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Poll: To sell or not to sell Australian assets? -

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EMMA ALBERICI, PRESENTER: The Treasurer, Scott Morrison, today confirmed his decision to block the part-sale of the New South Wales electricity distributor Ausgrid to foreign investors.

Chinese and Hong Kong bidders were vying for a 50.4 per cent lease of the company. Mr Morrison said the decision was based on national security concerns.

It comes just days after a report was handed to Prime Minister Malcolm Turnbull and his Chinese counterpart, calling for greater economic ties between the two countries. In particular, the report called for a treaty to allow more foreign investment between China and Australia.

To sell or not to sell: we will discuss how much foreign investment Australia should allow shortly.

But first, we asked you whether you thought there were some Australian assets that were too important to allow foreign investors to control.

Here is Brigid Anderson with the results of our poll.

BRIGID ANDERSEN, REPORTER: Land and power: hands off. The overwhelming majority of you, 94 per cent, said some Australian assets were just too important to be controlled by foreign investors.

Food security was the major concern. Rob from Victoria fears: "We will become a starving nation with our rich food bowl feeding people overseas."

Ian Howland said it was "beyond a joke" that governments allowed the sale of our food sources. And the sale of Australia's electricity grids? "Ludicrous."

But does it matter who the foreign buyers are? Joss Stehbens said it only "raises the hackles of Australians when it's Asians buying in. I wonder why that is?," she asks.

Well, for many of you, it was because of China's communist Government. That is why there were a few of you who supported the idea of a treaty between the two countries that was mutually beneficial.

But even then, there were words of caution from people who had lived and worked in China. Brad Stephensen warned it wouldn't be "worth the paper it's written on if it in any way hinders the Chinese national agenda." And Richard Morris said it would be up to Australia's diplomats and officials to perform "a careful balancing act."

EMMA ALBERICI: Ryan Manuel from the Australian National University is one of the authors of that Australia-China joint economic report that was handed to both countries' governments this week; Peter Cai is a research fellow at the Lowy Institute's East Asia program; and Dr Jeffrey Wilson is an academic advisor to the Foreign Investment Review Board. They joined me a short time ago.

Welcome, gentlemen.

I will start off with the question we asked our viewers, which is: are some assets just too important to be sold to foreign investors? And if so, which ones?

Dr Wilson?

JEFFREY WILSON, DR., MURDOCH UNIVERSITY: I am sure there would be a number of pieces of critical infrastructure that probably were too important to be sold to foreigners. You could imagine something like a defence force base or maybe a nuclear power station.

But there is an awful lot of infrastructure in Australia that might not necessarily be of such a critical nature: service stations, water distribution. One of the issues that we have seen come up in these debates this week is that everybody agrees critical infrastructure should be sold off, but no-one entirely agrees what exactly infrastructure is that's critical.

EMMA ALBERICI: What do you think, Ryan Manuel?

RYAN MANUEL, AUSTRALIAN NATIONAL UNIVERSITY: Yes, there are. Which ones exactly are ill-defined and that is the problem we face. We need to start defining them.

EMMA ALBERICI: Which ones would you feel uncomfortable to see sold off in Australia?

Personally, I would feel uncomfortable: obviously, anything that touched upon our strategic capabilities; anything that touched upon our defence forces. The other thing I would be worried about is whether or not investments made Australia more productive, as to whether they were actually just Australia selling off stuff that existed so that we could get a better price, necessarily.

EMMA ALBERICI: Peter Cai?

PETER CAI, EAST ASIA PROGRAM, LOWY INSTITUTE: There is actually, under current foreign investment policy there is a definition of - a list of sensitive sectors. They may not necessarily be critical, but they are sensitive.

For example, like a national carrier: Qantas; like media companies, because with a media platform you can exert influence in Australia's domestic political debate. And also with things like: you know, Qantas is not critical infrastructure, so to speak, but it is a very iconic Australian brand. And for a lot of the people, that can be also a very critical asset that cannot be sold to foreigners.

EMMA ALBERICI: Which ones would you not like to see go offshore?

PETER CAI: I think I probably agree with Ryan: a lot of the defence-related facilities cannot be sold. Especially with Huawei's case in the past, the Government have clearly indicated since, like a critical telecommunication network...

EMMA ALBERICI: This was the Chinese company that tried to buy certain aspects of the NBN infrastructure?

PETER CAI: To supply equipment: yes. So that is deemed to be too important. I think I probably agree with some Government decisions around critical telecommunication infrastructure as well.

EMMA ALBERICI: Let me ask another specific question and that is to the issue of the week: and I guess, very pointedly, Jeffrey Wilson, what was your view on the decision by the Treasurer to knock back the Ausgrid 50 per cent sale?

JEFFREY WILSON: Well, the decision was rationalised as being the result of a briefing from the national security apparatus.

But what's interesting about this is that China's State Grid has already many investments in Australia that have been approved in Queensland, NSW, Victoria and South Australia; and it was also approved to bid for TransGrid in NSW, just in December last year.

