Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Economics Legislation Committee
18/11/2020

BURGELL, Mr Edward, Senior Adviser, Business Council of Australia

MCKISSACK, Mr Adam, Chief Economist, Business Council of Australia

[11:50]

CHAIR: I welcome representatives from the Business Council of Australia. Thank you for appearing before the committee today. The information on procedural rules governing public hearings have been provided to witnesses and is available from the secretariat. I would advise that answers to questions on notice are required by midday on 20 November. Do you have any opening remarks before we ask you some questions?

Mr McKissack : I might just outline some of the key concerns we raised in our submission. The first point I'd make is that I think the BCA understands the need to address national security concerns. There is no dispute: governments around the world are doing similar things in terms of changing their regimes, and so Australia is not alone and we understand that. At the same time, we're in a global recession. Australia's in its deepest recession for many, many years, and attracting foreign capital is as important as it has ever has been. Business investment is at lows we haven't seen since the early nineties recession. FDI flows into Australia are down 40 per cent in 2020. If you look at net capital flows, capital is flowing out of Australia currently, which hasn't happened since the early 1970s, so Australians are preferring to invest abroad more than foreign investors are willing to invest here.

The global race for capital is only going to become more competitive as we work through this global recession, so we need to make sure that in addressing these national security concerns we are not discouraging this much-needed foreign capital. We've seen that other jurisdictions have had a go at changing their rules. The United Kingdom, for example, is introducing quite similar rules. They're a lot more targeted and are clearer about the types of things that should be brought into the test, so we think there's probably something to learn from what other jurisdictions are doing. Our feeling is the way that this regime's currently framed in terms of a national security test is too broad and will bring in a lot of rats-and-mice investment, a lot of routine, plain vanilla, adding to the cost and time that transactions take place.

The other thing we would note is that the FIRB regime over time has always had the gatekeeper role. The Treasurer's had quite broad powers in respect of a broad range of investment. You go through the system, you get approved and then off you go: you're part of the normal Australian legal system. The Treasurer's powers under the FIRB legislation are extinguished, and you can just go on your way.

Under the current rules being proposed, there will be a call-in power, a last-resort power and very strong penalties. Once you've made your investment, you're not home free. There's potential for comebacks later on and some quite big penalties attached. That fundamentally changes the way this regime operates, so we need to be very careful in terms of the scope and just how this regime is applied to different transactions.

We think you could define things more tightly than the current draft legislation does. Obviously, the costs of going too broad are you clog up the system. Things take a long time. We see the deadlines for clearing investments being extended from 30 days to 90 days, so obviously it's anticipated that things will take longer. It could become self-defeating for government. If you're clogging the system full of lots of fairly standard transactions, it's probably going to be harder to find the things you're actually worried about. We think it doesn't really work for business and it doesn't really work for government if you are too broad in the application of the regime. We've suggested in our submission some ways that you might tighten up the definitions. We've suggested that there might be ways to streamline the system for the more routine transactions. Given that the Treasurer will have a call-in power, a reserve power, I think that gives you a bit more freedom to be less vigilant at the front door because you now have a back door where, if you are worried about a transaction, you can bring it in later. We think there is potential for streamlining to offset some of the regulatory costs. Those are the key points that we are keen to make, but obviously there is more information in the submission. I'm very happy to take questions.

CHAIR: Thank you. How much of your concerns could be alleviated with clear guidance material?

Mr McKissack : Clearer guidance material could certainly help. But that is second best; it's probably best if you know you are not in a regime at all. For a foreign investor having to look at its due diligence when it's looking to invest in Australia, I think it's a lot cleaner proposition when you know that you are in a regime or that you are not. To the extent that there is a bit of fuzziness in definitions, guidance material can help. But I don't think it's your first option.

Senator O'NEILL: We've had evidence this morning that has indicated that this has been a very rushed process. Even though there have been two drafts, and consideration at those points in time, the general feedback, to be frank, is that the consultation has been in the form of being told what's going to happen rather than receiving suggestions and working with that. Has that characterised the Business Council of Australia's interactions with the government over this piece of legislation? You've come with a long shopping list today.

Mr McKissack : Certainly the view of our members is that it was a fairly quick consultation process. There wasn't a lot of time to pull submissions together and have two-way conversations about some of the concerns. So I think there is a bit of a feeling of: what's the hurry? It has been a very compressed consultation process.

