The blind bouncer: arrogant and costly

The Treasurer has apparently told the media that the Foreign Investment Review Board “unanimously” recommended the prohibition of the Singapore Stock Exchange’s bid to merge with (or take over) the Australian Securities Exchange. What does “unanimity” mean or matter in secret tribunal? Nothing whatever. Swan should draw no comfort from that.

But by far the worst aspect of this decision proceess is it’s arrogant obscurity which imposes a loss on man Australian asset owners and shareholders Update: For example “…now that ASX looks set to stay independent, its shareholders will have to realise that it will never again be valued this highly” (today’s Financial Times)

“Speaking in Singapore last night, SGX chief executive Magnus Booker said the group had been informed of Mr Swan’s position by the FIRB but said the board itself had not made any criticisms of the bid and had not asked for any changes.” Extract from The Australian

If Booker’s claim is correct, the FIRB is acting contrary to fundamental precepts of natural justice and good administration. To respond with a raspberry, providing no explanation of its reasons is unacceptable in any regulatory domain let alone in the contingent prohibition of an important (whether you like it or not) cross-border investment.

An arbitrary inward-investment ban devalues all trade-exposed investments in Australian assets. It means, in effect, that every Australian asset, including equities, has at best an less-than-optimum market value because the Government might, without giving reasons, nullify any external bid. The maximum value any asset owner may realise will be determined by qualified “Australian” bidders (whatever “Australian” means in this context; domiciled, at least). The uncertainty affects every asset; not just those on the bloc at any time.

If this were a goods or services import rather than a capital movement Singapore could force the Australian government to be more transparent by challenging the decision in WTO. FIRB’s failure to give reasons (or to publish sufficient guidance before its decisions) would be contrary to Article X of GATT (goods) and probably to Article III of GATS (services). But WTO does not provide for fairness or transparency in investment decisions.

This action is, in any case, merely high-handed pretence on the part of the government. They have given us no reason to believe—what is unlikely anyway—that they have any more secure knowledge of the private intentions or future course of a company than any other observer or investor. That is why we have consented, through Parliament, to their arsenal of laws and regulations to control the actual behaviour of firms including detailed controls on the conduct of securities business and the behaviour and decisions of Directors. Why is that not enough for them? Why do we need a secret tribunal to be a blind “bouncer” at the door to our investment market?

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