Need for transparency as 'slush fund' allegations get bandied about | Lenore Taylor

We don’t yet know whether the $5bn Northern Australia Infrastructure Facility (NAIF) will be – as was alleged in parliament this week – a “slush fund” used to pursue the government’s “pro-coal agenda”. But we do know some government ministers are absolutely determined to promote coal mining and generation – in particular the Indian conglomerate Adani’s $21bn Carmichael coalmine in Queensland – without a thought for how it will contribute to the global warming that is bleaching the Great Barrier Reef up and down the Queensland coastline and increasing the intensity of cyclones. And we do know Adani has put its hand up for a $1bn concessional loan from the facility to help build a $2.2bn rail line that is essential for the mine to proceed. We also know Adani’s chief executive said with surprising certainty on Friday that engineering work on that rail line would start in June, and that construction was scheduled for September. And we certainly know the NAIF rules are way too opaque and the publicly available information way too sparse, to be absolutely sure it won’t, or couldn’t, be used to achieve a political end. The “slush fund” claim was made by former treasurer Wayne Swan, who told parliament the facility’s procedures were “as dodgy as Lehman Brothers”, the bank that sparked the global financial crisis. Swan has written to the auditor general demanding an investigation. The NAIF is supposed to be an independent statutory authority that makes recommendations to resources minister Matt Canavan about how concessional loans can be used to boost the economy of northern Australia. The minister gives final approval for any loan, but according to the legislation setting up the fund, he cannot direct its recommendations. Asked how Australians could be assured of the NAIF’s independence, its chief executive, Laurie Walker, told Senate estimates this month that “the minister has no ability under our act to direct the NAIF board to support any particular project or individual, and the board will absolutely adhere to its obligations under the act”. At that point the minister, Canavan, interrupted. “Can I just add to that, too, that I support everything Ms Walker just said, but I do see it as part of my role to help promote the fact that we have a Northern Australia Infrastructure Facility that investors to this country should, certainly, be considering as an option.” And he had just finished telling the committee: “I think, unfortunately, there has been a view that various Australian governments have not been supportive of the coal sector, but it is fantastic that we have a prime minister that has said loud and clear that we back the coal industry and we think it is a very strong and important sector for our economy.” And he has repeatedly said how confident he was in the Carmichael project’s future and how beneficial it would be for his home state. (Adani and governments repeatedly claim it will provide 10,000 jobs, although evidence from an economist commissioned by Adani itself – Jerome Fahrer of ACIL Allen – given in the land court in Queensland stated that “over the life of the project it is projected that on average around 1,464 employee years of full-time equivalent direct and indirect jobs will be created”.) And late last year, just before the mine’s billionaire proponent, Gautam Adani, was due to meet state and federal political leaders, Brisbane’s Courier Mail “exclusively” reported that $1bn had already been “set aside” for it, and it had recevied conditional approval. The minister said that while he was confident, that “exclusive” was a bit premature. This week the paper was again extolling the project’s benefits and puzzling out loud over why environmentalists were opposed to it, in an article written by a journalist who declared he had recently travelled to India as a guest of Adani. In fact, the only reason we even know the Adani mine is one of four projects now in the “due diligence” stage for NAIF funding is that the minister announced it, after speaking to the fund and the company. The NAIF itself hasn’t made public any of the companies it is working with, and says it won’t. Swan compared the checks and balances for the NAIF (a body set up to provide loans to projects that can’t get private financing) with the $10bn Clean Energy Finance Corporation that Labor established – a body the Abbott government repeatedly sought to dismantle precisely because it was established to provide loans to projects that couldn’t get private financing. The CEFC, Swan pointed out, was required to deliver a designated rate of return on taxpayers’ money. The NAIF has no such specific requirement, and had provided no documentation about how it would decide whether a loan was likely to be repaid, or even how it would determine whether a loan was needed. “The few policies they do have they are now keeping a secret ... the Turnbull government wants to turn it into a boondoggle machine in pursuit of its ideological and political pork-barrelling. But the NAIF appears to have been intentionally set up, in the first instance, with no ability to operate independently; with a board that has been stacked in favour of mining investments; and with an investment mandate so broad and vague that minister Canavan can essentially treat the NAIF as his own personal slush fund,” Swan fumed. “For months, ministers Canavan and Joyce have repeatedly promoted a $1bn loan to Adani to partly fund the Carmichael railroad while simultaneously claiming that investment decisions of the NAIF are independent. If the Adani mine is to go ahead, it must be able to stand on its own merit – it should not get one-fifth of minister Canavan’s slush fund to help make it a profitable investment.” The Australia Institute – one of many groups campaigning against the Adani mine – requested documents about the NAIF’s application and approvals processes, including how it would assess risk and how it would determine whether a project was in the public interest. The FOI request was refused on the basis that it “would reveal to proponents and other interested parties the NAIF’s methodologies beyond what is required or appropriate to disclose publicly”. And this week the Labor party got the Senate to back a demand that Canavan deliver similar documents in the Senate. The minister eventually replied that he couldn’t because he was “not in possession of the documents mentioned”. Given that the “documents mentioned” included a statement of how much risk the NAIF was prepared to take while lending $5bn of taxpayers’ money and given the act says “the facility will develop a risk appetite statement to guide its investment decisions, in consultation with the responsible minister” (that is, Canavan) it seems astonishing the minister would not have it. And if the facility hasn’t got a risk policy yet, how can it be considering a $1bn loan for a project that is set to start engineering works in June? There is nothing wrong with a government looking for ways to promote development in northern Australia with concessional lending. But there would be everything wrong with providing a massive government-backed concessional loan to achieve a political end without proper public scrutiny or process, or even a definition of how it was determined to be in the public interest.