International Finance Agreements Amendment Bill

Dr WAYNE MAPP (National—North Shore) Link to this

I will take only a short call on this bill. The reason is that this bill is, I think, supported by most parties, if not all parties, in the House. It is worth drawing members’ attention to the fact that 170 countries are party to this convention. They include all of the OECD countries, and that probably means some parties are therefore automatically against it.

It is noteworthy that there is an allocation of shares. For the OECD countries it is 59,000 shares, and New Zealand’s share of that is 513 shares—very small. We have a small role to play in the agency, but it is essentially part of New Zealand’s responsibilities to facilitate international investment, particularly in places of political risk, which is what this agreement provides for. It provides for the protection of that kind of investment. There is a small risk potential, I guess, in these situations, and New Zealand will have an obligation in relation to that. We calculated in the Foreign Affairs, Defence and Trade Committee that probably in the region of about $100,000 is at risk per year. We felt that was not a major issue.

I can say to members that this bill excited the attention of the nation to such an extent that I have an unparalleled announcement to make: there were no submissions on it, whatsoever. I do not think much more needs to be said about the bill, other than to say it is part of the framework of New Zealand being a responsible country, and being part of the family of nations. As National has been making quite clear in recent years, in foreign affairs issues in particular there is very much a bipartisan approach to these matters. I suggest that this is precisely one of the areas where we would expect that approach to be reflected in the votes in this House. Thank you.

Hon PAUL SWAIN (Labour—Rimutaka) Link to this

I have always thought that the best speeches Wayne Mapp makes are the short ones. I thought that that was one of his best, actually.

Of course, the Labour-led Government supports this legislation. As the previous speaker mentioned, it allows us to become a member of the Multilateral Investment Guarantee Agency. A number of steps have to be taken. We have already signed the convention, in September 2005, and after that we were required to pass legislation, which, hopefully, is what we are doing today, and we then lodge this with the World Bank. What was not mentioned before is that this Multilateral Investment Guarantee Agency is one of the five agencies of the World Bank. It is an important body. The core reason for setting it up was to try to enhance the flow of capital in technology-developing countries, for productive purposes, by providing investment insurance against what is called sovereign and political risk. In other words, it is allowing the private sector to invest in countries with, often, high political risk, and having the opportunity, if there is a default, to be able to have a sizable world body to negotiate that default on behalf of the individual donor or investor. It is an important agency, and it does fit in with New Zealand’s essential goals, which are to try to help and promote investment and development in developing nations.

There is not much more to be said, except that it is important to note that although this particular agency is concerned primarily with alleviating poverty, it complements New Zealand’s other current provisions for export insurance by providing guarantees for equity payments for New Zealand companies investing in developing countries. In our view, it hits a number of targets. It plays our part in trying to ensure that investment is going into developing countries to ensure that they progress and grow, and provide jobs and long-term sustainable growth for those economies, but recognises risk. It makes sure there is an ability to deal with that if something goes wrong, given the political risk of some of these investments, although at the same time it is supporting our export sector by providing some form of insurance and giving them some comfort when they make these investments. I wholeheartedly support this bill, and recommend that it be passed without too much delay.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) Link to this

Tēnā koe, Mr Assistant Speaker. Tēnā tātou katoa i te Whare. I understand that this bill is intended to amend the International Finance Agreements Act of 1961 so that New Zealand can become a member of the Multilateral Investment Guarantee Agency, and to ratify the convention establishing the Multilateral Investment Guarantee Agency signed by this Labour Government in Seoul on 6 September 2005, linking that agency to others referred to in that Act, including the World Bank, the IMF, and the International Finance Corporation.

The Multilateral Investment Guarantee Agency is one of just five agencies that make up the World Bank Group. There are 170 members, including New Zealand. The stated mission of the Multilateral Investment Guarantee Agency is to enhance the flow of foreign investment to developing countries by providing insurance for member countries against both sovereign and political risk. It provides protection against an inability to transfer local currency outside the country caused by the host Government’s actions, protection against the loss of an insured investment as a result of acts by the host Government—it may reduce or eliminate ownership—protection against the host Government breaching a contract, and protection against the loss or destruction of assets caused by politically motivated acts of war or civil disturbance in the host country. The risk insurance is provided for terms of up to 20 years for investments, investment loans, and deals where the investor’s return comes from the revenues or production of the investment.

That is the official spin, but the history of foreign investment paints a much different and far darker picture in this country. Foreign capital has always played a big role in the New Zealand economy, from right back in the colonial days when the settler Government first attracted British investment by promising land to settlers that had been stolen from Māori, then called for further investment to bankroll the war against Māori whose lands had been stolen. But, despite all that, up until 1950 foreign investment was still only about 11 percent of the total investment.

