Comments on Maaike Okano-Heijmans and Daniel Lanting "Europe finds the China connection", 24/07/2015
This post seems completely European centric. It is quite one sided advocate for the European standards and I am not sure that is either the best way for all European countries to work with China or indeed for a better world.
First, are the European standards the best standards with no room to improve? I think those people who hold that view may be too arrogant and out of touch.
Secondly, if it is to work with China in a collaborative way, why should only the European standards need to be followed and why not also consider a compromise between the European standards and the presumably different Chinese or Asian standards?
Given the quite diverse situations among the European countries, the benefits and otherwise of working with China may be quite different. As a result, the member states of Europe are likely to seek more cooperative solutions as opposed to the authors' advocate of a consolidated approach to hold the European standards.
On China's part, it is likely to invest in countries where maximum benefits for both partners can be expected to achieve.
PS, what a title that is quite different from its content.
Showing posts with label foreign investment. Show all posts
Showing posts with label foreign investment. Show all posts
2015-06-21
Non-discriminatory policy on foreign investment for Australia preferred
Comments on Shiro Armstrong, Sam Reinhardt and Tom Westland "A Swiss-cheese approach to foreign investment isn’t in Australia’s interests", 15/06/2015
Undoubtedly, there are benefits in adopting non-discriminatory foreign investment policies similar to WTO most favoured nation provision. Economists and polling often, however, do not see eye to eye with each other. Pollies often take short term approach based on electoral pressures and will always find and use discrimination approaches to please powerful and vocal sections of the electorate. They probably don’t want to lose their power to do so.
Undoubtedly, there are benefits in adopting non-discriminatory foreign investment policies similar to WTO most favoured nation provision. Economists and polling often, however, do not see eye to eye with each other. Pollies often take short term approach based on electoral pressures and will always find and use discrimination approaches to please powerful and vocal sections of the electorate. They probably don’t want to lose their power to do so.
On the other hand, economists argue for free trade. Yet the reality is there are enormous difficulties to negotiate really free trade agreements.
2012-10-26
Net creditor is not a cause of alarm for lower trade GDP ratio
Comments on Yu Yongding "China’s rebalancing act: between exports and domestic demand", 25/10/2012, http://www.eastasiaforum.org/2012/10/24/chinas-rebalancing-act-between-exports-and-domestic-demand/
I don’t have a problem with a fall, a rise or no change in the ratio of trade to GDP in China. However, I cannot see why it is necessarily that being a large net creditor means being in the worst position in today’s global economy when faced with ‘infinite quantitative easing’.
The question is how to use that credit. It does not necessarily have to be used in holding US government bonds. The US stock market has boomed following the QEs. The US housing market is still low and there are values there. A move from government bonds to equities would not only keep the value of credits, but also increase its value.
And it is not necessary for all those reserves to be held in government hands. Why not transfer some to private holders?
It is not the credits but only the limitations of fixed thinking that is the problem for China.
I don’t have a problem with a fall, a rise or no change in the ratio of trade to GDP in China. However, I cannot see why it is necessarily that being a large net creditor means being in the worst position in today’s global economy when faced with ‘infinite quantitative easing’.
The question is how to use that credit. It does not necessarily have to be used in holding US government bonds. The US stock market has boomed following the QEs. The US housing market is still low and there are values there. A move from government bonds to equities would not only keep the value of credits, but also increase its value.
And it is not necessary for all those reserves to be held in government hands. Why not transfer some to private holders?
It is not the credits but only the limitations of fixed thinking that is the problem for China.
2010-05-21
A framework for managing excessive short term international capital inflows
Comments on Mathew Joseph “Capital controls: The way forward for India”, 21/05/2010, http://www.eastasiaforum.org/2010/05/21/capital-controls-the-way-forward-for-india/
I have not read the IMF report and don't have first hand information. According to what Joseph says, it shows that the IMF is yet again showing its incompetence in terms of managing or advising international economic matters especially on emerging economies.
As to options for macro management of capital inflows, I think it is important to distinguish shorter and longer terms objectives. They have quite different implications.
I believe that a better alternative or option is to levy refundable tax on capital inflows if it becomes necessary. Such a refundable levy works in the following way:
the levy is temporary in nature with a duration for managing capital inflow stability
it is set at an appropriate levy
it will be refunded after a specified period if the capital has always stayed in the country, otherwise it will not be refunded
it should attract a return at or slightly below the government bond rate of the same duration
in this way, so serious long term capital inflow is not unduely punished with little costs, but short term hot money or capital can be prevented or limited through the increased costs
It is better to have an international framework, agreement or principle to govern such regulations or management of international capital flows by individual national governments.
