Interview with Stephen Dziedzic - ABC News Channel

  • Transcript, E&OE
11 September 2020

Reporter: Well Minister, thanks very much for joining the ABC. Now, you’ve announced today, effectively, that Australia’s going to loan an additional US$100 million to PNG to help it in a pretty difficult financial time. Can you explain why you're doing that?

Alex Hawke: Yeah. Thanks, Stephen. And the Australian Government has decided to extend our support to PNG following a direct request from the PNG Government in response to the deteriorating budget situation because of COVID and the economic impacts of COVID on the region. Obviously PNG has worked very hard with international institutions like the IMF, the World Bank, the Asian Development Bank and they've got a Staff Monitored Program in place which we have great confidence in. And in response the Australian Government has agreed to the request from PNG to loan money to them to support that effort to get their finances under control in this critical time.

Reporter: What are the conditions, if any, that have been placed on this loan?

Alex Hawke: Well obviously, this is a loan, it has to be repaid, and PNG has a great record of repaying all of its loans, especially to Australia and we're quite confident that they'll meet those conditions. It's at a low interest rate, we only charge an administrative fee; and of course, it has no impact on the Australian budget the way the loan is structured. So, we are confident that this will provide the necessary financial support to PNG at this very difficult time, and of course be repaid.

Reporter: Now we've seen a shift, for about 20 years or so Australia had basically stopped providing direct budget support like this to PNG, but for the last two years running now we've seen announcements. What's changed? Why have we moved to this sort of direct support?

Alex Hawke: Well, these things move in cycles and the Howard Government did, as you say, make a loan to PNG, it was repaid, and that was necessary at the time. PNG has been able to run its own finances. This is a sovereign country making its own decisions - we support their sovereignty and their stability. The economic conditions have come to a point where budget support is needed, they've made a request to us; and given COVID we've seen fit to extend that support to make sure that they had the finance they need to keep stability in their operation of their government and make sure that they can pay their bills during a very difficult economic time.

Reporter: Is Australia worried about others coming in and offering predatory loan agreements? Is this a risk, particularly when COVID is battering the PNG budget in such a way?

Alex Hawke: Well, Australia has the highest standards in relation to financing and loans, and the work that we do with our partner countries in the Pacific and the rest of the world - and we support the IMF, the ADB, institutions like that who are running a Staff Monitored Program in PNG which will mean a great discipline and greater focus on budget requirements. We've always warned against a debt trap diplomacy in the region, and of course countries taking on a greater debt burden than they're able to do at unreasonable terms, and that's why an Australian loan of this nature is a high quality loan at very low rates - only at the cost of the money that we've been able to obtain and a small administrative fee, and it provides that stability and that certainty. And certainly, we'd always warn any country in our region against taking on debt at unreasonable rates.

Reporter: We've seen that phrase thrown about a lot - debt trap, debt trap diplomacy. It's a pretty contentious one in the Pacific. Do you believe we are seeing debt trap diplomacy? And if we are who's doing it?

Alex Hawke: Well, there's no doubt when you look at the finances of the region that countries have been convinced to take on loans at unreasonable or sustainable rates, and we've been highly critical of that. Especially when the infrastructure or the product that's been received by that country hasn't been functional, or suitable, or what the country intended. And you know there's different governments, different regimes throughout that period when you think about accumulated debt. We of course are always a strong advocate for high quality financing, making sure you go to the right institutions which offer you good terms in your interests and provide good quality assets. And certainly, we've seen around the world countries taken advantage of, in particular regimes or governments taken advantage of by particular actors.

Question: Yeah. When you’re talking about particular actors though, most of those higher profile projects that have been criticised as white elephants, certainly come under some pretty fierce criticism from your predecessor, most of those projects are funded by China. That's what you're referring to here.

