Opportunities and risks: the Aboriginal Land Rights (Northern Territory) Amendment (Economic Empowerment) Bill 2021

 

Our wills and fates do so contrary run
That our devices still are overthrown;
Our thoughts are ours, their ends none of our own.
Hamlet, Act 3, scene2

 

The Senate Finance and Public Administration Legislation Committee has now published its report of its Inquiry into the legislation. The Government and ALP members of the Committee recommended the Bill proceed unamended. The Greens provided a dissenting report. The report, copies of submissions, and some associated documents are available on the Committee’s web page (link here).

 

I expect that the Bill will be passed this week, probably without amendment.

 

From one perspective – that of Minister Wyatt, his agency, the NT Land Councils, and APONT (the Aboriginal Peak Organisations of the NT) – the Bill is a positive step towards Aboriginal empowerment and greater self-determination. It is the result of a codesign process over a number of years that inter alia streamline the mining provisions of the legislation (various mining interests were involved in the drafting of the legislation), reverses a number of provisions that the land councils have strongly opposed for some years, in particular relating to the capacity to delegate their powers to local corporations, and provisions relating to permits. The core of the amendments however are the proposal to establish a new statutory corporation, the NT Aboriginal Investment Corporation (NTAIC), which will be provided with a capital base totalling $680m over the first three years from funds already appropriated to the Aboriginals Benefit Account (ABA). The majority of the Directors of NTAIC will be appointed by the Land Councils. The NTAIC will have responsibility for investing that capital base (either passively or actively), and for deciding and making beneficial payments to community groups and projects across the NT.

 

On the surface, this all seems to be heading in the right direction, not least since the 1984 review of the ABA by Jon Altman recommended consideration be given to shifting the ABA under Aboriginal control, a proposal that has sat in abeyance for over thirty years (see Altman’s submission to the Inquiry).

 

Yet all is not what it seems. Of the 67 submissions to the inquiry, less than ten were supportive of the proposals. See Altman’s tabled supplementary document providing a critical assessment of the submissions in favour. Key issues raised by those with concerns (and I am one of those people)  included the extent of consultations including the lack of involvement of Aboriginal interests beyond the land councils, the effective secrecy of the process, alleged flaws in the design of the NTAIC that potentially compromise the quality of its governance, and structural tensions related to the NTAIC’s overarching functions (is it an investment body focussed on driving economic development as the name of the Bill suggests, or a beneficial grants body?). The Scrutiny of Bills Committee raised a series of technical concerns (that may nevertheless have real world implications) that the Minister proposes to disregard. An overarching concern was the potential for the land councils to accrue greater power at the expense of the interests of traditional owners.

 

It must be said that the Land Councils in their evidence to the Committee were adamant that the critiques of the Bill do not stand up to close scrutiny. Whether it is the land councils who are correct, or the critics, only time will tell.

 

For those interested in a more comprehensive understanding of the respective arguments, I recommend readers start with the Parliamentary Library’s excellent Bills Digest on the Bill (link here) read the submissions to the Senate Committee inquiry in favour of the Bill by the NIAA and the Land Councils, and for the critical perspective Jon Altman, Greg Marks, Bill Gray, the Australian Human Rights Commission, Ngurratjuta/Pmara Ntjarra Aboriginal Corporation and Michael Dillon (link here). The Committee’s majority and dissenting reports are also good overarching accounts of the arguments, albeit not entirely comprehensive (link here).

 

If we step back, and get up in the grandstand, what might we surmise about the drivers behind the process on this issue so far? In three words: politics, politics and politics.

 

The Government clearly wished to neutralise the potential threat of overwhelming anti-government sentiment from Territory Aboriginal voters. Labor too is focussed on this constituency, having preselected former NLC CEO and former NT Government Minister Marion Scrymgour for the House of Representatives seat of Lingiari. Labor’s support for this Bill may well be a result of the fact that to adopt an alternative position would be seen to undermine their candidate in the forthcoming election. IF so, this is astute politics at the cost of poor policy. On the issue of electoral disengagement, see this previous post analysing the extremely poor voting turnout amongst Territory voters (link here).