I have not read the IMF report and don't have first hand information. According to what Joseph says, it shows that the IMF is yet again showing its incompetence in terms of managing or advising international economic matters especially on emerging economies.
As to options for macro management of capital inflows, I think it is important to distinguish shorter and longer terms objectives. They have quite different implications.
I believe that a better alternative or option is to levy refundable tax on capital inflows if it becomes necessary. Such a refundable levy works in the following way:
the levy is temporary in nature with a duration for managing capital inflow stability
it is set at an appropriate levy
it will be refunded after a specified period if the capital has always stayed in the country, otherwise it will not be refunded
it should attract a return at or slightly below the government bond rate of the same duration
in this way, so serious long term capital inflow is not unduely punished with little costs, but short term hot money or capital can be prevented or limited through the increased costs
It is better to have an international framework, agreement or principle to govern such regulations or management of international capital flows by individual national governments.
2010-03-19
A Rhodes Scholar but not a worldly scholar
Comments on Jonathan Bonnitcha “The real costs and benefits of investment treaties”, 16/03/2010, http://www.eastasiaforum.org/2010/03/16/the-real-costs-and-benefits-of-investment-treaties/comment-page-1/#comment-104303
I noticed Jonathan Bonnitcha's main conclusion and some of its implicit implications, although not entirely by any means.
I also noticed the qualifications, or the likes of seems likely or unlikely he used in deriving his conclusion.
Having considered the qualifications and conclusion, I am left very much bewildered to say the least: what can the readers get out of Jonathan Bonnitcha's article?
More specifically, does his conclusion seem likely, if I can borrow his tactics but not trying to be too slippery myself, to be sufficiently reliable?
This is by no means to be disrespect to a Rhodes Scholar such as Jonathan Bonnitcha. However, I do feel that the use of the tactics “on the one hand, …, on the other hand, …..”, as what some people mock the economic profession, is not necessarily cutting through with the worldly readers.
I noticed Jonathan Bonnitcha's main conclusion and some of its implicit implications, although not entirely by any means.
I also noticed the qualifications, or the likes of seems likely or unlikely he used in deriving his conclusion.
Having considered the qualifications and conclusion, I am left very much bewildered to say the least: what can the readers get out of Jonathan Bonnitcha's article?
More specifically, does his conclusion seem likely, if I can borrow his tactics but not trying to be too slippery myself, to be sufficiently reliable?
This is by no means to be disrespect to a Rhodes Scholar such as Jonathan Bonnitcha. However, I do feel that the use of the tactics “on the one hand, …, on the other hand, …..”, as what some people mock the economic profession, is not necessarily cutting through with the worldly readers.
2009-09-25
Overhaul the policy of foreign investment
Comments on David Llewellyn-Smith “THE DISTILLERY: China silence”, 25/09/2009, http://www.businessspectator.com.au//bs.nsf/Article/THE-DISTILLERY-Wheres-China-pd20090925-W7VG4?OpenDocument
I agree with the second paragraph completely.
The federal government needs to have a strategic review of its policy on foreign investments in general and its approach to Chinese investments in particular.
There needs to be transparency in this area to contribute to national interest.
The obscure ways and approach by the foreign investment review board is incomprehensive and incomprehensible. And there is a legitimate question on its competency to do a proper job.
There should be an urgent overhaul of the nation’s foreign investment policy that dated back to the cold war era.
I agree with the second paragraph completely.
The federal government needs to have a strategic review of its policy on foreign investments in general and its approach to Chinese investments in particular.
There needs to be transparency in this area to contribute to national interest.
The obscure ways and approach by the foreign investment review board is incomprehensive and incomprehensible. And there is a legitimate question on its competency to do a proper job.
There should be an urgent overhaul of the nation’s foreign investment policy that dated back to the cold war era.
2009-08-31
Professor Dyfey's comment appreciated
This is a remark following the comments of Proffesors Dufey and Anderson on my earlier comment on and a question to G.E. Anderson "How do Australia’s foreign investment rules apply to China?" 21/08/2009.
Comments of both Profesors Dufey and Anderson are very much appreciated. Also thank Prof Anderson for the reference provided.
Professor Dufey's comment is very helpful to understanding the issue. Firms are regulated by the host country, irrespective its ownship structure and sources.
Comments of both Profesors Dufey and Anderson are very much appreciated. Also thank Prof Anderson for the reference provided.
Professor Dufey's comment is very helpful to understanding the issue. Firms are regulated by the host country, irrespective its ownship structure and sources.
2009-08-21
Why and how different ownership matters in foreign investment?
