown substantially. Also, if you look at the opportunities for us with the bank, with our involvement our New Zealand companies will get more opportunities to get into the projects in the region. So overall I would say that it is a hugely beneficial investment, and also it is good for the region and it is good for New Zealand. Thank you very much.

It is a pleasure to take a call in this third reading debate and to acknowledge the member who has just resumed his seat, Jian Yang, and the contributions of other members.

The member makes a very good point: New Zealand is, indeed, the first Western country to sign up for this international bank as a founding member. New Zealand was also the first Western country to convey diplomatic recognition on the People’s Republic of China. We were the first Western country to welcome the admission of China into the World Trade Organization, and we were the first Western country to have a free-trade agreement with the People’s Republic of China.

Much of that was on the watch of Labour-led Governments. We mention that for two reasons. Firstly, we underscore the ongoing contribution that Labour-led Governments have made to New Zealand’s foreign policy and its broad internationalist outlook. We are not a large country, but we are a very constructive one. We are seen internationally as one of the least corrupt countries in the world, deservedly; one of the easiest countries in the world to do business with; and a country—perhaps up until this week—that has had a long and internationally recognised commitment to human rights. I believe that is still intact, despite some sullying from members opposite.

I am proud to be a New Zealander, and I am proud to be a member of the New Zealand Labour Party, which has upheld over the decades the finest traditions of New Zealand’s independent but multilateral and constructive foreign policy. So here we are today, where we are debating the International Finance Agreements Amendment Bill to set up this multilateral bank.

The second reason that I mention New Zealand’s relationship with the People’s Republic of China is, of course, that China has been a very influential sponsor in the early stages of the development of the Asian Infrastructure Investment Bank. That is important because New Zealand had to make a decision: would we become an early participant in that process, and encourage good governance in that bank, or would we take the approach of some other Western countries and say: “No, no. We want to stay solely within the other institutions.”—what they call Bretton Woods institutions: the Asia Development Bank, the World Bank, and the IMF? We chose the former course, and I believe—and Labour believes—that that was the right approach to take. This is because a constructively engaged, multilaterally disposed China is good for the region, and it is good for the world. An isolated China, on the other hand, is less good.

Let us turn to some of the arguments that have been raised in the various stages of this debate. One was the reluctance of our Western friends to initially support the bank. I think, as my colleague David Parker said earlier, those questions and tensions, if you like, have eased progressively during the set-up process of the bank, not least because of the participation of senior New Zealand officials or former officials, such as John Whitehead, former Secretary to the Treasury, in the design of the articles of association of the bank.

In the Committee stage we all took some time to work through those and to recognise the contribution of officials in setting up a two-tier governance structure with a board of governors and a board of directors, transparent powers, and good governance processes. New Zealand joins the board of governors. We will have the right, alongside other countries, to appoint directors, and we look forward to there being a healthy flow of transparent information to the board of governors so that we as a shareholder can ensure that we are continuing to participate in the national interest.

I do want to acknowledge—and I do not think I have done this before—the contribution of our New Zealand First colleague Richard Prosser. I thought he described the controversy around the use of the Future Investment Fund pretty accurately. The $140 million initial contribution and the $450 million contingent liability are being underwritten by the Future Investment Fund, which he quite rightly pointed out was the fund created when the half-share in New Zealand State-owned enterprises was sold down by the current Government. That was a fund that was clearly established for the development of alternative infrastructure in New Zealand—social infrastructure: schools, hospitals, roads, etc. in New Zealand.

I agree with the member that the Government has been fundamentally dishonest, actually, in taking those funds for a different purpose than the fund was clearly legislated for. That may even be subject to challenge, but that is an issue for another day. New Zealand does not believe that is a sufficient reason to vote against the bill, but we do join members alongside us in condemning the chicanery that has gone on by the misuse—and the multiple misuse—of the Future Investment Fund. I think the Government has committed it about 16 times over in various press releases so far this year.

I turn briefly to note the Foreign Affairs, Defence and Trade Committee report and the national interest analysis, which are detached. I made the point in the Committee stage that that national interest analysis was pretty thin. It was a little bit on a wing and a prayer. Certainly, there were no numbers on it.

I would challenge officials, as we bed in our participation to the bank, to be very transparent in accounting for—both through the Ministry of Foreign Affairs and Trade, New Zealand Trade and Enterprise, and Statistics New Zealand—any indication of contractual flows that stem from our participation in this bank. In other words, if New Zealand suppliers are getting bank contracts or consultancies, it would be valuable for that to be recorded so that 5 years down the track we can look back and actually quantify what the value-add to New Zealand exporters from our participation was, which would be alongside the more general value of the sustainable development of our region. We have both a general multilateral interest and a specific national export interest in participating in that region.

The main benefits of New Zealand becoming a party to the bank, therefore, should include the increased economic development in the Asian region, with flow-on benefits direct and indirect to New Zealand. The bank will support the economic integration of the Asian region, it will augment New Zealand’s existing relationships, and it will contribute to the implementation, it is hoped, of best-practice policies, operational standards, and economic and social safeguards in place alongside its infrastructure investment. It will reinforce our constructive, longstanding, and positive relationship with the People’s Republic of China while we also explore, potentially, new forms of relationship with other countries in the region, and it could and should provide commercial opportunities for New Zealand firms, which we are very keen to see quantified.

Just to return, if you like, to the top of the analysis, this proposal emanated from a perceived shortfall in commitment to infrastructure investment in the Asia-Pacific region by the Bretton Woods institutions—in particular, the amount of funding available to the Asian Development Bank—and some arguments about its shareholding, which was Japan-heavy, and its governance.

We are not, in supporting this Asian Infrastructure Investment Bank, denigrating the Asian Development Bank. We think there is room for both, and we think the combination of both will recognise the growing importance of the Asia region to the world economy and to New Zealand.

We have looked in detail at the governance arrangements set out in the articles of association, we have recognised the role of New Zealand officials in bringing best-practice guidelines to that, we have noted the advantages of being a founding governor of the bank through our founding shareholding, and we have commended what it represents in terms of constructive engagement with the countries of our Asia-Pacific region.

We have criticised the use of the Future Investment Fund, and we have questioned the depth of the national interest analysis that went with this, but overall, in geostrategic terms, we believe this to be a sensible, prudent, and long-sighted investment in the growing infrastructure, and the growing political infrastructure, of the Asia-Pacific region. We commend the bill to the House.