Senator O'NEILL: We heard earlier from Mr Pearce of the Association of Mining and Exploration Companies. He fears that there is a gap between the perceived risk, the way that has been constructed in public—I don't want to verbal him—and the actual risk. You mentioned in your opening remarks that, like all Australians, you of course want to make sure that we have national security. Is the haste another example of a big announcement without doing the proper work to make sure national security is generally assured but business can continue? Is this the government acting in haste?

Mr McKissack : It's difficult to comment. I think there is a lot of uncertainty about the risks. Certainly we don't see what government sees. The government has access to a lot of information we don't have, so they will know better what risk they are trying to address. I can't really say whether the government has got that right or not.

Senator O'NEILL: So if you trust them and they've made a good assessment and they've given you this piece of legislation, why are you not trusting the restrictions they're putting on business? They're the government of business. They should be, absolutely, looking after business, shouldn't they?

Mr McKissack : What I can say, to finish the answer, is it does seem that the net's been cast very wide. It doesn't feel like it's been targeted in any particular way. It seems that the definition will drive off the critical infrastructure list. That list is currently quite short. It covers things like ports, electricity, gas assets and water, I think, and telecommunications gets picked up. So, currently, there's quite a tight definition of sectors where infrastructure is defined as critical. I think that will be the gateway into this national security test. The longer list does take in a lot of the economy. You're picking up things like food and groceries, and food and groceries, as a thing, are a huge part of the economy. The sense is, surely, the risks aren't so broad that they cover so many parts of the economy in such a broad sense. The feeling is that the net has been cast quite wide and is not trying to hone in on where the greatest risks lie.

Senator O'NEILL: This comes to the commentary today from many witnesses about the lack of definition of critical terms that are embedded in this piece of legislation. Do you have concerns about the fact that they're going to be determined in regulation—that looks like the intention of the government at this stage—with the words 'national security business' and 'national security land' still unknown?

Mr McKissack : Yes, that is a concern.

Senator O'NEILL: How is that explicable? What rationale could the government have for doing that? Clearly, that must be impacting business confidence.

Mr McKissack : Yes. Really, it's a question for government; it's not really a question for us.

Senator O'NEILL: You interact with the government a lot. They rely on a lot of the commentary you provide. If business is at the heart of what the government is an advocate for, is this how they normally do business with you? You don't sound like you've been informed very much by what the government's doing.

Mr McKissack : We certainly have been part of the consultation process. We've had the opportunity to express our views through submissions, as we've made to this committee.

Senator O'NEILL: But you characterise that as one way. Is this a government that's deaf to the business sector?

Mr McKissack : We certainly wouldn't say that. It's a difficult area. There's a lot of uncertainty about risk. National security risks can arise in various ways. It appears to me that a fairly risk averse approach has been taken in the broader possible set of transactions. Our feedback on that, which we're providing through the processes, is it's probably too broad. It will get in the way of a lot of fairly routine transactions at a time when we're trying to attract foreign capital into the country. Let's not forget where the economy is right now. We need to attract investment. There's no economic recovery if we don't have investment pick up.

Senator O'NEILL: The government's proposing to change the definition of 'foreign government investor' for the purposes of streamlining applications, to avoid what they call passive investors having to notify. Do you have views on this particular change?

Mr McKissack : I'm not totally on top of the detail. I think it is trying to pick up things like a foreign pension fund that might be part of an ownership chain and it gets caught as a foreign investor. I think that has problems for some of the big funds. Some of the big foreign investors out there are these big pension funds. I understand it's trying to address that sort of problem. I don't know the sort of detail of that provision but it's one our membership, I think, has been quite positive about.

Senator O'NEILL: What do you think of the new register proposal, and do you have a view about how transparent the data in the register should be and what information should be available? It is different in other jurisdictions. One of the things I'm sure you would know, as I do, from visiting regional communities is that people are very concerned, particularly about land ownership, that everything is hidden. The government is proposing a register, but it's a register that starts at a particular point in time. It doesn't capture previous data and there's no indication of how the register is going to be updated or reviewed. There's certainly an indication that it won't be accessible to the general public. What's your view about that?

