Aussie firms join Asian criticism of aid cuts

Aussie firms join Asian criticism of aid cuts

SYDNEY (Reuter): Australian industry has joined a chorus of criticism from Asian nations over Canberra's abolition of a major foreign aid program and has warned the move will handicap firms competing for business in the region.

The recent decision, which annoyed Asian nations and sparked calls for the foreign minister to quit, will effectively rob Australian firms of an export subsidy and weaken its ability to compete for contracts offshore, industry sources told Reuters.

"It makes us less competitive," said a source within a major construction firm which benefited from the A$124 million (US$95 million) per year Development Import Finance Facility (DIFF).

Under the four-year-old program, Canberra provided cheap finance for infrastructure projects in developing countries in return for Australian involvement in developing the projects.

In practice, DIFF's soft loans were used as "sweeteners" to help firms win contracts and to make inroads into Australia's poorer neighbors, the sources said yesterday.

"More often than not now, any bid for construction work is looked at in conjunction with financing packages that are offered with it," said the construction-firm source, adding that aid funds were commonly used by European firms bidding for work in Asia.

Asked if DIFF funding could mean the difference between a successful bid and a lost contract, the source said: "It does, absolutely. Anything can make the difference."

Another big construction firm with offices in Asia has also raised concerns about DIFF's demise, a source within the company said.

"I think we have made some contact with the government on it, just to tell them that it does not affect our projects but it could affect confidence of these governments in Australian companies," the source said.

"In general, we see it maybe could damage, in the short term, some relationships with Australian business," he added.

Industry annoyance over DIFF's abolition comes amid a chorus of criticism of the two-month-old decision from Asian nations, including China, Indonesia, the Philippines and Vietnam.

Foreign Minister Alexander Downer, who initially insisted his decision had not raised a single complaint from Asian governments, was forced late last month to apologize for his remark after reports of Asian disquiet emerged.

Downer resisted opposition calls for his resignation but only last Friday, on a visit to Vietnam, reconsidered his intention to withdraw DIFF aid for a bridge over the Mekong River after talks with his Vietnamese counterpart.

In axing the program in May, Downer said it was a casualty of government spending cuts but he also signaled a desire to shift Australia's A$1.6 billion annual aid budget away from export subsidies towards direct poverty alleviation.

But the peak Australian Chamber of Commerce and Industry has approached the government to replace DIFF.

"I think we are going to miss the boat in those markets," chamber executive director John Martin said on Friday. "We are going to miss the project and that's a problem."

A spokesman for Downer said on Friday the government would consider a new version of DIFF, provided it was geared towards alleviating poverty, but the government's austerity drive meant there was "no plan B waiting in the wings".