The 'Australia in the Asian Century' white paper
(White Paper) released October 28 signals the countrys
intention to develop deeper relationships with Asia. But it
must first clarify its foreign investment policies.
The federal governments White Paper comes
at an especially critical time as Australia repositions itself
after the commodities boom. Last month the central bank said it
expects resource investment to peak in 2013.
The White Paper compiles the governments
goals regarding Asia, and the countrys own future, in one
report. Although Australian businesses have long been active in
Asia, sources hope that the White Paper will influence
political opinion and perhaps lead to a clearer foreign
Mark Thirlwell, director of the Lowy Institute for
International Policys International Economy Program and
the acting director of its G20 Studies Centre, said that in the
immediate term the white paper is unlikely to make any
significant difference to Australias level of economic
engagement in the region. Instead, it is a statement of where
Australia would like to be as well as of currently planned
It includes a lot of goals that arent
particularly new, but are pulled together in one place,
Many of its recommendations, though broadly
supported by Australias business community, require
significant commitment and regulatory change as a first step
towards ensuring Australias ambitious to compete
effectively with Asia by 2025, said Allen & Overy
Australias managing partner Grant Fuzi.
But some experts have criticised the White Paper
for being too vague and ignoring cost. The day after it was
released, the Lowy Institutes International Security
Program director Rory Medcalf wrote an
opinion titled 'Bold on vision, short on funding' in The Australian.
Media hype surrounding the White Paper has made an
impact. Thirlwell noted that its been on the front page
of newspapers which may raise awareness among companies that
havent yet thought along these lines.
Mark Crean, deputy senior partner of Herbert Smith
Freehills, agreed. While bigger businesses have many
relationships, plans or investments either into or from many
Asian countries, he said the paper focuses on creating more
ties with small and medium-sized enterprises.
But larger corporations could also reap benefits.
If the White Paper inspires changes to policies in areas
such as working visas, taxation or regulation it may also
benefit larger businesses, he added.
Australias foreign investment regime has been
criticised in sensitive sectors. But the White Paper may adjust
political opinions by creating a dialogue about the two regions
in the broader Australian community. Crean said, While
business generally understands, it may assist in changing the
way the political world sees Asia.
This year Australia has been involved in several
controversial foreign investment decisions. Chinese technology
Huawei criticised the government after it was blocked from
supplying the National Broadband Network (NBN), claiming
that it was due to political rather than national security
In the especially sensitive agriculture sector,
Archer Daniel Midlands $2.7 billion bid for Australian
Graincorp is encountering political opposition. Other
actions this year include the
implementation of a land register for easily accessible
information about foreign investment in agricultural
There have also been unfortunate debates in
Parliament about keeping firms (or farms) in Australian hands,
and in the current discussion about Graincorp, sections of our
media have lamented that foreign capital sees value but
domestic capital doesnt, Crean stated. This
paper may be helpful in beginning community-level discussions
about foreign capital by not being dangerous.
The government has been juggling local anxiety
about foreign investment and its goal to attract more inbound
interest. Although White Paper does not explicitly include any
new foreign investment policies, it does reiterate a commitment
to make the prevailing investment regime more transparent.
But clarifications are needed. One of the problems
with the investment regime is that its sent mixed
messages rather than clear signals.
The official view, which I believe is
genuinely held, is that we welcome foreign investment,
Thirlwell said. But when one looks at the operation of
the foreign investment regime, some foreign players
particularly those with state-backed investors feel a
discrepancy between the top-level welcome message and the
actual implementation of the policy.
Crean agreed that there has been a particular focus
on state-owned enterprises investing in Australia.
Although our foreign investment principles are supposed
to be predictable and transparent, Australia hasnt always
passed this test, he said. We need to continually
focus on communicating clear principles for what will pass the
board or where issues might arise.
As markets become more competitive,
Australias must evolve. Fuzi stated that all of the White
Papers recommendations, if supported by genuine policy
change, have the potential to increase Australias
attractiveness as a hub for both inbound and outbound
investment. But he also noted that Australia cannot be
complacent because of its proximity to Asia and wealth of
An issue we must not lose sight of is that we
must remain a competitive and legally stable environment to
attract Asian capital, he added. The cost of doing
business in Australia is high, and many of the emerging
economies are also looking at investments in other BRIC
countries or emerging markets - where the costs are
significantly lower. We must remain competitive.
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