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Tuesday, 9 May 1972
Page: 1424

Senator COTTON (New South Wales) (Minister for Civil Aviation) - Senator Kane made a number of observations in the speech he has just made. He asked for a freeze and he talked about horses bolting. I thought that the proposal made by the honourable senator on behalf of the Democratic Labor Paty involved not a frozen horse but a Trojan horse. What he proposes is a device containing a lot of hidden things which would appear suddenly if the door were opened. The International Telephone and Telegraph Corporation, to which Senator Kane referred, has withdrawn the offer it made until the whole question of takeovers is more closely considered, so it seems to me that Senator Kane's proposal is redundant. He referred to multinational enterprises and he referred at some length to a paper on this subject. I think all countries are conscious of the growth of multinational enterprises, of corporations or companies that are so large that they transcend national' boundaries. The honourable senator referred specifically to 2 companies, Shell and Lever Bros. I was not clear whether he objected to those companies. If he does object to them I would point out they have been substantial factors for many years in the growth of the economy in this country, as indeed of many other countries. In the main, countries import their technologies and capital when they are young and developing, just as we have done. Multinational corporations are not necessarily totally evil.

Senator Gair - They have taken over a few companies in the past.

Senator COTTON - That is quite accepted. Indeed, within Australia some companies have taken over other companies and some still seek to do so. Without any doubt, matters of concern are associated with these issues in any country. But, equally, great benefits of economies of scale, advanced technology, the ability to mount great research programmes, improvements of living standards and improvements in the products available flow from the activities of companies such as these which are large enough to engage in the total range of development. Many of these companies are substantial factors in underdeveloped countries. Lever Bros is playing a substantial part in developing the oil palm industry throughout the Asian and island area. It is a significant factor in that part of the world.

I think that it is extremely unlikely that any Parliament in Australia that I can contemplate will ever abdicate its responsibility or its authority for the well-being of its people to any company the management of which is domiciled outside Australia. Regard would be paid to the fact that we need to have access to some overseas capital in this country to mount a general development programme, to give ourselves the living standard that we require and to have access to the new products of the world. This does not mean that we allow ourselves to be dominated. It does not mean that we are unconscious of the problem. But to close the door totally in the face of this opportunity without examining it carefully would not seem to me to be what the Australian Democratic Labor Party really wants or what the Australian people would really wish us to do.

On 10th November 1971, as reported at page 1812 of the Senate Hansard, a motion was moved by Senator Byrne which led to a debate on very much the same general issues and general principles, but over a wide field. I took part in that debate. I have no wish to repeat my remarks. But the general observations made at that time by the body of the Senate are worth reading again. It was a serious debate. I have read the report of the debate more than once since then. It bears upon the whole problem of the overseas capital position. I refer only briefly to one point. The Australian people do mount a tremendous programme of saving and investment to develop their own country. It is one of the highest rates in the free world - of the order of 82 to 85 per cent. The balance of the money for mounting our development programme comes from overseas capital and in many cases it comes from retained profits, earnings and appreciations left in this country. So, as a group of people we are not lagging in mounting our own programme. But, if we were to shut ourselves back to our own ability to finance our own development without regard to anybody overseas, we would then be delimiting our development, shutting down our rate of growth and, consequently, shutting down our living standards as we continued on.

On 10th December 1971, as reported at page 2677 of the Hansard record, the Senate agreed upon the terms of reference for a select committee to investigate foreign ownership and control of Australian enterprises. That committee is sitting at present under the distinguished chairmanship of Senator Withers, who is working with a number of estimable colleagues. It is actively at work. I think that I might refer to its terms of reference with profit because they indicate the wide scope of the work that the Senate has already agreed upon and which the committee is engaged upon. The Senate resolved:

That a Select Committee be appointed to inquire into and report upon foreign ownership and control of Australian commerce, industries, land and resources and in particular to report upon -

(a)   the increasing alientation of the beneficial ownership of Australia resources to non-Australian interests;

(b)   whether or not foreign ownership and control of Australian commerce, industries, land and resources is prejudicial to Australia's interests in all circumstances;

(c)   whether in respect of any commerce, industry, land or resources foreign ownership or control is excessive;

(d)   the best method of mobilising Australian capital resources and attracting their commitment to national development;

(e)   the best method of reconciling (he inflow of overseas capital for Australian development with the retention of Australian ownership and control.

