On 14 June 2017, the Senate referred matters relating to the governance
and operation of the Northern Australia Infrastructure Facility (NAIF) to the
Senate Economics References Committee (the committee) for inquiry and report by
7 December 2017.
The committee received two extensions to report by 6 July 2018.
The terms of references for the inquiry are:
The governance and operation of the Northern Australia
Infrastructure Facility (NAIF), with particular reference to:
adequacy and transparency of the NAIF's governance framework, including its
project assessment and approval processes;
adequacy of the NAIF's Investment Mandate, risk appetite statement and public
interest test in guiding decisions of the NAIF Board;
used to appoint NAIF Board members, including assessment of potential conflicts
transparency of the NAIF's policies in managing perceived, actual or potential
conflicts of interest of its Board members;
adequacy of the Northern Australia Infrastructure Facility Act 2016 and
Investment Mandate to provide for and maintain the independence of decisions of
status and role of state and territory governments under the NAIF, including
any agreements between states and territories and the Federal Government; and
other related matters.
Conduct of the inquiry
The committee advertised the inquiry on its website and wrote to
relevant stakeholders and other interested parties to draw attention to the
inquiry and invite them to make written submissions.
The committee received 116 submissions as well as additional information
and answers to questions taken on notice, which are listed at Appendix 1.
A significant number of the submissions received by the committee
broadly responded to the inquiry's term of reference g. any other related
matters. These submissions mainly commented on the possible economic and
environmental impacts of the Indian multinational Adani Group's (Adani Group)
proposal for NAIF funding to build a railway line from the Carmichael coal mine
to the Abbot Point port in Queensland, also referred to as the North Galilee
Basin Rail Project.
The committee also received a large number of emails through online
campaigns organised by Greenpeace, GetUp and Do Gooder. In total, these three
campaigns generated over 15 000 emails. The majority of these emails expressed
concern at the possible grant of NAIF funds to Adani.
The committee held five public hearings:
Canberra––11 August 2017;
Cairns––1 February 2018;
Darwin––2 February 2018;
Broome––9 April 2018; and
Canberra––20 June 2018.
The names of the witnesses who appeared at the hearings are listed at
The committee thanks all the individuals and organisations who assisted
with the inquiry, especially those who made written submissions and appeared at
Northern Australia Audit:
Infrastructure for a Developing North
The development of Northern Australia became a particular focus for the
Australian Government in 2015. In January of that year, Infrastructure
Australia released a report entitled: Northern Australia Audit: Infrastructure
for a Developing North Report (Infrastructure report). The Infrastructure
report identified gaps in the provision of infrastructure in Northern Australia,
resulting in 'unmet demand, missed opportunity, excessive pricing or poor
It also highlighted that there were a number of sources of market failure in
the provision of infrastructure in Northern Australia which could require
The Infrastructure report established that there are significant
challenges to the creation of infrastructure in the northern part of Australia—specifically
its remoteness, its smaller population and its dispersed industries. It suggested
that if these challenges could be overcome, Northern Australia represented a
significant economic potential, partly due to its proximity to the Asia-Pacific
Shortly after the release of the Infrastructure report, the establishment
of NAIF was announced by the government on 12 May 2015 as a measure of the
2015–16 Budget. The then Treasurer, the Hon. Joe Hockey MP, explained:
I announce tonight a
new $5 billion Northern Australia Infrastructure Facility which is the first
major step in our plan for our great North.
We will partner with
the private sector and governments of Western Australia, the Northern Territory
and Queensland, to provide large concessional loans for the construction of
ports, pipelines, electricity and water infrastructure that will open our
Northern frontier for business.
White Paper on Developing Northern
Following this announcement, on 18 June 2015, the government released the
White Paper on Developing Northern Australia (White Paper) which built
on the prior Infrastructure report. It furthered the idea of an infrastructure
investment facility and outlined how the NAIF might function. It confirmed that
the government would partner with the private sector and northern jurisdictions,
in order to provide concessional loans to finance infrastructure projects in
The White Paper proposed that concessional loans could be provided to a
range of projects including airports, ports, rail, roads, energy, water, and
communications infrastructure. The White Paper also noted that project
proposals would be accepted from 1 July 2015.
The White Paper set broad guidelines for the types of projects that NAIF
The Facility will
provide concessional loans to projects that would not otherwise have been able
to be built and will be aimed at infrastructure that will increase the
productive capacity of northern Australia. Supported projects should have
benefits that flow beyond project proponents.
The White Paper also outlined elements of the project approval process,
noting that 'the Government will assess all projects for financial viability
before issuing a loan', and that 'this assessment will ensure that the
proponent is capable of repaying the loan'.
The White Paper proposed that projects would have to meet eligibility
criteria 'covering geographic eligibility, types of infrastructure and
financial criteria', that would be determined following a consultation process.
Finally, the White Paper noted that the establishment of a NAIF 'aligns
with the recommendations of the Northern Australia Advisory Group',
which called for 'mechanisms by which strategic 'game changing' and 'nation
building' infrastructure investments in the north can be identified and funded
by the public and private sector'.
In November 2015, the government released a Consultation Paper on NAIF which
considered NAIF's objectives and delivery model as well as the criteria for a
project's loan eligibility and potential loan characteristics.
The consultation process drew on expertise from industry, state and territory
governments, relevant federal government departments and other stakeholders.
