International Finance Agreements Amendment Bill — In CommitteeText is incorporated into the Bound VolumeInternational Finance Agreements Amendment Bill — In Committee[Sitting date: 10 November 2015. Volume:710;Page:7804. Text is incorporated into the Bound Volume.]International Finance Agreements Amendment BillIn CommitteePart 1 Preliminary provisionsGRANT ROBERTSON (Labour—Wellington Central):It is a pleasure to take a call on Part 1 of the International Finance Agreements Amendment Bill. As we discussed when the House was looking at this during the second reading it is a bill that did not generate an enormous amount of public interest when it came before the Foreign Affairs Defence and Trade Committee. In fact there was precisely no public interest when it came before the select committee but that is not to say that it is not an important piece of legislation.What I think would be useful here in Part 1 is—obviously Part 1 is the purpose clause and the purpose of this bill is to allow New Zealand to participate in the Asian Infrastructure Investment Bank. In principle that is something that on this side of the Chamber we support. There is no doubt that as the Asian region continues the enormous growth that we are seeing across it the need for infrastructure investment—the need for investment that the international community provides—only grows.The Asian Infrastructure Investment Bank arose out of the belief and I guess you could say the concern of those in the Asian region that the gap in infrastructure investment was too big to be bridged by those organisations that are currently working in the region—in particular we think here of the World Bank and the IMF. That was initially the subject of some significant concern by core stakeholders within the World Bank. There were some media reports that the United States Government and others were lobbying against countries being involved in this but we are told in the report that was provided to the select committee that other agencies like the World Bank have been closely cooperated with and collaborated with in developing the frameworks to allow this to exist and importantly that they will work together with the Asian Infrastructure Investment Bank to make sure that their projects do not cut across each other or are not in fact not working together in the best interests of the countries in the Asian region.So having got to that position it is good to acknowledge that New Zealand officials have been working alongside others to make sure that this bank has the strongest possible governance arrangements and has the best working framework to ensure the investments it makes are going to not only provide that infrastructure but also support other values that are important to New Zealanders. It is worth noting that it was New Zealand officials who worked very hard to ensure that appointments to the board of the Asian Infrastructure Investment Bank will be open transparent and merit-based that there will be a non-resident board of directors and that the appropriate environmental social and procurement safeguards will be put in place around what the bank does. That is very significant because although in principle we can say: “Yes we want this infrastructure to happen.” if there are not the right safeguards around it then we could see infrastructure investment that is less than desirable.So annex 1 of the framework document lists off the draft environment and social framework for the Asian Infrastructure Investment Bank. It is useful to note the environmental coverage is making sure there is an assessment around biodiversity impacts critical habitat impacts protected areas and climate change—the precautionary approach. All of these are really important parts of what makes for good investment. They have been secured in this agreement and from our point of view that is very important. We also have the social coverage which includes social risks impacts on the community impacts on vulnerable groups and gender-specific impacts—an important thing to note on Equal Pay Day today. It also talks about working conditions and the fact that during the implementation of operations working conditions health and safety child labour forced labour and labourrelations standards all have to be taken into account when infrastructure investment is being put in place under the Asian Infrastructure Investment Bank’s work. These are important safeguards and it is very important for New Zealand’s participation that those safeguards are there. New Zealand worked hard to ensure that the governance arrangements and the safeguards were there—that there was stability.Our actual financial contribution to the bank is modest but perhaps appropriate in terms of our relative GDP—well it has to be appropriate in terms of our relative GDP because that is how it is worked out. So we are making an initial contribution of around—well let us do US dollars because of exchange rate fluctuations shall we—US$92 million over the next 5 years. We have also committed US$369.2 million of callable capital. As my colleague Phil Goff noted in his intervention in the second reading New Zealand has never had to call on the capital that we put aside but that is the extent of the contribution that we have made. As I say although that is not a significant financial contribution it is an important stake for New Zealand to say that we are committed to this bank. We are committed to the Asian region and the opportunities that arise.The reasoning for joining the bank was threefold. Economic factors—New Zealand’s economic success is linked to the Asian region. I know that the leader of the Labour Party Andrew Little was in China last week and other Ministers from the other side of the House have visited regularly as well. No one can underestimate the extent of the development that is there and the extent to which China is continuing to invest. The Prime Minister will go with a business delegation to Viet Nam next week—there is a country where there is a need for increased infrastructure investment for it to continue to develop sustainably. It has enormous rates of growth but it is a country that could do that. We have just seen the elections this weekend in Myanmar—there is a country with an enormous infrastructure deficit that could be assisted by the work of this bank. From New Zealand’s point of view all of those are countries with which we will trade and do trade and all of those are countries that we want to see flourish in order for our region to flourish.The second reason was around connectivity to market and our ability to build on the connections that we already have in Asia. We have status within ASEAN we attend the East Asia Summit—that is where the Prime Minister is going next week—and obviously we have the free-trade agreements with China and other ASEAN members. This is a further step in New Zealand staying connected in the Asian region and connected to where we will see much of our future trade relationships.Then there is just the question of the ability to influence. If New Zealand is not there in a discussion like this we do not have the ability to do the very things that I mentioned before—making sure that the governance arrangements are sound and that the bank is working with the systems that we would want.So I will leave my contribution there. Suffice it to say that the Labour Party supports this bill. In this Part 1 of the bill there are no particular changes to deal with. In Part 2 there is one which I will take a brief call on.Hon BILL ENGLISH (Minister of Finance): Can I thank the member for a pretty succinct and sensible summary of the Asian Infrastructure Investment Bank and its purpose as laid out in this bill. Also can I thank the Foreign Affairs Defence and Trade Committee and chairman Mark Mitchell.The legislation is here because the New Zealand Parliament has dealt with it pretty expeditiously. I have just a couple of points to make in addition to those made by the member and I look forward to contributions on the way through this debate. It is a slightly unusual piece of legislation—it is not the only one that has been done like this but essentially we are legislating the Articles of Agreement of the Asian Infrastructure Investment Bank which were not written by us. They are the result of the collective discussions of a significant number of countries.I might say that the way they are laid out in this legislation should be a lesson to our own bureaucracy. There is admiral economy clarity and brevity in these articles for what is a complex multinational institution. It all fits into about 20 pages or slightly more and you can actually read it and understand it. So I would like to give the select committee credit for that but actually it did not have the opportunity toget into the detail of it—although I know Mr Parker could have improved on it.However it does demonstrate something that I think is certainly a feature of a bipartisan approach in New Zealand and that is that under successive Governments New Zealand has been able to carve out a bit of a role as an honest broker in international events and international forums. This piece of legislation here is a product of that actually because when the original proposal was put forward there was a great deal of concern and reticence among a number of countries that this bank may be set up in a way that enabled it to expedite the policies of the Chinese Government and that was it. Of course it was any number of