Mr McKissack : Part of our proposal on streamlining is actually to use these registers more to give yourself more visibility of what foreign investment is coming in. There are probably a lot of transactions you could do just with the registration process and not have to go through the whole screening process. We actually think there's the potential to use the registration idea to maintain the visibility of foreign investment coming in, but to make registration the only requirement. You can say: 'Register your investment. Tell us what you're going to do. Tell us how much you invested. If we think there's a problem, we'll let you know.' They don't have to necessarily go through the whole process of the FIRB, the screening process and waiting months for approval. We think that registers have some potential to improve the system. I don't think that's being utilised currently, but we've certainly put it forward in our submission as something that you can use to simplify things.

Senator O'NEILL: As it stands, the government haven't picked up your recommendations about the way to manage a register or make it more public facing?

Mr McKissack : No, I don't think they have.

Senator O'NEILL: You did mention fees. One of the concerns I have about the Foreign Investment Review Board is that it is within Treasury—and I am mindful to put on the record that it's the Treasurer who always makes these decisions; it's no-one else. It's the Treasurer's responsibility—because we've found in other inquiries that the Foreign Investment Review Board service has been compromised in terms of how many people were in the area, particularly in the area of compliance. We have on the record now that, in 2019, multibillion dollar deals with compliance trails were being supervised by only two people in Treasury, which I would frankly say is completely inadequate and I reckon most Australians would agree with me—I think that one would pass the pub test. Given that resource deficit and these big changes, is that perhaps why the fees have gone up so much—that this becomes fee for service because they're going to have to grow this whole area so much more? Do you have any understanding of that? Have the fee increases been explained to the Business Council? Has the increase in red tape been explained to you?

Mr McKissack : Not as such. I think there is increased resourcing being provided to that part of Treasury as part of this reform package.

Senator O'NEILL: Yes, I think it's gone from two to 13 staff currently. But, if this comes in, it will need a lot more than that. That's just the compliance part.

Mr McKissack : Certainly, fees of up to half a million dollars for a transaction are seen by our members as quite excessive. It goes beyond cost recovery. When the Productivity Commission looked at this in the last year or two, I think it was about seven-to-one revenue to cost.

Senator O'NEILL: They delivered that in June this year.

Mr McKissack : It is effectively like a stamp duty being applied to businesses. It is not a pure cost recovery.

Senator O'NEILL: You think this is a revenue-raising exercise as an impost on foreign investment and to the cost of Australian businesses, as it's constructed.

Mr McKissack : It's clear that the revenue far exceeds the cost of running the system. I think our members would see it as a tax, that's right.

Senator O'NEILL: The government hasn't listened to you on that?

Mr McKissack : We've conveyed our views to government; I think they get taken on board. I don't know what they've done with that information. It's probably predictable that, when you increase fees, business responds negatively. But we haven't had any specific response on that.

Senator O'NEILL: So it's a bit of an ambit claim, you think, Mr McKissack, and you'll eventually wear them down to a more reasonable price?

Mr McKissack : I have no idea.

Senator O'NEILL: I notice we have been joined by Mr Burgell. Are you here with the business chamber as well?

Mr Burgell : That's right, yes.

Senator O'NEILL: Given that across the board—from the significant increase in scrutiny of national security from our first witness to you now—there is a general demeanour of awareness of the haste with which this matter is proceeding, have you asked the government to reconsider its start date of 1 January 2021?

Mr McKissack : No; we've accepted that as a done deal.

Senator O'NEILL: A fait accompli?

Mr McKissack : Yes.

Senator O'NEILL: Are you accepting that on the strength of the government's statement of 'there are national security matters we can't talk to you about and you just need to trust us', or have they convinced you, as the peak body for businesses large and small right across Australia, that this must be done in the time frame that they have set—which means it looks like, after a one-day hearing here, this is going to be through parliament before Christmas?

Mr McKissack : We would like to see this done properly. As I said at the start, we understand there is a genuine issue to address—

Senator O'NEILL: How do you understand that? That's the heart of my question. There is the perception and the reality. I have my concerns, and, like you, I am yet to be convinced by the government, and I am anxious about the parliament passing this legislation when there are so many concerns being raised. Your articulation of it being a one-way conversation—it's not a conversation when it's only one-way; it's an information reveal more than a conversation. I'm concerned about that.