(f)   the operation of exchange control restrictions which may prevent Australian investors from buying shares in companies registered overseas which have a major beneficial interest in an Australian company;

(g)   the advantages and disadvantages of existing and potential foreign investment, with particular regard to export performance, commercial and industrial initiatives, and introduction of valuable skills and technology;

(h)   whether the purpose for which foreign capital is sought or is made available should be a factor in determining its acceptability;

I think all honourable senators will agree that they are extremely wide terms of reference. The Senate agreed on them after very substantial, consequential and useful debate and has placed the reference in the hands of a Committee of which Senator Withers is Chairman. The Committee is now engaged on that inquiry. The Senate now has before it another proposal which is really in the same area, covering exactly the same field in much more restricted fashion. That motion has been moved by the Australian Democratic Labor Party. It is really the same horse, racing under the same colours, but carrying a slightly different jockey. This time the jockey is Senator Kane. The DLP is asking the Federal Parliament - it is clear after a careful reading of the motion - to do a Bolte, and I do not think that that is what we really want to do.

In the Senate I represent the Treasurer (Mr Snedden). I am therefore obligated to pass to my colleagues in the Senate the response to this urgency motion that the Treasury feels is appropriate to the circumstances. The Treasurer and the Treasury find it difficult to understand why the Democratic Labor Party has brought forward this urgency motion at this time on this particular subject. It is well known to all honourable senators that for some time the Treasury has had in hand an intensive study of the effects of foreign ownership on the Australian economy. This study will treat in detail the measurement of overseas ownership and the statistical information available on it; the relationship of foreign ownership to the balance of payments and through it to the economy; the degree of foreign ownership and control of Australian industries and resources; and the relationship between overseas investment and domestic monetary management.

Only 6 weeks ago the Australian Labor Party moved in another place an urgency motion dealing with the increasing control of Australian industries and resources by foreign companies. The terms of the urgency motion now before the Senate are longer but are very much the same. However, there is a rather major difference which should be referred to specifically. The DLP motion advocates an immediate freeze of all transfer of equity to other than already Australian owned interests. This is an extremely far-reaching proposal, as I atn sure my colleagues will agree. It covers not only all foreign takeovers but also appears to cover every single purchase of every single share by a non-resident or an Australian resident company which is not Austraiian owned.

The Government therefore does not see any wisdom at all in having such a debate in advance of the release of the Treasury's paper on foreign investment, which has been referred to by me in detail. That paper is expected to be tabled in the Parliament before the end of this session.

Senator Kane - We want to close the door before the horse bolts.

Senator COTTON - Yes, we talked about that frozen horse. Surely it would be only sensible to wait for the Treasury paper with detailed statistical information backing it up and its framework for analysis before we attempt to take on board such draconian measures as those proposed by the DLP motion. Having regard to our previous concern in debate, we now all have a picture of how complex is the issue of foreign ownership and control. The terms of reference of the Committee engaged on this inquiry indicate the tremendous depth and width that are called for in the examination. We would regard it at present as being quite foolish to attempt to debate such issues in the framework of the terms of reference set out in the motion.

The proposal is that there should be an immediate freeze through legislative and administrative measures of the transfer of the beneficial ownership of shares of Australian public companies to non- Australian ownership until such time as the report of the Senate Select Committee, to which I have referred, on foreign ownership and control has been presented; or alternatively, until the Government has announced the terms on which and the conditions under which equity in Australian public companies may be acquired by non-Australian interests. The Senate Committee, which has been referred to more than once by me, is an all-party Committee. The implication in the motion is that the Committee will present a report which will contain various recommendations on the matter, recommendations which the Government will accept quickly and on which the Government will act. This may not necessarily be the case. The recommendations may well require further work. They may be able to be acted on quickly; they may take time. It would be a very dangerous procedure for the Government to freeze the transfer of all shares to foreigners until such time as all these events flowing out of the Committee's work and its report were to be available to the Government. At the moment I do not think anybody would want to canvass what particular reference, issue or recommendation the Committee may come up with. We would not want to be anticipating its work. Apparently it will concentrate upon long term effects of foreign investment on the ownership and control of Australian assets. So the Committee's work may not give the full information that is required to enable the Government to act upon its references and recommendations. That is one difficulty.