Comments on G.E. Anderson “How do Australia’s foreign investment rules apply to China?” 18/08/2009, http://www.eastasiaforum.org/2009/08/18/how-do-australias-foreign-investment-rules-apply-to-china/
What does the ownership in terms of public versus private make to owning some shares of a firm in another country? All firms in a country are subject to the regulations of that country, whether they are owned domestically or by foreign investors. A country can always regulate the behaviour of the firms operate in its land. So what are the concerns or fears of a firm is owned by a public firm of another country? It defies logic to understand the reasons behind.
In many countries, foreign investment is subject to government review and approve. In Australia, there is a Foreign Investment Review Board (FIRB) that does reviews and advises the Australian Treasurer on foreign investment matters. Reuters reports that the FIRB is described by critics as secretive and sometimes unpredictable. It says the following:
“Australia approves about 99 percent of large foreign investments, the vast majority being routine property purchases, but it does occasionally reject contentious deals that it deems to be against the national interest. It rarely, if ever, gives a detailed public reasoning for such decisions.”
This seems to suggest that there is not much transparency in government decisions to block foreign investments. As a result, it may be used as an unfair protection or discrimination against foreign investments.
Also, there are few internationally agreed rules governing international investments. This is an area that has huge potential to impede international capital flows, because a review of foreign investments can not only slow the process and create inefficiency, but also create difficulties for large investments.
There is an urgent need for transparency in government regulations of foreign investments and a need for an international agreement on international capital flows to remove discrimination and barriers to foreign investments.
What does the ownership in terms of public versus private make to owning some shares of a firm in another country? All firms in a country are subject to the regulations of that country, whether they are owned domestically or by foreign investors. A country can always regulate the behaviour of the firms operate in its land. So what are the concerns or fears of a firm is owned by a public firm of another country? It defies logic to understand the reasons behind.
In many countries, foreign investment is subject to government review and approve. In Australia, there is a Foreign Investment Review Board (FIRB) that does reviews and advises the Australian Treasurer on foreign investment matters. Reuters reports that the FIRB is described by critics as secretive and sometimes unpredictable. It says the following:
“Australia approves about 99 percent of large foreign investments, the vast majority being routine property purchases, but it does occasionally reject contentious deals that it deems to be against the national interest. It rarely, if ever, gives a detailed public reasoning for such decisions.”
This seems to suggest that there is not much transparency in government decisions to block foreign investments. As a result, it may be used as an unfair protection or discrimination against foreign investments.
Also, there are few internationally agreed rules governing international investments. This is an area that has huge potential to impede international capital flows, because a review of foreign investments can not only slow the process and create inefficiency, but also create difficulties for large investments.
There is an urgent need for transparency in government regulations of foreign investments and a need for an international agreement on international capital flows to remove discrimination and barriers to foreign investments.
2009-08-19
A need for a world investment organisation
Comments on Maaike Okano-Heijmans and Frans-Paul van der Putten “Europe needs to screen Chinese investment”, 18 /08/2009, http://www.eastasiaforum.org/2009/08/18/europe-needs-to-screen-chinese-investment/
It seems there is a fairly urgent need to have an international or world organisation to facilitate and oversee international capital flows or cross-border or foreign investment, given the magnitude and importance of capital movement internationally at present and into the future, and the likely increasing disputes or impediment or protections that affect the efficient allocation of global financial and physical capital resources.
There should be a set of agreed principles that govern international capital flows. The principles should be non-discriminatory in nature. National security may be a legitimate reason for some government intervention, but the rules governing it needs to be spelt out clearly and that should not be used as an excuse for discrimination at will by governments or politicians either economically, politically or racially.
There should be an international agreement on international investment and capital flows. One additional advantage of having an international overseeing organisation is to minimise the potential damages done by big speculative players in the international capital market.
Should different ownership be treated differently, given that all firms are under the regulation of a sovereign country? But it is an interesting and legitimate question and needs to be addressed openly and fairly.
One option for such an international organisation is to broaden the responsibility of and empower the WTO, so it would also serve as a forum for nations to settle disputes in international capital flows. Another option is to restructure the IMF and give it a new mandate on overseeing international capital flows.
It seems there is a fairly urgent need to have an international or world organisation to facilitate and oversee international capital flows or cross-border or foreign investment, given the magnitude and importance of capital movement internationally at present and into the future, and the likely increasing disputes or impediment or protections that affect the efficient allocation of global financial and physical capital resources.
There should be a set of agreed principles that govern international capital flows. The principles should be non-discriminatory in nature. National security may be a legitimate reason for some government intervention, but the rules governing it needs to be spelt out clearly and that should not be used as an excuse for discrimination at will by governments or politicians either economically, politically or racially.