 

The Government also wished to deliver miners streamlined access for prospective mineral exploration on Aboriginal land, and was prepared to trade the Howard Government inspired, but now defunct and no longer contentious provisions on delegated powers and permits for these gains.

 

A further Government motivation is its need to deliver the appearance of action to its own ideological constituency. Thus we see it package up what I previously described as ‘a largely rhetorical policy narrative built around economic opportunity, jobs and wealth creation’ (link here). While the NTAIC gives the appearance of substance, the funds to be allocated are entirely transfers from already appropriated funds for the ABA. There is no net addition to the Government investment in ‘developing the north’ and for this reason, I continue to assert that this reform is, at its core, essentially rhetorical in purpose. Yes, it will potentially have substantive impacts (hopefully positive, potentially negative), but they will not in themselves make a serious difference to the economic status of Aboriginal Territorians. The amounts involved are, compared to the scale of the needs, not large enough.

 

A final Government motivation derives from its deep antagonism to funding social housing in remote areas, notwithstanding the crucial significance of overcrowding as a driver of poor social and economic outcomes. This is an issue I have posted about on numerous occasions previously. The Land Councils have for some years been pursuing an agenda to establish a community controlled housing entity, an agenda that I very strongly support. How might a government divert them from this agenda? By offering an alternative agenda and arguing that it is not possible to do more than one thing at a time. See my November 2020 post (link here) where I explicitly canvassed the possibility that the Minister was seeking to avoid progressing this agenda. The following exchange from the Committee’s public hearing is instructive:

CHAIR: Great. Do you see this legislation as the end of the codesign process?

Mr Nugent (CLC): Certainly not. From the views that've been expressed, and the documented resolutions of our council, the Central Land Council, there is still much reform and much to be done. One of the larger reforms that has been sought was the establishment of an Aboriginal community-controlled housing entity. It was hoped some years ago, when discussions began with the current minister and the current minister authorised discussions with his department, that an Aboriginal controlled-community housing entity would be part of this suite of reforms. It's a very large and complex piece—housing in the Northern Territory for Aboriginal people, particularly now in a time of a world-wide pandemic health crisis. It's absolutely vital. It was accepted some time ago that this particular piece, the community-controlled Aboriginal housing entity, still required further work. We're still endeavouring to engage with the government on that basis. That would be one major piece that still has a ways to go. (Committee Hearing 18 November 2021, pages 2/3; emphasis added).

 

The Land Councils clearly believe they have obtained adequate concessions from the Government during the codesign process to offset the adverse implications of the Government’s broader motivations. While that is an assessment for them to make, for what it is worth, I don’t see substantial benefits for Aboriginal interests. As I argued in my submission to the Committee inquiry, I do not accept that there is Aboriginal control over the NTAIC. Whatever increased influence is obtained (there will undoubtedly be some), it is partial and leaves open the potential for future co-option by governments regarding the ongoing flow of funds from the ABA to the NTAIC.

 

Moreover, as I argued in my submission, the broader risk to the core statutory role and modus operandi of the land councils is significant. This risk (discussed in detail in my submission) goes to the heart of the role of land councils, and to the very raison d’etre for land councils to have a role in negotiating third party land access on Aboriginal land in the NT. So too is the risk of economic loss significant if the NTAIC decides to adopt an active (as opposed to passive) investment strategy.

 

The huge and largely unpublicised increases in Land Council budgets that I pointed to in my November 2020 blog post (link here) is in retrospect directly relevant to the ongoing negotiations over the ABA and ALRA amendments. As I said then, Ministers generally expect a quid pro quo for these types of decisions. We can now see that whatever concessions were provided in return for these budget decisions relate to the provisions of this Bill. Without open and transparent process, codesign can easily slide into back room dealings. The fact that the Minister made no mention of the codesign process then underway when he announced the $100m for the land councils (by the way making him complicit in the secrecy that many of the critics – including Aboriginal critics – allege) only reinforces the reasonableness of a deeply sceptical perspective on the process adopted. In hindsight, it is clear that my 14 June 2021 post on the Minister’s first announcement of his proposals (link here) was correct in warning of the need for close consideration of any reform proposals.