At the time of writing, submissions to the consultation paper have not been
Following this consultation, the Northern Australia Infrastructure
Bill 2016 (NAIF bill) was released publically on 28 January 2016.
The NAIF bill was introduced into Parliament on 17 March 2016 and referred to
the Joint Select Committee on Northern Australia (Joint committee) for inquiry
The Joint committee tabled its report on 14 April 2016, which recommended
that the bill be passed to allow the establishment of NAIF and commented that NAIF 'could potentially make a significant
contribution to the development of critical infrastructure in Northern
The NAIF bill was passed on 3 May 2016 and received royal assent the
following day. The NAIF was then
established on 1 July 2016.
On 17 March 2016, NAIF's draft Investment Mandate was released for
public consultation, to which the Department of Industry, Innovation and
Science (department) received 11 submissions. These submissions are not
currently available on the department's website.
The Investment Mandate was made and registered on the Federal Register
of Legislation on 4 May 2016 and commenced the following day.
Purpose of inquiry
Since its establishment in July 2016, NAIF has been subject to a significant
level of public scrutiny, of which the controversial Carmichael coal mine, and
associated railway line, proposed by Adani was the prime catalyst.
Concern over the potential loan to Adani led to a broader interest and
scrutiny of NAIF's operations and governance with stakeholders raising the
Lack of overall transparency and accountability;
Inadequate executive oversight by the Minister for Resources and
Effectiveness of the NAIF Board––its independence, composition
and management of conflicts of interest;
Public disclosure of information;
Deficiencies in NAIF's project assessment and approval processes;
Absence of clear and effective communication with the public.
These concerns were echoed by a diverse range of individuals and
organisations, which speaks to the broad nature of the criticisms NAIF has
encountered. For example, the Arid Lands Environment Centre contended that:
The current structure of the NAIF and its accountability to
the Australian government and Australian taxpayers leaves a lot to be desired.
The NAIF has not demonstrated it is capable of delivering investment that
provides sustainable and equitable benefits to the economies of the north. This
is due to a fundamental lack of proper accountability, transparency and
integrity, which has left the facility vulnerable to conflicts of interest and
opens up the potential for corruption.
In their submission to the inquiry, Professor John Quiggin, Associate
Professor Kristen Lyons and Dr Morgan Brigg, argued that:
The establishment of the Northern Australia Infrastructure
Facility offers substantial potential benefits and also substantial dangers.
The potential benefits will arise if the NAIF is used to promote infrastructure
investments where the social benefits exceed the commercial returns.
The dangers arise first from the possibility of a return to
an investment strategy based on an outdated developmentalist strategy and
second from the risk that the allocation of funds will be driven by short term
Transparency Australia International also commented that:
Through our research, we found that the NAIF processes for
investment decision-making lack transparency, accountability and integrity.
These weaknesses undermine public scrutiny of its decisions, give rise to
conflicts of interests, and could result in companies with a history of
noncompliance, criminal or corrupt behaviour gaining access to public funds.
This inquiry seeks to examine these issues in the context of the adequacy
and transparency of the NAIF's governance framework including its Act,
Investment Mandate, Board processes and policies.
Ms Laurie Walker, NAIF's CEO has also acknowledged the importance of
this inquiry, commenting that the 'outcome of this inquiry is extremely
important, because it goes to the confidence that the market and stakeholders
have in the integrity of our process'.
Expert Review Report
In December 2017, Mr Tony Shepherd AO was selected by direct tender by
the Department of Industry, Innovation and Science to conduct an independent
expert review of the NAIF.
Mr Shepherd has considerable experience in the development and management of
major infrastructure projects throughout Australia. The review was conducted
between 4 December 2017 and 20 January 2018, and was released by government on
18 April 2018.
The review's aim was to 'recommend ways to accelerate project
development' and ensure the NAIF can best meet its legislated objective to
enable 'the construction of northern Australia economic infrastructure which
provides a basis for economic and population growth in northern Australia'.
The review considered NAIF's policy settings, with particular reference
to its Investment Mandate, and assessed the implications on NAIF's project
identification, selection and assessment processes, including risk settings.
The review made 15 recommendations. A number of these recommendations proposed
changes to NAIF's 2016 Investment Mandate, in particular recommendations 4, 5, 6,
and 7. This saw NAIF's original 2016 Investment Mandate repealed and replaced
with a new 2018 Investment Mandate which came into force on 3 May 2018.
Australian National Audit Office review
On 18 May 2018, the Australian National Audit Office (ANAO) announced
that it would undertake a review of the NAIF that was included in the Annual
Audit Work Program for 2017–18.
The ANAO proposes to examine if NAIF has:
in place a sound governance framework that is fit-for-purpose;
implemented arrangements that support effective integrity and
transparency in relation to its operations
In a letter to the Hon. Wayne Swan MP, the Auditor-General advised that
'the audit report is anticipated to table in December 2018'.
Scope and structure of report
The report is divided into five chapters including this introductory
Chapter 2 examines NAIF's governance framework, including its
Act, Investment Mandate and governance policies. This includes an assessment of
the 2018 Investment Mandate.
Chapter 3 examines NAIF's Board of Directors, including how it
deals with conflicts of interest.
Chapter 4 examines issues in relation to NAIF's project
assessment and approval processes.
Chapter 5 examines issues around NAIF's transparency and
accountability, as well as how it communicates and engages with the public.
Recommendations made by the Shepherd review, which have not yet been
implemented, are discussed in the relevant sections in chapters 3, 4 and 5.
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