International Finance Agreements Amendment Bill

Hon MAHARA OKEROA (Minister of State) Link to this

I move, That the International Finance Agreements Amendment Bill be now read a third time. This bill, which will amend the International Finance Agreements Act 1961, has been thoroughly considered. It has been subject to a national-interest analysis by the Finance and Expenditure Committee. The bill was examined before the second reading by the Foreign Affairs, Defence and Trade Committee, which recommended that it be passed with no amendments.

First, I would like to thank the House for its support of this bill and for allowing its rapid passage. As noted in the second reading debate, the International Finance Agreements Act allows New Zealand to belong to, and to meet its obligations as a member of, various multilateral financial institutions, including the IMF and the International Bank for Reconstruction and Development. The passage of this bill is the next step towards New Zealand becoming a member of the Multilateral Investment Guarantee Agency—or MIGA—which is the final agency within the World Bank Group to which New Zealand does not belong. New Zealand first became a party to the Multilateral Investment Guarantee Agency convention in Seoul on 6 September 2005.

The national-interest analysis concluded that it was in New Zealand’s interest to join the Multilateral Investment Guarantee Agency, as its services are well aligned with our broader development interests and, to a lesser extent, with our foreign policy interests. The analysis also noted that the assessment of whether New Zealand should join the Multilateral Investment Guarantee Agency was based on three broad categories: firstly, supporting multilateral organisations; secondly, contributing to development goals; and, thirdly, supporting the New Zealand private sector.

Multilateral forums or agencies such as the World Bank are an important part of the international architecture, and are an important way in which New Zealand may influence our external environment. In this way, the goals of the Multilateral Investment Guarantee Agency are aligned with New Zealand’s aid and development goals. Further, the subscription to the agency is able to count towards the Government’s goal of achieving aid contribution equal to 0.35 percent of gross national income. The Multilateral Investment Guarantee Agency provides specifically targeted insurance products, which seek to mobilise private sector resources in order to help address stark development challenges, such as the development of infrastructure or the creation of jobs. It also provides political and foreign risk insurance for equity investments into frontier, underdeveloped markets, which often may be affected by war or civil dispute.

National has observed that this reduces the costs of capital for private sector firms aiming to invest in developing markets. But it is also about helping firms handle uncertainty and find their feet in foreign and challenging markets, by leveraging off the World Bank’s knowledge of conditions on the ground. I note that the agency’s most recent guarantee has encouraged $85 million of investment into Afghanistan to improve telecommunications.

Assuming that the International Finance Agreements Amendment Bill is passed, New Zealand will be required to deposit a copy of the Act with the World Bank. New Zealand will then be required to pay a subscription fee. The subscription that will be involved is the purchase of one of 513 shares, at a cost of approximately US$5.5 million—10 percent is in cash and 10 percent is via a promissory note. The remaining US$4.4 million will be subject to call by the Multilateral Investment Guarantee Agency. The fund is unlikely to be called upon, as a call would require the agreement of all shareholders. Thank you Mr Deputy Speaker.

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

National is supporting the International Finance Agreements Bill, and I want to make some general points. The Labour Government has been going on and on, and we have heard the vein-popping speeches, which have become so ubiquitous that television commentators now refer to them as the standard modus operandi for our Minister of Trade. I have to say to Mr Goff that if he wants to become the leader of the Labour Party he has to look a little bit more authoritative and a bit more dignified than when giving these bizarre kinds of speeches. I tell him to change tack if he wants to overthrow the boss when the time comes, and that could be quite soon.

One of the interesting things we have noticed about these vein-popping speeches—where the sweat is on his brow—is that Labour is in a state of panic because National has said that, actually, it does make sense to have a bipartisan foreign policy. And actually, to be honest, for a long time there has been a bipartisan foreign policy. The Government is deeply alarmed about this, and there is reason for its alarm. Labour members will have read Colin James’ articles in the New Zealand Herald where he says John Key is not so much the competitor of Helen Clark—and of course he is—but that he is actually the successor.

