Coalition Senators emphasise the importance of the Northern Australia
Infrastructure Facility (NAIF) to the ongoing development of Northern
Northern Australia is uniquely positioned due to geography, climate, and
sparse population, and thus government intervention may be necessary to
catalyse economic development.
Coalition Senators of the committee are pleased with the conduct of the
NAIF Board and management, and congratulate the NAIF team on their diligence
and their effective stewardship of taxpayers' funds. This dedication to proper
process is now bearing fruit with new loan agreements that will foster
development in Northern Australia being announced with regularity.
Coalition Senators commend NAIF for the work that they have already
completed, committing over $120 million in concessional loans.
Government Senators note previous criticism of NAIF's slow tempo of
contract and are reassured by recent NAIF announcements that the time and diligence
applied to each application is in keeping with NAIF's responsibilities to the
Low quality of evidence
presented to inquiry
The Chair's Report states in its Chapter 2 Committee View section that 'the
majority of evidence received by the committee was not complimentary of NAIF's
governance framework'. Aside from the evidence from Export Finance and
Insurance Corporation (EFIC)––which was complimentary––there was no
authoritative evidence at all from the lending sector that would suggest any
deficiencies in the NAIF model. Most lenders would likely agree that the merits
of any application for finance should be reviewed unsparingly, and that lenders
have a commercial responsibility to protect applicants' details.
Furthermore, Coalition Senators categorically reject the assertion in
the Chair's Report (2.99) that the 'majority of evidence' claimed that the
governance framework was 'severely inadequate to ensure effective oversight of
the NAIF's performance of its role as a commercial financier'. It is hard to
justify such a conclusion, given that there was no input into this inquiry from
the commercial lending sector.
Coalition Senators wish to stress the importance of seeking the views of
the community. Nevertheless, it is the preference of Coalition Senators that,
when producing a parliamentary report, authoritative sources are used to inform
the inquiry. The use of secondary and tertiary sources in the Chair's report is
concerning, and the anecdotal, lay-person opinion does not lend a persuasive
tone to the arguments being presented.
Coalition Senators of the committee note that the Chair's report
contains numerous alarmist perspectives as to what 'could' occur as a result of
perceived inadequacies in NAIF processes. Such statements are conjecture, not
evidence, and should be dismissed as lacking in any weight at all. The only
useful information that is available to the Parliament and the public is the
evidence of exacting standards and due diligence in the formation of contracts
between NAIF and Project Proponents––as evidenced by the July 3rd 2018
announcement of a $96 million loan to James Cook University to expand their
Political Motivation of
The Senate Standing Committee on Economics' inquiry into the Governance
and operation of the Northern Australia Infrastructure Facility (the
Inquiry) has been a blatantly political enterprise designed to capture
Greens/Labor-Left hysteria regarding the proposed Carmichael Mine in the
Galilee Basin and use that hysteria to bolster the Labor by-election campaign
for the seat of Batman in Victoria in
The inquiry was also used by the Australian Labor Party to assist in
securing preferences from the Australian Greens in Queensland––who were
outraged at the prospect of the Carmichael Mine and any potential NAIF Loan for
the mine's rail infrastructure. The Queensland Labor Party thereby sand-bagged
the seat of South Brisbane for Queensland Treasurer Jackie Trad in the State
election in 2017. The politicisation of the Adani proposal––and its use by the
left as a virtue-signalling device––is evidence of both Bill Shorten and
Annastacia Palaszczuk's repeated backflips on the issue of support for the
Carmichael Mine, and the potential NAIF loan. The suggestion that consideration
of the Adani application constituted some kind of collusion or conspiracy is,
of course, pure fiction.
All parliamentarians and all members of the Australian public have cause
to be extremely concerned that the Australian Labor Party and the Australian
Greens are able to hijack the Parliamentary committee process for such blatant
electioneering. This is compounded by the undue pressure that has been placed
upon the operations of the NAIF and the potential for such pressures to
interfere with the NAIF executing its remit: fostering development in Northern
Australia in a manner that is consistent with the interests of the Australian
Governance of NAIF
Coalition Senators completely reject the suggestions in the Chair's
Report concerning the implementation of layers of additional oversight into
NAIF processes. The current customary levels of government and parliamentary
oversight are completely adequate and would meet the expectations of the
Coalition Senators note that:
NAIF's governance meets or exceeds the public sector
governance standard set by the Australian National Audit Office (in its best
practice public sector Governance Better Practice Guide) and the ASX Governance
Council Core Corporate Governance Principles for listed companies.
Coalition Senators wish to highlight that independent, reputable
governance experts from Allens Linklaters and the Australian Government
Solicitor have reviewed NAIF's core governance documents and confirmed in their
view they are best practice. This includes NAIF's Confidentiality Policy and
its Conflict of Interest Policy.
Transparency of Investment
Coalition Senators note that analysis of eight Australian lending
institutions operating in similar projects to NAIF, including the two public
and the top five private banks and a regional bank, which demonstrates that
none of them disclose publically their Risk Appetite Statement or credit
decision-making governance documents.