 

Under these changes, the Land Councils have achieved only partial control over the ABA. A partial reform may seem attractive, but it can also operate as a rationale for leaving the status quo in place. One of the lessons I have learned over my career in public policy is that real reform is hard, and in particular, there are always unintended consequences. The risk of negative unintended consequences with these reforms strikes me as particularly high.

 

The Minister and the Land Councils should take careful note of Shakespeare’s warning: Our wills and fates do so contrary run!

 

 

Closing the Gap: rhetoric trumps substance

 

I have recently published two CAEPR Discussion Papers on Closing the Gap.

 

The first, titled The first decade of Closing the Gap: What went wrong? (link here), deals with the initial phase of Closing the Gap from 2008 to 2020. This phase extends from the announcement of the new policy architecture for closing the gap by the Rudd Government, established under a COAG agreement known as the National Indigenous Reform Agreement (NIRA), through to its expiry in 2018 -2020.

 

The second Discussion Paper, titled The new policy architecture for Closing the Gap: Innovation and regression (link here), covers the second ‘refreshed’ phase of closing the gap established under the National Agreement on Closing the Gap (link here) promulgated in July 2020.

 

The first Discussion Paper demonstrates how LNP Governments from 2013 progressively dismantled and/or defunded the various National Partnership Agreements that were encompassed by the NIRA, based on an examination of key high level evaluations and reviews, and importantly, on a ‘review’ of the NIRA commissioned by COAG obtained, after extensive effort, under FOI (link here). The key point here (confirmed in the NIRA review prepared by Government officials and endorsed by the Joint Council on Closing the Gap) is that from 2013 onwards, while Prime Ministers stood up each year and delivered heartfelt reports to the Australian people and parliament on closing the gap, the overall funding allocated in phase one was progressively cut back and not renewed as appropriations ended.

 

See this earlier post for an account of the reasons the document was initially refused in full (link here). Following an appeal to the Australian Information Commissioner, and the preparation of multiple submissions countering the agency’s blustering, the Department finally released the document in full in November 2020, in advance of a pending decision by the Information Commissioner. The 15 months delay between the original request (in August 2019) and the release was justified by the agency on the basis that changed circumstances meant that it was no longer not in the public interest to refuse access. I for one was not persuaded by the agency’s rationales, both in refusing access initially, and releasing later in advance of the Information Commissioner review.

 

The second Discussion Paper critically analyses the policy architecture put in place by the ‘refresh’ process which was based on a codesign process with the Coalition of Peaks, comprising over 50 Aboriginal and Torres Strait Islander community-controlled peak and member organisations across Australia. After describing the processes leading up to the negotiation of the new National Agreement on closing the gap, the analysis discusses the relevant academic literature and critically assesses the implementation risks that could undermine the success of the second phase of closing the gap. Those risks are more than substantial. The Discussion Paper then outlines a series of further reforms that might  be considered to address those risks.

 

While each Discussion Paper stands on its own, they are complementary insofar as they are chronologically sequential. The evidence shows that the LNP Government has for eight years cut or failed to renew financial resources directed to closing the gap. Over time, these decisions effectively eviscerated the capability of the initial policy architecture to gain traction. Looking forward, the LNP Government has deliberately shifted responsibility for much of the heavy lifting to the states and territories, and allocated what can only be described as a miserable contribution going forward (link here). In the future, any shortfall in meeting the Closing the Gap targets will be primarily the fault of the states and territories. Over the past eight years, the Opposition ALP, and to a lesser extent the Greens, appear to have run dead on these steadily accumulating incremental cuts, preferring to score vapid political points rather than mount a sustained campaign directed to holding the LNP Government to account for its (deliberate) policy failures. In these circumstances, the likelihood that the nation will get serious about closing the gap and make a substantial difference in the near future seems remote. Only sustained and effective political pressure will change this pessimistic reality.

