Export Finance and Insurance Corporation Amendment (Support for Commonwealth Entities) Bill 2016 [provisions]

by Luke Fletcher and Rod Campbell

The Jubilee Australia Research Centre and The Australia Institute welcome the opportunity to make a submission on the Export Finance and Insurance Corporation Amendment (Support for Commonwealth Entities) Bill 2016.

The primary purpose of Efic under the original Export Finance and Insurance Corporation Act 1991 is to “assist the development of Australian export trade.” Efic was established to address the market failure of Australian exporters being unable to secure finance or insurance services from commercial suppliers for financially viable projects.

Such issues can arise for small to medium sized enterprises (SMEs), particularly those that are new to export markets. Efic can play a valuable role in assisting such firms. Our chief concern is that these amendments to the Efic Act could divert Efic’s resources away from this role towards activities that have little relation to this market failure or Australian exporters. 

Efic has already been criticised for not filling this role. A 2012 Productivity Commission inquiry found that Efic has a bias towards large corporations and that Efic’s services to them were not justified. The Commission was particularly critical of Efic’s provision of finance to resource projects in Australia, infrastructure (e.g. rail lines and terminals) and services (bus routes). It also found that large corporate clients were often repeated beneficiaries of Efic support.

A new Statement of Expectations, sent to Efic by then-Trade Minister Andrew Robb in 2015, appeared to be an attempt to address some of the criticisms made by the 2012 Productivity Commission Report. It directed Efic to cease its direct support of onshore resource projects, although did allow Efic to continue to provide support to SMEs supplying such projects. It allowed Efic to continue to support overseas resource projects, so long as Efic was not crowding out the private sector. It put a limit on Commercial Account facilities to the same company (maximum of three times in three years) and required Efic to seek DFAT approval if Efic gave support to more regularly than three times in three years.

We understand that Efic has attempted to respond to the new directives with a greater focus on SMEs, although more research is required to determine how successful this has been.

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