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".