Mr McKissack : If it takes more time to get this right, we would definitely support taking more time to do it. We don't see any particular magic about 1 January 2021. I have no insight into why everything has to happen by that date.

Senator O'NEILL: Thank you for that. Do you have any view about the need for a review mechanism—the timing of such a thing—or a sunset clause with regard to this legislation?

Mr McKissack : How do you mean?

Senator O'NEILL: It was put earlier that to push pause and have a more careful review of some of the unintended consequences that have now been identified by participants in this inquiry and also in those one-way conversations—that before enactment, or once it's enacted, it would be put into the legislation that there was a forced period of time where what's already been instituted would be reviewed and perhaps reformed.

Mr McKissack : I think we would certainly support a process where there is additional time to review the content and work through some of the issues we have raised in our submission. Certainly that would be option A. Failing that, I think some sort of built-in review process would seem a prudent step, given the nature of the changes. As I said, it is a bit of a game changer; this legislation does quite significantly change the way the FIRB regime operates. I think we won't fully understand what it means, particularly for our members, until we see it in action. I think that is a very good suggestion—that you come back and review it and identify unintended consequences. I also agree on putting the timing upfront to understand what we're doing, to get the definitions right and to target where we see the risk as greatest.

Senator O'NEILL: I don't know if you are across the detail to the level where you might be able to clarify this for me: on the change in the interaction between the Minister for Home Affairs and this particular piece of legislation, have you formed a view about item 225, which amends the Security of Critical Infrastructure Act?

Mr McKissack : The only real thing that we have focused on is the scope of sectors covered by that act, which we understand will feed into definitions picked up for the foreign investment rules in terms of who is in scope for the national security test. So we've focused on that part of it. I think we have made a separate submission on the security of critical infrastructure changes, but that's not something I'm on top of the detail of.

Senator O'NEILL: I'll ask some questions of Treasury this afternoon, and that might help a little, but as I read this I am a little concerned that the Minister for Home Affairs has priority over the act and the ability to issue directions under section 32 of the SOCI Act. Would it be of concern to your members that it was not the Treasurer who made decisions about what happens but the Minister for Home Affairs who could suddenly be in your food and grocery business, as you've indicated, because that's captured at this point in time with the vagueness of the definitions?

Mr McKissack : I think we'd certainly want to understand where there's any sort of discretionary power being applied. We'd want to understand the implications, how it's going to be used and what are the safeguards, whichever minister it is. We want to fully understand what that means.

Senator O'NEILL: I have to agree with you. What I am concerned about is that if the Business Council doesn't understand what the government is doing, what chance has a small business in Wagga Wagga or Bourke or Tumbi Umbi on the Central Coast got of having a sense of what is going on in their business world? Indeed, what will foreign companies or foreign investors make of this, given there's so much uncertainty about exactly what the government is trying to do here?

Mr McKissack : There's certainly a huge task if it's going to take effect from 1 January. Where are we now? We're in mid-November. There's a big education task I think over that short period of time for people to understand what this all means.

Senator O'NEILL: As a former teacher, I know that no-one wants to learn anything in January or December—

Mr McKissack : No. People aren't that receptive over Christmas; it's true.

Senator O'NEILL: especially after the year we've had. Can I go to your opening comment, because I think it is important to the context in which this is happening: 'Yes, I am very concerned about the changing world and national security.' I'm very interested in your comment about capital flowing out of Australia, about capital flowing out of Australia in a form not seen since the 1970s. That does say something to me about business confidence about what's going on in Australia, but I would like to understand more what the Business Council knows about this very concerning capital flow.

Mr McKissack : This is a big issue for the Business Council, and it's something we made a lot of in our budget submission for the October budget this year. It's very unusual. If you look right through Australia's history, we've always been a capital importer. That makes sense, right? We're a relatively small population. We're on a large continent with a lot of resources. You would expect investment opportunities to be strong in Australia, relative to overseas. It's been more natural that we would be an importer of capital in net terms. So it is very unusual that in the last couple of years we've become a net exporter of capital. I think it's probably about 1972 that we last saw that. If you go even further back in history, it wouldn't have happened very often. So that concerns us. It does tell you something about probably a range of regulatory settings of how our tax system is operating, of how competitive we are on a range of fronts. It is not just FIRB, obviously; it's how we sort of set up our corporate tax system. There are a range of things. I think it is a central driving kind of fact for us. It is not the way it should look. We should be attracting capital into this country, and we've got to make sure that we do. I think a lot of our prosperity depends on bringing that capital in as we have through our economic history, bringing with it competition, innovation, all of the things that capital brings. We have got to keep attracting it. We've got to make sure we don't put up unnecessary barriers to that coming in.

