Goff Phil: International Finance Agreements Amendment Bill — In CommitteeText is incorporated into the Bound VolumeGoff Phil: International Finance Agreements Amendment Bill — In Committee[Sitting date: 10 November 2015. Volume:710;Page:7807. Text is incorporated into the Bound Volume.]Hon PHIL GOFF (Labour—Mt Roskill): Part 1 of the International Finance Agreements Amendment Bill sets out the purpose clause and the purpose is of course to enable New Zealand to become a member of the Asian Infrastructure Investment Bank. Then the rest of the bill implements our obligations under it including the whole of the articles of agreement which take up about 30 of the 34 pages. Labour supports this bill and the reason that we have supported it both at the Foreign Affairs Defence and Trade Committee and here in the Chamber is that there is a gap in infrastructure investment in the Asia region and this enables us to join a bank that will foster sustainable economic development. But I have questions for the Minister in the chair the Hon Craig Foss who I am sure is very well informed about the bill.The first thing—when we assessed whether we should become a member of the bank—was that it was very well known that the United States was opposed to countries joining up to it and it was opposed for basically two reasons. First of all it claimed somewhat curiously that investment needs were being met in the Asian region. I say “curiously” because both the World Bank and the Asian Development Bank which are both operating in this area suggested that a further trillion dollars was needed each year to support economic growth in the region. So it is not a case of the Asian Infrastructure Investment Bank elbowing out other banks but rather supplementing those banks to meet an unmet need. The second reason that the United States appeared to oppose this was that it said it would expand the influence of China. I actually concur curiously with the comments of the Minister of Finance who made it clear that the gap was there and it was real and that the old Bretton Woods institutions were not doing the job. They were not doing the job partly because they reflected the world as it was in 1945 and not as it is in 2015. One of the outcomes of that is that China was actually constrained from playing the full role that it ought to play in Asia under those Bretton Woods institutions.It is quite clear that China is an economic superpower. It is the second-largest economy in the world and equally that gives it responsibilities and obligations to help other countries in the region—and by providing infrastructure investment it can do that. Of course under what is set out in this bill in the articles of agreement China will end up with about 25 to 30 percent of the voting rights. That gives it a significant role and that is because it invested $30 billion out of the $100 billion that will be available for infrastructure investment. But my question to the Minister is this: as we worked through the process of agreeing to become a member of this bank what approaches were made directly or indirectly formally or informally by the United States to try to persuade us not to become members? As it happens its expressed opposition to the bank has not prevented the vast majority of countries in the region—38 regional members of the bank from the Asian and Middle East region and 20 non-regional members—signing up to the bank. That includes other countries like Germany France the United Kingdom and the Scandinavian countries which are clearly very much part of the Western developed world but nevertheless see some real benefit in having this bank set up and operating.I want to just touch briefly on the amount of capital that we are putting into it because I know that other parties in the Committee may have some concern about that. The subscribed capital is US$92 million. That however is payable over 5 years so the amount of money that we are sinking into it each year is less than the referendum on the flags debate. I think it is about $22 million a year that it comes out at. We also put up US$369 million in callable capital but when I did a little bit of research on our participation in like institutions to the best of my knowledge the callable capital that we have committed to has never been called up because the institutions have never run into financial difficulty. I would like the Minister if possible just to confirm that fact. So the US$369 million that we will subscribe in callable capital is unlikely to be called upon.Why are we becoming a member of this bank? That is what the purpose clause addresses. I think the first cause very clearly is economic. Our future now is inextricably linked to the future of the Asia-Pacific region and as such with most of our largest trading partners in the Asia-Pacific region we have a vested interest in how well the region does. I did a free-trade agreement with China and with ASEAN. Those countries are all part of this bank and those countries particularly the ASEAN countries will benefit from having a bank that will improve its infrastructure—the infrastructure of the countries—and improve their economic performance. That will have a flow-on effect for New Zealand. So it is the right thing to do but doing it will also benefit New Zealand economically.The other benefit we get is from our connectivity to the market. We are a country that has origins as a Western European country but we have fought very hard to be seen as an active participating and contributing member in the Asia-Pacific region. As a small country we do not have a very large share in this bank or voting power but it is the symbolic importance of our being seen to be committed to the development of the region. What is really important from my experience in working economically and in trade matters with the Asia region is building relationships. Before you can do business you need to build a relationship and this for us is about building that relationship.The third reason why we are being a member I think is because it gave us a chance to get in very early on in the development of this bank and to influence how that bank would be set up and the rules under which it would operate. I want to again pay tribute to John Whitehead who represented New Zealand in those negotiations. I think he did a fine job. We were able to help ensure that the membership of the bank is broad and open. We were able to ensure that there are sound governance and appointment processes followed by the bank. That was important. I think we probably exercised an influence beyond our size. We were able to establish the principle that decisions have to have regard to environmental and social issues. For us and the importance we place on those things that is also very important.But most important we were able to help ensure that this bank will operate according to economic and financially sustainable principles. As a result there will be proper oversight for investment decisions and for development outcomes. There will be international best practice for the way this institution runs. When we did the international treaty examination of the bank there were also risks pointed out but I think we have been able to mitigate those risks and I think the arguments very clearly are in support of our participation in this bank. I commend those who helped negotiate the agreement. The Labour Party will be supporting this bill through its final stages.