There should be an international agreement on international investment and capital flows. One additional advantage of having an international overseeing organisation is to minimise the potential damages done by big speculative players in the international capital market.
Should different ownership be treated differently, given that all firms are under the regulation of a sovereign country? But it is an interesting and legitimate question and needs to be addressed openly and fairly.
One option for such an international organisation is to broaden the responsibility of and empower the WTO, so it would also serve as a forum for nations to settle disputes in international capital flows. Another option is to restructure the IMF and give it a new mandate on overseeing international capital flows.
2009-07-30
Luke Nottage's reply appreciated
Reply to Luke Nottage’s reply to my comments on his article “China, national security, and investment treaties”, 24/07/2009, http://www.eastasiaforum.org/2009/07/24/china-national-security-and-investment-treaties/comment-page-1/
Thanks, Luke.
What I thought was there had been missing links in the whole drama of that detention. Each side has been left with speculations, misinformation and misunderstanding.
Another point was that it was highly likely that Stern Hu was caught in Chinese wider measures to clean up its internal management issues and in that process Stern Hu was a party to some of those issues.
There is more to be hoping for a better Chinese legal system we'd like to, and for the Chinese people too. It is them to bear that legal system much more than we Australians. The Stern Hu case, while being taken so seriously in Australia and with a lot of publicity, it is highly likely to a drop in the ocean in China as there are many more, much more serious cases that may be unfair from our point of view, or even may also be unfair within that complex and sometimes not clear legal system.
Your colleague's argument is impractical even to raise at a bilateral discussion. Even it could be done, probably there are always ways to bypass it, I am afraid.
Thanks, Luke.
What I thought was there had been missing links in the whole drama of that detention. Each side has been left with speculations, misinformation and misunderstanding.
Another point was that it was highly likely that Stern Hu was caught in Chinese wider measures to clean up its internal management issues and in that process Stern Hu was a party to some of those issues.
There is more to be hoping for a better Chinese legal system we'd like to, and for the Chinese people too. It is them to bear that legal system much more than we Australians. The Stern Hu case, while being taken so seriously in Australia and with a lot of publicity, it is highly likely to a drop in the ocean in China as there are many more, much more serious cases that may be unfair from our point of view, or even may also be unfair within that complex and sometimes not clear legal system.
Your colleague's argument is impractical even to raise at a bilateral discussion. Even it could be done, probably there are always ways to bypass it, I am afraid.
2009-07-13
The case against Mr Hu and Australia China relations
Comments on Glenn Milne “Case calls for Kevin Rudd to ring his China plate”, 13/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25769691-33435,00.html
It appears that Rudd is dealing with a complex China. It may also be the case that China has been dealing with a complex Rudd.
The Australian white paper of defence implicitly sets China as a threat and the excuse for increasing military spending substantially, in the context of a potentially waning US. Irrespective the assumptions are correct or not, that certainly did not send a signal that Rudd and Beijing are close and special friends.
Then there was the Australian government a series shows in the context of a number of Chinese proposals of investments in Australia. New measures regarding foreign investments were introduced immediately after some Chinese investment proposals. Special and strict conditions which are possibly unacceptable to many foreign investors were imposed to approved Chinese investments in Australia. Then there were delays in completing the government’s review of the Chinalco proposed investment in Rio, that could be construed as a tactic to give Rio more time to ride out the share market turbulence and change the relative attractiveness of the Chinalco proposal. In the end, the Chinalco Rio deal failed not by shareholders vote but by the Rio board’ rejection, after months saying that the Chinalco proposal was the best for Rio.
One would wonder what role the Australian government under Rudd played in all those issues regarding Chinese investments in Australia. The Chinese may not be as stupid as we Australians think they are. Also, if the Australian government and big firms can play games with the Chinese, the Chinese may also be able to play some games back. Which side will have the upper hands is dependent on one’s interpretation. It seems the Chinese may have a different interpretation from the Rudd government and Rio.
Now there are reports that the case in which Mr Hu was caught has been approved by Chinese President Hu Jintao. The case now becomes Mr Hu versus President Hu. This, and the timing of the case, whether it was coincidental or deliberate, raise a number of questions for Australia China relations, not just now but long into the future.
It appears that Rudd is dealing with a complex China. It may also be the case that China has been dealing with a complex Rudd.
The Australian white paper of defence implicitly sets China as a threat and the excuse for increasing military spending substantially, in the context of a potentially waning US. Irrespective the assumptions are correct or not, that certainly did not send a signal that Rudd and Beijing are close and special friends.
