Huawei’s John Lord pleads 5G case for China telco

The politically sensitive issue over the role of Chinese companies in Australia moves to the National Press Club in Canberra today.

The politically sensitive issue over the role of Chinese companies in Australia moves to the National Press Club in Canberra today, where Huawei’s Australian chairman John Lord will seek to diffuse concern about his company’s role in Australia’s 5G rollout.

The former rear admiral in the Australian Navy will use the speech to make his big pitch to Canberra that Huawei is a privately owned Chinese company with no threat to Australia’s ­national security.

Based in Shenzhen in southern China, Huawei has been in Australia since 2004. It employs more than 700 people here and is already a major supplier of tele­communications equipment in Australia.

While it was excluded from supplying equipment to the National Broadband Network in 2012, it has had a thriving business in the mobile phone market in Australia, with major customers including Optus and Vodafone.

The past few years have seen increasing concern in Canberra about “national security” issues, including the last-minute decision by the federal government to block the sale of Ausgrid to foreign bidders in 2016 and the establishment of a Critical Infrastructure Centre last year to identify critical national infrastructure.

Governments around the world have become increasingly concerned about national security and the need to protect “critical assets” from outside interference, including potential cyber hacking and attacks by criminal networks and spies.

The CIC has identified eight “critical infrastructure sectors” it will be keeping a close eye on, including energy, communications, water, transport, health, food, banking and finance — along with commonwealth government activities.

Huawei is a privately owned Chinese company — not a state-owned Chinese enterprise like Ausgrid bidder State Grid.

But the company has decided to come out publicly with letters to politicians and today’s speech to counter media speculation that it will be excluded from supplying equipment for the superfast 5G network to Telstra’s major ­rivals — Optus, Vodafone and aggressive newcomer TPG — on “national security” grounds.

Lord’s speech comes as the government’s Security of Critical Infrastructure Act comes into force on July 11.

The act gives the government the power to work with the owners of what it deems to be critical infrastructure assets to “conduct risk assessments” on whether there is any potential danger to the assets, including “the power to enforce mitigations if they are not implemented through collaboration”.

In passing the legislation, the government says it “welcomes” foreign involvement in the economy but warns that “foreign involvement increases a malicious actor’s ability to access and control Australia’s critical infrastructure, in a way that can have subtle effects on the continuity of services to citizens, but extreme consequences for other dependant infrastructure or defence assets”.

It is a broad statement that gives the government a wide remit to act as it sees fit, but one that will have many challenges for a country that relies heavily on foreign investment and expertise for its development — and can make life less clear for foreign companies wanting to invest here.

All the major suppliers of 5G infrastructure, for example, are foreign-owned.

To exclude a major supplier like Huawei from 5G would limit the supplier market for the smaller Australian telcos and have long-term cost implications for consumers — further entrenching the power of dominant player Telstra, which has already signed up with Ericsson.

That said, governments are entitled to make decisions on national security grounds at a time when the world is more concerned than ever over the threat of sophisticated cyber hacking by malicious elements.

As Lord will point out today, Huawei already supplies telecommunications equipment to major international companies around the world including Vodafone, Britain’s BT, Canada’s Telus, Spark in New Zealand as well as Italy’s Telefonica and Deutsche Telecom.

Blocking Huawei on “national security” grounds from 5G would only add to the perception in Beijing that Chinese companies are being singled out for special attention by the Australian government.

The government was at pains to argue that its decision to stop Ausgrid being taken over by either State Grid or Hong Kong’s Cheung Kong Infrastructure was not something aimed at companies from China or its special administrative zone in Hong Kong.

The debate over Huawei and 5G comes as the government is also reviewing the latest bid by CKI to expand its Australian footprint — this time in the form of a $13 billion takeover bid for gas pipeline group APA.

The bid will have to pass reviews by both the Foreign Investment Review Board, which is now being assisted in its deliberations by information from the Critical Infrastructure Centre, and the Australian Competition & Consumer Commission.

CKI is a privately owned Hong Kong company founded by entrepreneur Li Ka-shing (who just stepped down from running the company, handing it over to elder son Victor). It has been a model foreign investor, providing much-needed infrastructure expertise and experience in Australia.

Just how the government handles the two cases will be closely watched by foreign investors and will set precedents for foreign investment policy. In doing so, it will have to make it clear that any decisions are based on sound national interest policy and not paranoia or xenophobia.