countries that were interested in participating because they were interested in the investment capital and the member Grant Robertson mentioned some of them.But with the early focus on Singapore but particularly New Zealand—because we count in the international world as a developed economy while the much wealthier economy of Singapore counts as a developing economy—as the first developed economy to participate was able to have considerable influence over the articles as we find them here.And finally can I just acknowledge the role of the parties across the Parliament. The speed at which this multilateral institution was proposed and has come into existence is remarkable by any standard. In fact there probably has not been another one like this. That demonstrates I think a wide set of interests in the broader multilateral community particularly to have institutions of a higher quality and a broader base than the current World Bank and the IMF where unfortunately reforms to their make-up that reflect the fact that the balance of world GDP has shifted away from the European and North American economies to a whole range of emerging economies—those reforms simply have not proceeded for various reasons but it has been disappointing. So there has been an interest from the international community in this institution because it can start afresh in the 2010s rather than the 1940s and the world of course is a bit different now.So I want to acknowledge the fact that the Parliament has seen the virtue of that and has expedited this legislation so that we will meet the deadline—by 1 January this will be in place and New Zealand will along with other countries be able to take up its role in the governorship of this bank.Hon DAVID PARKER (Labour): Can I concur with my colleague Grant Robertson and the Minister of Finance’s comments. I do think it reflected well on New Zealand that we were early to the party when it came to saying that we thought that this was a good idea and that we then tried to mould it into a well-governed organisation that will do good in the world. I know that some of the opposition in other parts of the world was not just against the potential—as the Hon Bill English has said—misuse of this fund as an instrument of Chinese Government policy which was one of the original concerns. Actually their concerns were sometimes just about the rising influence of China and a desire that China not be able to exert the influence in the world that it can through this new agreement. That was an inappropriate reason for opposition to this Asian Infrastructure Investment Bank and I am pleased that the New Zealand Government got on the right side of that debate from fairly early on.There is one issuein particular that I would like to raise in respect of Part 1. Part 1 as the Minister has already told the Committee inserts the articles of association that are set out in new schedule 8 in the schedule of this bill. It does that at clause 5 of the bill. Those articles of association include the number of shares that the New Zealand Government subscribes for and everyone who subscribes for a share takes up a capital subscription—or a capital risk if you like; some of it has to be paid across but some of it is just there to be called upon if needed. Every 10 of those shares carries with it a $1 million capital subscription so New Zealand’s capital subscription is $461.5 million for 4615 shares. I have done a quick calculation as to what New Zealand’s share of the total is because there is $75000 million of capital being subscribed for. As a consequence New Zealand’s contribution is 0.64 percent of the capital roughly—less than 1 percent.The proportion that New Zealand takes in these organisations—and the IMF is the same—is lower than it would have been in yesteryear because the New Zealand economy has not grown at the same rate as overseas economies have and as a consequence our proportion of the total of these capital funds is less than it used to be in yesteryear. We saw that—I am not sure whether it was earlier this year or last year—when an Act of Parliament was brought in to change another of the agreements under the International Finance Agreements Act where we amended the IMF articles to note the changing proportion of different countries in the world economy and New Zealand’s percentage of the total capital went down because our share of the world’s economy went down because New Zealand has not done as well as some other countries. At the time of that debate the International Finance Agreements Act was amended to enable amendments to articles of association by way of regulation by the executive rather than bringing those agreements back to this House.The effect of this amendment bill in concert with the earlier amendment bill that says these things can be changed by regulation is that this Parliament is setting up a system in respect of the Asian Infrastructure Investment Bank which is what this bill is mainly about that in the future we are handing over to the executive the power to change. We objected to that at the time when the regulation-making power was being conferred on the Minister of Finance and the Government because we think that we should have these important agreements coming back to this House when they require alteration. It actually does not happen very often. I think the IMF articles have been changed only a few times since they came into force many many decades ago so it is not an onerous task for Parliament to keep an oversight of how our participation or how the rules of those organisations change.I am not going to take much longer on that point other than to note the fact that I would like the Minister in the chair to respond with why it is that he thinks that when New Zealand’s obligations under these articles change because of a change in the articles—where they do have significant monetary effects for New Zealand—why that sort of thing should be able to be done by the executive rather than coming back to this Parliament because that is what we are doing with this clause.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.FLETCHER TABUTEAU (NZ First): I too would like to acknowledge those officials who undertook that early participation in negotiations in this agreement. I give them credit for the fantastic work that they did. That does not actually preclude our continuing opposition to this legislation.Part 1 enables our participation in this infrastructure bank. Many of the speakers including the Minister have spoken of one of the benefits being the ability to influence economic factors and connectivity to the market. The arguments given are: increased economic development in the Asia region—we have heard that repeatedly; supported increased economic integration—that it augments New Zealand’s existing relationships. Let us take a reality check here and just stop and look at what the officials actually provided this Committee in terms of information. The reality is that there is nothing in this legislation and nothing in the appendices attached to it schedule 8 that says—it actually specifically says that there will be no investment in New Zealand. New Zealanders will not seek for investment to be undertaken in New Zealand under this legislation nor it specifically says will the investment bank itself actually invest in New Zealand.The question was then asked as to what the benefit is to New Zealand of signing up to this financial agreement. We have heard a lot of lovely intangibles but the reality is—and this is the reality—Government officials never undertook a financial impact statement or an analysis of the benefit of this financial agreement with New Zealand because from the outset they established that there would be no or negligible financial benefit to the New Zealand economy. Those were the Government’s own official words. That is the reality of this situation that this Committee is in today. That is the reality of the contribution being given here. It sounds lovely when you hear the words from some of the members today about the impact on New Zealand but that is not the reality. The officials themselves have said so.New Zealand First has questioned the economic impact from the outset. The argument has also been around influence but we would also point out that China for example will trade with New Zealand without a free-trade agreement. In fact trade with China was growing exponentially before a free-trade agreement because China wanted what we had. It wanted our commodities and it was prepared to come and negotiate and work with New Zealanders to do that. Businesses and New Zealand will continue to build relationships with China and the ASEAN communities. We have as Mr Goff so rightly pointed out these free-trade agreements with the Republic of Korea with China and agreements with the ASEAN community. That will not stop because this Government for example would go before them and say: “Look we’re willing to help you write this infrastructure financial agreement because we think we have something to contribute but we actually can’t afford to give you the money.” I think that would have been fair and reasonable and we would not have broken friendships or undermined our relationships if we had said honestly: “Look we’re up to $80 billion to $100 billion worth of Government debt. We’ve sold assets. We’re supposed to be paying for our own hospitals our own schools and investing in our own community. Look the reality is that we can’t contribute that