 

I hope these Discussion Papers will go some way to highlighting the ways in which governments are failing not only First Nations, but the nation as a whole, and consequently, point towards strategies that might ultimately take us out of the wilderness. While the issues are articulated in bureaucratic and technical terms, the outcomes on the ground are measured in shortened lifespans, reduced educational opportunities, increased family violence, increased incarceration, increased out of home care, higher rates of mental illness, higher unemployment, and significantly reduced life opportunities. To some, this may sound like ‘deficit discourse’, but my point is that these outcomes are real and they are clearly and demonstrably a function of the lack of substantive policy and political commitment by governments and the political class generally.

The future of the Ayers Rock Resort: a soothsayer’s prognostications

 

How oft the sight of means to do ill deeds

Makes deeds ill done

King John Act 4, scene 2.

 

The ILSC Annual Report 2020-21 released on 27 October 2021 (link here) includes some interesting information on the state of play with the Ayers Rock Resort (ARR), owned and managed by ILSC subsidiary Voyages Indigenous Tourism Australia Pty Ltd.

 

ARR was purchased by the ILC in 2010/2011 for $300 million in contentious circumstances. According to the RBA inflation calculator (link here), $300m in 2010 equates to $360m in 2020. The then Board’s vision in pursuing the purchase was ostensibly to provide Indigenous interests with an iconic business asset at the symbolic heart of the continent. The ARR and its associated town infrastructure of Yulara had been established some decades before with substantial financial assistance from the then NT Government. The ARR’s location, control of the Yulara airstrip, and effective control over development activities within Yulara provide ARR with monopolistic commercial leverage over tourist access to Uluru.

 

While the strategic insight had merit, the issues in contention revolved around whether the substantial price paid by the ILC was excessive, and whether the ILC had the financial capacity to undertake the acquisition. There were also questions of alignment between the ILC’s objectives and the actual aspirations of the Anangu traditional owners (TOs) of the Yulara land. At a more fundamental level, there is an as yet unresolved question over whether a single purpose large scale commercial enterprise located remote from developed infrastructure and significant surrounding economic activity will ever have the robustness and resilience to develop into a long term sustainable and commercially viable enterprise. This is the question that has been at the heart of the aspirations for ‘northern development’ for well over a century.

 

My own view is that the price paid was excessive and the ILC did not have the financial capacity to fund the purchase. Over the decade since, the financial commitments arising from the purchase have imposed a significant constraint on the ILC’s ability to undertake its core statutory remit. That is, to acquire land for dispossessed Indigenous groups, and to provide assistance in land management for those with access to land through the multiple land rights and native title mechanisms in place across the nation. On the question of TO aspirations, it is a complex and evolving issue that I am not in a position to ascertain. My intuition however is that TOs have mixed feelings, appreciating the jobs and commercial opportunities arising from the influx of tourists, while not valuing the social and cultural impacts of tourists on their country. As for the fundamental question related to northern development, the answer so far has been that without substantial government subsidies, sustainable commercial survival is most often a chimera.

 

In 2010, the then ILC Board decided to proceed with the purchase of ARR against the wishes of the two Ministers responsible for the ILC legislation, the then Ministers for Finance Penny Wong and Indigenous Affairs Jenny Macklin. At the time, the ARR had been on the market for some time, and the former owners had allowed it to run down. The ILC funded the purchase through substantial borrowings. The purchase also involved a commitment by the ILC to offer 7 percent equity in the ARR to a local Aboriginal corporation, Wunu Unkatja (WU) after ten years. WU are currently considering whether to take up the offer. The ILC’s purchase was strongly supported by the then Opposition Shadow Minister Nigel Scullion (he was a Senator for the NT), and once he became Minister in 2013, he strongly resisted the attempts of the new ILC Board to review and address the implications of the previous Board’s decision to acquire ARR. Since the ILSC is a statutory corporation, the Commonwealth Government’s status as the ARR’s effective owner and ‘funder of last resort’ along with its ‘head in the sand’ approach since 2013 means it cannot avoid responsibility for future outcomes.