Then there was the Australian government a series shows in the context of a number of Chinese proposals of investments in Australia. New measures regarding foreign investments were introduced immediately after some Chinese investment proposals. Special and strict conditions which are possibly unacceptable to many foreign investors were imposed to approved Chinese investments in Australia. Then there were delays in completing the government’s review of the Chinalco proposed investment in Rio, that could be construed as a tactic to give Rio more time to ride out the share market turbulence and change the relative attractiveness of the Chinalco proposal. In the end, the Chinalco Rio deal failed not by shareholders vote but by the Rio board’ rejection, after months saying that the Chinalco proposal was the best for Rio.
One would wonder what role the Australian government under Rudd played in all those issues regarding Chinese investments in Australia. The Chinese may not be as stupid as we Australians think they are. Also, if the Australian government and big firms can play games with the Chinese, the Chinese may also be able to play some games back. Which side will have the upper hands is dependent on one’s interpretation. It seems the Chinese may have a different interpretation from the Rudd government and Rio.
Now there are reports that the case in which Mr Hu was caught has been approved by Chinese President Hu Jintao. The case now becomes Mr Hu versus President Hu. This, and the timing of the case, whether it was coincidental or deliberate, raise a number of questions for Australia China relations, not just now but long into the future.
President Hu and Mr Hu of Rio
Comments on AAP news report “Hu Jintao reportedly endorsed Rio probe; inquiry was not 'revenge' for Chinalco”, 13/07/2009, http://www.businessspectator.com.au/bs.nsf/Article/Chinas-president-endorsed-Rio-probe-TVRVU?OpenDocument
This revelation should be conciliation to Rudd in terms of special relationship with China for two reasons. First, it started before the collapse of the failed Chinalco Rio deal. Second, it was proved by China’s top leader, highlighting the seriousness of the issue that China regarded, especially the matter involves a foreign company executive and an Australian citizen, presumably. The Chinese would have considered the potential ramifications of the issue.
It, however, may still have some subtle messages that China may want to send to Australia. Although the timing may appear largely to be a matter of the natural investigation process and coincidental to other possibly related issues, one would have to wonder the fact that it broke out shortly after the normal deadline of the end of June for the negotiation of the iron ore contract price.
Clearly, the centre of the matter involves a person from Rio. Rio has broken the deal with Chinalco, and that is a fact. Rio is the leader in negotiation of the iron ore price.
The Australian government brought a raft of measure into foreign investment rules immediately following some Chinese proposals of investment in Australia and in the process of reviewing Chinese proposed investments in Australia. It also imposed certain strict conditions on some Chinese investments it proved. It delayed the reviewing process that could be construed as a tactic that contributed to the failure of the Chinalco deal. In addition to the commercial matter, there has been the issue of Australian’s white paper on defence that at least implies China would be a threat to the region and Australia. Therefore, is China sure whether Australia is a friend or enemy?
Whether China is sending some signals or not, probably only Rio and the Australian government would know. All of us can only speculate.
This revelation should be conciliation to Rudd in terms of special relationship with China for two reasons. First, it started before the collapse of the failed Chinalco Rio deal. Second, it was proved by China’s top leader, highlighting the seriousness of the issue that China regarded, especially the matter involves a foreign company executive and an Australian citizen, presumably. The Chinese would have considered the potential ramifications of the issue.
It, however, may still have some subtle messages that China may want to send to Australia. Although the timing may appear largely to be a matter of the natural investigation process and coincidental to other possibly related issues, one would have to wonder the fact that it broke out shortly after the normal deadline of the end of June for the negotiation of the iron ore contract price.
Clearly, the centre of the matter involves a person from Rio. Rio has broken the deal with Chinalco, and that is a fact. Rio is the leader in negotiation of the iron ore price.
The Australian government brought a raft of measure into foreign investment rules immediately following some Chinese proposals of investment in Australia and in the process of reviewing Chinese proposed investments in Australia. It also imposed certain strict conditions on some Chinese investments it proved. It delayed the reviewing process that could be construed as a tactic that contributed to the failure of the Chinalco deal. In addition to the commercial matter, there has been the issue of Australian’s white paper on defence that at least implies China would be a threat to the region and Australia. Therefore, is China sure whether Australia is a friend or enemy?
Whether China is sending some signals or not, probably only Rio and the Australian government would know. All of us can only speculate.