Senator O'NEILL: In your words, then, are there unnecessary barriers in the legislation as it stands at this point?

Mr McKissack : Our submission is saying that we think it is broader than it needs to be, that it will probably bring more things into scope than is necessary and that what the government should do is target it to areas of high national security risk, as is done through the existing Security of Critical Infrastructure Act, where there are four or five sectors, which make sense as areas you'd worry about. Once you start getting into food and groceries, higher education and research, you're getting into a lot of different parts of the economy. I think we're saying, yes, there's a genuine problem—target it to the problem you're trying to solve; don't try and spread the net too broadly.

Senator O'NEILL: How do you explain that the government could be so out of step with the Business Council in this?

Mr McKissack : I'm not sure I'd characterise it in quite that way. We've put our submissions to government. They've taken that information on board. They're looking at a set of risks that we don't necessarily see. The feeling is perhaps that they don't want to miss anything—the broader the net is, the less likely you are to miss a risk that you might not have thought about. We're saying, from a business point of view, that there's a cost imposed by doing that, by wanting to look at everything that's coming through the door, at zero dollars, picking up really minute transactions. We are trying to highlight the costs involved in that.

Senator O'NEILL: Can I go to the summary of changes. In addition to the fee costs—which you said are more than cost recovery; they are, rather, a tax on doing business—there is a proposed summary of changes where, in the existing law, a range of powers do not exist. We can see in the proposed new law that penalties are increased significantly, up to maximums for civil penalty penalties of 75 per cent of the value of the investment and 2.5 million penalty units. Compared to penalties available to ASIC, this would have pretty sharp teeth, which could be a fantastic dissuader for an entity that might seek to do harm to Australia, and that's its intention, no doubt. Do you have a view about that?

Mr McKissack : They're very significant penalties, and they're penalties that appear to be designed for a significant problem. Again, it comes back to targeting. If you have a concern about a particularly high risk then you bring strong penalties to address it. But what worries us is that, if you're bringing in the smaller, fairly routine transactions and you still have these quite big penalties attached—you could be a trucking company transporting goods for a food and grocery business and, potentially, the way we read it, you could be caught up in this regime and get hit by a penalty as large as that. So it's a proportionality issue that we're getting at.

Senator O'NEILL: Is this a sledgehammer to crack a walnut?

Mr McKissack : I think for some transactions it is. Obviously, for the ones they're really worried about it probably isn't, but I think there are a broad range for which it probably is.

Senator O'NEILL: The Treasurer currently has no power to revoke an approval if a foreign person provides information in their application that is false or misleading in a material particular—basically, if they lie in their application. This law would give the Treasurer that power. And I suppose the penalties we've just been discussing are the dissuader—they're the stick to make sure that people tell the truth about who they are and the nature of the way they're constructed. Do you believe that the Treasurer should have that power in a delegated form?

Mr McKissack : I think that sort of power needs to be exercised very carefully. We've argued in our submission that you need some kind of safeguards around that sort of exercise. You need to know that you might be in a position where you're misleading and that you are covered by this legislation. Strong penalties could come your way if you've done the wrong thing. I guess what we're most concerned about is that you're a bit of an innocent bystander in this and that you probably should have declared something that you didn't know, because you were running a food and grocery business. So I think that it's a power that has to be used very carefully. Again: targeting.

Senator O'NEILL: I guess this is the risk of rushing in without adequate time for the entire business sector, because a lot of it is caught up in this particular piece of legislation—a large chunk of Australian business is caught up in this.

Mr McKissack : It is. All of these issues should be worked through, I agree.

Senator O'NEILL: Interestingly, the current act does actually have a provision for the criminal and civil enforcement penalties. The Treasurer has not used those powers since 2015. What do you think that indicates?

Mr McKissack : It probably indicates that he hasn't had to use them.

Senator O'NEILL: So, if the Treasurer hasn't had to use these powers since 2015, why this hasty process with such widespread concern about the nature of the legislation and how much of it is going to be by regulation, which is basically in the Treasurer's gift?