minuscule sum to make this work for you.”The other issue I have and it is actually a question for the Minister in the chair Craig Foss—if I can find my notes—is around our participation and our level of influence. I think it was the Hon Mr Parker who said that we have a 0.64 percentage of share in this bank. He is bang on. My calculation was 0.66 percent; it was even more generous. But if you go into the appendices—I ask the question specifically of the Minister in the chair. Our participation on the board is dependent on those rules and one of those rules says—schedule B of schedule 8 clause 2(a)—that we have to have 6 percent share in this bank in order to be a participative member.Hon CRAIG FOSS (Minister for Small Business): Just to give a quick answer to Mr Goff’s point—yes Mr Goff you are correct. There are similar organisations such as the Asian Development Bank the IMF—the International Monetary Fund—and the World Bank which we contribute to and have capital invested in as well as presumably this one if Parliament passes the International Finance Agreements Amendment Bill. The callable capital has never been called upon Mr Goff for your clarification. To the previous speaker Mr Tabuteau—I guess that if New Zealand was an island nation that had no interest in the development of its region or other economies or peoples or cultures or countries that member may be correct. But actually there is an obligation and responsibility to be part of this region and those other organisations which are similar to the organisation we are proposing to invest in here—for example the Asian Development Bank and the World Bank—invest in the Pacific actually helping sustainable energy projects and helping countries to become self-sufficient. I guess in brief that part of being a leading developed civilised nation with a solid economy and great history in helping other countries develop is that also as these Asia-Pacific countries—Asian countries in particular—that this organisation will be assisting grow their interest in New Zealand products and services grows as well. So it is actually in a roundabout way an investment in our region to help grow our Asia-Pacific region particularly which will in turn over time assist opportunities for the New Zealand economy to grow alongside them. Thank you.STUART NASH (Labour—Napier): I hope there are no media watching this because they may find me in the situation of agreeing with Mr Foss. Mr Tabuteau it was a rather naive speech. The reason I say that is there are a number of reasons why this is a very important development in the international banking sector. First and foremost I think you will find that most 21st century literature says that for an economy to grow it has got to have good sound infrastructure. We are talking about power stations we are talking about roads which are a sort of 20th century infrastructure but in this day and age we are also talking about copper about fibre and all those other things that link the world and allow businesses to locate pretty much anywhere that they can. When you look at the applicants who have joined this bank—we are talking about India Thailand Malaysia Singapore the Philippines Pakistan Oman Qatar Sri Lanka Uzbekistan and Viet Nam—New Zealand was actually the first developed Western country to apply to join. In recent months so have a number of others—Germany and Britain for example.One of the reasons as Mr Goff alluded to that the United States was against this was it cited that it believed that the governance within the Asian Infrastructure Investment Bank would not be up to standard. That is slightly ironic in a way because I believe after the reading I have done that if the Asian Development Bank and the International Monetary Fund and the World Bank had actually undertaken the sort of development and put in place the sorts of strategies that the region needed then this bank would not have been formed in the first place. In fact the irony is that the push for change around the IMF has been supported by President Barack Obama because he himself actually called for reform in the IMF last year. So this has really sprung up as a need in the region. As mentioned it is a massive part of the global economy. It is growing and it is where a huge chunk of our future lies. The thing is when America mentioned the governance arrangements and the concerns it has if you read through chapter V of new schedule 8 in the International Finance Agreements Amendment Bill it lists all the governance arrangements. It seems to me that it is very clear they need a quorum of two-thirds of members. Article 22 states: “1. Each member of the bank shall be represented on the Board of Governors and shall appoint one Governor and one Alternate Governor.” It looks very very robust from a governance perspective. I believe that you would find that the Germans and the Brits let alone other developed countries would not have a bar of this if they thought that the governance structure was not absolutely sound.The other thing I would like to talk about is this. If you go to article 2 “Functions” of the agreement set out in schedule 8—look at the functions. They are to promote investment in the region of public and private capital but when you look at article 2(iii) it actually talks about “to encourage private investment in projects enterprises and activities contributing to economic development in the region in particular in infrastructure and other productive sectors and to supplement private investment when private capital is not available on reasonable terms and conditions;”. One of the legal tests is a reasonable person test and I wonder what “reasonable terms and conditions” means. If that actually means that this bank is going to lend money more akin to the interest rates in Asian nations as opposed to for example in the developed world—in New Zealand for example—then it is perhaps not a bad thing. Infrastructure is vital and the funding is US$100 billion. That sounds like a lot of money and in many circumstances it is. But when we are talking about major infrastructure projects US$100 billion actually is not that much money when you think a large power station can cost $2 billion to $3 billion. It is a lot of money but for infrastructure development in these developing nations I suspect—and it will be interesting; Mr Foss has said we have never had to call down on our capital reserves but you may find that this is the case going forward certainly over 5 years because these economies are growing at a great rate of knots.I agree with a number of the speakers that it is very important that New Zealand is part of this. Mr Tabuteau is right. I cannot see any circumstance at all where the infrastructure would be built in New Zealand out of money from this fund—it is not needed. We have sufficient capital markets and sufficient private investors to allow the sort of infrastructure needed in this country without having to dive into this whatsoever. But these sorts of banks are not set up to help developed countries maintain or grow their infrastructure; they are really about developing countries and the flow-on effect from that can be massive. It is already acknowledged that India is an economy growing at a great rate of knots as is China and a lot of the other economies mentioned. Thank you.TIM MACINDOE (Senior Whip—National): I move That the question be now put.Hon CLAYTON COSGROVE (Labour): I like other members of the Labour Party—we are supporting this piece of legislation. But I do want to touch on a couple of comments that Mr Tabuteau made—and Mr Nash dealt with some of them. In essence the argument for opposing this seems to be that there is no hope of any monetary investment in New Zealand from this institution which as Mr Nash has pointed out is quite right. We are a developed country we are not a developing country and the moneys that will flow from this bank—its purpose is to fill the gap in the infrastructure and development in the Asian region.But that does not mean that there is nothing in it for New Zealand. What is in it for New Zealand if you look quite clearly—as colleagues outlined the membership of this organisation—is that we do have influence we do have connectivity. We have been right at the base and at the foundation of the genesis of this bank to put in place good governance rules and transparency. And as these funds are invested in Asian developing economies what is in it for New Zealand I think is self-evident. As these economies develop their infrastructure as they grow—at its brutal best or simplest—the buying power for goods and services of these nations will increase. They will look to countries like New Zealand to engage in commercial arrangements. We will be a recipient I am sure as other developed countries are of much of the work. And that is in terms of the growth of our economy the investment and the jobs and all the ancillary benefits that flow from that as we are party to other countries as their respective economies develop and grow.The more access that we can get to an economy that is growing and prospering the better it is for our nation. So I see this as part of a tradition that New Zealander has had for many many years. We are members of the UN the Asian Development Bank the IMF the World Bank the World Trade Organization (WTO)and one could argue and it is true that both our monetary contribution as others have said and our voting contribution or proportion are very modest. That again