Coalition Senators wish to stress the importance of keeping the identity
of prospective borrowers confidential. King & Wood Mallesons state that:
...borrowers expect a rigorous system of confidentiality to be
applied to protect information relating to any potential or current loans and
to any commercial projects these loans relate to. The type of projects that
NAIF may finance (being key infrastructure projects) have particular commercial
sensitivity due to the scale of investment these projects require and the
parties that participate in this market. In our view, the potential for
borrowers’ commercially confidential information to be disclosed to the public
may prevent borrowers from considering applying for finance from NAIF and may
reduce the volume of projects in Northern Australia financed by NAIF.
Coalition Senators note that Tony Shepherd has stated that sufficient
checks and balances, both internal and external, are already in place:
Mr Shepherd: I think the thing is that you've got to look at
the internal mechanisms within the NAIF itself to ensure the investments are
done wisely and in accordance with the relevant laws, and then you've got to
look at the external mechanisms for checking that. They are subject to external
audit and they are under the supervision of the ANAO—that to me is sufficient
check and balance.
Current and upcoming
Coalition Senators applaud NAIF for its patience and diligence in
selecting projects that will increase the productive capacity of Northern
Australia. The criticism levelled at NAIF for being slow to pick projects is
rash, and rushing Corporate Commonwealth Entities into making decisions with
taxpayers' money is of limited utility.
To date, over $120 million in loans have been funded by NAIF.
Projects have now been announced in all three Northern Australian
states/territories. These loans include:
The Onslow Marine Support Base in Western Australia;
The Humpty Doo Barramundi Farm in the Northern Territory; and
The JCU Engineering Innovation precinct announced on July 3rd
A potential $516 million loan to the Kidston Solar/Pumped Hydro project
also appears to be well advanced.
The NAIF's lending to date is truly 'Northern', encompassing all
Coalition Senators reject Recommendation 1 of the Chair's report, noting
that the current requirement to consult on alternative financing is undoubtedly
Subsection 11(4) specifies that the responsible Minister will
seek agreement from the Minister for Finance and the Treasurer, and consult
with the relevant jurisdiction(s), prior to agreeing to the use of an
alternative Financing Mechanism.
Coalition Senators further note that Tony Shepherd believes that the
current requirements for ministerial consultation are sufficient:
CHAIR: Do you think it would be appropriate for the
NAIF to have two responsible ministers?
Mr Shepherd: I'm really not sure of the advantages of
having two. If it's working okay, if it's fulfilling its mandate, I don't see
the need to bring in another minister.
Coalition Senators believe that Recommendation 1 is a blatant, politically
motivated attempt to undermine the Minister for Resources and Northern
Coalition Senators agree-in-principle with Recommendation 2 concerning
the Memorandum of Understanding (MOU) between NAIF and the Clean Energy Finance
Corporation (CEFC). However, it is important to note that each Corporate
Commonwealth Entity has a set of different funding criteria, and will view
Project Proponents through a different lens. It is also possible that the MOU
may actually cause an increased administrative burden on both corporations,
distracting them from their core focuses.
Coalition Senators note that NAIF and CEFC each have a specific remit;
however these will overlap on occasion. In situations where a project can
develop infrastructure in Northern Australia and provide for cleaner
energy outcomes, the best interests of the taxpayer may be served investments
from both funds.
Coalition Senators wholeheartedly support the objective of engaging
indigenous members of the community in NAIF projects. NAIF has already
demonstrated the ability to effectively engage with the indigenous community in
NAIF strongly supports Indigenous communities in northern
NAIF is currently engaging with Indigenous led proponents or
those partnering with Indigenous communities on projects related to social
infrastructure, eco-tourism, agriculture and horticulture, resources and
innovative energy solutions for remote communities. In total there are around
18 enquiries. Three of those are in due diligence.
Further all NAIF finance recipients must develop strategies for
Indigenous participation, procurement and employment. This is a mandatory
criterion and the NAIF Board will be looking to see identifiable leadership and
change and its loans will ensure there is accountability.
However, Coalition Senators reject Recommendation 3, which includes 'a
requirement that within 30 days of an Investment Decision, the Northern
Australia Infrastructure Facility publish detailed Indigenous Engagement
Strategies (IES) from applicants when an investment decision is taken'. The
Commonwealth's commitment to Indigenous engagement and employment is
self-evident (such as requirements for Indigenous employment within the
Commonwealth Procurement Rules), and imposing additional layers of administrative
burden on the NAIF––or any other agency for that matter––does little to
progress these objectives.
Coalition Senators note that the 2018 NAIF Investment Mandate already
has a requirement that Project Proponents submit an IES,
however there should not be a blanket requirement that this be published, let
alone within 30 days of the Investment Decision. Potential release of each
Investment Decision's IES should be assessed on a case-by-case basis. There may
be instances in which the IES contains information that is
commercial-in-confidence. Such sensitivities should be considered on a
case-by-case basis before an IES is made public.
