Pettis Jill: International Finance Agreements Amendment Bill — Third Reading 
Pettis Jill: International Finance Agreements Amendment Bill — Third Reading 
[Volume:642;Page:11893] 
JILL PETTIS (Labour) 
: 
 I am glad to join the debate this afternoon. I do not think this debate will be quite as passionate as the previous debate on water but nevertheless it is a very important bill that I believe will be perused and discussed as we go through the afternoon. 
If I had not made the uncharacteristic interjection on Mr Mapp I wonder whether he would ever have got around to talking about the bill itself. I do agree though that New Zealand has for a long time adopted a bipartisan position on most issues around foreign affairs. But there have been many differences over the years between the Labour and National parties. On matters of defence of nuclear issues and of overseas aid there has always been a degree of difference. Certainly the Labour Party’s attitude towards some developing countries is quite different from that of the National Party when one gets down below the surface to what is in National’s policy. Some of us remember Don Brash the previous leader of the National Party whose views on nuclear issues were vastly different from those of Labour. So we have not always had total agreement on matters that fall under the umbrella of foreign affairs. 
This International Finance Agreements Amendment Bill is having its third reading. The National speaker was right when he said that there was accord between the parties on the Foreign Affairs Defence and Trade Committee on this bill and the committee recommended that the bill be passed. The bill amends the International Finance Agreements Act of 1961. This gives New Zealand the authority to become a member of the Multilateral Investment Guarantee Agency which was established by the Convention Establishing the Multilateral Investment Guarantee Agency that entered into force on 12 April 1988. This bill is necessary in order for New Zealand to ratify that convention and it is time that it was done. There have been a succession of Governments both National and Labour since the Multilateral Investment Guarantee Agency was formed so this amendment bill and the ratification of the convention is most timely indeed. 
The committee raised a number of issues during its hearings. We learnt during the process of the advantages and disadvantages to New Zealand of the treaty entering into force. The advantages of New Zealand ratifying the Convention Establishing the Multilateral Investment Guarantee Agency include for example contributing to international efforts to promote development through facilitating foreign direct investment flows. That is important for New Zealand. It is also about enhancing New Zealand’s credibility and reputation at the World Bank through increasing our support of that very important organisation. It is considered that these advantages support and contribute to the reasons why New Zealand should become a party to the Convention Establishing the Multilateral Investment Guarantee Agency. 
There is another aspect relating to our ratifying this convention—that is unless New Zealand is a member of all five institutions of the World Bank Group it is unable to chair any annual meeting of that group. That is an advantage of some significance to New Zealand and is a worthy reason why we should ratify the convention. 
The Multilateral Investment Guarantee Agency is in essence an insurance agency. Its mandate is to encourage development and alleviate poverty by mobilising investment into developing countries and to encourage private sector development. The alleviation of poverty is a critically important issue. By ratifying the convention New Zealand’s subscription obligations towards that process will count towards our gross national income as part of our overseas aid target. The alleviation of poverty is something that Labour Governments in New Zealand have always felt very strongly about and they have put a lot of effort into it internationally. The committee did talk about the potential fiscal risks to New Zealand taxpayers by our being in the agency. But it is worth noting that any annual loss that does occur is shared between all shareholders so it limits our liability. 
The agency operates within a company structure so New Zealand and other member countries are afforded limited liability as its shareholders. Article 8(d) of the convention states:“Liability on shares shall be limited to the unpaid portion of the issue price.” So for New Zealand this will be equal to the value of 513 shares at an estimated value of roughly $9 million. But of this only around $900000 will be held by the agency with the remainder being subject to call. The committee was concerned about the potential for fraud abuse. However insurance companies manage matters such as moral hazard and adverse selection and the agency charges a premium based on risk which includes the reputation of the host Government. In extreme circumstances the agency will refuse to guarantee for political risk for instance if a loss is almost assured. 
So although this bill is not one that will attract a huge amount of attention—I know that it will not be on the front page of the newspapers—nevertheless it still is an important bill. So being a member of the Multilateral Investment Guarantee Agency means that New Zealand as a member of the World Bank Group will contribute to the World Bank’s mission of poverty elimination and the achievement of the millennium development goals. The core mission of the Multilateral Investment Guarantee Agency is to enhance the flow of capital and technology to developing countries for productive purposes by providing a range of key services. This is an important bill. It will largely remain below the radar in the minds of most New Zealanders but nevertheless it is significant and I am pleased to have spoken to it this afternoon.