I see Mr Shane Jones smiling because he, of all people, knows the truth of that, and he, of all people, knows the opportunity it provides for his personal political ambitions. He knows that it is not really a smart idea to become the leader of a party when it is going into Opposition immediately after a Prime Minister of 9 years has resigned. A little time needs to elapse, and there need to be other people to take that job in the interregnum. So he can see the desirability of all that, and he understands the implications of that. There is a significant and important point I am making here. When Colin James refers to Mr Key as the successor—

JILL PETTIS (Labour) Link to this

I am glad to join the debate this afternoon. I do not think this debate will be quite as passionate as the previous debate on water, but nevertheless it is a very important bill that I believe will be perused and discussed as we go through the afternoon.

If I had not made the uncharacteristic interjection on Mr Mapp, I wonder whether he would ever have got around to talking about the bill itself. I do agree, though, that New Zealand has for a long time adopted a bipartisan position on most issues around foreign affairs. But there have been many differences over the years between the Labour and National parties. On matters of defence, of nuclear issues, and of overseas aid, there has always been a degree of difference. Certainly, the Labour Party’s attitude towards some developing countries is quite different from that of the National Party, when one gets down below the surface to what is in National’s policy. Some of us remember Don Brash, the previous leader of the National Party, whose views on nuclear issues were vastly different from those of Labour. So we have not always had total agreement on matters that fall under the umbrella of foreign affairs.

This International Finance Agreements Amendment Bill is having its third reading. The National speaker was right when he said that there was accord between the parties on the Foreign Affairs, Defence and Trade Committee on this bill, and the committee recommended that the bill be passed. The bill amends the International Finance Agreements Act of 1961. This gives New Zealand the authority to become a member of the Multilateral Investment Guarantee Agency, which was established by the Convention Establishing the Multilateral Investment Guarantee Agency that entered into force on 12 April 1988. This bill is necessary in order for New Zealand to ratify that convention, and it is time that it was done. There have been a succession of Governments, both National and Labour, since the Multilateral Investment Guarantee Agency was formed, so this amendment bill and the ratification of the convention is most timely, indeed.

The committee raised a number of issues during its hearings. We learnt during the process of the advantages and disadvantages to New Zealand of the treaty entering into force. The advantages of New Zealand ratifying the Convention Establishing the Multilateral Investment Guarantee Agency include, for example, contributing to international efforts to promote development through facilitating foreign direct investment flows. That is important for New Zealand. It is also about enhancing New Zealand’s credibility and reputation at the World Bank through increasing our support of that very important organisation. It is considered that these advantages support and contribute to the reasons why New Zealand should become a party to the Convention Establishing the Multilateral Investment Guarantee Agency.

There is another aspect relating to our ratifying this convention—that is, unless New Zealand is a member of all five institutions of the World Bank Group, it is unable to chair any annual meeting of that group. That is an advantage of some significance to New Zealand, and is a worthy reason why we should ratify the convention.

The Multilateral Investment Guarantee Agency is, in essence, an insurance agency. Its mandate is to encourage development and alleviate poverty by mobilising investment into developing countries and to encourage private sector development. The alleviation of poverty is a critically important issue. By ratifying the convention, New Zealand’s subscription obligations towards that process will count towards our gross national income as part of our overseas aid target. The alleviation of poverty is something that Labour Governments in New Zealand have always felt very strongly about, and they have put a lot of effort into it internationally. The committee did talk about the potential fiscal risks to New Zealand taxpayers by our being in the agency. But it is worth noting that any annual loss that does occur is shared between all shareholders, so it limits our liability.

