Good morning and what a delight it is to be here in the great financial city of Sydney to talk finance, investment and how it can support social development.
The private sector is the engine of sustainable economic growth and the Australian Government recognises that investors play a vital role. As Foreign Minister responsible for the Australian Government's overseas development program, our foreign aid budget, I welcome the increasing interest in what we call "impact investment", and I thank the Impact Asia Pacific Group for facilitating this Summit.
Worldwide, the funding required to meet the United Nations Sustainable Development Goals exceeds the total global aid budget by US$2.5 trillion. To fulfil the umbrella commitment that no one is left behind, governments and the private sector need and must to work together. Partnering with the private sector is a high priority for the Australian Government — a point that I will reaffirm in our upcoming Foreign Policy White Paper, which will be released shortly. Small and medium enterprises can have significant social and economic impacts on their communities. However it is important that business people in the Asia Pacific have access to the capital they need to expand their operations. Currently, East Asia and South East Asia contribute only six per cent of total assets under management for impact investors globally. The market in the Pacific is smaller still.
The Australian Government is working to identify and support 15 promising social enterprises in our region, through a $15 million Frontier Innovation initiative under the Department of Foreign Affairs and Trade innovationXchange, which was mentioned earlier. This is an ideas hub within the Department that we established in 2015 to trial and test new and creative ways to overcome seemingly intractable development problems. The Frontier Innovation Initiative has received over 730 applications from 51 countries in the region – with around one third of those applications from women. The strong response to the Frontier Innovation Initiative shows that there is high demand for impact investment in our region.
Today I'm really pleased to be able to announce another new initiative - the Emerging Markets Impact Innovation Fund. This will be a $40 million flagship financing mechanism to attract greater investment to our region and three characteristics of the Fund make it an exciting initiative that will truly make a positive difference. First, it fills a gap in the market. Too often, small to medium-sized businesses in our target countries in South East Asia struggle to access the capital they need to grow despite providing the services, products, innovation and employment that are critical for poverty reduction and economic growth. We estimate this funding gap is over $500 million – of which over 65 per cent is for early-stage financing. This Australian Government fund will help to address that shortfall, by deploying capital to funds that service early-stage SMEs, and by providing technical assistance to funds and businesses to improve management capacity, financial skills and business operating practices.
Second characteristic – the Fund will be an anchor investor, providing loans, equity and guarantees that reduce risk for other investors, making it easier for additional capital to be invested, and third, it will have social impact at its core. It will support companies that are of most benefit to poor communities and enhance quality of life through products or services, supply chains or employment practices. This Fund that will be fully operational by the middle of next year, will have broad coverage, including agriculture, healthcare, education, financial services, clean energy and technology and the like. It will help a range of businesses to expand their operations – from café owners in Bangladesh and sustainable agriculture producers in Indonesia, to financial services firms in Vietnam, education innovators in Laos or clean energy services providers in Cambodia, just as examples.
A tender process will commence shortly to engage an investment manager and trustee to oversee the Fund's operations. Importantly, it will encourage private sector funds to particularly target enterprises that have a positive impact on women – whether they are led by women, promote gender equality in their workplaces, or provide products or services that support women. I think this will set an example for other investment funds, and build on the ground-breaking work in South East Asia of our Investing in Women program, which is a $45 million Australian Government initiative that commenced in 2016.
I am pleased to announce partnerships of that program with Patamar Capital and with the Small Enterprise Assistance Fund, and I believe the representatives of both are here today. These two pioneering impact-investment funds will support women-owned and women-led small and medium businesses across Indonesia, the Philippines and Vietnam. For example, the Small Enterprise Assistance Fund is investing in a hospital for women and newborns in Southeast Asia, and expects significant leverage from Asian co-investors. Patamar Capital is finalising an investment in Indonesia to connect women farmers to buyers, achieving higher prices and reduced costs for those small farmers. We expect every dollar of our investment to leverage three dollars from other investors, and I look forward to announcing additional impact investing partnerships through our Investing in Women in the coming months.
