What's happening at the
Wednesday 23 Aug 2017 | 10:55 | SYDNEY
Wednesday 23 Aug 2017 | 10:55 | SYDNEY

Five points on foreign investment (part 5)

By

COMMENTS

12 May 2009 17:19

Mark's first point is that Australia is inescapably dependent on foreign investment. His second is that foreign investment from emerging economies will grow. Third, he argues that state-owned entities investing in Australia should be treated differently. And fourth, he says that while reciprocity of investment rights may be a polical necessity, it is not an economic one.

5. Australia’s foreign investment regime is quite capable of dealing with the challenges posed by Chinese investment into the Australian resource sector. There are two opposing views regarding the merits of the existing regime. One sees it as far too restrictive and lacking in transparency, with the result that it unnecessarily discourages a large amount of foreign investment. From the other side come fears that it is ill-suited to deal with the challenges posed by the current wave of Chinese investment into the resource sector. 

In fact, the current regime does a reasonably good job. There is certainly no need to introduce any further restrictions on inflows, since the array of policy tools already available are more than sufficient, and the regime already identifies the crucial point, which is that government-controlled investment deserves special attention. 

And while there is a reasonable case to be made for some further liberalisation – perhaps by multilateralising the terms offered to the US under the Australia-US FTA – and certainly a case for more transparency, fears about  the negative impact of the current regime are probably overdone. They also tend to neglect the political benefit that derives from being able to reassure sceptical voters that foreign investment in Australia is indeed in the national interest.

You may also be interested in...