The agency operates within a company structure, so New Zealand and other member countries are afforded limited liability as its shareholders. Article 8(d) of the convention states:“Liability on shares shall be limited to the unpaid portion of the issue price.” So, for New Zealand, this will be equal to the value of 513 shares at an estimated value of roughly $9 million. But of this, only around $900,000 will be held by the agency, with the remainder being subject to call. The committee was concerned about the potential for fraud abuse. However, insurance companies manage matters such as moral hazard and adverse selection, and the agency charges a premium based on risk, which includes the reputation of the host Government. In extreme circumstances, the agency will refuse to guarantee for political risk, for instance, if a loss is almost assured.

So although this bill is not one that will attract a huge amount of attention—I know that it will not be on the front page of the newspapers—nevertheless, it still is an important bill. So, being a member of the Multilateral Investment Guarantee Agency means that New Zealand, as a member of the World Bank Group, will contribute to the World Bank’s mission of poverty elimination and the achievement of the millennium development goals. The core mission of the Multilateral Investment Guarantee Agency is to enhance the flow of capital and technology to developing countries for productive purposes by providing a range of key services. This is an important bill. It will largely remain below the radar in the minds of most New Zealanders, but nevertheless it is significant and I am pleased to have spoken to it this afternoon.

TIM GROSER (National) Link to this

Kia ora tātou. It is always a great privilege to follow my colleague Dr Mapp, who has put the context of the International Finance Agreements Amendment Bill in the broader framework of the problems facing Labour, and its desperate attempt to make foreign policy a divisive issue for New Zealanders. [ Interruption] Absolutely, I say to Dr Mapp. He has provided that broader political framework, and I shall make just a few brief comments on the substance of the bill, as I do not think I can improve on his comments.

This bill has gone through the Foreign Affairs, Defence and Trade Committee, and has attracted quite careful attention from the parties that have been watching its passage. It has attracted broad support. Along with a number of members of this House, I was a little surprised to find, when we first came across this issue, that New Zealand was not already a member of the Multilateral Investment Guarantee Agency, given that there are 170 members and that we historically have put a lot of emphasis on multilateralism. It is the one avenue of diplomacy where New Zealand’s small size, frankly, does not really matter as much, because ideas count as well as power. Nevertheless, this lacuna existed, and this bill will fix up that problem. It is part of a broader jigsaw, if you like, of putting in place international cooperation that, for the first time, will include New Zealand within its aegis.

The second thing I would say is that this measure is a fairly low-cost solution from our country’s point of view. From memory, the contingent liability is US$5.5 million and we have an immediate cash liability of 10 percent of that. So the cost of this solution is pretty modest. I would imagine it is deeply improbable that the full contingent liability—modest though it is in itself—will ever be called upon in the future, largely because of the very prudent management principles underlying this agency, which are reflected in the bill.

The design is prudent. If members look at article 15 of the new schedule 7, which is in the schedule of the bill, they will see that it involves careful cooperation with the host country, which I think is absolutely necessary. Foreign investment remains a sensitive issue in many of these developing countries. This is not a case of the World Bank going in with its muddy boots on, over the top of host country wishes. It will not operate without the express consent of the host country.

I think the design is prudent in terms of management of risk. It has a limited risk of up to 150 percent of the capital on call, and each individual project is capped at US$110 million. In a sense, this is quite a modest amount of money. It indicates that we are not talking about mega projects or mega power projects; we are talking about relatively modest projects by the standards of international capital, with a maximum liability of US$110 million.

It attacks real problems, as previous speakers in previous stages of this bill have pointed out. It is very, very difficult for private companies—whether they are New Zealand companies, or companies from other countries—seeking to put some investment opportunities before these developing countries, to get private market insurance for expropriation, or for breach of contract by the recipient Government. Of course, this measure would not cover breach of contract by a private actor in those countries. It is very difficult, if not impossible, to insure against war and civil war, which are quite explicitly set out in the relevant provisions of this bill.

This is prudently designed legislation. I think New Zealand is right to get into this agency. It is fundamentally important in terms of lowering risk premium and opening up development opportunities for developing countries. Thank you.

