Dick Smith must be delighted: He had barely begun his latest ‘watch those foreigners’ campaign when Opposition Leader Tony Abbott jumped in feet first and blithely warned China the Australian government is going to toughen its inward foreign investment policy.
“It would rarely be in Australia’s interest to allow a foreign government or its agencies to control an Australian business,” Abbott opined with maximum impact during a speech in Beijing this week, leaving swathes of the business community aghast.
If Abbott is under the impression that Dick Smith somehow represents Australian business he is so far off the mark it is alarming.
It’s not that the tenor of the speech was fundamentally undiplomatic or indeed that Abbott has instantly matched Kevin Rudd’s infamous tirade against China, leaving the Australia-China connection marooned by both sides of politics… rather it’s that Abbott and Smith threaten to choke off China’s wider investment in Australia just when China is already looking elsewhere.
This week China has launched its biggest ever foreign takeover bid, but it was not in Australia. Rather, the oil group CNOOC has offered $15 billion — cash — for Canada’s Nexen oil group.
Why did China go for Canadian oil plays instead of our own Woodside or Santos?
Perhaps it’s because the Canadian government — with the stunning exception of BHP Billiton’s bid for Potash Corp — waves through the majority of foreign takeovers, or because Canadian projects are cheaper — the CNOOC bid is on eight times earnings, while Santos trades on 12 times earnings, and Woodside trades on 17 times earnings. Relevant also are dreadful labour costs and and logistics that have, for example, tripled the original budget for CITIC-backed Sino Iron’s first Pilbara project.
Dick Smith had actually got off to a bad start with his latest ‘pro-Australia’ initiative based on protection land ownership. Earlier this month he bought $1 million worth of shares in AACo, the iconic, ASX-listed beef company that owns prime beef pastures across Australia. Smith then toured AACo farms broadcasting his concern over ‘foreigners buying all our good land’.
Smith’s next move was to publicly call on Clive Palmer to match him in support. Palmer may tend to buffoonery, but he is nobody’s fool… China is his client and no way was Palmer going to damage a client relationship. Indeed, Palmer quite rightly has since dodged Smith’s entreaties and branded Abbott’s China comments as “dangerous”.
But Smith — and those who support him — still win because Abbott was ready to ignore the realities of client relationships and the integrated nature of multi-national projects.
‘We don’t support the nationalisation of business by the Australian government, let alone a foreign one,” Abbott declared at one point in Beijing. But virtually all significant China companies acquiring overseas are ultimately state backed and FIRB figures show roughly half of all the deals examined in Australia are from China.
Nobody is saying the relationship with China is ideal: China has protective policies that understandably frustrate all foreign partners. But megaphone diplomacy will get us nowhere.
Be careful what you wish for, Mr Abbott: The realities of Dick Smith’s fortress Australia could be grim.
This article first appeared on Business Spectator.