Then in 1984 the Government lifted restrictions on New Zealand companies investing overseas and taking advantage of cheap overseas labour, which of course led to the loss of thousands of New Zealand jobs to offshore manufacturing. Unfortunately for New Zealand, the Government’s response was not to protect jobs but to start reducing the restrictions on foreign investment into Aotearoa. That led to the privatisation and sale of some of the country’s largest companies beginning in 1988, and giving foreign investment a real boost. Indeed, sales at the time were structured to make overseas participation inevitable. Many companies were sold cheaply in a depressed market, and by the mid-1990s most of New Zealand’s top companies were between 30 and 100 percent foreign-owned. Yet the reality of all that investment is that rather than investing in New Zealand, extending production and creating jobs, foreign investors basically took over existing companies, stripped them of their assets, laid off thousands of workers, and took their massive profits back offshore with them.

Then, if that were not enough, in 1995 the Government amended the Overseas Investment Act to make it even easier for foreign investment in the New Zealand economy. That included the lifting of restrictions on the purchase of New Zealand land, even though a National Business Review poll in 1995 clearly showed that more than half of all Kiwis did not want land to be sold to foreigners and, in fact, said they would support a law to ban the foreign ownership of New Zealand land.

Māori have been particularly hard hit by much of the privatisation and sale of New Zealand’s assets, through the selling of huge Māori workplaces such as forests, the railroad, and Telecom, and through the break-up and sale of many of the country’s freezing works. The Government was also selling off resources that were subject to Treaty claims—resources that were hard enough to recover when held by the Crown, but that would become nigh on impossible to get back once ownership had moved offshore. It all culminated in 1997 when the Government wanted to sign up to the OECD’s Multilateral Agreement on Investment, which aimed to remove virtually all restrictions on foreign investment, giving multibillion-dollar foreign raiders an open season on assets in Aotearoa. A massive campaign against the Multilateral Agreement on Investment brought together Māori, activists, unions, students, anti free-trade groups, local mayors, Grey Power, the Alliance, and even New Zealand First—Labour sat on the fence during this one—which eventually forced the Government to abandon negotiations on the Multilateral Agreement on Investment in late 1998.

So the history of foreign investment in this country has never been particularly pleasant for Māori. There is no reason to believe that much has changed with the advent of the new, more powerful World Bank - IMF rape and pillage brigade. Today the Labour Government continues to negotiate and sign an increasing number of trade agreements that give rights to large corporations over the very resources that Māori lay claim to. Now it wants us to amend the International Finance Agreements Act in order to lock New Zealand into the Multilateral Investment Guarantee Agency.

Well, no way will the Māori Party support any plans to continue the rape and pillage of this nation’s assets. Nor will we support the stupidity of our having to put up insurance so that the rapists get compensation if they cannot have their dastardly way. Here is where we see the hyp—oh, there is that word again.

R DOUG WOOLERTON (NZ First) Link to this

If this International Finance Agreements Amendment Bill were to be in any way compromising our sovereignty, we in New Zealand First would be opposed to it. By and large, we do tend to examine “world this” and “world that” things very, very closely indeed to make sure they are not doing that. But New Zealand must play its part in the world, and I think this bill is completely consistent with the view we have in New Zealand, which is that we will not participate in acts of anger or aggression. This bill certainly does not do that, but certainly we have a record of punching above our weight when it comes to being listened to internationally. I believe that our respect internationally is high, thanks to people—some of whom are in this House—who have participated internationally.

JOHN HAYES (National—Wairarapa) Link to this

I rise to support this bill on behalf of the National Party, and to say that we will have no amendments to make. To be really fair and straightforward to my colleague from the Māori Party, I think this is actually a very minor piece of legislation, reflected in the fact that the convention was established in April of 1988, and already 170 countries have signed up to it. One wonders why it has taken us so long.

What the bill does is provide 20 years of insurance cover, thereby reducing the risk for people engaged in investment projects where there is going to be a cash flow depending on a revenue stream or some sort of productive process. The sorts of things it protects against are the inability to transfer local currency into foreign currency, the expropriation of assets by the host Government, the host Government breaching a contract, and also against a war or civil disturbance.

I have checked around on the Internet and I can report to the House that there is only one project in our area of greatest interest, the South Pacific, that is covered at the moment by this scheme. That is the Lihir gold mine in Papua New Guinea. I would also report to the House that there are about eight other gold mines in Papua New Guinea that do not seem to need this cover.

We support this bill because it supports the flow of foreign direct investment into developing countries, and it is low cost. New Zealand’s participation in this would cost about US$5.5 million, but we have to front up with only 10 percent in cash and 10 percent in promissory notes, so the remaining US$4.4 million would be subject to call, and we were given an assurance by Treasury in the select committee that that happening is most unlikely.

I would like to take issue with Dr Cullen’s comments recorded in Hansard when he introduced the bill. He said that this bill was going to contribute to: “poverty elimination and the achievement of the Millennium Development Goals.” Well, I would like to say that I do not agree with the Minister. The Minister and his leader and their United Nations friends are much better at making slogans, mantras, and goals than actually meeting them. I would just like to remind the House of Prime Minister Kirk, who in 1974 managed to get our aid contribution up to 0.55 percent of gross national income. This Government’s sorry record is 0.27 percent. Successive Labour Governments have had an opportunity to make a serious contribution if they had wanted to, but they have not delivered on Mr Kirk’s achievement. If the Labour Government really believes the mantra of the United Nations Millennium Development Goals, then I think that it has got to look at this in the context that these mantras are supposed to turn slogans into bankable pledges, complete with a number and date.