2009-06-12
A lesson from the failed Chinalco Rio deal
Comments on Peter Yuan Cai “Chinese media’s response to the Rio-Chinalco deal”, 12/06/2009, http://www.eastasiaforum.org/2009/06/12/all-quiet-on-the-eastern-front/
While I have been critical to the Australian government's handling the matters regarding to Chinese investments and some commentators and politicians fanning ignorance and hostility towards such investments, I came to realise that the Chinalco - Rio deal was probably made a bit too complex to look attractive to more people.
Some Australian commentators say it was too complex, including more than 600 pages documents and involving complex transactions. In hindsight, maybe a less complex deal would have been much better.
Starting with complexity and failure was not good for confidence building on both sides. Maybe that is a lesson for all involved. Of course, how to manage issues involving the politics and public relations in Australia by Chinese investors remains as important as ever, if not more so.
It is also important investment that Chinese investors need to make. Investing wisely and having good returns to such investment will benefit both sides. It is in both sides' interest to foster such investment.
While I have been critical to the Australian government's handling the matters regarding to Chinese investments and some commentators and politicians fanning ignorance and hostility towards such investments, I came to realise that the Chinalco - Rio deal was probably made a bit too complex to look attractive to more people.
Some Australian commentators say it was too complex, including more than 600 pages documents and involving complex transactions. In hindsight, maybe a less complex deal would have been much better.
Starting with complexity and failure was not good for confidence building on both sides. Maybe that is a lesson for all involved. Of course, how to manage issues involving the politics and public relations in Australia by Chinese investors remains as important as ever, if not more so.
It is also important investment that Chinese investors need to make. Investing wisely and having good returns to such investment will benefit both sides. It is in both sides' interest to foster such investment.
2009-06-10
Same colleagues with quite different approaches to OZ minerals
Comments on Stephen Bartholomeusz “Money or the box for OZ Minerals?” 10/06/2009, http://www.businessspectator.com.au/bs.nsf/Article/OZs-search-for-value-pd20090610-SV5QV?OpenDocument&src=sph
Bartholomeusz's article is more objective and much sensible than that of Gottliebsen's.
There are uncertainties associated with the latest offers. Also, why could those offers have been made earlier? Are there some tricky nasties in those offers? What is the probability or likelihood of failure of the last minute proposal? Those are the issues the board has to work out or make a judgement. You can't just refuse the Minmetals offer without calculating the risk weighted value of the other offer.
Gottliebsen has been acting hysterically with high emotion and no rationality and common sense. Gottliebsen needs to be a fair dinkum and should not be acting as an irresponsible outsider to tell either the board or the shareholders what they should do.
Bartholomeusz's article is more objective and much sensible than that of Gottliebsen's.
There are uncertainties associated with the latest offers. Also, why could those offers have been made earlier? Are there some tricky nasties in those offers? What is the probability or likelihood of failure of the last minute proposal? Those are the issues the board has to work out or make a judgement. You can't just refuse the Minmetals offer without calculating the risk weighted value of the other offer.
Gottliebsen has been acting hysterically with high emotion and no rationality and common sense. Gottliebsen needs to be a fair dinkum and should not be acting as an irresponsible outsider to tell either the board or the shareholders what they should do.
Rio board and shareholders and the failed deal with Chinalco
Comments on Ross Daniel’s comments on “Australia needs to get its act together on China, and fast”, 9/06/2009, http://www.eastasiaforum.org/2009/06/07/australia-needs-to-get-its-act-together-on-china-and-fast/
I have some sympathy to Ross Daniel's point, although I don't think the deal was uncommercial even when it was first promulgated and the Rio board then acted against the shareholders' interest. Although the value of a company is hard to measure because ever changing environment and internal situations, one could get a clue from its share prices. At the time the deal was conceived, what was the total market capitalisation of Rio and what value was the deal value Rio at? I did not calculate that but that should be an easy matter to do. I suspect that that deal valued Rio much higher than the market capitalisation.
One got to remember is the fact that Rio was having very high debt to equity ratio and the market situation during late last year and early this year was so dangerous that some companies were fighting for their own survival. The deal and the Rio board had to take that into account. Yes, it turned out that the world banking and finance crisis almost subsided now, but back then, the whole system was in danger of collapse and many companies, especially those with high debt would have gone under if the banking crisis was not averted by the unprecedented and concerted efforts by the governments of major large countries/economies.
Individual shareholders may or may not have got the whole and true picture as the board in most of time, unless the board is acting strangely but that is relatively rare. On the other hand, shareholders have every right to be concerned and often get emotional.
Even now it is unclear whether the deal with BHP will bring benefit to Rio or not, given that many major countries are voicing their concerns about the monopolistic nature of the deal. They may devise some scheme to counter any savings and pricing monopoly behaviour that would potentially benefit Rio. Don’t worry about WTO rule, if there are many countries that think it is unfair, they will act and design new rules. The matter of fact is that WTO rules are made by its member countries. They can make them and they can change them.