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

Tēnā tātou katoa i te Whare. In 1914 Emiliano Zapata, the Mexican revolutionary, said: “It is not only by shooting bullets in the battlefields that tyranny is overthrown, but also by hurling ideas of redemption, words of freedom, and terrible anathemas against the hangmen, that people bring down dictators and empires.” Today we follow that tradition by opposing the latest sorry saga in a stream of international financial agreements, this big brother to the Multilateral Agreement on Investment, which itself was dumped 10 years ago following strong opposition from all around the country. Today we have the Multilateral Investment Guarantee Agency backstopped by the world’s great financial brothels: the World Bank, the International Monetary Fund, the International Finance Corporation, and—to no one’s surprise—some rather puffed up but altogether petty and rather pretentious little pimps from right here in Aotearoa.

Yesterday the Nats tried vainly to win the Māori Party over to this bill, even going so far as to tell us that we should support it because the Greens did, only to have the Greens vote six opposed to it, time after time after time. The Māori Party also opposes this bill, because we oppose the corporate takeover of Aotearoa in 2007 in the same way that society railed against the corporate excesses that led to the crash of 1987, and in the same way that society opposed the Multilateral Agreement on Investment in 1997. We oppose this bill because it demeans us as a nation and because it lowers our credibility to a point where Campaign Against Foreign Control of Aotearoa spokesman Murray Horton could say that New Zealand is rapidly becoming the $2 Shop of the South Pacific, while all the while trying to dominate the economic sovereignty of small Island States.

Yesterday I made the point that the Māori Party is not opposed to development per se, but that we are opposed to development and investment that strips indigenous people of their right to control their own future. We see that in how this Government has allowed us to become trapped in a stranglehold of binding obligations that are part and parcel of these international financial instruments. I quote the Foreign Affairs, Defence and Trade Committee, which recently stated: “The Multilateral Investment Guarantee Agency has a unique comparative advantage that neither private companies nor the New Zealand Government can match because of the unique relationship the World Bank maintains with the host Governments of developing countries.”—and we know what that is; it is a case of: “Either you take it or we pull your loans.” The committee goes on: “This means that there are few alternatives to MIGA’s products for New Zealand firms.” What that means is that the agency is locking us into a smothering monopoly, run not by us but by the World Bank.

Although the text of the bill is paved with the pretence of concern about struggling regional economies and the gap between the rich and the poor, it is also blatantly clear that this bill is intended to surrender another mark of our sovereignty to the big-money boys.

Me te mihi anō hoki ki a koutou e ōku whanaunga i tērā taha, i te mea nā koutou tēnei taha o taku kōrero.

[Acknowledgments to you, as well, relations of mine on that side, because this part of my address is yours.]

But, then, I guess that giving away the economic and political sovereignty of the nation is just par for the course for a Government that is today leading the charge against a document designed to support the sovereignty of the world’s indigenous peoples. Today is the day on which the Declaration on the Rights of Indigenous Peoples will be voted on at the United Nations General Assembly. Today is the day when this Government, including Parekura Horomia, Nanaia Mahuta, Mahara Okeroa, Dover Samuels, Mita Ririnui, and Shane Jones, will formally oppose that declaration—a document that has taken 24 years of scrutiny and sacrifice by indigenous people the world over to bring it to this point. Today—as we consider this bill—is the day when New Zealand’s great myth of racial harmony will be cruelly and finally exposed for all the world to see. Today—as we consider this bill—is also the day when indigenous peoples the world over will wonder how a country so strong on human rights for children can be so cold on human rights for its own tangata whenua.

Today—as we consider this bill—is a day of great shame for those Māori MPs who would sacrifice not only the nation’s sovereignty through this Multilateral Investment Guarantee Agency bill but also their people’s hopes and dreams so that they might retain their precious seats on the Treasury benches. In speaking to this bill, I note this: I will retain forever my whanaungatanga to those Labour Māori MPs who today have forsaken their people but I will also lose forever a measure of my respect for them because of the damage they have done to their people’s hopes and dreams.