Coalition Senators note the need for input from the Indigenous community
at all levels of NAIF governance, from the board through to the administration
of the NAIF. However, there is the need to balance diversity with the need for
prudent fiscal management. It would be a 'false economy' to limit the Board's
field of expertise or sacrifice relevant skill in the name of a quota.
Coalition Senators reject Recommendation 5, noting that it is not
appropriate to require disclosure of project-by-project conflicts of interest
within 30 days of an Investment Decision. NAIF already has robust systems in
place to ensure that conflicts of interest are properly managed and do not lead
to questionable Investment Decisions being made due to ulterior motives.
Indeed, NAIF's investment mandate already contains a provision
concerning corporate governance which ensures that 'the Facility has
credibility in financial markets and maintains a positive commercial
Subsection 17(1) provides that in undertaking its investment
function, the Facility must have regard to Australian best practice government
governance principles and Australian best practice corporate governance for
Coalition Senators note that, as set out in NAIF's submission to this
inquiry, NAIF's processes are consistent with both the ANAO best practice and
ASX publicly listed company protocols.
Coalition Senators reject recommendation 6, noting that the disclosure
requirements are excessive and may breach commercial-in-confidence
Coalitions Senators note that Recommendation 7 is already a requirement
under the Commonwealth's Australian Industry Participation (AIP) Plans, with
which the NAIF must comply:
Section 18 provides that Projects must comply with the
Commonwealth's Australian Industry Participation (AIP) Plan policy, before the
Board can make an Investment Decision on an Investment Proposal. AIP Plans are
designed to provide details on the expected opportunities to supply goods
and/or services to the Project; how these opportunities will be communicated to
potential suppliers; and how Australian businesses will be assisted in
longer-term participation, including encouraging capability development and
integration into global supply chains. The purpose of this section is to
maximise the opportunities for Australian businesses to participate in major
Coalition Senators note that Recommendation 8, which calls for a
prescriptive portion of the NAIF funding to be allocated to Tourism, is
unnecessary, as NAIF is already actively supporting tourism. NAIF CEO Laurie
Walker outlined this at Senate Estimates on 1 March 2018:
I can confirm that NAIF is also focussed on supporting the
tourism industry. For example: walkways and eco-tourism infrastructure;
airports and heliports; cruise ship ports; marinas; and associated road, power,
communications and water all contribute to tourism experiences.
There are 18 currently active [tourism project-related] enquiries
22 per cent of total active enquiries).
We expect to be able to contribute strongly to financing tourism
assets particularly where there is a differentiated tourist offering. We
envisage that bringing together of Indigenous cultural experiences and
ecotourism has the potential for NAIF to support the development of iconic
Separately NAIF is also looking to support medical and educational
tourism with its ability to finance social infrastructure.
We are cognisant in identifying tourism projects to review that
NAIF needs to have an expectation that projects are capable of repaying any
NAIF loan or other investment i.e. NAIF is not a grant funder. Proponents
interested in NAIF financing of tourism assets need to ensure that mandatory
criteria will be able to be satisfied.
Coalition Senators wish to draw attention to the fact that Recommendation
8 is simply a re-statement of a Labor policy announcement from 2017. The
response of Coalition Senators has not changed: under the current scheme any
amount of lending to the Tourism Industry can take place. There is no need for
a prescriptive Tourism fund allocation. Such prescription could limit the total
Tourism funding allocation or, alternatively, could have a chilling effect on
applications for positive infrastructure developments from outside the tourism
Coalition Senators reject Recommendation 9 on the grounds that the NAIF
is not different to any other Corporate Commonwealth Entity, and thus should be
treated like all others.
Coalition Senators reject Recommendation 10 in light of the evidence
given to the committee by Tony Shepherd.
CHAIR: Wouldn't that give the community some knowledge of
who is applying to the NAIF and what they're applying for?
Mr Shepherd: Yes, but I think that has the opposite effect
in terms of who applies, because many applicants will not wish their name or
any details of their proposal to be disclosed until it's been assessed and the
NAIF decides it wants to proceed with it. When it does happen, under their
legislation they have 30 days to publish the essential details. It would be
just like saying to a bank, 'Let's see who's applying for a loan.' That's
hardly going to work. Most of the applications are commercial-in-confidence.
CHAIR: But, if the community is able to see who the
proponents are, don't you think that would give them more investment in seeing
the NAIF succeed?
Mr Shepherd: I don't think so. I think in the end that would
be a discouragement for people coming forward with proposals, particularly
those who would wish to remain confidential for strong and valid commercial
reasons. I think at the end of the day what we're trying to do is get the north
developed, and that's got to be the pre-eminent requirement.
Coalition Senators note that Recommendation 11 simply mirrors the current
Commonwealth Government's policy of decentralisation.
Recommendation 12 could breach privacy protections of existing
employees, and would certainly discourage many highly regarded and qualified
professionals from applying to work at the NAIF.
Senator Jane Hume
Navigation: Previous Page | Contents | Next Page