Bills Digest no. 27 2006–07
Export Finance and Insurance Corporation Amendment Bill
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact Officer & Copyright Details
Export Finance and Insurance
Corporation Amendment Bill 2006
Date introduced: 16 August 2006
Commencement: The formal provisions of the Act commence on Royal
Assent; the substantive provisions commence on a day to be fixed by
Proclamation or six months after Royal Assent (whichever occurs
To implement changes to the board management structure of the
Export Finance and Insurance Corporation (EFIC) in accordance with
the Uhrig Review.
The Export Finance and Insurance Corporation Act 1991
(the Act) commenced on 1 November 1991. The Act establishes
the Export Finance and Insurance Corporation (EFIC)(1)
as a statutory corporation charged with increasing Australia s
The EFIC Act provides for four key functions, to:
- facilitate and encourage Australian export trade by providing
insurance and financial services and products to persons involved
directly or indirectly in such trade;
- encourage banks and other financial institutions in Australia
to finance or assist in financing exports;
- manage the Australian Government s aid-supported mixed credit
program (a facility which has now been discontinued, although loans
are still outstanding under it); and
- provide information and advice regarding insurance and
financial arrangements to support Australian
EFIC forms part of the portfolio of the Department of Foreign
Affairs and Trade. The Minister for Trade, the Hon. Mark Vaile, MP,
appoints the members of the EFIC Board and, on the recommendation
of the Board, appoints the Managing Director. The majority of the
members of the board are from the private sector.(3)
The EFIC Board Audit Committee monitors compliance with
obligations under the Act, the Commonwealth Authorities and
Companies Act 1997, and any other applicable
On 17 August 2006, the Senate referred the Bill 2006 to the
Foreign Affairs, Defence and Trade Committee for examination
and report by 9 September 2006.(5)
Because of the lack of any substantial criticism of the proposed
legislation and the comprehensive submission from EFIC and the
Department, the committee decided not to hold a public
hearing.(6) The Committee received a joint submission on
behalf of the Department of Foreign Affairs and Trade and EFIC. The
submission states that the Bill will have no financial or
regulatory impact and EFIC s mandate and functions will not be
affected; the EFIC board has been consulted on the proposed changes
and has agreed to them.(7)
considered the bill and decided the provisions of the bill were
consistent with the recommendations of the Uhrig Report. It
recommended that since EFIC is a commercial organisation, it is
appropriate that EFIC be aligned more closely with the board
template as intended by the bill.(8)
The Bill will make changes to the governance arrangements of
EFIC, which are contained in sections 32 47 of the Act. These
changes will result in the current board management structure
reflecting more closely the corporate governance model detailed in
the Review of Corporate Governance of Statutory Authorities and
Office Holders (Uhrig Review) conducted by Mr John Uhrig AC in
The Coalition had flagged its intention to examine statutory
authorities and office holders in its 2001 election platform. On 14
November 2002, the Prime Minister, the Hon. John Howard, appointed
Mr John Uhrig AC to review the governance practices of statutory
authorities and office holders, particularly those agencies which
impact on the business community.
The objective of the review was to identify issues concerning
existing governance arrangements and to provide policy options for
Government to gain the best from statutory authorities and office
holders and their accountability frameworks.(10)
The Prime Minister received the Uhrig Review in June 2003, and
it was released by the Minister for Finance and Administration on
12 August 2004.
The review concluded that there was no universally agreed
definition of corporate governance. The report provides the
in general terms, corporate governance encompasses
the arrangements by which the powers of those who implement the
strategy and the direction of an organisation are delegated and
limited to ensure the organisation s success, taking into account
the environment in which the organisation is
The Report recommended that two templates should apply to ensure
good governance of statutory authorities: agencies should either be
managed by a Chief Executive Officer (CEO) or by a board structure.
Both templates detail measures for ensuring the boundaries of
responsibilities are better understood and the relationship between
Australian government authorities, Ministers and portfolio
departments are made clear.(12)
Uhrig recommended that the selection of the management template
and financial frameworks to be applied should be based on the
governance characteristics of a statutory
The Financial Management and Accountability Act 1997
(FMA Act) should be applied to statutory authorities where it is
appropriate they be legally and financially part of the
Commonwealth and do not need to own assets. The FMA Act applies to
budget-funded authorities managed by a CEO. The FMA Act establishes
various management and reporting responsibilities for the CEO
(sections 44 46, 49 and 51), as well as allowing the Minister to
give guidelines to the CEO (s. 64). Furthermore, the FMA Act
provides an accountability framework for CEOs to manage agency
The Commonwealth Authorities and Companies Act 1997
(CAC Act) should be applied to statutory authorities where it is
appropriate that they be legally and financially separate from the
Commonwealth. The CAC Act applies to authorities that are corporate
entities managed by a board. It requires the head of the board to
report to the responsible Minister (sections 15 16), and to ensure
that the authority s activities comply with government policies (s.
28). A board structure is favoured if there is a strong commercial
focus to the organisation, or if the agency is intergovernmental.
EFIC is a Commonwealth authority under the CAC Act.