I understand that the word “hypocrisy” is heavily frowned on in this Chamber and that one may not use it to describe the actions of another member of Parliament, so I will not use it. But the duplicitous dealings that characterise this Government’s actions, the double-standards by which this Government gives corporate rights greater status than the rights of Māori people, and the acts of self-deception as practised by this Government and evidenced by the granting of rights to overseas investors to benefit from privileges that ordinary New Zealanders are denied, are a slight on our nation and a stain on what little credibility this country ever had in terms of race relations. This bill calls on New Zealand to insure commercial enterprises that have no loyalty whatsoever to New Zealand. This bill calls on New Zealand to insure risky capitalist ventures whose sole motive is profit. This bill does nothing for our sovereignty.

Yesterday I said that the Māori Party was opposed to this bill. I missed a bit. I apologise for my error, and I clarify our position here. Today I can confirm that the Māori Party absolutely, totally, completely, and utterly supports the vote at the United Nations to adopt the Declaration on the Rights of Indigenous Peoples. Today I can also confirm that the Māori Party is equally absolutely, totally, completely, and utterly opposed to this bill, and will be opposing it with the votes it has by virtue of its holding the majority of the seats allocated to the indigenous people of Aotearoa. Tēna koe, Mr Deputy Speaker. Kia ora tātou katoa.

JOHN HAYES (National—Wairarapa) Link to this

I say to the people of New Zealand that the member who has just resumed his seat, Hone Harawira, is a man of absolutely muddled thinking. How can we possibly say that this International Finance Agreements Amendment Bill, which is supportive of economic development in our small Pacific neighbours, will impact on our sovereignty? For goodness’ sake! He is a man of totally muddled thinking.

This Government has had the past 8 years to pass this legislation. It has fiddled and fiddled its time away, and it is in the twilight of its stay on the Treasury benches.

SHANE JONES (Labour) Link to this

Ā, kia ora anō tātou e te Whare i tēnei ahiahi. Te mahi tuatahi, me mihi au ki te kapu. Āe, tēnei kapu whai mana ahakoa ngā kapua o te raruraru e tau ana ki runga i a ia, nau mai, hoki mai ki waenga tonu i tēnei Whare i roto o Aotearoa.

[Greetings once again to us of the House this afternoon. The first thing for me to do is to acknowledge the cup. Yes indeed, this prestigious cup, despite its being shrouded by problems that have landed upon it, I welcome you upon your return to the inner chamber of this Parliament House of New Zealand.]

Before I launch off and offer some lucid thoughts, in contrast to the drivel I heard from my whanaunga from up north, and that very vague sort of recitation of a half-baked career I heard from the member for Wairarapa, I will acknowledge the presence of the Parliamentary Rugby World Cup, which has been brought back to Aotearoa. It sits, unfortunately, under a cloud of some discontent, controversy, and tumult inspired by a half-baked campaign from Mr Power. Let us hope that our national team brings home the real Rugby World Cup, and that we retain both of them in 2011.

I spoke earlier about the International Finance Agreements Amendment Bill, and I do not propose to repeat a great deal of what I said earlier. This bill enables us to burnish and deepen our credentials in relation to how we are intervening in less developed countries and in those nation States that require our assistance.

There is one thing the member for Wairarapa said that I actually agree with. There is, if not an arc of instability, a range of troubles lying not too far from our borders in the Pacific, and it is our obligation in Aotearoa to ensure that we are developing the best remedies for that. One of the best remedies is to grow the size of the economies in those islands. New Zealand businesses are unwilling or afraid to put too much capital at risk if there is no prospect of their either recovering their assets or collecting on their receivables. By joining the Multilateral Investment Guarantee Agency we improve the prospects of our businesses extending in that direction.

