Goff Phil: International Finance Agreements Amendment Bill — Second ReadingText is incorporated into the Bound VolumeGoff Phil: International Finance Agreements Amendment Bill — Second Reading[Sitting date: 05 November 2015. Volume:709;Page:7752. Text is incorporated into the Bound Volume.]Hon PHIL GOFF (Labour—Mt Roskill): This bill as the Minister has suggested allows New Zealand to join a new international investment bank the Asian Infrastructure Investment Bank and it serves to implement New Zealand’s obligations under the articles of agreement.I want to say that Labour supports this bill because it supports New Zealand’s involvement in the Asian Infrastructure Investment Bank and we think that it is the right decision to do so and for the right reason. I say that because you Mr Deputy Speaker will know that Labour does not support every Government investment decision. In fact if I contrast this decision which is soundly based with the decision to make facilitation payments to a Saudi businessman to enable New Zealand to try to get a free-trade agreement—an agreement that was a disaster and a bribe—I can say that this agreement by contrast is a paragon of virtue.Labour believes that the Asian Infrastructure Investment Bank is a positive move and that the investment that we will make in it will be soundly based. I have to say that the issue was initially controversial. The United States made no secret of its opposition to this bank being established. It was opposed to the idea and directly and indirectly sought to influence other countries not to participate. The grounds for the United States doing that were first of all that it said the International Monetary Fund the World Bank and the Asian Development Bank adequately met the needs of investment in Asia. That is patently incorrect. In fact I can quote the former Secretary to the Treasury Alan Bollard who is now in the APEC secretariat. He made the point quite clearly that there is absolutely huge demand for investment in infrastructure in Asia and that it was not being met by the established Bretton Woods institutions.Secondly the United States seemed to argue that support for the bank would allow China to expand its influence. It may do but it also has to be seen as incredibly naïve to think that the world’s second-largest economy and a financial superpower in its own right does not have the ability and the right to expand its influence. In fact the United States to some degree has brought this on itself because the US Congress stood in the way of China exercising influence commensurate with its size in the IMF and the World Bank. That is not a prejudiced comment from me; that is something that our Minister of Trade Tim Groser acknowledged some months ago. Will China expand its influence? Well China has 25 to 30 percent of the voting rights in this bank but it is only one of 50 countries that currently will be a member of the bank. It sits alongside other large countries both developed and developing like Britain Germany France Italy the Republic of Korea Russia and India.We I think made the right decision in becoming involved early in the negotiation of how this bank would be set up. We were the 24th country to join. That does not sound like we rushed into it but we were in fact the world’s first developed country to join those negotiations and as a result we were able to influence the outcome of the negotiations. I want to pay a particular tribute here to John Whitehead known in this House as a former Secretary to the Treasury a person I have known for the best part of 40 years. He is a person of incredible skill experience and integrity and I know from the feedback I have got that John Whitehead did an extraordinarily good job in making sure that this institution follows international best practice for financial institutions. We should be proud of the contribution that he has made and the bank is better for that.As the Minister said the select committee was not exactly swamped with submissions on this bill. In fact we received no submissions. Maybe there is a subtle message to the Government there—if it wants to cut down on submissions it should use the words “international financial agreement” in the title of a bill and the average layperson will say: “This is altogether too complex and we shouldn’t go near it.” It is not hugely complex but it is very important. And it is important to know what this bank will do. It is a multilateral investment bank and what it is designed to do is to address the gap in infrastructure investment that exists in the Asian region. It seeks to foster sustainable economic development and to work with other multinational institutions to promote regional cooperation and partnership. Although the United States said that it was not really necessary it was interesting that a former Minister of Trade whom I got to know and is now head of the International Monetary Fund Christine Lagarde has welcomed the establishment of this bank.Why should New Zealand be supporting it? Well I think there is scarcely a member in this House who would not acknowledge that our future as a country is tied up very closely with the future of the Asia-Pacific region. It is our geographic location it is where most of our largest trading partners are based and it is a region that is important to us economically and politically and we need to be seen to be involved in and making a constructive contribution to that region. The contribution that New Zealand is making is relatively small. We are putting forward capital of NZ$145 million over 5 years and we have callable capital of something like US$461 million. I hasten to add that I think in our entire history of putting up callable capital that capital has never been called up and there has never been a financial collapse of an international institution that we have put capital towards. So I do not think there is a huge amount of risk in that regard.What are the drivers of our involvement in the bank? They are first of all economic. As I said our future is linked with the Asia region and Asian growth is constrained by limited infrastructure investment. If Asia develops its infrastructure and grows economically that is of direct benefit to us because that is the predominant region into which we are trading.Secondly it is important because of our connectivity to the market. New Zealand is a small country and its influence is commensurately small you would think but we can develop that influence by the relationships that we develop. The free-trade agreement with China is a classic example. The Chinese repeatedly in those negotiations quoted back to us New Zealand’s “four firsts” because we had developed the relationship with China and they valued the effort that we made. And as a result of that New Zealand became the first developed country to get a free-trade agreement with China 10 years ahead of our mates across the Tasman. Well just as relationship-building was important in that the relationship-building that is implicit in our involvement and our constructive contribution to the Asian Infrastructure Investment Bank is equally important.Thirdly just to develop a point I made a moment ago it was important to commit because we could influence in the negotiations the way in which the bank was set up. We made sure that the bank’s membership is broad and open; we made sure that it followed sound governance and appointment processes; we ensured working with others that environmental and social issues were to be taken into account by decisions made by the investment bank; and we ensured working again with others that it will operate according to sustainable economic and financial principles. As a result this is an institution that will have proper oversight for investment decisions and for development outcomes. Both of those things are important in a decision to be part of it and it will follow international best practice.This is a soundly based decision. This bill is appropriate in committing us to membership of that bank and allowing us to meet the requirements for that membership to happen as soon as the bank comes into existence.