Now, it ultimately didn't win the bidding for TransGrid, but it was given the tick of approval then.

So the question that one has to ask - and the Treasurer effectively refused to answer - was: what has changed over the last eight or nine months that the answer has been yes, yes, yes and then, all of a sudden, today is no?

The Treasurer's answer at the press conference was that he was the only person with security clearance high enough to know this answer: so, effectively, trust him.

But I don't think that's an answer that gives the Australian public or business community much answer as to what precisely is going on here and what has changed.

EMMA ALBERICI: Peter Cai, what did you think of that decision?

PETER CAI: I think, without access or the benefit of the intelligence briefing, it is very hard to argue about the merits of the decision itself.

I think perhaps the most puzzling aspect of the decision actually to knock back the Cheung Kong Infrastructure, which has very extensive holdings throughout the world and especially in the United Kingdom - and also being a very long-term investor in Australia, I suppose with a very good track record - yet has been knocked back.

The speculation is: it is seen as being too close to Beijing, which is also very interesting because...

EMMA ALBERICI: Isn't this the same company that since 1999 has owned the energy distribution network in SA?

PETER CAI: Yes. Absolutely. And...

EMMA ALBERICI: So it is the same asset, isn't it, in terms of what it does? It is the same as Ausgrid, isn't it?

PETER CAI: Yes. And what is also interesting is: people think perhaps Cheung Kong Infrastructure is too close to Beijing, but the billionaire who owns the company actually has become a little bit more distant from Beijing over the recent years. He has actually changed the incorporation of his company to Bermuda and has shifted a lot of his assets actually out of China, into Europe and the United Kingdom, because he is becoming less confident of China's economy.

I think even some state media described him as a bit of a traitor, because he really profited very handsomely from China's economic development. At a time when people started to become more sceptical over China's economy, he decided to pull all of his investment out of China. If anything, he is actually becoming less of a favourite of Beijing.

So that's why, when you look at the decision, it does puzzle me.

EMMA ALBERICI: Ryan Manuel, what do you think is behind the Treasurer's decision? It is a big question to ask you, but you are a China specialist. You have been looking at this particular question. You have written a paper this week on these very matters. I am curious to know what you think is behind the decision?

RYAN MANUEL: I think we have to take the Treasurer on his word. If he says it is for national security, then we have say it's for national security. But what's behind...

EMMA ALBERICI: But there seems to be an inconsistency with how that test is applied?

RYAN MANUEL: Well, this is the thing. I am not sure there is a test.

And one of the problems we have as a country is that, frankly, we tell the Treasurer: you can say whatever you want, as long as it doesn't meet what we refer to as the national interest test, which is much broader, much vaguer.

The reasons that the Treasurer gave on national security - I mean, as many others have noted, one of the problems of course is: a) that's not necessarily consistent with previous decisions; b) it is clearly not consistent with advice given to the NSW Government during the process, which is a relatively long process.

And finally: for the Treasurer, I mean, he doesn't have to give any reasons when it is national security. Whereas often other parts of the national interest test: you see a more fulsome explanation.

What is actually behind it, then, are probably a few things. The first one is agreed on by all parties and that is that, following the Darwin Port decision, the Foreign Investment Review Board's make-up was changed slightly and it was given beefed-up security powers, so to speak, in that it was given two new members. It was given David Irvine, who is a former ambassador to China but also formerly head of ASIS and ASIO; and Mr Pulver from the Defence white paper and also many other bodies.

I think the Government signalled very clearly then, in December, that it would be doing more work on national security. The question is that we haven't actually - it is very hard as well, because it is national security, to actually specify what that work would be. So we have to presume in essence, given all of those factors, that something has happened in the last nine months that has led the Treasurer - and he has been given the powers to do this: to say no, this is not a good deal.

The part that is particularly unusual is, as Mr Cai noted, it is not just a Chinese SOE (state-owned enterprise): it is a private company, 30 per cent of which is owned by a Hong Kong resident. But I mean, other investors in Cheung Kong include the Norwegian sovereign wealth fund. (Laughs)

I mean, this is a very difficult deal to understand for national security reasons. But unfortunately we have to take that on face value.

EMMA ALBERICI: Do you all believe that, at least in part, there is an element of xenophobia at play with these decisions; and particularly with the complexion of the current Parliament being as it is and the kinds of comments we have heard articulated from parties such as One Nation?

Jeffrey Wilson?

JEFFREY WILSON: I think these kind of domestic political issues: you couldn't write these off. We have seen a number of groups in Australia ramping up a campaign again foreign investment more broadly and sometimes Chinese more specifically.

I think the National Party and Barnaby Joyce has been becoming more vocal about this for many years, as has Nick Xenophon as well; not to mention One Nation and its new senators. And this fundamentally changes the nature of foreign investment review process.

The reality of the FIRB is that it doesn't actually, in high-profile cases like this, make decisions itself in a bureaucratic and automatic manner. But they do get taken by the Treasurer to the Cabinet, which is a political committee. And the nature of that advice is then discussed and made as a political decision.