The United Nations Millennium Development Goals resolve to cut the rate at which mothers die in childbirth by three-quarters by the year 2015; they are going to make the number of people without safe water drop by half; they are going to cut infant mortality by a third. These goals sound really good, but there is no data in most countries on which to make any sort of reasonable or measurable comparison to measure progress in this context.

I noticed that the World Bank used the goals in June this year, when it was pitching for an infusion of $32 billion from richer member countries. Pascal Lamy, head of the World Trade Organization, invoked them in early July this year when he was making a plea to save the Doha round.

When we look at these goals, we see they aim to generate a buzz about the duties the Government might otherwise overlook. After all, Ministers in our immediate neighbourhood have a lot on their plate. They have to fend off rivals, they have to put down insurgencies, and they have to distribute the baubles of office. To me, they seem to be much less focused on saving mothers from eclampsia, or young children dying from malaria, or their own citizens from catching HIV/AIDS .

I would just like to say to Mr Cullen that poor and developing countries collect no reliable numbers on deaths from malaria, or deaths in childbirth. The goals are supposed to be everybody’s responsibility, which invariably means they become nobody’s responsibility. I say to Mr Cullen that I think the poor are going to blame the rich for not coming up with enough money, and the rich are going to blame the poor for not deserving more money. The United Nations Millennium Development Goals envisage some kind of nationwide nannying—well known to this Government—that only an accountable domestic Government can deliver upon, not distant donors. Distant donors cannot sustain them.

In supporting this bill, I want to make the point that National members do it on the grounds of support for encouraging foreign direct investment, particularly in the developing world. We do it on the grounds of supporting the World Bank, and we do it on the grounds of supporting the 170 countries that have already signed up to support the convention. We also do it because a very small amount of taxpayer money is required—about US$1 million. However, we do not support this bill on the grounds of its contribution to poverty eradication. Developing countries have to make their own way out of poverty by their own efforts, which is the only way any country—including our own—can ever do it. To Minister Cullen I would say that the only way to make poverty history is to understand how history is made.

NANDOR TANCZOS (Green) Link to this

The Green Party opposed this bill at first reading, and we will continue to oppose the bill. It seems to us that a number of concerns that we raised at the first reading have not been addressed by the select committee in any way. Mr Hayes presented the bill as a modest and benign measure, and one that was well overdue. The Green Party thinks we should have another look at what it is actually about. As has been said, the Multilateral Investment Guarantee Agency exists to protect foreign investors from the risks associated with investing in developing countries. So the idea is that New Zealand and other countries put up capital to cover the insurance for those corporations. It seems they do not have to buy their own insurance; we buy it for them. It costs us around $9 million to belong to the agency, and it is not the only agency of the World Bank that provides this kind of guarantee; there are other examples of a similar kind of operation.

What interests the Greens is that the agency does have a set of guidelines for the projects where it will guarantee investment, and it is supposed to cover things like human rights, environmental issues, and social issues. But a recent investigation by the Compliance Advisor Ombudsman of the World Bank—the agency’s parent body—strongly criticised the agency for its involvement in projects where it had guaranteed the investor but had been completely negligent about addressing the other issues that it is supposed to give regard to, such as human rights issues, the environmental record, and the social effects on the host community. The Green Party is very strongly of the view that our aid money should not be going to support an agency that performs as negligently as that.

My co-leader Jeanette Fitzsimons spoke in the first reading about a number of examples in order to highlight the issue. She mentioned that the agency insured investment in a copper and silver mining project in Katanga in the Democratic Republic of the Congo. The audit of that project concluded that the risks to the local communities, in terms of the human rights impacts, were not adequately considered. It appears that the mining company that the agency insured apparently provided logistical support to the Congolese army during a violent counter-offensive to suppress a small-scale uprising. According to the United Nations, as many as 100 civilians were killed during the military offensive, which was supported by that multinational company. That incident was investigated by the World Bank.

There does not seem to be any process whereby the guaranteeing agency investigates the effects of the investment projects it is insuring and guaranteeing. It seems pretty clear that those effects were negative in terms of human rights and the safety and well-being of those local people.

Essentially, we have an organisation that doles out our money to foreign investment companies to guarantee them against the local risks of investing in countries where they hope to make a great deal of money. That agency does not even bother to investigate—as it is supposed to—whether the projects it is supporting will be good for the local community at all.

Let me reiterate that the audit of the agency was not done by some radical Third World non-governmental organisation but by an official of the World Bank. The World Bank found that the agency was not living up to its responsibilities, not taking due care, and not giving due diligence to projects. The conclusion we have to reach is that the agency is there simply to facilitate profit making, regardless of the effects and impacts on the local community. The Green Party will vote against this bill once again. We cannot support a bill that claims to be about benefiting developing countries but that offers us no surety at all in that regard.