Australia attacked over Asian aid cancellation

Australia attacked over Asian aid cancellation

SYDNEY (AFP): Four Asian countries have made strong protests to the Australian government over its cancellation of an aid scheme tied to contracts they had negotiated with Australian companies, a shadow minister said.

China, Indonesia, the Philippines and Vietnam were close to signing contracts worth A$1 billion (US$800 million) sweetened with the offer of soft loans under Canberra's Development Import Finance Facility (DIFF) scheme.

But opposition foreign affairs spokesman Laurie Brereton said the scheme had become a casualty of budget cuts by the new government and the contracts had been lost -- with "enormously adverse consequences for our relationship with Asia."

The DIFF scheme, which provided aid equivalent to about 35 percent of the value of a contract, had generated trade valued at A$1.2 billion for A$126 million in expenditure in the 1995/96 financial year, Brereton said.

Figures released this month by Canberra's aid agency AusAid showed 50 contracts involving 86 Australian companies in the pipeline under the scheme this year were worth A$1.074 billion.

"This meant enormous job opportunities for Australians", Brereton said in a television interview.

"Many of these projects are already in the pipeline so it's not just a case of forgone opportunity for Australia. These are projects in respect of which we have memorandums of understanding with the governments of the host country."

In some cases, host governments had spent many millions of dollars in preparation for these projects.

"This is the reason that Indonesia, China, Vietnam and the Philippines have all called our ambassadors in and have protested about the proposed abolition. It's not just a case of the nations involved or a few industries.

"Every reputable business commentator, every business leader in Australia has said that this is a very foolish proposition."

Officials in Canberra say the DIFF scheme was similar to programs operated by most western industrialized countries and all of Australia's major competitors in the Asia-Pacific region.

Brereton said the abolition of DIFF meant "that we are going to be completely uncompetitive with the Netherlands, France, with Italian companies who will be bidding for this work."

Australia's ruling conservative coalition had criticized the then Labor government "for being too engaged with Asia and saying they wanted to turn us back to our more traditional ties," Brereton said.

"But putting aside the rhetoric the reality is that some of the measures now see coming through like the abolition of the DIFF scheme will have enormously adverse consequences for our relationship with Asia.

One casualty of the abolition of DIFF is the Melbourne-based Transfield Defense Systems Pty. Ltd. which had tendered for a A$60 million (US$48 million) contract to supply three search and rescue ships to the Philippines.

The project had qualified for DIFF support worth more than A$20 million and Transfield had high hopes of winning against at least two other overseas bids.