The Australia Institute made a submission to the Senate Economic Committee’s Inquiry into the governance and operation of the Northern Australia Infrastructure Facility (NAIF).

Over the past year The Australia Institute has investigated the governance and operations of the NAIF. NAIF is entrusted with $5 billion of public funds and has an important role in facilitating economic development. Despite this, NAIF is an under-resourced agency with a sparse governance framework. It is facing enormous government pressure to fund a particular and highly problematic project. Recent developments at the NAIF do little to allay these concerns. Similarly, our research into Efic, the agency conducting NAIF’s project assessment, has raised concerns about its project assessments. We note similar concerns have been recently, and repeatedly, raised by the Productivity Commission.

This detailed submission addresses each of the Inquiry’s Terms of Reference in sequence, focusing in detail on the adequacy and transparency of its policies and governance. Recommendations to clarify and reform the NAIF are listed below.

Before directly addressing the Terms of Reference, this submission first addresses NAIF’s assessment of a proposed $1 billion concessional loan to Adani’s coal rail line. NAIF’s ongoing consideration of this proposal raises serious concerns about NAIF governance and operations.

Put simply, the proposal makes no economic or environmental sense. As the Productivity Commission has made clear, there is no economic basis for taxpayer support for resource projects in Australia, and on this basis former Minister for Trade Andrew Robb in late 2014 directed Efic to stop funding such projects – yet NAIF, with Efic assistance, is now doing just that. Spending 20% of the NAIF’s funds on subsidising new coal supply would have the dubious distinction of damaging both existing coal regions and the climate. It would also redirect NAIF’s capital away from investment and jobs in other industries like tourism, agriculture and renewable energy.

Not only is Adani’s project inappropriate, but Adani has proven itself to be an inappropriate applicant. In Australia, Adani has been dishonest about the public benefits and viability of the project, and has even claimed they do not need the NAIF support to proceed – this statement alone should be grounds for disqualification.

Others have raised significant concerns about Adani’s corporate track record and its links to tax havens.

Despite all of this, NAIF has not only continued with assessment of Adani’s project, but allowed its deliberations to be prejudiced by the now former Minister’s inappropriate and sustained public support for the loan. This is in a context of clear public opposition to the proposal.

NAIF’s handling of this proposal is already damaging both the NAIF’s and the government’s reputation. To offer this loan would be disastrous for the NAIF’s credibility as an independent and responsible financing agency.

Reforms are needed to ensure NAIF can play a responsible role in supporting prosperous and sustainable development in Northern Australia. But until it has resolved the Adani issue NAIF will not get clear air.