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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