is not an excuse for us not being around the table. One could argue that in every international institution—the ILO the World Intellectual Property Organization and the others that I have mentioned—we have always had a modest role to play and a modest say. A good friend of mine whom some of you will know Mike Moore was fond of saying that New Zealand is—what is it—less than 1 percent of the world’s population; some would argue we have 90 percent of the world’s opinions from time to time.Of course our contribution and our voting muscle at these international institutions are modest but you have to argue that if you look at our seat around the Security Council the positions that we have had within the WTO and within the Commonwealth—the whole host of international institutions—to use the old cliché we have punched well above our weight. We have had influence. As the Minister Mr English said we have been looked to on many many occasions as the honest broker as the country that does not have an axe to grind that can go in between countries in economic dispute or whatever and do the deal. Those relationships are priceless. Mr Goff saidquite rightly as the guy who negotiated the China free-trade agreement that before you can do business in China and in a number of these Asian economies you have to build that relationship. We may be small. Our contribution in monetary terms may be small and our voting rights may be extremely small but we still are respected and we are around the table and we are participating. That is where New Zealand in part gets a massive payoff.I just come back to the original point. This bank its purpose is to target that gap in infrastructure investment within the Asian region. If that gap is plugged if there is access to capital in developing countries those countries grow their economies grow they reach out across the world for goods and services and expertise—and we have an advantage being one part of this institution but we have an advantage because of having the reputation as world-class providers of many goods and services—they will reach out to us and other countries. That is the investment. If you are looking for the investment in New Zealand that is part of a massive payoff—being there being part of it being reached out to and providing those resources that in turn grow our own economy.So I think with respect that it is slightly simplistic to say: “Well we’re investing $126 million initially with a commitment to $504 million going forward but because the bank’s not going to flick a bit of money to New Zealand therefore we should not be part of it.” If that was the case we would never have been a part of the Asian Development Bank or the IMF or the World Bank or other institutions because the likelihood of us receiving capital is as Mr Nash said extremely low. We have good institutions. We have mature capital markets. We can fight our own battle economically. So I think you have got to look at this in its widest possible context.Again as others have pointed out there is always the counter question: what is the cost of not being there? What is the cost of not being around the table part of a growing international institution with Asia the fastest-growing region in the world? You could look to the China free-trade agreement easily and say: what if that had not been in place in terms of the relationships with China? What if we had not participated in the Asian Development Bank and those others—we have ultimate directors there—what would have been the cost to New Zealand? The cost would have been relationships. The cost would have been those tangible—and I would argue they are very very tangible—benefits of goods and services and access to markets. That is a huge cost. So the Labour Party does support this piece of legislation. It is part of New Zealand’s international tradition to be a plank owner a foundation member of these great international institutions.I think we can look back and I do commend those who negotiated this—being in on the ground floor has allowed us to have our say on transparency to have our say on the structure and to have our say on the governorship. As others have pointed out Europeans and others look to this institution with respect. They would not do so if those fundamental arrangements were not in place. And actually by being a memberof this institution—again although we are a small nation we have a massive reputation—I would argue it also gives some credibility and integrity to it. People would ask if New Zealand and others in the region were not there: “What are we doing? What is our purpose?”. So I commend the bill to the Committee.I think it is sad that there was not a heck of a lot of public notice taken of it at the select committee but it is a very very important building block as New Zealand continues to play its part as a respected and mature developed nation throughout the world given that we can contribute our expertise. We do not know everything but we could contribute that expertise. We can continue to act as an honest broker and navigate countries through intricate and complicated procedures. This builds on that tradition.A party vote was called for on the question That Part 1 be agreed to.Ayes 109New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 12New Zealand First 12.Part 1 agreed to.Part 2 Membership of Infrastructure BankThe CHAIRPERSON (Hon Trevor Mallard): This is debate on clauses 6 to 11.Hon PHIL GOFF (Labour—Mt Roskill): Part 2 of the International Finance Agreements Amendment Bill is about the membership of the infrastructure bank. It makes the substantive changes that enable New Zealand to become a member of the Asian Infrastructure Investment Bank. Again I would like to talk about why we should become a member of the bank and why we are supporting this.In that respect just to touch on some of the comments made by my friend and colleague from the New Zealand First Party about whether this brings in only intangible benefits I think Fletcher Tabuteau drew on the analogy that China would have traded with us anyway so we therefore did not need to have a free-trade agreement with China. Well I am sorry; that is absolutely wrong. I know that New Zealand First opposed that agreement at the time. But it was not about intangible benefits; it was about very tangible things in terms of removing the tariffs. Actually making it tariff-free meant that you could increase your trade. Also—and maybe not quite as objective but certainly as strong a factor—there was the profile that it gave us. China always talked about the four firsts. That was in reflection of the relationship that we had with that country. That is why our exports went from $2 billion a year to over $10 billion a year.It is the same thing for this agreement. What would have happened—or what would happen—if New Zealand was the only substantial country in the Asia-Pacific region that did not participate in this bank? What message would we be sending to our colleagues in the ASEAN region? The message we would be sending is that we did not care about their infrastructure needs we were not really part of their region and we did not have an interest in helping them with either the technical assistance this bank will give or with the infrastructure investment assistance. Next time we went along to one of those countries and said to it “OK we’d really like to develop this relationship. We’d like more students we’d like more tourism we’d like to trade more with you.” it would scratch their heads and ask whether this is a country that is really committed to its region. It might still buy our products but it would be less inclined to regard us favourably and to give us the benefit of the doubt at times when a relationship really demands that we need the benefit of the doubt. So I think you cannot simply dismiss our involvement and our commitment to the Asian Infrastructure Investment Bank as being something that is simply an intangible benefit.The fact of the matter is that the greatest tangible benefit is that if we invest in this bank along with other countries that are giving the bank much more capital we will help the development of those countries. They will develop their middle class and their taste for New Zealand products and they will buy more products off us. To consider that New Zealand is an isolated island and can act without regard to the global environment within which we participate is a wrong view and I believe a naive view.What are the tangible benefits then of becoming a member of the bank which is what this part of the bill is about. First of all it is about increased economic development in the Asia region and the flow-on benefits that that will bring. Every study that has been done including by other development banks like the World Bank and the International Monetary Fund has said that there is a huge lack of capital for investment in infrastructure and that that is holding the region back. If they can get that capital if they can develop that makes the whole region better off it makes it more stable it makes it more prosperous and New Zealand benefits.Secondly it is in support of increased integration of the region. When we did the international treaty examination at the Foreign Affairs Defence and Trade Committee that was a key point made by officials reporting to us on our national interests as to why we would benefit from participation in and membership of the bank. It also augments our existing relationships in the region. For