Mr McKissack : I think these are all questions for officials.

Senator O'NEILL: Does it concern you that that is the case?

Mr McKissack : Certainly we want to see all the issues dealt with properly before this legislation comes into place and, as I said, there are a lot of concerns that we've raised. We'd like to see those concerns addressed prior to this legislation coming into place.

Senator O'NEILL: One of the concerns that I have is the current capacity for the government to actually monitor when they put conditions on a particular takeover from a major entity, such as energy providers. I'm very familiar with the Alinta case, which was a purchase from Chow Tai Fook. They've got till the end of this year to finally comply with the terms and conditions, which is four years after the time at which they applied and were given consent to purchase that major electricity infrastructure. They've purchased other pieces since then, as well. The government's got some proposals here about starting to capture the movement of foreign investors in amassing different entities. Do you have confidence that they will be able to do that better with the new legislation, or do you think that will still be a problem—that we don't have good visibility about who's got what?

Mr McKissack : Just on a compliance issue, if I look at our membership, I think we are compliance focused. If they are asked to do something, they will go to a lot of lengths to make sure that they've met the conditions of whatever approval comes their way. I think we have a corporate culture that is geared towards compliance, so I'm perhaps less concerned on that sort of aspect. Certainly the new legislation gives the government a lot more powers to enforce conditions put on investments, to the extent they feel that's necessary, but, in terms of what we see and in terms of our membership, I think, as I say, we are quite focused on compliance.

Senator O'NEILL: One of the parts of the proposed legislation, item 132 in schedule 1, gives the Treasurer particular powers. These could require a person to, amongst other things, comply with the act, comply with the conditions of a no-objection notification and exemption certificate, and comply with specifications in the regulations—so it gives them more power to clean up a mess if someone isn't complying, which to me sounds like a good thing to do. It actually indicates, though, that the Treasurer could make a direction if a consequence or possible consequence arising from a relevant contravention is that:

… the composition of the group of senior officers of a corporation is contrary to the national interest …

So, at the moment, you could be a foreign company, as Chow Tai Fook is, operating as a declared private business out of Hong Kong—and we had evidence about that this morning, about how private it might be and how connected to the government it would need to be to actually exist—and put in, for the sake of compliance with our current regulations, a board predominantly led by Australians. This piece of the legislation says that the Treasurer can say, 'I'm not happy with that,' and intervene. Do you think that that's an appropriate power to give the Treasurer of Australia? Does the Business Council have a view about that?

Mr McKissack : Again, I think it's certainly a power you'd hope is only applied in very much a last resort sort of situation. To be honest, in the time that we've had available to work through the legislation, it's not an issue we've spent a lot of time looking at, but now you've raised it, it's one I think we'll look at more closely. You'd certainly hope that is very much a last resort sort of power.

Senator O'NEILL: There are also monitoring and investigation powers that I think, perhaps, you might want to have a look at. I really do appreciate your contribution to the democratic process by putting in a submission; however, I think hitting this point of our discussion reveals just how dense this piece of legislation is. There's only limited time for entities such as yourself to engage with everything, and, if you're having one-way directions from the government rather than a conversation about concerns, it's likely that important things, like the one I've just mentioned, could be overlooked. That won't help us if the legislation is rushed through in the next couple of weeks and it's implemented on 1 January 2020. That doesn't help us prevent the ills of poorly conceived legislation. Do either of you want to respond to that? Or are there any other issues that you would like to put on the record this afternoon?

Mr McKissack : I think we've have covered our concerns pretty well through this discussion. Thank you for the opportunity to come along and explain them in person. I do accept what you're saying. I think we do need to get this right. There's obviously a genuine problem the government wants to solve. Let's solve it in a way that doesn't create unnecessary cost in the middle of this pandemic-induced recession. What's the hurry? Let's take our time and resolve the sorts of issues that we've raised and other business organisations have raised through this process.

Mr Burgell : I don't have anything further to add to Mr McKissack.

Senator O'NEILL: Hopefully this hasn't just been constructed as a Christmas present, with a nice big bow on it, that will cost us an awful lot of money and opportunity into the future.

CHAIR: There being no further questions, we will suspend for lunch. Thank you very much.

Proceedings suspended from 12 : 34 to 13:3 4