 

Ten years on and the ILSC’s ownership of ARR has been demanding on a number of fronts, most recently arising from the impact of Covid 19. The 2020-21 financial statements for the ILSC value the ARR at $390 million although the ANAO auditor went out of his way to point out that this valuation is highly sensitive to the assumption of a return to pre-covid occupancy levels and room rates within two years. Over the past decade, the ILSC has invested at least $100m and probably closer to $150m in capital upgrades to the airport and all of the individual hotels that comprise ARR (see list below). The most recent Annual Report notes the completion of a number of major refurbishments (page 88). The size and age of the ARR’s infrastructure makes it inevitable that a process of ongoing and significant capital investment will be required for as long as the asset operates. The ILSC continues to carry $102.5m in debt related to the original purchase, and some $27m from the NAIF (link here) ostensibly related to the upgrade of the Connellan airport. Last financial year the ARR operated at an underlying loss, offset by Covid related subsidies. Voyages net loss for  2020-21 was $7.6m (page 87).

 

In real terms, and using conservative estimates, over the past decade the ILSC has spent at least $460m and still owes a further $127m on ARR, an asset worth $390m today. In round figures, the ILSC is at least $200m out of pocket (albeit this is a loss that remains uncrystallised). Moreover, it is quite clear that the ARR will continue to be a challenging and expensive asset to manage going forward.

 

These challenges are complicated by the statutory requirement in section 191D of the ILSC’s legislation (link here) that limits its acquisition functions to purchasing land for granting to Aboriginal corporations, and where circumstance require the ILSC to acquire the land directly, it is required to divest the land within a reasonable period. So, as the ILSC annual report (page 90) notes:

The ILSC’s commitment to its mandate of divesting acquired and improved land will see continued efforts to rebuild the value and financial sustainability of Voyages’ assets in readiness for future granting. The subsidiary will continue to focus on infrastructure improvements, operational efficiencies and Indigenous benefits.

 

The frank admission that the ‘value and financial sustainability’ of ARR requires rebuilding is significant and worth contemplating. Having now held direct title over the ARR for ten years, the question arises whether continued delay in divestment of the asset (which looks more like a liability) accords with the statutory requirement to divest within a reasonable period. There have been calls for early divestment for a number of years. See for example this 2015 Guardian article citing calls by Mick Dodson, and confirming that the ILC and the Central Land Council had been in discussion over the issue (link here).

 

While the genesis of this problem can be traced back to the original flawed decision-making by the ILC Board in 2010, finding a solution falls squarely on the current Directors, as well as the responsible Ministers. As explained below, the pressures to find a solution are likely to grow over the coming years.

 

The recent ILSC Annual Report contains (to my knowledge) the first formal indication that the ILSC Board is now focussed on the divestment issue. The Annual Report notes rather flatly (page 107) that the Board had established the ‘Project Aurora Steering Committee’:

The Project Aurora Steering Committee supports the ILSC in developing a pathway to divestment for the Ayers Rock Resort, land and business assets, including providing guidance on engagement with traditional owners. The Committee was established by resolution of the ILSC Board on 14 April 2021.

 

One very real constraint going forward – beyond Covid – will be the impact of Australia’s cooling strategic relations with China and the resulting likely fall off in the previously significant and growing Chinese tourism market, where over 50 percent of all Chinese tourist to the NT visited ARR. (link here).

 

Another constraint, perhaps the most significant, is finding a potential Aboriginal corporation with the skills, capability and financial resources to take over the ARR. At the moment, the only potential recipient would be Centrecorp, a development corporation closely associated with the CLC (link here). The risk for Centrecorp would be the uncertain, but potentially significant ongoing capital costs associated with running the ARR whether or not it is making a profit or a loss.

 

The ILSC Annual Reports and other corporate documents provide very little information on the strategic options being considered. Accordingly, it might be of use if I – in my role as an experienced soothsayer –  have a go at listing the options.

 

Options for solving the ARR divestment issue

 

Option one: sell the ARR asset. The advantage would be to cut the ILSC’s losses, which are likely to take many years to recover, and in some potential scenarios may worsen. The political reality however is that there would be strident opposition from a range of sources to relinquishing the Indigenous branded asset in such an iconic location. No Minister will want to oversee its sale to non-Indigenous owners.

