Nationalism and foreign investment policy

“If they can’t trust Australia’s tax, customs and corporate regulators to prevent Chinalco from somehow sneaking illegal cut-price iron ore tankers off to its competitors in China, then Chinese companies will ramp up their investments in other countries.” Extract from John Garnaut in The Age

The fact is that we can trust our competition and fiscal regulatory agencies to manage foreign-domiciled investors just as we trust them to manage Australian investors. That allows us to offer national-treatment to investors, pre-establishment and after establishment. It would be tantamount to saying “investors who can comply with Australian regulatory standards don’t need to stand in the FIRB’s queue for three or six months or more waiting for an obscure review of their intentions (as if the bureaucrats would know) and our ‘national interest’ (ditto for the Treasurer).

Such a policy would create a significant competitive edge for the Australian regulatory framework in the world of foreign-investment. It would be a far-from-unregulated regime for investors but it would be the same regime for both domestic and foreign firms. Here is an extract from some remarks I made at an Institute of Public Affairs conference on foreign investment policy last year.

“It’s good to do business in Australia because we have well-developed laws and efficient, reviewable, institutions that monitor fair commercial practice, directors’ responsibilities, and transfer pricing and ensure that all Australians share in the economic benefits of growth.

They include a bunch of familiar acronyms ASIC, the ACCC, APRA and the ASX. Several others, less familiar, also support our comparatively transparent and well-ordered commercial landscape: The Australian Accounting Standards Board, the Financial Reporting Council, and the Australian Transaction Reports and Analysis Centre.

Why then do we have the Treasurer standing at the door to our investment market making decisions on individual commercial relationships and on who may, or may not, have a seat on an Australian company’s board?

Could you imagine our biggest customers asking the Treasurer whether he will allow them to import from Australia?

Never. But this is precisely what is going on with the pre-establishment barriers we maintain to FDI.”

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