years speaking as foreign affairs Minister and trade Minister we were actively involved in the region at ASEAN regional forums at APEC meetings and so on. It is critically important. The majority of our trade flows now not to Europe but to the Asian region. [Bell rung]The CHAIRPERSON (Hon Trevor Mallard): I will give the Hon Phil Goff the call in a second but—I apologise to the members again—I misdescribed the debate. We are now debating Part 2 which includes the clauses I mentioned but also the schedule. Given the size of the schedule it is a fair proportion of the bill.Hon PHIL GOFF (Labour—Mt Roskill): We can indeed talk about the schedule. I thought we would be having a separate debate on the schedule—The CHAIRPERSON (Hon Trevor Mallard): No we are not.Hon PHIL GOFF: OK so let me address some of those things too because what is in the new schedule 8 in the schedule is important—that is the articles of agreement. It is 30 out of the 34 pages of the bill. It is therefore pretty critical.But I want to also address one amendment that the committee made which was to clause 9. Under clause 9 we deleted new section 8(1A). I want to talk about the reasons for that. New section 8(1A) basically gave article 19(1) of the articles of agreement the force of law in New Zealand. So a layperson reading this might ask why we would delete that. What article 19(1) does is prohibit members of the Asian Infrastructure Investment Bank from imposing restrictions on currencies held or used by the bank. That will still govern our actions anyway but the advice that the select committee was given was that it was not necessary. This article and the restrictions that it imposes do not need to have effect domestically for us to still be bound by it so it was not necessary for that to be included. Secondly it would be inconsistent with all of our other agreements with other international financial institutions if we were to include that clause. So not too much should be read into the fact that that clause has been taken out. It is simply that it was not necessary and it would have been inconsistent.Can I come now to the schedule of the bill which is really important. First of all article 1 sets out the purpose of the bill which is to “(i) foster sustainable economic development create wealth and to improve infrastructure connectivity in Asia by investing in infrastructure in other productive sectors;”. Also I think the second factor is significant—“(ii) promote regional cooperation and partnership in addressing development challenges …”. So that sets out clearly what the purpose of this bank is and why we would want to be a member of it. It makes it clear that membership is open to members of the International Bank for Reconstruction and Development—that is the Asian Development Bank as we know it. It talks about the amount of authorised capital stock that the bank shall have. The sum set out under article 4 is some US$100 billion—that is US$100 billion. So what that gives us is a sense of the size of this bank and the significance that it will have in achieving the purpose for which it is set up.We are investing in this bank remember because the Asian Development Bank and the World Bank were not meeting the level of demand in the Asian region for investment in infrastructure and that US$100 billion is clearly large enough to make a difference. Article 5 sets out the way in which we make our subscription to the organisation which is in five instalments each of which is 20 percent of the amount that we have to pay. That represents US$18.4 million a year. So it is a significant sum that we are contributing but compared with the larger countries like the US$30 billion that China is putting in it is relatively small but symbolically it is important and that is deemed to be our fair contribution.Article 13 sets out the operating principles and I think it is important that the bank shall be bound by sound banking principles. If this bank was not going to operate according to those principles and if we had not been involved in the negotiation and we were not confident in that then we would not be making this investment. So that is also pretty important.I want to touch on one other section if I can find it in terms of the election of the president of the bank which is really important. It sets out the principle that the election should be by an open transparent and merit-based process. If we need to have confidence in the way that this bank operates it needs to operate according to best international practice. I think the articles of agreement in front of us can give us that confidence—STUART NASH (Labour—Napier): I would like to speak to Part 2 of this bill and mainly to new section 3(3) inserted by clause 6(2) and new section 10(2)(da) inserted by clause 10(1). New section 10(2)(da) talks about schedule 8 which sets out the text of the Infrastructure Bank agreement as Mr Goff alluded to.I would like to say to Mr Tabuteau that I know he is not in agreement with this bill and he is not supporting our membership of this bank but if New Zealand First is ever in a situation where it has the power to withdraw New Zealand’s membership it can be done. There are clauses under chapter VII “Withdrawal and suspension of members” where a member can withdraw simply by delivering a notice in writing to the bank that we are gone. You get 6 months and you are still liable for all the liabilities and promises that a country has made but the bottom line is that I could not see a case where New Zealand would withdraw from such an agreement especially when you look at schedule 8 and the articles of agreement—why it is being undertaken.If you look for example at schedule 8 “Articles of Agreement of the Asian Infrastructure Investment Bank” one of the main ones is “to remove the financing bottlenecks faced by the individual economies in Asia and will complement the existing multilateral development banks to promote sustained and stable growth in Asia;”. So this is not saying it is an either/or—that a country applying for money from this bank has to choose between this bank and the Asian Development Bank the World Bank the IMF etc. This is just filling a gap that is perceived—well not perceived—it is acknowledged that it does exist.But when we talk about New Zealand’s membership and this is what article 3 does—approval is also given to the New Zealand Government to become a member of the Infrastructure Bank in accordance with the Infrastructure Bank agreement. There are a number of reasons why we would join this. We have talked about this before but one of the things that surprise me is that people have said that the Americans in particular have seen this as China having undue influence over the development of the region. Well the Chinese are incredibly smart as well. They understand that as citizens of the countries that are members of this bank will draw down funds to help their infrastructure move from subsistence living into consumerism the Chinese ability to service that and the Chinese economy’s ability to grow will grow along with these economies.As mentioned we are talking about Malaysia the Philippines Thailand India Viet Nam and Uzbekistan—there is massive growth potential in this region for all the countries that are investing in this bank. As I mentioned Australia is Great Britain is but the United States is not. It is one of the main ones. But there are a number of New Zealand companies that may not only be able to take advantage of the growing consumerism in these economies but also be able to take advantage of the infrastructure development as it occurs. We know that there are a number of New Zealand companies and consultancies that are world-leading experts when it comes to the development of for example geothermal energy cadastral mapping and any number of other infrastructural projects that may be required or that may come from the funding from this bank to these growing economies.The other thing also—I always agree with Mr Goff and I certainly do here—is we have got to stand for something. If New Zealand said: “We only care about ourselves. We don’t care what is going on in the rest of the world.”