I have some sympathy to Ross Daniel's point, although I don't think the deal was uncommercial even when it was first promulgated and the Rio board then acted against the shareholders' interest. Although the value of a company is hard to measure because ever changing environment and internal situations, one could get a clue from its share prices. At the time the deal was conceived, what was the total market capitalisation of Rio and what value was the deal value Rio at? I did not calculate that but that should be an easy matter to do. I suspect that that deal valued Rio much higher than the market capitalisation.
One got to remember is the fact that Rio was having very high debt to equity ratio and the market situation during late last year and early this year was so dangerous that some companies were fighting for their own survival. The deal and the Rio board had to take that into account. Yes, it turned out that the world banking and finance crisis almost subsided now, but back then, the whole system was in danger of collapse and many companies, especially those with high debt would have gone under if the banking crisis was not averted by the unprecedented and concerted efforts by the governments of major large countries/economies.
Individual shareholders may or may not have got the whole and true picture as the board in most of time, unless the board is acting strangely but that is relatively rare. On the other hand, shareholders have every right to be concerned and often get emotional.
Even now it is unclear whether the deal with BHP will bring benefit to Rio or not, given that many major countries are voicing their concerns about the monopolistic nature of the deal. They may devise some scheme to counter any savings and pricing monopoly behaviour that would potentially benefit Rio. Don’t worry about WTO rule, if there are many countries that think it is unfair, they will act and design new rules. The matter of fact is that WTO rules are made by its member countries. They can make them and they can change them.
2009-06-08
Basic logic versus clearly defined national interest
Comments on comments by hc on Peter Drysdale’s “Australia needs to get its act together on China, and fast", 7/06/2009, http://www.eastasiaforum.org/2009/06/07/australia-needs-to-get-its-act-together-on-china-and-fast/
It is not clear to me that your point that this outcome was not politics but basic economics, in conjunction with your other statements. Those statements include: the Rudd Government on this occasion seems to have moved behind the scenes to limit the deal; that deal would have been advantageous to Rio but disastrous for Australia; Rio could have extracted more from Chinalco than BHP.
What your statements mean that the Rudd government played a role in deal the death blow to the Chinalco - Rio deal, against Rio's own interest. If that is not politics but economics, what is politics but not economics? Your arguments seem to defy basic logic, even though they started with a suggestion that Peter Drysdale's analysis seems miss some basic things. I am really puzzled by your construction of an interesting logic.
Very few objective minded people will disagree with you on the point that Australia's foreign investment policy is to safeguard its national interest. But the real questions are: how you define national interest? how you make sure it is non-discriminatory; how transparent your review processes are? whether your review has been used as a political issue rather than done by clearly define national interest criteria?
You say we should make it clear that we won’t allow major Australian resource suppliers to be owned by major consumers of these resources. What is your definition of ownership? None at all, 10%, 15%, 20%, 49% as the QANTAS case, 50% or more, or what? Is it good enough just say no foreign country ownership if there are also customers from that country? Please be more specific and clearer, because that is important and often missed, as in your case.
Further, how do you distinguish an investor from a customer country that is independent of those customers from that country from other investors from non-customer countries? Should they be treated differently or in the same way? Is Telstra the same as or different from Optus in Australia, the same country?
It is not clear to me that your point that this outcome was not politics but basic economics, in conjunction with your other statements. Those statements include: the Rudd Government on this occasion seems to have moved behind the scenes to limit the deal; that deal would have been advantageous to Rio but disastrous for Australia; Rio could have extracted more from Chinalco than BHP.
What your statements mean that the Rudd government played a role in deal the death blow to the Chinalco - Rio deal, against Rio's own interest. If that is not politics but economics, what is politics but not economics? Your arguments seem to defy basic logic, even though they started with a suggestion that Peter Drysdale's analysis seems miss some basic things. I am really puzzled by your construction of an interesting logic.
Very few objective minded people will disagree with you on the point that Australia's foreign investment policy is to safeguard its national interest. But the real questions are: how you define national interest? how you make sure it is non-discriminatory; how transparent your review processes are? whether your review has been used as a political issue rather than done by clearly define national interest criteria?
You say we should make it clear that we won’t allow major Australian resource suppliers to be owned by major consumers of these resources. What is your definition of ownership? None at all, 10%, 15%, 20%, 49% as the QANTAS case, 50% or more, or what? Is it good enough just say no foreign country ownership if there are also customers from that country? Please be more specific and clearer, because that is important and often missed, as in your case.
