Commonwealth of Australia Explanatory Memoranda

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EXPORT FINANCE AND INSURANCE CORPORATION AMENDMENT (SUPPORT FOR COMMONWEALTH ENTITIES) BILL 2017

                                 2016-2017




  THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA




                                 SENATE




EXPORT FINANCE AND INSURANCE CORPORATION AMENDMENT
    (SUPPORT FOR COMMONWEALTH ENTITIES) BILL 2017




              REVISED EXPLANATORY MEMORANDUM




   THIS EXPLANATORY MEMORANDUM TAKES ACCOUNT OF
 AMENDMENTS MADE BY THE HOUSE OF REPRESENTATIVES TO
                THE BILL AS INTRODUCED




 (Circulated by authority of the Minister for Trade, Tourism and Investment,
                     the Honourable Steven Ciobo MP)
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      Export Finance and Insurance Corporation Amendment (Support for
                      Commonwealth Entities) Bill 2017

                                      OUTLINE

Purpose/Objective

The Export Finance and Insurance Corporation Amendment (Support for
Commonwealth Entities) Bill 2017 ("the Bill") expands the functions of the Export
Finance and Insurance Corporation ("Efic") to make available Efic's specialist
financial capabilities to Commonwealth entities and companies on a fee-for-service
basis, subject to Ministerial approval.

The Bill also expands Efic's ability to support a wider range of Australian small and
medium-sized enterprises (SMEs).

Why the Bill is required

This Bill is required to give legislative effect to the elements of the Government
Decision that require legislative amendments. The Bill will create amendments to the
Export Finance and Insurance Corporation Act 1991 ("the Act").

The policy objective of the first amendment is to allow Efic to offer its specialist
financial capabilities in the operation and administration of Commonwealth financing
programs, where there is no connection to exports. Following Efic's provision of
services to the Northern Australia Infrastructure Facility ("the NAIF"),
Commonwealth departments have expressed interest in leveraging Efic's expertise.
Efic's functions in the Act do not include the provision of Commonwealth services,
and the NAIF arrangement required a consequential amendment to the Act. The
amendment would ensure future arrangements are permissible under the Act on a fee-
for-service basis, and would be subject to the approval of the Minister for Trade,
Tourism and Investment.

Efic will be mandated to charge a compulsory fee for any assistance it provides,
which must not be such as to amount to taxation. Efic would not provide loans or
guarantees to support Commonwealth financing programmes. For example, Efic can
advise on the appropriate structure of a loan and manage the loan on behalf of the
Commonwealth entity. However, Efic cannot provide the loan in its own name.

The policy objective of the second amendment is to enable Efic to support a wider
range of Australian SMEs. The amendment keeps references in the Efic Act to
support for manufacturing and expands the definition of an "eligible export
transaction" by adding references to support for tourism operators, online businesses,
exporters of intellectual property and other related rights, and businesses engaged in
overseas direct investment. The amendment will ensure Efic's support for businesses
engaged in overseas direct investment will result in more Australian jobs. The
amendment introduces a net employment stipulation. Businesses will have to certify
in writing their reasonable belief that Efic's support for overseas direct investment
will result in a net increase in the number of people employed in Australia.
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The amendment does not change Efic's purpose of operating only in the market gap
where banks are unable to help, and any support must still be attached to exports. For
SME exporters, this proposed amendment is estimated to save up to $12,000 per
application by providing Efic the ability to provide a direct loan rather than just a
guarantee.

                        FINANCIAL IMPACT STATEMENT

The Bill will have no direct financial impact.
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                                NOTES ON CLAUSES


Clause 1:Short title

1.     Clause 1 is a formal provision specifying the short title of the Bill.

Clause 2:Commencement

2.     The Bill will commence on the day after the Bill receives royal assent.

Clause 3:Schedule(s)

3.     Clause 3 provides that legislation that is specified in a Schedule to this Bill is
amended or repealed as set out in the applicable items in the Schedule concerned, and
any other item in the Schedule to this Bill has effect according to its terms.
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Schedule 1--Amendments

Export Finance and Insurance Corporation Act 1991

Item 1 - Subsection 3(1)
Insert:
                Commonwealth company has the same meaning as in the Public Governance,
                Performance and Accountability Act 2013.
                Commonwealth entity has the same meaning as in the Public Governance,
                Performance and Accountability Act 2013.
                EFIC's Commonwealth entities function means the function set out in
                paragraph 7(1)(dc).


