Saturday 09 Oct 2021 | 19:19 | SYDNEY
Saturday 09 Oct 2021 | 19:19 | SYDNEY

Chinese investment: FIRB debacle?


Graeme Dobell

2 October 2009 15:33

Has Australia somehow managed to concede the moral high ground to China over the core issue of Chinese investments in Australian minerals? Incredibly, this might just be the case.

The stakes could not be higher. The Chinese economic miracle is set to sustain Australia's prosperity for a long time, yet in the last few days, Australia has developed a case of the policy wobbles. Please ignore Clive Palmer’s silly remark about Chinese investment being treated differently 'because of the colour of their skin.' Most unhelpful, yes, but there's no law that says mining billionaires require brains as big as their bank balance.

The really amazing effort has been from the Foreign Investment Review Board. Last week, a director of the FIRB, Patrick Colmer, did a most unusual thing (for the FIRB that is). He got up and gave a speech to a Sydney conference where he apparently laid down new details about what Chinese investments will be accepted by the Investment Board.

Colmer seemed to offer China's state-owned companies thresholds for investment in Australian companies. Various reports agree that Colmer said overseas investment in big companies (read big miners) should be capped at 15 per cent. Investment in new or green field projects should be below 50 per cent. In the context of Australia's problems with China, this is a policy statement of the highest importance.

For the international perspective, here's the report of the speech carried by The Financial Times and here's the version from the wire service, AFP. Reuters played catch-up on the story by putting out a background piece with this wonderful third paragraph: 'Some experts argue Australia's 34-year-old foreign investment regime is murky and unpredictable, despite government claims to the contrary, and say the whole process can become a guessing game that turns investment away.'

Why am I quoting the media rather than the speech itself, you ask? That's where it starts to become worrying. When I first heard about Colmer's speech, I immediately went to the FIRB website. And I've been back several times since. No sign of this major announcement. A lot of people have been waiting for more than a week to see the details.

Today, The Australian rightly took two big swipes at the FIRB for what looks like an extraordinary blunder of either personality or policy. See the pieces by Glenda Korporaal and Matthew Stevens making the simple point: Where is the transcript of the speech? What is the actual language of the policy Colmer announced?

Eventually, the FIRB will have to make some sort of statement. But the damage may already be done. Because when you look at the existing policy as stated on the FIRB website, it does not quite match what Colmer is reported as saying about 15 per cent and less than 50 per cent. The key paragraph reads:

A substantial foreign interest occurs when a single foreigner (and any associates) has 15 per cent or more of the ownership or several foreigners (and any associates) have 40 per cent or more in aggregate of the ownership of any corporation, business or trust.

Presumably, Colmer is arguing that Chinese state-owned enterprises all amount to a single foreigner and that is where the 15 per limit cuts in. And is the rule 40 per cent or 50 per cent?

The same page has the explanation for the FIRB's powers that drive all that commentary about its murky nature and Chinese suspicions about the Rudd Government's actions:

The Government has the power under the Foreign Acquisitions and Takeovers Act 1975 (the Act) to block proposals that are determined to be contrary to the national interest. The Act also provides legislative backing for ensuring compliance with the policy…The screening process undertaken by the FIRB enables comments to be obtained from relevant parties and other Government agencies in considering whether larger or more sensitive foreign investment proposals are contrary to the national interest. The Government determines what is 'contrary to the national interest' by having regard to the widely held community concerns of Australians.

Hang on a minute. Maybe I was a bit too harsh in whacking Clive for saying we're picking on the Chinese. It's not enough to say Australia has let in $34 billion of Chinese investments in 18 months if we also look as though we are making up some of the rules as we go along. We're the ones calling on the Chinese to try 'rule of law' not 'rule of man'.

As I have argued before, in dealing with China we are attempting to change the punch line of the old joke about where a 500lb gorilla sits (A: Anywhere it damn well wants!). In trying to get China to play nice we had better make sure we know exactly what our policy and interests are. And we had better state them more clearly and explicitly than we have managed over the last couple of days.

Photo by Flickr user Rossco (Image Focus Australia), used under a Creative Commons license.