Parties fighting to keep foreign investment out

FOREIGN  investment policy seriously risks falling victim to the votes battle.

TWO big international issues have emerged during this election campaign.

One, of course, is the wave of asylum-seekers. The other is the perennial "patriotic" concern about foreign investment, and, to a degree, about foreign labour, with the fuss stirred by Labor about 457 visas.

All politicians seem to preface their focus-group-driven anxieties about foreign investment by stressing how important it is to Australia -- presumably, as long as it doesn't happen in their constituencies.

Fortunately, beyond the diplomatic corps in Canberra, our neighbours aren't watching the election too closely. They've got priorities of their own.

If they did decide to take notice, they might wonder where we were heading, what's happened to the regional leadership we once espoused towards freeing up international economic relations.

Our leaders seem increasingly reluctant to invest any political capital in this area at all. That's one reason we've seen only sporadic, modest trade deals landed in recent years.

If we're to make substantial progress with our big trading partners, we must be prepared to explain to our own key interest groups why sections of the economy need to be opened wider to international competition. But this painstaking task is largely being abdicated.

The recent trajectory of the debate is a tad depressing, especially since the golden wave of portfolio investment from Europe and America is receding, and we now need to concentrate on promoting foreign direct investment as a crucial driver of our development.

Two years ago, then treasurer Wayne Swan -- anyone remember him? -- vetoed the $8 billion bid by the Singapore stock exchange for a "merger" that was in reality more of a takeover, of the Australian exchange. There was only low-intensity debate within parliament about it.

Just over a year ago, Tony Abbott visited Beijing, and made a well-crafted, sensible speech about relations with China.

However, inside it, he said: "Chinese investment is complicated by the prevalence of state-owned enterprises. It would rarely be in Australia's national interest to allow a foreign government or its agencies to control an Australian business."

This opened up quite a debate, with then trade minister Craig Emerson attacking Abbott for "taking the journey to China to tell them investment by their state-owned enterprises is unwelcome, creating Chinese perceptions of high sovereign risk in Australia". Swan lambasted Abbott for allowing foreign investment policy to be "taken over by Barnaby Joyce", in the face of "a pipeline of investment coming our way, creating jobs and wealth in Australia".

Soon after that visit, the Coalition published a discussion paper on foreign investment in agricultural land. While "unambiguously" welcoming and supporting foreign investment, this noted "growing community and industry concern that some types of acquisitions may be contrary to the national interest".

Awkwardly, these are exactly the sorts of acquisitions needed to boost our crucial food industry as Australia's most important new growth driver, as the resources sector reaches a plateau, albeit a pleasingly high one.

The paper introduced the Coalition's plan for the lowering of the threshhold that triggers Foreign Investment Review Board scrutiny of investment, from $244 million to $15m, and for a register of foreign agricultural land purchases.

This is intended to placate Joyce, an outspoken Nationals senator who is viewed by liberal Liberals on this important topic as an opponent within. Abbott is thus likely to ensure, if elected, that Joyce -- and possibly the Nats in general -- are kept away from trade or other portfolios that have foreign investment oversight.

Although the Coalition's lowering of the threshhold nevertheless sends a negative signal to our Asian and other economic partners, it probably won't mean much change on the ground, since FIRB very rarely rejects investment bids, even though it does occasionally seek revisions.

The bigger setback comes from the Labor camp, with Kevin Rudd -- who has always been instinctively critical of international markets -- admitting he is "a bit anxious" about an "open-slather" approach to foreign ownership of farming land, and urging "a more cautious approach", with joint ventures favoured over foreign acquisitions.

This is closer to China's own approach. And to Bob Katter's. He has complained that the Prime Minister seems to be reading from his own massively protectionist manifesto.

Treasurer Chris Bowen has written that "promoting foreign investment to promote growth would be a very Labor thing to do".

In the good old Hawke/Keating days, maybe. But not so much today, when the response from Canberra to countries such as South Korea that seek the comfort of international arbitration to resolve investment stalemates in either country, has been to  halt negotiations on trade and investment.

Leaving to one side the asylum-seeker imbroglio, it's in foreign investment policy that we're in danger of really racing to the bottom.