Item 2 - At the end of subsection 3(3)
Add:

         ; or (e) the supply to persons who are not ordinarily resident in Australia of services
relating to tourism; or

          (f)      the conduct of an online business with customers outside Australia; or

        (g)      the sale or licensing of intellectual property and related rights to persons
outside Australia; or

       (h)       direct investment outside Australia where a benefit flows back to Australia
(whether directly or indirectly).


Item 3 - After paragraph 7(1)(db)

Insert:
      (dc) as directed by the Minister, to assist Commonwealth entities and Commonwealth
           companies in performing their functions or achieving their purposes by providing
           services in relation to financial arrangements and agreements;


Item 4 - At the end of section 7
Add:

(3)       The reference in paragraph (1)(dc) to providing services in relation to financial
arrangements and agreements does not include the provision of loans, insurance or
guarantees.
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Item 5 - Subsection 8(3)

Repeal the subsection, substitute:


(3)     Subsection (1) and subparagraphs (2)(b)(i) and (iii) do not apply in relation to:
        (a)      EFIC's Northern Australia economic infrastructure functions;
                 or
        (b)      EFIC's Commonwealth entities function.


Item 6 - Subsection 9(6)

Omit all the words after "does not apply", substitute:


                 in relation to:
        (a)      EFIC's Northern Australia economic infrastructure functions;
                 or
        (b)      EFIC's Commonwealth entities function.


Item 6B - At the end of section 16
Add:

         (3)      However, EFIC must not make a guarantee or enter into a contract under this
section in relation to a loan or a proposed loan that is to be used for the dominant purpose of
direct investment outside Australia unless the requirement in subsection (4) is satisfied.

         (4)    The person who carries on the business must certify, by writing given to
EFIC, that the person reasonably believes that the loan will result in a net increase in the
number of people employed in Australia by the business or a related business during the term
of the loan.

Item 6B - At the end of section 23
Add:

        (3)      However, EFIC must not lend money under this section for the purpose of
financing a transaction whose dominant purpose is direct investment outside Australia unless
the requirement in subsection (4) is satisfied.

        (4)     The person to whom the money is lent must certify, by writing given to
EFIC, that the person reasonably believes that the loan will result in a net increase in the
number of people employed in Australia in the business concerned or a related business
during the term of the loan.
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Item 7 - Section 84A

Repeal the section, substitute:

84A EFIC must charge for certain services

        (1)      EFIC must charge fees for services it provides in performing the following:

                 (a)     EFIC's Northern Australia economic infrastructure functions;

                 (b)     EFIC's Commonwealth entities function.

        (2)      The fees:

                 (a)      must be sufficient to compensate EFIC for the services it provides in
relation to those functions; but

                 (b)     must not be such as to amount to taxation.
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              Statement of Compatibility with Human Rights
          Prepared in accordance with Part 3 of the Human Rights (Parliamentary
                                   Scrutiny) Act 2011


       Export Finance and Insurance Corporation Amendment (Support for
                       Commonwealth Entities) Bill 2017


This Bill is compatible with the human rights and freedoms recognised or declared in
the international instruments listed in section 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Overview of the Bill
The Export Finance and Insurance Corporation Amendment (Support for
Commonwealth Entities) Bill 2017 (referred to in this Explanatory Memorandum as
'Bill') gives legislative effect to enable other Commonwealth entities and companies
access to Efic's services, and to ensure Efic can effectively support a wider range of
small to medium sized Australian exporters.


Human rights implications
This Bill does not engage any of the applicable rights or freedoms, as it relates to
changes in the mandate of Efic (the Government's export credit agency).


Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.


    Circulated by authority of the Minister for Trade, Tourism and Investment,
                         the Honourable Steven Ciobo MP