—and I am not talking about from an economic perspective; I am talking about a social perspective—then that would go against what I believe is a very important part of our global brand and what we actually stand for in the global market and that is for a fairer more equitable society. We do know that infrastructure projects deliver the sorts of social outcomes required to move people from subsistence right through to consumerism. We only have to look at China to see what a developing economy can achieve in the space of a very short period of time. As mentioned this is what we stand for.The economic benefits to New Zealand of membership—as one organisation used to say there are benefits in membership. I think the benefits in this agreement or in being a member of this bank far outweigh the costs. Mr Tabuteau—well not only Mr Tabuteau but a number of speakers have talked about the cost. It is only I think $156 million over 5 years—Mr Goff?Hon Phil Goff: Yes.STUART NASH: As Mr Goff pointed out it is less than we are spending on the flag referendum. So the cost to New Zealand is minimal per year—the cost to New Zealand is minimal but I think the economic benefits are absolutely substantial going forward.FLETCHER TABUTEAU (NZ First): Not to labour the point but everything that has been spoken of in these contributions I actually tend to agree with. Investment in China and in the neighbouring Asia-Pacific region is essential for the development of that region. I concur with the previous contribution from Stuart Nash that investment in infrastructure development in those underdeveloped regions will bring up the social capacity of those memberships.What I wanted to point out and what I still insist on is that the underlying commitment on behalf of this Government to this infrastructure agreement bank is based on lies told to New Zealanders. The Government has sold off our assets and told us they would be used for New Zealand but they are most clearly not being used for investment in New Zealand. That is our issue with this legislation. We cannot agree with the cries about what message it would send to China and what message it would send to the regions when we do not contribute. I contest that New Zealand First as the name might suggest is more concerned with what message it sends to New Zealanders when our commitment to this bank is based on lies from this Prime Minister.I just want to finish my contribution with a very technical question to the Minister in the chair the Hon Craig Foss. You will forgive me Mr Chair. It is actually in relation to our commitments under the joint statement of principles of partnership. New Zealand is expected to ensure adequate consultation with Tokelau on any treaty such as this one that we are committing ourselves to. My understanding is we have not undertaken that consultation. I would be happy—and I would hope—if this could be proven to be incorrect. But we do have a commitment. I would like to understand what consultation has been undertaken on the part of this Government because we are expected to do so under our own legislation when it comes to these financial trade agreements. So I put it to the Minister and I hope I am proven wrong that we have not consulted as per our obligations. I would be intrigued to know what that feedback from consultation is. Thank you for your forbearance Mr Chair.Hon DAVID CUNLIFFE (Labour—New Lynn): Thank you for this opportunity to contribute in the Committee stage on Part 2 of the International Finance Agreements Amendment Bill and I reiterate that Labour is supporting the bill. Part 2 contains a number of operative provisions in clauses 6 7 8 9 and 10—and importantly clause 10 is the linking section that attaches schedule 8 which is the Articles of Agreement of the Asian Infrastructure Investment Bank. I will make only a brief point about clause 8 which is to note that subclause (2) inserts new section 5(e) which says “all payments required to be made … to the … Bank under the terms of the Infrastructure Bank Agreement.” and new subsection (2) which says “Expenses … may be incurred without further appropriation …”. I would like the Minister in the chair Craig Foss to clarify for the Committee whether that means there is a contingent liability risk on New Zealand beyond the US$92.3 million I think it is to which our initial contribution amounts; if so what is the nature of that liability risk and can he put a top-end quantum on it. I think it is important for the Committee to be aware of that.Turning to new schedule 8 and with the preface that I understand that a former New Zealand Secretary to the Treasury Mr John Whitehead was instrumental in contributing to these articles of agreement I say that it is clear that they have been carefully worked through and I wish to turn in particular to the operating principles in article 13. This contains I think it would be fair to say a blend of banking principles and principles that reflect the international nature of the bank. The bank will be guided by sound banking principles; it will not finance any undertaking in the territory of a member if that member objects to such financing; it will pay due regard to the ability of the recipient to obtain financing on reasonable terms from other sources—which I think is important because what that says is that this bank is trying to fill in the financial funding gaps for Asian regional infrastructure not—The CHAIRPERSON (Hon Trevor Mallard): I apologise for interrupting the member. I have been consulting with Standing Orders and I do want to talk to Mr Tabuteau about a comment that he made previously. I want to refer him to Speaker’s ruling 48/2 which states: “The offence of calling another member a liar or implying that another member of the House is a liar is an offence against the House …”. It then goes on to make it very clear that that is not acceptable. I therefore require the member to withdraw the comment and to apologise.Fletcher Tabuteau: I withdraw the comment and I apologise.Hon DAVID CUNLIFFE: Clause 5 of article 13 talks about the ability of the recipient to obtain financing from elsewhere which goes to the point as I said that this is a supplementary or gap-filling fund and that reflects us back on the earlier debate that we had in the first reading of this bill when we were debating whether the creation of this bank represented in some ways a vote of no confidence on the existing Bretton Woods institutions and the sufficiency of the World Bank and the Asian Development Bank. From there that led us into a discussion of the relative interests of the United States as the sponsor of the Bretton Woods institutions and to reflect upon the rise of China as a very important country in the region which had been the principal driver of the creation of this additional institution.I think it is important to turn to chapter V in the articles of agreement and in particular the governance section in articles 22 23 24 and 25. What that does is it separates out the composition of the board of governors from the board of directors and I want to reflect upon those two different roles. New Zealand in agreeing at the outset to be a founder member of the Asian Infrastructure Investment Bank acquires a seat on the board of governors and an alternate governor if our regular member is not able to attend. That allows New Zealand to participate in exercising the powers under article 22 23 and 24 which include appointing directors and the powers thereof are set out later. It includes appointing under article 29 the president and overseeing the role and functions of the bank.It is instructive that in appointing the board of directors the governors are divided into two groups: nine shall be elected under article 25 by the governors reflecting regional members and three shall be elected by governors representing non-regional members thus making it clear that in all ordinary circumstances it will be regional members who will hold the power of appointment over directors or the board of directors. That is significant because it goes to the point of the shifting balance of influence between the non-regional Bretton Woods powers and the regional powers that are largely sponsoring this initiative but with whom New Zealand is pleased to associate on this occasion. The powers of the directors are set out in articles 26 27 and 28 and it is important to note the allocation of voting under article 28. Founding members are allocated 600 founding member votes and then other votes that are proportionate to their financial contributions.New Zealand does indeed get a seat at the table of an important new institution. New Zealand does get visibility to governance—or at least high-level governance—documents. I guess in the articles of agreement we have yet to see the precise nature of the reporting from the board of directors to the board of governors and we would of course anticipate that it is mainly the directors to whom management information will flow. It will be very interesting to see—and the Minister may wish to comment on that—whether New Zealand as one of the smaller founding participants could expect to see New Zealanders on the board of directors of the bank. If that is not the case could the Minister please let the Committee know the extent to which New Zealand will have visibility to reports and paperwork that are going to the board of directors as opposed to the board of governors. We would not want to see New Zealand in a situation where because it is on the higher-level appointment board but not on the day-to-day governance board it loses some degree of visibility to the operations of the bank. So we would like the Minister to take a call on that point.The Foreign Affairs Defence and Trade Committee has commented on a number of the features of the founding documents of draft policies contained in the schedule. It comments for example on the innovative governance mechanisms and attests that the model has adapted from and learnt from the World Bank and the European Investment Bank noting the non-resident board of directors which is less expensive to operate it says than some of the models requiring resident investors. It notes that New Zealand advocated for open transparent and merit-based appointments and that the Asian Infrastructure Investment Bank agreed to write that into the articles of agreement that the president is required to come from a regional member country and that a range of other safeguards have been inserted. The select committee report notes that a lot of emphasis was put on ensuring that the bank has the right safeguards in place including environmental social and procurement safeguards.I have a couple of notes on that. Firstly the articles make clear that procurement can be openly conducted from any regional country which