Questions surround Efic's role in AIFFP

CANBERRA — With the outcome of Australia’s federal election determined, work is progressing on the Australian Infrastructure Financing Facility for the Pacific scheduled to start operating in July. The implementation of AIFFP will be a collaboration between the Department of Foreign Affairs and Trade and the Export Finance and Insurance Corporation — Australia’s export credit agency providing Australian exporters with a range of specialist financial solutions to build their global market. But there are concerns within the development sector that the implementation has been rushed, and that there has been little attempt to address the role Efic will play — its mandate is to advance Australian opportunities, which appears in conflict with the objective of development. “We have broad concerns about the AIFFP and we really think it shouldn’t be delivered by Efic at all,” Lucy Manne, head of policy and campaigns for ActionAid Australia told Devex. “With Efic, it is going to be ultimately about serving Australia’s national interests, which is not the right message ... It’s just not appropriate, and it’s not what they were designed to do.” AIFFP operation The director of DFAT’s Office of the Pacific, Cherie Russell, explained at the 2019 Aid Supplier Conference that there will be a split of responsibilities between DFAT and Efic to focus on what each does well — DFAT will be responsible for the delivery of grants and Efic for loans. DFAT’s safeguarding policies — including on environment, gender, disability, and child protection — will need to be met as part of projects supported by AIFFP, as well as supporting local employment. And some expertise is being contracted in to support the new responsibilities required. “There will be roles with our external systems, much like the aid program — monitoring and evaluation, project assessment, project preparation, and all of that work we will contract in from external support,” Russell told the audience. In DFAT's submission to an Australian senate inquiry into new legislation providing Efic with an additional $1 billion Australian dollars ($692 million) to support AIFFP, DFAT provided further clarity on how the two would work together. DFAT will act as the manager of AIFFP and the assessment of projects will be undertaken by DFAT and an AIFFP board. “Efic will not be responsible for decision making for AIFFP infrastructure loans,” the submission read. “Efic will provide technical and expert financial advice (such as credit assessment and loan structuring), portfolio management and operational support to the AIFFP.” But the submission did say that Efic would contribute to a rigorous due diligence process including assessment of credit risks, country risks, and environmental and social risks. What is Efic’s mandate? Following the passing of the legislation that provided Efic with additional capital to support AIFFP, an updated statement of expectation was provided by the minister for trade, tourism, and investment, Simon Birmingham. According to Birmingham, “positive outcomes for Australia or Australians” is the priority. All AIFFP projects funded through Efic must demonstrate a benefit to Australia — which include greater Australian participation in supply chains, access to new markets for Australian businesses, more Australian jobs, and payments, dividends, or other financial proceeds from overseas to Australia. But Efic is expected to conduct diligence processes and engage with DFAT to determine if infrastructure projects are also “appropriate for the relevant nation,” and they are expected to comply with a range of standards including OECD recommendations on sustainable lending practices. Efic is also expected to expand upon its governance and reporting requirements, which includes its transaction disclosure log and freedom of information disclosure log with regular reporting to DFAT. But in the interest of its Australian business customers, Efic also has to protect information that is declared commercial-in-confidence by clients and borrowers. And this creates a transparency loophole that has been raised concerns in the past. “We were told that when it comes to climate policy, their [Efic] main influencing factors are the general direction of the government of the day.” --— Luke Fletcher, executive director, Jubilee Australia Concerns about Efic A 2012 inquiry into Efic by the Productivity Commission was critical of its operations, including its ties to large companies and lack of transparency on decision-making and safeguards. The funding two years later of $100 million Australian dollars to BHP Billiton and Rio Tinto for a project in Chile suggested that Efic had not taken on board recommendations. Its 2009 decision to provide $500 million Australian dollars to support an ExxonMobil liquefied natural gas project in Papua New Guinea was criticized in a 2018 report released by Jubilee Australia — an Australian not-for-profit research centre that aims to promote economic justice for communities in the Asia-Pacific region by holding Australian corporations and government agencies operating there to account — for not delivering social and economic benefits to local communities. More recently, Efic was given the responsibility of administering a $3 billion Australian dollar Defence Export Facility to enable Australian businesses to benefit from global weapons sales — an area of responsibility that questions social impact and safeguarding duties as well as creating potential conflicts with the objectives of AIFFP. And currently under consideration for funding by Efic is the development and construction of an offshore oil and gas field in Senegal by Perth-based Woodside Energy — a project that has been criticized by groups such as ActionAid Australia for its potentially negative impact on the marine environment, coastal communities, and the ability to deliver on the Paris Agreement. “[Efic’s] involvement in the extractive operations really put them on our radar in 2006,” Luke Fletcher, executive director of Jubilee Australia told Devex. Fletcher explained that Jubilee’s attempts to request information surrounding controversial projects, including the ExxonMobil PNG project, have been blocked citing “commercial-in-confidence” reasons. And attempts to engage the organization on environmental policies has produced similar results. “We were told that when it comes to climate policy, their main influencing factors are the general direction of the government of the day,” he said. “And the government of the day is currently very relaxed about climate targets.” For ActionAid’s Manne, the transaction disclosure logs Efic releases do not provide the level of detail required to help understand project-level impacts and whether organizations such as hers need to be doing more to advocate for groups that may be harmed. In addition to ActionAid and Jubilee, vocal dissenters against Efic’s role in AIFFP include DevPolicy’s Stephen Howes and the Australian Council for International Development. “We have so many concerns, including why it is all focused on infrastructure when aid is needed for poverty alleviation,” Fletcher said. “Our concern is that there will be bias to big infrastructure, that will neither help poverty alleviation or climate adaptation. All of the Pacific — including Pacific leaders — say that climate change is their greatest threat. We just don’t know how it will work.” Efic, however, has downplayed their role, a spokesperson told Devex that “AIFFP is managed by DFAT, not Efic.”