Of course, my whanaunga Hone Harawira seems to connect this measure with the failed attempt of Mugabe and his supporters, of Gaddafi and his supporters, to assume the mantle to talk for Māori rights and the Treaty, on behalf of the people of Aotearoa, at the United Nations. Let us leave the United Nations to those nation States that are suffering collapse, so that they can learn, so that they can resume the journey of knowledge that will take them back to 1648 when the Peace of Westphalia created the first notion of a nation State. Let us leave the United Nations for handling those sorts of problems. I ask whether one single person in Aotearoa believes that, by associating with Mugabe and associating with Libya, our race relations and the endeavour we are putting together as a people driven by a common purpose—to create a more prosperous, stable, and harmonious Aotearoa—will be advanced one iota. Who believes that we will be advanced one iota by an association with that half-baked idea?

It has taken 24 years to arrive at some indigenous rights accord that is meaningless, vague, impractical, and completely incapable of being implemented. It has very little application here, unless we are capable of deepening the sense of shared responsibility in our own country. I know of not a single New Zealander who treats his or her country with pride who would be pleased to have the United Nations lecture us. So the less I hear from the United Nations, and the less I hear from the people who hope to vote to impose that accord on us—an accord that has absolutely no application to how people here live their ordinary daily lives—the better I will feel. I accept that it is an instrument of exaggeration, and that it will be a device used to confuse our people throughout the marae that somehow this measure represents a diminution of the country’s sovereignty or a diminution of Māori rights. That shows just how far the Māori Party has got to go to connect with the hard, relevant, and real issues that confront Māori families every day—not these flights of fancy, wandering around with Marsh Arabs and whoever else bedevils the United Nations.

Let us come back to this contribution that our country is making. Not only will we put a small amount of capital into the pūtea, so to speak, but, most important, the bill reminds us that we cannot have a civil society in a failed nation State situation without a growing economy—and economies cannot grow as islands unto themselves. So if this legislation allows us, either through Government agencies or private investment, to deepen and improve infrastructure, and enables people to take commercial risks in a situation that is politically diabolical, then we should celebrate that.

That is a better option than the inhabitants and members of those societies thinking that Aotearoa will be a soft touch for them. In the light of the problems, for example, that ravage Fiji’s economy, if the people there are foolish enough to believe that 4.2 million people in Aotearoa will welcome them with open arms, they are wrong. We would rather see people develop their own countries. We will play a constructive role, but we will not have them rely on the belief that they can come here and sustain their own countries through remittances, etc. So I say to the opponents of this bill that it has nothing to do with overwhelming those countries’ sovereignty. It has nothing to do with undermining their capacity. Many of those failed nation States, those small Pacific Islands, have already undermined themselves.

This is an attempt for us to take a place of pride—small though our contribution might be—to ensure that our Pacific Island neighbours grow large and prosperous. They may even—perish the thought—emulate the girth of the last speaker, John Hayes. He is a man who, in a career that took him to far and distant climes, demonstrated that the wines of New Zealand not only could be taken to distant areas—into dusty, irrelevant, and boring rooms—but also could be consumed. The man comes back into the House to demonstrate that he indeed had a long, varied—I could not say “rich”—and obviously enjoyable career, if his physical shape is an indication of the high level of living that his career afforded him.

I join my colleagues on this side of the House—and Jill Pettis—in commending this bill to go forward. I remind listeners not to listen to a single thing that came from the member for Te Tai Tokerau, Hone Harawira, who said that the United Nations’ decision was somehow an advance on race relations and an elevation of Māori aspiration. No, let us leave the United Nations to those nation States that are warring with each other, whether they be Kurds or whether they be from Darfur or Zimbabwe. Leave the United Nations to them. Let us bring our take of Māori and Pākehā in Aotearoa on to our own maraes—and this is the highest legislative marae in the country—and we will find our own solutions in our own country. Kia ora tātou katoa.