includes New Zealand so we would hope to see New Zealand contractors and service providers getting a share of procurement and I invite the Minister to comment on whether the national interest analysis background documents contain any estimates of the value of the procurement flows in which New Zealand might be expected to participate. The select committee notes that it will be expected to collaborate with global and regional institutions and I do believe that we are going to need reporting on that in the future. The Minister may wish to comment on how he expects to keep tabs on that issue because there is both the potential for constructive gap-filling by the Asian Infrastructure Investment Bank and some degree of overlap and/or competition with the Asian Infrastructure Investment Bank and the World Bank. So exactly how the New Zealand Government would seek to form a view given that it is on the board of governors of the Asian Infrastructure Investment Bank and the IMF - World Bank system to tell whether those relationships are constructive or destructive would be a very important I think thing to consider.I turn the attention of the Committee to article 31 about the international character of the bank. I think there are some important safeguards there. Clause 1 of article 31 states: “The Bank shall not accept Special Funds loans or assistance that may in any way prejudice limit deflect or otherwise alter its purpose or functions.” It is important that its purpose which is infrastructure and other productive development in the region be underlined. There is a very important statement in clause 2 of article 31 especially given the controversy on its founding.Hon CRAIG FOSS (Minister for Small Business): Just briefly I will answer a question the member had regarding Tokelau. Tokelau was informed of our intention and feedback was sought from it regarding our intention to join the Asian Infrastructure Investment Bank. The member may know that Tokelau is not eligible to be a member as it is not a member of the Asian Development Bank or the International Bank for Reconstruction and Development for his interest. Just quickly I note that those shares will go on to the Crown’s balance sheet as an asset and any capital that could be called would be there as the member described as a contingent liability. Thank you.Hon DAVID CUNLIFFE (Labour—New Lynn): Thank you Mr Chairman I do appreciate your indulgence—just to wrap up a couple of technical points in respect of the articles of agreement. Article 31(2) states: “The Bank its President officers and staff shall not interfere in the political affairs of any member nor shall they be influenced in their decisions by the political character of the member concerned. Only economic considerations shall be relevant to their decisions. Such considerations shall be weighted impartially in order to achieve and carry out the purpose and functions of the Bank.”I really would like the Minister in the chair Michael Woodhouse to share with the Committee some examples of the policies that the New Zealand Government would be expecting to see implemented under that all-important provision because for those particularly in the western hemisphere who have alleged that this new institution would be in some way a tool of creeping political influence this safeguard would seem to weigh against that in a healthy and constructive way—but of course it is only as good as its implementation. So Minister if I could turn your attention to that very important clause in the articles of agreement clause 2 of article 31 how will we know—how will the New Zealand governor know—whether that has been implemented in practice and how will it service any concerns that might subsequently take place?There is a range of technical articles going on in chapter VII; in chapter VIII around suspension and termination of operations of the bank; in chapter IX around status immunities privileges and exemptions; in chapter X on various interpretive sections; and then in chapter XI on signature and deposit and ratification and enforcement provisions. Schedule A—the schedule to the schedule—commences on page 30 and then it sets out New Zealand’s relative number of shares which I think is interesting for us all to see—4615 shares being US$461.5 million. That raises a very important point because of course earlier in this debate the House had been tossing around the number US$92 million which converts to approximately NZ$140 million. Here we see that the actual liability is US$461 million which is closer of course to 600 and something or—I have not got a calculator—NZ$700 million. As they say in the language of governance it is a non-trivial amount of liability.It is instructive I think that that comes from the Future Investment Fund a fund of some $16 billion one-twentieth of which approximately would be covered by this liability or fully funded from it. That is a very significant proportion of the funds raised by the Government’s so-called mixed-ownership model asset sales programme the proceeds of which were repeatedly stated to be for the development of New Zealand infrastructure and New Zealand health education and social services. If this—and it is a significant proportion of it; close to one-twentieth of it—is instead to be allocated to the underwrite of the Asian Infrastructure Investment Bank then we need to know exactly what benefits will flow to New Zealand.I would ask the Minister through the chair to comment on what estimates have been provided to the Government on the economic flows to New Zealand that pertain to this subscription. Will it be a measurable flow of procurement services to New Zealand service providers? Will New Zealand qualify for infrastructure projects within New Zealand using Asian Infrastructure Investment Bank funds? Mr Joyce in question time today was celebrating the Crown’s investment of NZ$3 million in a harbour project in the Eastern Bay of Plenty. Would that project which is designed in the first instance to service a marine farming project—I think it is called Eastern Sea Farms a large aquaculture project which I understand is around 50 percent owned by Chinese interests—qualify for Asian Infrastructure Investment Bank funding if the Government does not follow through on what it is quietly indicating may follow in time for the election which is the balance of I think the $29 million or $30 million required to make that project happen?That raises in turn the larger question of whether other infrastructure projects in New Zealand would qualify for Asian Investment Infrastructure Bank funding. The Government seems very reluctant to do major economic development regional infrastructure projects except perhaps some roads. But even those have been concentrated in semi-urban roads of national significance and regional roading has often been put on the back-burner as a result. So I think that is an important question.Will New Zealand get consulting or service-providing contracts from the procurement streams of this bank; if so do we have any idea how much? Will New Zealand service providers be eligible to provide infrastructure construction and expertise in third-party countries? Just for example some of our State-owned enterprises are best world practice I understand in geothermal technology. Will that qualify; if so what estimates have been made in our national interest analysis about the cash flow back to New Zealand? Because US$461 million of liability out of the Government’s Future Investment Fund—so-called—is a big chunk of change. What are we getting for it?That is not to say that Labour opposes the bill. We support the bill and I have taken some time to go through the articles of agreement to indicate provisions that we are by and large comfortable with and indeed New Zealand has materially contributed to. We are comforted with the proscription on political interference. We are comforted with the well-set-out transparency requirements and the layering of the role of the board of governors on which New Zealand will sit and the board of directors. But we ask exactly what level of transparency will be provided to the governors in terms of the operations of the bank as opposed to the board of directors on which it is less likely we will sit and what estimates have been provided to the cash-flow benefits to New Zealand.I have to say that once again the national interest analysis that was provided to the select committee was kindly put more qualitative—well-written but qualitative—than quantitative. That is there are no numbers in it. It says—and the Foreign Affairs Defence and Trade Committee has summarised—that “New Zealand’s economic future is linked to the Asia region” and therefore it is a good thing for us to participate. It is a very general argument and in this Committee stage debate drawing upon the articles of association I think it is incumbent on us to try to get into the detail of that so that we can see what attempt has been made by the Government to quantify those benefits.It talks about on page 3 of the Foreign Affairs Defence and Trade Committee report connectivity to the market beginning with the truism that “New Zealand is part of Asia”. Yes of course it is but that argument alone is not sufficient to justify our involvement in this. And it talks about our ability to influence but even the national interest analysis does not go into the point we have just made in these contributions that we sit on the board of governors but not necessarily