 

Option two: reduce the ILSC equity exposure. This is similar to option one, with the added complication of adding complexity to future management, but without reducing the likely political reactions.

 

Option three: move to divest the ARR to an Aboriginal and Torres Strait Islander corporation. The challenge is to find a corporation with access to the financial resources and management capabilities to take on what is an extremely complex business, subject to multiple risks, and revenue variability. Most importantly, given the ARR’s ANZ loan (with an outstanding balance of $100m) will fall due in 2025, and on current projections will need to be rolled over. Any recipient Aboriginal Corporation will need to be prepared to take on what is a very significant liability along with a highly risky asset, as well as having the capacity to manage relations with the local TOs who will expect to be involved as co-owners and co-managers.

 

The soothsayer’s prognostications

 

Clearly, there is no good option available. Ideally, the ILSC would paydown the outstanding loan before divestment. However, doing so would likely require the best part of another decade of ILSC ownership, financial uncertainty, and serious financial impact on ILSC core activities. As I pointed out in a recent academic article, (Unmet

Potential, esp. pages 113-4 in Rademaker & Rowse (eds) Indigenous Self-Determination in Australia, ANU Press, link here), the ILSC has funded much of its ongoing operations through selling down its previously substantial cattle herd. This is a strategy that is both short-sighted and which will not be available forever. Without pre-emptive action, the day is drawing close when the ILSC and importantly the Commonwealth Government will confront the reality that retaining ARR within the ILSC will drastically cut back its capacity to fulfill the ILSC’s core statutory remit.

 

Given this background, it seems more than a coincidence that the Commonwealth has recently introduced legislation to establish a Northern Territory Aboriginal Investment Corporation (NTAIC) as the key part of a suite of amendments to the NT Aboriginal Land Rights Act. The amendments have been codesigned with the NT land councils, and are, in my view, conceptually flawed. In a separate post, I will link to key submissions to the Senate Committee when they become available.

 

While it is unclear whether the land councils have been appraised of, or have considered, the possibility that the NTAIC will be asked to take over the ARR, it is inconceivable to me that the Commonwealth has not given this option serious consideration. The advantage for the Commonwealth would be to shift the ownership to a subsidiary of the NTAIC comprised potentially of an assemblage of smaller TO corporations with minority holdings. Importantly, while technically it would remain under Commonwealth control and ultimate ownership, any future financial recourse required to ensure the ongoing viability of the ARR would be made from pre-existing appropriations made to the ABA rather than from new appropriations. This would reduce the Commonwealth’s overall contingent liability. Conceivably, the Minister could also use ABA funds to pay off the ANZ loan either before or as part of the divestment transaction.  

 

The apparent advantage to NTAIC (and the land councils) would be that at face value, the NTAIC would increase its capital base by around $400m, with the potential to grow significantly over the coming decade. On the downside, that potential comes with very substantial commercial uncertainties and risk, and may well diminish further the funds available to NTAIC for distribution to thousands of potential beneficiaries across the NT. And it may also come with a net reduction in ABA funds available for distribution ot Aboriginal Territorians into the future.

 

If correct, these prognostications suggest a reason for the secrecy and haste surrounding the current legislative process. They also add weight to the case for much more rigorous scrutiny of the Government’s NTAIC proposals.

 

Appendix: Incomplete list of selected capital costs since 2011

$43m  2012 Refurbishment of Sails in the Desert and Uluru Meeting Place (link here).

$7m    2017 Tjintu solar field: (link here);

$27m 2019 Connellan airport upgrade (link here);

$?       2021 completion Sails in the Desert bathroom refurbishment (228 rooms) Ann. Rpt. p.88

$?       2021 final refurbishment and upgrade of five campground amenity blocks Ann. Rpt. p.88

$?       2021 refurb Connellan airport amenities; expansion security screening area Ann. Rpt. p.88

This list is the basis for my assessment that at least $100m has been spent on capital upgrades at ARR since its acquisition by the ILSC in 2010/11.