The motion seems to assume that all foreign acquisition of Australian shares is in some way undesirable. I think all would agree that, on reflection, this is just not so. Any long term across the board disruption to the purchase of shares by overseas interests would result in severe disruption to normal business activities. It would be an intolerable situation if the Government tied its hands and the hands of business in the manner suggested by the motion. Only after the fullest inquiry, debate and research could decisions of such far reaching consequence be taken. The final part of the motion suggested - I think Senator Kane suggested also - that the Government has no existing policy in relation to the purchase of equity in Australian public companies by non-Australian interests. This equally is not so. It has been long standing government policy that the purchase of local equity by foreign interests must normally be financed by an inflow of cash. The financing of new equity or the takeover of existing equity through local borrowing is not permitted. Furthermore, foreign interests wishing to expand their activities in Australia must also abide by the existing borrowing guidelines which limit access of foreign controlled companies to the local capital market. Above all, foreign interests wishing to take over Australian companies must conform to the conditions of the take-over code announced in 1969, which is published and available freely.

No senator on this side of the Senate and no member on this side of the other chamber would deny the importance of overseas capital to Australia and of being able to see what it meant and what its consequences were. This is why the Treasury is up-dating its general policy on the matter. This is why there is a take-over code. This is why it has been adopted in some cases and why, on deflection and after examination, it has not been adopted in other cases. This is why in some cases people wishing to expand in Australia have been asked to bring their money with them, and why in other cases they have been allowed to raise some money on the Australian market. All these things are done carefully and systematically by both the Treasury and the Reserve Bank.

Senator Byrne - That guideline goes only to the source from which the finance comes, not to the quantum of control.

Senator COTTON - I think that the practical effort would be that some regard would be had to this, but no-one here has the time or the necessary experience to sit in the final seat of judgment in the Senate and say that overseas company A can do it and that overseas company B cannot. AH governments and all political systems are bound to have a general line of policy which is carried out by the people who run the Public Service. I think, in fairness, that everyone would regard the Australian Treasury as being a very competent body. It is so regarded by overseas treasuries with whom it deals.

To some extent the motion has set up a straw man. It deals with something that is not required. There are publicly known conditions under which equity in Australian public companies may be acquired by non-Australian interests. The Government recognises fully the concern that is being expressed in various quarters about the apparently increasing proportion of foreign ownership and control in Australia. The Treasury White Paper is expected to analyse this in detail. Some regard could be had, if I had a lot more time on this, to what it really means in the sense of servicing that capital, to what extent the money flows out of Australia and to what extent it remains here as retained investment. Is it getting more expensive to service, in total, the gross national product and trading income? I do not have those figures available, but in a longer debate I would want to develop that point. I remember doing certain work on this matter a few years ago. The evidence was that in the total sense of growth and ability to service not only Australian capital but any overseas borrowings Australia was better off. In effect, we had made more profit out of using other people's money than they had made out of using us.

The new Canadian legislation referred to by Senator Kane deals with the screening of proposed foreign take-overs. I can assure my colleagues that the Government is giving very serious consideration to the Canadian legislation. It is being examined. It has particular regard to the great influence the United States of America has on the Canadian economy. The circumstances are very different and to some extent quite singular, but it is being looked at very critically by the Government with a view to seeing whether anything in it is useful in the review that is taking place. As there are great differences, I refer to them. Only recently Canada introduced new measures to screen take-overs, but the Canadians have been studying this matter intensively for a long while. They did not introduce the measures as the result of an ad hoc urgency debate. So we feel that the motion comes at an inappropriate time. We do not think it serves a useful purpose. In the Treasury Paper to be released shortly, the Government will be examining very closely and will be allowing full public scrutiny, including scrutiny by my colleagues in the Senate, of its policy towards foreign investment in Australia so that anybody who has a view can have a good look at the White Paper. Any contribution that is required to be made can be made. Any difference of view can be taken into account. This will be a careful and deliberative job, not one based upon an off the cuff idea which I do not think is helpful in the present scene.

I suggest that there are certain courses of action to be taken by the Parliament in these circumstances. We should wait for the statement which has been prepared carefully and which is due in a couple of weeks; we should let the Senate continue with the work which it has already charged itself to do, namely, to find out through its Committee under its terms of reference what the situation is; we should allow the Committee to make recommendations, and we should consider those recommendations and act on them. From those remarks I think honourable senators would understand that the Government does not feel that there is any wisdom in the motion. The Government is unable to accept it.

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