the board of directors and that therefore there is a limitation on the influence that we can bring to bear.So on both the financial and the non-financial returns I would ask the Minister in the chair to take a brief call. What quantum has been provided to the Government in terms of financial returns to New Zealand service providers and what level of transparency pertains to the governors as opposed to the directors on the strategy direction and operations of the bank? Thank you.STUART NASH (Labour—Napier): Mr Cunliffe does bring up an interesting point. Mr Cosgrove and I alluded to it but you never know it could arise. Under article 2 “Functions” in clause (iii) of new schedule 8 it actually says the fund is to “encourage private investment in projects enterprises and activities contributing to economic development in the region in particular in infrastructure and other productive sectors and to supplement private investment when”—and this is the important part—“private capital is not available on reasonable terms and conditions;”.I suppose there could be an argument that why would private capital invest in a wharf in—Ōpōtiki did you say Mr Cunliffe? [Interruption] In a wharf in Ōpōtiki. If the Government backs down from saying we will not invest in this and yet there are defined social and economic benefits for that reason then I suppose there is nothing stopping—I do not know whether it would be the Ōpōtiki District Council or whatever applying to the bank and I assume it probably has to be through the New Zealand Government for funds to build this wharf on reasonable terms and conditions. And again what defines reasonable terms and conditions? They may look at the New Zealand market and say: “Well there’s a risk premium in this and therefore it’s going to get quite high interest rates.” Or then again it could be at the rates that you borrow money from a bank in China that has negligible interest rates. Who knows? I mean I find it difficult. It is an interesting proposition but you never know it might occur.What I would like to look at is schedule A of new schedule 8. This lists the countries and the number of shares and their capital subscription to this fund. And it is interesting because there are 37 regional countries and there are 20 non-regional members that have decided to contribute money in varying amounts to this fund. It really goes to show that according to the amount of money going in there really has been a gap in the funding infrastructure or in the funding mechanisms to really drive infrastructural growth forward hence the need for this bank because as a number of speakers have alluded to America has been dead against this because it thinks the old institutions already fit the bill. But I would suggest that by looking at the countries that have invested in this perhaps America is on a little bit of a limb when it believes that in fact there is no need for such a bank. Time will tell.But let us have a look at some of these countries. Let us start at the top: Australia. When we say that one of the Americans’ concerns about this is that the governance would not be up to scratch there are a number of countries here that would not go near this if they believed that the infrastructure or the governance arrangements for this bank were anything but absolutely first-class and in line with the expectations of developed countries. So we have got Australia. Australia is actually putting in $3.69 billion. That is a lot of money. The reason why I think Australia is putting so much money in is—well it has said it is very much part of this region. It is very keen to see these markets grow because being a commodity producer it needs to move its economy from pure commodities towards finished goods and other products and it sees this market as a very important one. So it is putting in $3.69 billion.Azerbaijan is putting in $254 million. I am not even too sure where Azerbaijan is. I know it is part of the old Soviet Union. I had to ask Mr Goff who I think has been to 190 of the 192 countries that exist in the world.Hon David Cunliffe: It’s warm and dry.STUART NASH: It is warm and dry. Even Mr Goff said it is one of the very few countries—one of about three countries in the world—he has not been to. But it has decided—Hon Phil Goff: They used to test nuclear weapons there.STUART NASH: Oh did they? Well they have decided that they need to diversify their economy—their part of this region. They are actually putting in $254 million themselves. I do not know how big the economy of Azerbaijan is but I suspect it is not particularly developed.David Bennett: It’s oil mate. It’s oil.STUART NASH: It is oil? Well Mr Bennett knows a lot about it but I would suggest that this is a substantial amount of money or a substantial commitment from an economy that understands the value of development.Bangladesh—keeping in mind that we committed US$461 million—has committed US$660 million. Bangladesh is a country we tend to see in the newspaper when there is a massive flood that wipes out villages and causes great devastation. It understands the implications of such a bank and I suspect places like Bangladesh will actually benefit substantially from the infrastructural development that will go on in the region and it may well happen in its country. It is committing US$660 million.Brunei—[Bell rung] Mr Chair there are a few more countries.The CHAIRPERSON (Hon Trevor Mallard): I am slightly stretched on the relevance. It is not National Geographic.STUART NASH: Well I am talking about schedule A here. OK well what I will do is talk about how some of the really big economies see the development of this and understand the value of development in this region.We have got China. I mean we all know that China is one of the driving forces behind this. It is the world’s second-largest economy and in my view it is not long before it is the world’s largest. But is it putting in nearly $30 billion. Close to 30 percent of all the money committed to this is being put in by China. India is putting in $8 billion. And again I suspect that India will be a recipient of a lot of the development that goes on in the region because you know it is a country that is on a fast track to developed nation status. Indonesia is putting in $3.3 billion. Even Iran is putting in $1.5 billion. So as we can see this certainly is not an American-backed or a Chinese-backed alliance when we have got countries like Iran—Israel is putting in $749 million which is interesting. Israel comes below Iran in the schedule. I think it is probably the only time you will see them side by side. We have got Korea putting in $3.7 billion. Turkey is putting in $2.6 billion.But it is not only these countries within the region that are putting in a substantial amount of money—it is about three-quarters or $75 billion. Well it is three-quarters of all the money heading into the fund. But the interesting thing for me is the non-regional members that are actually putting in a substantial amount of money. These are the ones that recognise the absolute potential for their own domestic markets in growing the Asia-Pacific market. We have got Brazil which is putting in $3.1 billion. Heaven knows it is spending a lot of money at the moment developing Olympic stadiums and that sort of carry-on. That should be a good tournament. We have actually got France which is putting in $3.3 billion and Germany is putting in $4.4 billion.So when the Americans had concerns about the governance or the arrangements or the legitimacy of this bank I suspect that it is one of very few countries in the OECD that has such concerns. When Germany is committing $4.4 billion to this bank then you know that there is something going on. Italy—$2.5 billion. We have even got Luxembourg committing $69 million. Again I do not know the size of the Luxembourg economy but I suspect—well I do know it is not a particularly big one so $69 million is a lot of money for it to put in.The last thing I would say is there are just a couple more economies from outside the region that are putting in a billion dollars or more. They are the Netherlands Spain and the United Kingdom. The United Kingdom is putting in $3 billion.I suppose the point I am trying to highlight is that this should not be seen as just a regional bank funded by regional players for the benefit of just our regional and local economies. This is a bank that has international buy-in. I think it will play a significant part in the coming years of the development of the economies that are actually going to drive growth within our own economy and certainly the region. That is why I am supporting the bill and I am very pleased to support it. Thank you very much.A party vote was called for on the question That Part 2 be agreed to.Ayes 109New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 12New Zealand First 12.Part 2 agreed to.Scheduleagreed to.Clauses 1 to 3A party vote was called for on the question That clause 1 be agreed to.Ayes 109New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 12New Zealand First 12.Clause 1 agreed to.A party vote was called for on the question That clause 2 be agreed to.Ayes 109New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 12New Zealand First 12.Clause 2 agreed to.A party vote was called for on the question That clause 3 be agreed to.Ayes 109New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.Noes 12New Zealand First 12.Clause 3 agreed to.Bill to be reported without amendment presently.