In the Pacific, Australia's efforts to promote impact investment are already yielding promising results. Last year for example, we invested in the Samoa Coconut Cluster factory. I actually visited this factory in December last year, and I met with the factory owner, Edwin Tamasese and some of the more than 200 coconut farmers who are benefiting from this investment. The company sells Samoa's virgin coconut oil to the world's luxury markets. From the success of this pilot, we built a new, larger initiative: the Pacific Readiness for Investment in Social Enterprise, I love these acronyms, this is Pacific RISE, and this program facilitates investments that deliver sustainable social benefits to the Pacific while providing commercial returns for investors. This year, Pacific RISE helped secure a $600,000 investment by an Australian impact-investment fund to support Tanna Coffee in Vanuatu. The investment will help Tanna Coffee rehabilitate their plantation and plant 200 hectares of coffee trees after the entire island was devastated by Tropical Cyclone Pam two years ago. I visited Vanuatu in the aftermath of Tropical Cyclone Pam and saw myself the devastation to the agricultural land, the crops that had been flattened, and the fact that farmers were left without any income. This kind of investment will help with the rehabilitation that is ongoing. The company hopes to more than double its production, create 200 new jobs and increase farmer incomes by 20 per cent as a result of this investment and the coming investments. And by the way, Tanna coffee is sold in Oxfam shops throughout Australia.
Pacific RISE has shown that our region is primed for investment. We've now built a pipeline of investment opportunities, with the goal of leveraging over $5 million in private investment. I certainly encourage organisations to approach the Pacific RISE team here today, to explore opportunities in the Pacific.
Our Government is encouraging the next generation of Australian entrepreneurs and business leaders to focus on social enterprise and impact investment. The New Colombo Plan was mentioned earlier, this is a Government initiative that I introduced in 2014 and the idea is to support Australian undergraduates at all of our universities to attend universities throughout the Indo-Pacific, and to live, study and undertake work experience in our region. Our undergraduates will undertake part of their course in a university in the region and it will be recognised back here in their undergraduate bachelor's degree. What is special about the New Colombo Plan is that our students are also gaining an opportunity for internship, work experience, some kind of practicum and while this is occurring across a diverse array of disciplines from medicine and law, and accounting through to architecture and the like, we're also seeing students becoming involved in social enterprise. We have some wonderful examples, students from seven universities are travelling to India to work with Pollinate Energy, an Australian-Indian social enterprise that's selling solar lighting to local communities. These are Australian students gaining insights into social impact, entrepreneurship, and humanitarian engineering.
Another one of our New Colombo Plan students, Liam Jewell, was in fact the 2016 New Colombo Plan Scholar in the Philippines – that means it was a 12 month scholarship – undertaking a Bachelor of Development Studies from University of Newcastle has interned with a microfinance-focussed NGO in the Philippines, it's called the Social Enterprise Development Partnerships Incorporated. As part of his internship, Liam developed more knowledge of current microfinance best practice, and in his words "an introduction to a very fascinating industry that I was only peripherally aware of before – social enterprise."
You might recall the original Colombo Plan back in the 1950s and 1960s that brought students from our region to Australia to gain qualifications from our universities and then go back home and build the productivity and prosperity to their nations. So we've reversed it, sending our students to learn from universities and communities in our region to come home with new perspectives, new ideas and insights, hopefully a second language, be far more Asia-literate with a much deeper understanding of our place in the world. I'm pleased to say that from a standing start in 2014 to the end of 2018 30,000 young Australian undergraduates would have lived, and studied, and worked in our region under the New Colombo Plan.
The Indo-Pacific offers excellent opportunities for impact investment, and the Australian Government is committed to growing this industry for the social and economic benefit of our entire region.
I wish you all the very best for today's summit and I look forward to hearing more of the outcomes.
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