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2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Asian development bank (additional subscription) bill 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
General Outline and Financial Impact
Outline - Asian Development Bank (Additional Subscription) Bill
2009...
Summary of Regulation Impact
Statement.......................................
Notes on Individual
Clauses........................................................
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Asian Development Bank (Additional Subscription) Bill 2009
In April 2009, the Board of Governors of the Asian Development Bank
adopted Resolution No.336 (Increase in Authorised Capital Stock and
Subscriptions Thereto) which increased the Bank's authorised
capital stock by 7,092,622 shares and authorised the acceptance of
increases in individual members' subscriptions. The capital
increase is one in which each member may subscribe to additional
shares in proportion to their current subscription. If all members
subscribe fully, the capital of the Bank will be tripled, and the
relative shareholdings of members will remain unaltered.
This Bill empowers the Treasurer to make the necessary agreement
with the Asian Development Bank for the purchase by Australia of
its entitlement of 16,379 paid-in shares and 393,101 additional
callable shares of the capital stock of the Bank.
This Bill empowers the Treasurer to make this agreement on such
terms and conditions as the Treasurer determines and, where
appropriate, to issue promissory notes to the Bank in payment.
This Bill also appropriates the funds necessary to make payments
under such agreement.
Date of effect: The Act will commence on the day the Act receives
the Royal Assent.
Proposal announced: The Government announced in the 2009-10 Budget
that it will contribute US$197.6 million of additional paid-in
capital toward the Asian Development Bank's general capital
increase and will increase its uncalled capital subscription by
US$5.6 billion, to assist in supporting countries in the Asia-
Pacific region during the global recession and meet the region's
ongoing development needs.
Financial impact: The Charter of the Asian Development Bank
provides that shares in the Bank are worth either US$12,063.50 or,
in special drawing rights (SDR), SDR10,000 per share. This Bill
provides that Australia will purchase 16,379 paid-in shares at the
lower US dollar share price at a total cost of US$197.6 million
(equivalent to A$241.0 million at the exchange rate of A$1 =
US$0.82). This amount is payable over a ten year period. The
393,101 callable shares are valued by the Bank at around US$5.6
billion (equivalent to A$6.8 billion), using the higher share price
of SDR10,000 per share. However, Australia will have the option of
paying any capital call on these shares using the lower value US
dollar price.
Australia's contribution towards the general capital increase at
the Asian Development Bank is a capital measure in the 2009-10
Budget and does not impact the underlying cash or fiscal balance.
The increase in Australia's uncalled capital subscription appeared
in the Statement of Risks as a contingent liability.
Compliance cost impact: Nil.
Summary of regulation impact statement
Regulation impact on business
Impact: The Bill relates to the relations between the
Australian Government and the Asian Development Bank and therefore
has no impact on business or individuals.
Notes on Individual Clauses
Clause 1 - Short title
1. This clause provides the short title by which the Act may be cited.
Clause 2 - Commencement
2. This clause provides that the Act commences on the day on which the
Act receives Royal Assent.
Clause 3 - Definitions
3. This clause provides that Agreement means the Agreement
establishing the Asian Development Bank, the Bank means the Asian
Development Bank established by the Agreement and callable and paid-
in shares have the same meaning as in the Agreement.
Clause 4 - Treasurer may make agreement for purchase of additional shares
4. To subscribe to the capital increase, the Treasurer, as Governor
for Australia of the Bank, is required to submit, before
31 December 2010, to the Bank, an "Instrument of Subscription"
setting out the number of additional paid-in and callable shares to
which Australia will subscribe on the terms and conditions laid
down in the Resolution.
5. Under the Resolution, Australia is entitled to subscribe to 16,379
paid-in shares valued at US$197.6 million and 393,101 callable
shares valued at around US$5.6 billion by the Bank.
6. Payment for the paid-in shares is required to be made in five equal
annual instalments, provided that as determined by the subscribing
member, the first instalment shall be paid on any of the payment
dates of 1 April 2010 or 1 July 2010 or 1 October 2010 or 1 January
2011 or 1 April 2011 that either (i) falls within 90 days after the
date on which the member's subscription becomes effective, or (ii)
immediately follows the end of such 90 day period; and the
remaining instalments shall be paid not later than the respective
anniversaries of the first payment date.
7. Of each instalment, the subscribing member shall pay 40 per cent in
convertible currency and 60 per cent in the currency of the
subscribing member (for the purposes of such payments, the
Australian dollar is deemed to be a convertible currency). The 60
per cent portion can be paid in cash or by non-negotiable, non-
interest bearing promissory notes. Such notes are liable to be
encashed in annual instalments over five years, commencing from
2015.
8. Payment of the callable shares of Australia's subscription may be
called on in the unlikely event the Bank is unable to meet its
financial obligations in respect to borrowings and guarantees.
Since its existence, no calls have been made on this part of the
Bank's capital and if the Bank continues to operate prudently, as
it has done in the past, it is unlikely that a call will be made in
the future. The callable capital of the Bank serves as security
for its borrowing operations on world capital markets.
Clause 5 - Issue of promissory notes
9. This clause provides that the Treasurer may, on behalf of
Australia, make promissory notes and issue them to the Bank, for
the purposes of making any payment that is to be made by Australia
to the Bank under an agreement made under subsection 4. Further,
promissory notes made under subsection 4(1) are to be non-
negotiable, non-interest bearing and payable to the Bank at par
value upon demand.
10. Sub-section 5(3) provides that Section 5 of the Asian Development
Bank Act 1966, which relates to authorisation of the issue of
securities by the Governor-General, does not apply in relation to
payments made under an agreement made under Sub-section 4(1).
Clause 6 - Appropriation
11. This clause provides that the money necessary for making a payment
for the purposes of an agreement made under subsection 4(1)
(including any payment that is to be made under a promissory note
made under Sub-section 5(1)) is to be paid out of the Consolidated
Revenue Fund, which is appropriated accordingly.
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