Alex Hawke: Well obviously we don't name anybody in particular. We think though, that anybody doing that isn’t acting in the interests of those countries as Australia does. I mean we can only answer for ourselves and every time we make sure it's directly in the interests of the people of the Pacific and the countries that we're loaning to or that we're helping. And Australia's got an excellent record in that regard and we operate by maintaining the highest of standards and setting the right role for others. And there are plenty of other good actors as well. I mean the World Bank, the ADB, the IMF, they're doing the right thing in the Pacific...other foundations, other countries and there's good models to follow.

Reporter: Now one of the loans that's been issued from Australia, it was revealed within PNG budget papers was effectively a direct swap for a loan that would have come from China. So how much does that calculus play into this decision. Are we uneasy at the prospect of PNG taking on more debt from the Chinese Government and is that one of the reasons why we're making offers like this $100 million loan announced today?

Alex Hawke: Well no, look, we haven't made an offer. PNG has approached us. And you've got to remember our history between Australia and PNG. We are brothers and sisters of people in PNG and we feel that way and people in PNG feel that way and certainly I've noticed that being in this portfolio. They've come to us, saying we need your help because we know you’re good quality partners to fund direct budget support to our country and we've responded to that. So, we haven't made an offer.

Reporter: [Interrupts] Sure. No, I appreciate that it’s come from a request from PNG [indistinct]…

Alex Hawke: [Talks over] And they’re a sovereign country, is my point Stephen.

Reporter: [Indistinct]… play into our calculus.

Alex Hawke: [Interrupts] Well no, well they’re a sovereign country. So- but you said offer; we haven't made an offer. We got asked for direct budget support - we've provided it. We've done that because we owe a debt to PNG from our shared history, you know, our administration of the country under the British, the wartime history that we've had, our shared geography, our regional, our family ties. That's why we do these things and because we know that a stable and sovereign PNG, well supported and doing very well for its population, is in the best national interests of Australia. That's why we do these things.

Reporter: Alright. Well the budget papers also show that Japan interestingly is providing a loan of some US$280 million. I'm curious how that came about; Japan's obviously increasingly their presence in the Pacific and also been an increasingly prominent aid partner in recent decades in the Pacific. Did Australia help coordinate that loan between Japan and PNG? Were we an intermediary at all? Well we need to major it all. Was that purely an arrangement between Japan and PNG?

Alex Hawke: Well look, Japan is a very high-quality partner in the Pacific. We work with them closely and we're constantly in discussions with the Government of Japan about regional assistance, especially through COVID. These are regular discussions. Obviously matters of financing from Japan have to be made by the Japanese Government. I'm not in a position to make any announcement about that and the PNG budget papers will outline the things that they believe are happening from their point of view. From the Australian point of view, we're providing our loan. We're happy to partner with Japan, we're happy to partner with New Zealand, happy to partner with the IMF, the ADB, World Bank, all of these institutions to help support Pacific countries. And you've got to remember, at this time, the G20 decision has been made that when a country wants to have a debt suspension, responsible countries should do that. Australia has of course agreed to suspend repayments for PNG following a request during COVID, and that's only what would be expected.

Reporter: Just back to PNG’s budget more specifically, we've seen recent figures that have demonstrated that some 60 per cent of PNG’s revenue is now taken up by its rising salaries bill and also interest of course. Does that cause Australia concern; is that structurally a real problem and is that inevitably going to see PNG, at least in the current economic climate, in a pretty parlous budgetary position?

Alex Hawke: Well, Stephen, you wouldn't expect me to be an expert commentator on another country's budget. PNG is a sovereign country and they’ve got to make their own budgetary decisions. We are concerned to work with our partners to make sure that high standards are met within countries that we loan to and the IMF has high requirements and they have a staff monitored program to enforce those requirements and make sure they're met. We have confidence in the world bank, the ADB, the IMF and partners to meet those requirements so that we can provide this loan and have it repaid in good time.

Reporter: Alright. Minister, look, thanks very much for speaking to the ABC. We appreciate your time.

Alex Hawke: Thanks Stephen.

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