And I think it would really stretch credulity to suggest that all of that politics just simply didn't matter when these decisions were made. The inconsistencies around this would kind of confirm that: that we have a company, that has been allowed to bid before, all of a sudden not allowed to bid. If the question is, what has changed?: well, that seems to be something that has changed.

EMMA ALBERICI: Peter Cai, is it possible to disentangle the politics from these decision-making processes?

PETER CAI: Yeah, well, I agree with what Jeffrey has said. You know, FIRB is actually: a lot of people refer to FIRB as kind of the decision-maker, which is not true. It's basically...

EMMA ALBERICI: FIRB being the Foreign Investment Review Board?

PETER CAI: Yes. That's basically an advisory body. So the power: the Foreign Acquisitions and Takeovers Act, which allows the Treasurer to make the decisions. So he, being the Treasurer, makes the final decision. The FIRB is basically an advisory body.

So if you look at a Lowy Institute poll on foreign investment: actually, over the last couple of years, there is a consistent popular opinion which suggests people don't actually want Chinese investment into certain areas such as agricultural land. It has been very consistent and very strong. I don't think the Treasurer would just ignore that, being a politician himself.

EMMA ALBERICI: Interestingly, our viewers consistently told us that food security was among their greatest anxiety when it came to foreign investment in Australia. Is that a legitimate concern?

PETER CAI: Yeah, that's one thing that puzzles me as well, because Australia: seeing as we produce something like... enough food to feed 60 million people. So I think when people talk about food security, I don't think people mean that Australia would go hungry. But if it is not that, I don't know what it is, because we produce so much surplus food...

EMMA ALBERICI: Someone in fact did articulate that, but...

PETER CAI: Yes. So we produce so much surplus food, there is actually three times from what we need. And we export all this surplus foodstuff to Asia. So I don't think, by having foreign investors investing in Australian agricultural land, somehow Australia will lose control over food production.

And it's also quite puzzling that people think, once foreign investors acquire land title, somehow Australia will lose its sovereignty. It doesn't mean that Australian legislation longer applies over the land and Australian officials can no longer have access to this land. I think people need to think about it.

It is not like people, once they buy this land it becomes a foreign enclave and no-one can have access anymore. So I think we need to... yeah, some time to debunk some of the myths around this.

EMMA ALBERICI: Do you agree, Ryan Manuel? I mean, it doesn't demonstrate a particularly great confidence in Australia's regulatory regime that so many people told us and have the wider view that food security should be enough of a reason to disallow Chinese investment in agricultural land?

RYAN MANUEL: Well, that is one way of looking at it. I just worry, though, that not all...

I think we have to be really careful to say that people being against foreign investment is just because of xenophobia. It is very easy to do that, but there is also: I mean, this week alone the Reserve Bank governor, Glenn Stevens, came out and talked about, actually: we need to think more about what types of investment we have.

Now, I think you are totally right: food safety investment - sorry, agricultural investment: it strikes me as not one that we should be as concerned about, in some ways. But there is this problem of: people are very attached to land. People are very attached to their own land. They often don't want people, even from Australia, to buy it either. And so it's not always just foreign investment that is part of the worry that is part of driving this.

The final part, of course, is that, actually as well, there are a lot of bad investments being made. If we look at, say, Chinese investment now that's coming in, it has a lot of support from people who want to sell off often bits of land that is perhaps less productive than it should be. And we saw waves of that again with the Japanese investment boom and we saw waves of that again before in the American investment boom.

I think there is a part of Australia understanding that investment and buying the land doesn't necessarily mean that it doesn't come back. It actually can mean that the land becomes more productive - which is quite a basic point, I know. But it is very hard to get that through, when you have all these big words like "security" and "safety" and factors that, frankly, your average person is not going to like.

Whenever you ask about food safety: I mean, of course we don't want anything that harms food safety. We don't want anything to harm security, either. You know, it's sort of like the investment version of asking for "jobs and growth". Like, of course we want these things.

EMMA ALBERICI: And a final word, Jeffrey Wilson, on this issue of food security: is it a valid concern that some Australians hold?

JEFFREY WILSON: I think a big concern for Australia's food security is the untapped potential in the Australian agricultural markets. There is a lot of land that's being unused or under-utilised: and often that is to do with availability of infrastructure, connection to processing, connection to markets and opportunities to value-add what are often low-value Australian exports, like grains, into more processed foods.

This requires investment, which the Australian economy quite frankly lacks the savings capacity to finance ourselves. And given that China is such an important economic player in the region: if Australia is going to export food to China, it means involving Chinese investment in developing the infrastructure to grow this food production.

So limiting that on some notion of "not selling the farm" is almost cutting off one's nose to spite your face. You lack the infrastructure, you lack the investments and you lack the markets. So I can't see how that would necessarily lead to a more food-secure Australia.

EMMA ALBERICI: Gentlemen, there is so much more to discuss on this topic but unfortunately we're out of time. Thank you so much