On 9 March 2006, the Minister for Trade announced a review of
EFIC was to be held.(14)
EFIC serves as Australia s Export Credit Agency (ECA). ECAs
facilitate and encourage export activity by providing
government-backed insurance and financial services to exporters
covering commercial and political risk. ECAs primarily cover market
sectors which are not served by the private sector, and
accordingly fill a gap in the market that otherwise would prevent
export activity.(15) This has led to criticism,
particularly from the non-government organization (NGO)
sector. It has been claimed that ECAs do not take into
consideration the environmental, social, or political impacts
of the projects which they support.(16)
The countervailing argument is that if ECAs did not provide
services, development in high risk markets would not be possible.
It is suggested that without the role of the ECA high risk markets
would be untapped. EFIC has at times come under similar
criticism for projects it has supported in Indonesia, Papua New
Guinea and the Lao Democratic People s Republic.(17)
However, since 2000, EFIC has become a leader amongst the ECAs
for its recognition of the need for environmental and social
standards in supporting projects.(18) EFIC has an
environment policy which implements Organization for Economic
Cooperation and Development (OECD) standards, which aims to ensure
its export transactions and investments address the fundamental
principle of an ecologically sustainable
To the end user, there is likely to be little obvious
manifestation of the Uhrig changes. The Bill repeals the
requirement for the Chief Executive Officer of the Australian Trade
Commission to be a member of the EFIC Board. As a result of the
amendments, the total size of the EFIC board will be reduced from 9
11 members to 6 9 members. This reduction in the size of the EFIC
Board is consistent with the Uhrig Review which recommends a board
of 6 9 members.(20)
The Bill provides that an appointed member (other than the
government member) shall hold office for three years. Additionally,
no appointed member will be permitted to hold office for more than
two terms (six years) or if serving as the Chairperson, for more
than three terms (nine years). These changes are consistent with
the Uhrig Review recommendations.(21)
Savings provisions in the Bill provide that an appointed member
other than the government member whose appointment is in force
immediately before the commencement of the Schedule continues to
hold office for the balance of the period of the appointment as if
the amendments had not been made. The Minister may terminate or
revoke the appointment. Similarly, the Managing Director of EFIC
whose appointment is in force immediately before the commencement
of the Schedule continues to hold office as if the amendments had
not been made. However, the Board is not prevented from terminating
The amendments will not impact on EFIC s ability to deliver
export facilitation services to Australian businesses. The
corporation s mandate will continue to be to focus on profitably
supporting the growth of Australian businesses internationally.
The Bill will have no financial impact on the Commonwealth.
Schedule 1 to the Bill contains amendments to the Export
Finance and Insurance Corporation Act 1991, including
amendments relating to the definition of appointed member,
composition of the Board, and changes to term appointments.
The Bill amends the Export Finance and Insurance Corporation
Act 1991. It makes changes to the governance arrangements of
EFIC. These changes will result in its current board management
structure more closely reflecting the board corporate governance
model detailed in the Review of Corporate Governance of
Statutory Authorities and Office Holders conducted by Mr John
Uhrig AC in 2003.
The change in the governance arrangements will not impact on
EFICs functions or services to Australian business seeking to enter
or develop export markets.
- Export Finance and Insurance Corporation website, http://www.efic.gov.au/.
- Export Finance and Insurance Corporation, Governance: Overview
of EFIC s role , http://www.efic.gov.au/static/efi/corporateinfo/governance.htm.
- Export Finance and Insurance Corporation, Principal
- Senate Foreign Affairs, Defence and Trade Committee,
Export Finance and Insurance Corporation Amendment Bill
2006, Canberra, September 2006, p. 1.
- ibid., p. 2.
Appendix 1: Joint submission on behalf of the Department of Foreign
Affairs and Trade (DFAT) and the Export Finance and Insurance
- ibid., p. 19.
- J. A. Uhrig, AC, Review of Corporate Governance of
Statutory Authorities and Office Holders, June 2003,
- ibid., p. 17.
- Sen. the Hon. N. Minchin (Minister for Finance and
Administration), Australian Government Response to Uhrig
Report, media release, 12 August 2004, http://www.finance.gov.au/scripts/Media.asp?Table=MFA&Id=550.
- Uhrig, op.cit., p. 12, point 6.
- Hon. M. Vaile (Minister for Trade), Review of the Export
Finance and Insurance Corporation, media release, 9 March
See also Department of Foreign Affairs and Trade, EFIC
Review 2006: Terms of Reference ,
- Senate Foreign Affairs, Defence and Trade Committee, op. cit.,
- ECA-Watch, The newer, bigger, badder banks , http://www.eca-watch.org.
- Aidwatch, Campaigns/Export Credit Agencies/Resources ,
- Malaika Culverwell, Bernice Lee and Izabella Koziell, Towards
an improved governance agenda for the extractive sector ,
Report based on RIIA workshop: sustainable relationships:
financing and monitoring responsibilities, Royal Institute of
International Affairs, October 2002.
- EFIC, Environment policy , http://www.efic.gov.au/static/efi/environment/environstd.htm.
- Explanatory Memorandum, p. 5.
- ibid., p. 6.
Politics and Public Administration Section
Foreign Affairs, Defence and Trade Section
14 September 2006
Bills Digest Service
This paper has been prepared to support the work of the
Australian Parliament using information available at the time of
production. The views expressed do not reflect an official position
of the Parliamentary Library, nor do they constitute professional
Staff are available to discuss the paper's
contents with Senators and Members and their staff but not with
members of the public.
© Commonwealth of Australia 2006
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by members
of the Australian Parliament in the course of their official
Published by the Parliamentary Library, 2006.
Back to top