by admin
March 18th, 2013

Increased Asian — particularly Chinese — investment in Australia has created a quandary for our political leaders as they manage local calls for more protectionism with the need to attract foreign investment. The task becomes more difficult in an election year when both sides of politics shamelessly exploit traditional Australian wariness of the foreigner. That wariness often becomes outright hostility when a foreign investor is perceived to be a foreign government, as China’s State Owned Enterprises (SOEs) are often suspiciously viewed. Even private companies like Huawei can be misperceived as arms of the Chinese government. It is then that the emotional question ‘How much of Australia should we let become Chinese?’ shapes the national foreign investment debate.

While most Chinese investment in Australia has traditionally been in our vast energy and resources sector, there has recently been an increasing interest in Australia’s rich agriculture and livestock sectors. Indeed, statements from Chinese investors that they would rather invest in agriculture than resources because it is the future have provoked anxiety. Even the head of Australia’s defence department, a seasoned diplomat, raised concerns that leading business leaders were minimising national security concerns when they called for a more indulgent approach to China and Chinese investment.

At the same time Australians are progressively more sensitive to the fact that Asian governments are looking to us to meet their food security needs. Just what this will mean in reality has ensured uncertainty amongst local agriculture and livestock industries. This concern spreads through suspicious rural and remote communities with strong emotional links to the agriculture sector, and is articulated at the national level through their elected representatives. The debates in parliament, including individual bills to stop some transactions involving Asian investors, are not well understood outside the national capital and seat of the federal parliament, Canberra. Not surprisingly the noisy, often nationalistic debates are sometimes wrongly perceived by foreign investors to be government sanctioned.

A number of factors combine to ensure the success of community backlash against Asian investment in agriculture and other ventures perceived to have security implications. These include:

— Australians have long mythologised their connection with ‘the land’ and farming and are sensitive to perceptions that this will be fractured through majority foreign ownership.

— Australia’s belief that its clean and green agricultural ventures are at risk of becoming ‘Asia’s food bowl’ thereby threatening locals access to their own produce. This was exemplified recently with shortages of infant formula products available in Australia and New Zealand after Chinese Australians — some motivated by genuine fear, others exploiting concerns over China’s recent food contamination scares — were buying the local product and shipping it back to China for family use or to be sold at inflated prices. Local producers could not meet the increase in demand and the shortages of local product for local babies made headline news around the world

— Political point scoring over foreign investment concerns has prompted Prime Minister Julia Gillard to promise to establish a register of foreign land holdings while Opposition Leader Tony Abbott has said he would consider lowering the threshold at which foreign investments in agriculture become eligible for scrutiny

— Most Chinese investment in Australia is by State-Owned Enterprises, which Australians believe are motivated by Chinese government ambitions rather than commercial imperatives. This belief has thwarted investment in areas as diverse as communications and even mining on national security grounds.

These concerns have been loudly-voiced in the public arena, as well as privately by interested allies such as the US. In some cases Australia has answered the concerns with regulatory intervention that has obstructed or limited the proposed venture. The recent purchase of cotton producer, Cubbie Station (after years in administration) by a consortium of Chinese and Japanese traders and an Australian (‘fifth generation’, no less) wool trader was said to be unnecessarily delayed because of pressure from a “noisy minority”. A National Party bill that went to parliament opposing the sale, confused and concerned the Chinese and Japanese investors, who (wrongly) considered it to have government backing.

Not surprisingly, the Australian Financial Newspaper recently reported that China’s richest man — and agricultural investor  — Zong Qunghou felt he was discriminated against in comparison to US and even Japanese investors.

Last year, the Chinese owned Shenhua Group withdrew its plans to develop mining interests across Australia due to what it said was increasing regulatory scrutiny. It appears to be staying with a project in NSW that has cost about $600 million to develop. Concerns from local farmers about the mine’s presence in a traditional agricultural region were blamed for planning approval delays and what the NSW Minerals Minister boasted were, ”tough new conditions for the renewal of Shenhua Watermark Coal’s exploration licence”.

There is also increasing evidence that a reluctance to be the brunt of negative, nationalistic campaigns, or to attract regulatory and political scrutiny, has resulted in Chinese investors opting to take minor stakes in struggling Australian agricultural concerns, in particular the dairy industry. This may be a mistake as it gives them little say in strategic decisions of the companies they are investing in.

Australia needs Asian investment. Yet it has not reconciled that need with emotional concerns about land ownership, food supply and national security. What this means for Asian investors is an imperative to develop new and innovative ways of meeting and assuaging Australian concerns about their activities. Too often Chinese investors in particular have thought that receiving government approval for their investment proposal is all they need for success. But in a pluralist-democratic society like Australia it is critical to also engage with local politicians, the media, community including indigenous Australians.

Along with attending to Australian regulatory concerns, Chinese investors should look to ensuring the public and community concerns are also addressed. They should ensure strong relationships at local levels that will help buffer electorally sensitive politicians when anti- foreign investment campaigns stir.  Government leaders, state and federal, are reluctant to single-handedly fight off well-orchestrated community criticisms of private projects, including foreign funded project. They are now demanding that developers and investors step up, and present clear community engagement plans when seeking project support and approval. So when a foreign investor is putting its transaction advisory team together, it needs to ensure that group of experts includes good communications and public affairs advisers.

Jacquelynne Willcox, is head of Public Affairs, Australia, at Weber Shandwick

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