Further, how do you distinguish an investor from a customer country that is independent of those customers from that country from other investors from non-customer countries? Should they be treated differently or in the same way? Is Telstra the same as or different from Optus in Australia, the same country?
2009-05-27
Stone's attack on the Rio deal is very much Nationals' and outdated
Comments on news “Curbs on Chinalco worthless, says John Stone” by reporter Jennifer Hewett of the Australian, 27/05/2009, http://en.wikipedia.org/wiki/John_Stone_(Australian_politician.
Mr Stone is still very much in the Nationals shoes now.
The Australian reported that Mr John Stone had condemned the proposed Rio Tinto-Chinalco deal as against the national interest, warning that any government conditions imposed on the giant Chinese company would prove "utterly worthless".
It is reported that Mr Stone’s attack on the proposed deal undermines the claim that it is possible to protect the Australian national interest through the traditional sort of concessions aimed at maintaining Australian control. The Australian said that he was one of the most powerful Treasury Secretaries of recent decades, and his vehement criticism would add to the political pressure on the Rudd Government over the issue.
Is that the true? Let’s have a look at Mr Stone’ background to put his attacks in the appropriate context. I searched the web and found the following information from Wikipedia (http://en.wikipedia.org/wiki/John_Stone_(Australian_politician:
John Owen Stone (born 31 January 1929) is a former Australian politician. He served as Secretary to the Treasury between 1979 and 1984,[1] and as a Senator for Queensland representing the National Party in the Senate from 1987 to 1990.
After gaining First Class Honours in Mathematical Physics for his Bachelor of Science degree and representing Western Australia (under 21) at hockey, Stone was selected as the Rhodes Scholar from Western Australia for 1951.
At Oxford he was awarded First Class Honours in Politics, Philosophy and Economics (PPE) and won the James Webb Medley Prize for Economics before joining the Treasury in 1954.
Stone rose within the Public Service to become Secretary to the Treasury under Prime Minister Malcolm Fraser. He penned a severe critique of Fraser's economic policies which was used against the Liberal party once the Australian Labor Party won the 1983 federal election. Stone resigned from the Treasury in 1984, after the election of the Hawke-Keating government, some of whose economic policies he supported.
Following the release of the Coalition's One Australia immigration policy in 1988, John Stone, as Shadow Finance Minister said:
"Asian immigration has to be slowed. It's no use dancing around the bushes" [2]
Despite his economic rationalist views, he initially opposed floating the currency and introducing a consumption tax; indeed he has repeatedly criticised the GST (and Treasurer Peter Costello) in print.
An informal advisor to Joh Bjelke-Petersen, Stone was elected to the Senate from Queensland as a member of the National Party at the 1987 election, and resigned in 1990 to unsuccessfully contested the House of Representatives seat of Fairfax, his place being taken by Bill O'Chee.[3]
Since retiring from the Senate, Stone has been a critic of multiculturalism and a supporter of the Samuel Griffith Society, which he helped found. He formerly had a column, on economics and politics, in The Australian Financial Review. Most recently, Stone has been critical of the Howard Government for its efforts at eroding the power of the states within the Australian federal system, regarding this as a departure from long-standing Liberal/National coalition "states' rights" ideology.
In its March 2008 issue, Quadrant Magazine published an article in which Stone argued that John Howard had been Australia's greatest Prime Minister.[4]
There is no doubt that Mr Stone was a distinguished Australian and was strong in economic policies as his two-decade long services in the Australian Treasury, including as the head of that department for a number of years, indicated. His voices should carry considerable weight in Australia. As an amateur economist, I respect his opinions on economic policies.
Does that mean his attack on the proposed Rio Tinto-Chinalco deal is correct? I have thought about it for a while and came to a negative conclusion. The following shows why.
Although Mr Stone served as the Secretary of Treasury, that experience had predated his role as a National Party Senator, for Queensland from 1987 to 1990. His economic views have much been influenced by his experience as a National Party Senator. This can be seen from his view about immigration, his opposition to floating the currency and the introduction of the GST, as well as a critic of multiculturalism in Australia.
Most economists agree that the floating of the Australian dollar was one of Hawke-Keating Labour government’s main structural reforms that, in conjunction with other reforms like reducing trade barriers and the introduction of enterprise bargaining, improved Australia’s productivity and brought enormous benefit to the nation’s wellbeing. Equally, the introduction of the GST enabled the abolition of a number of inefficient State taxes and the reduction of personal taxes and hence enhanced economic efficiency and productivity in Australia. Majority Australians now have now realised and enjoyed the benefits of those reforms.
What Mr Stone did to those important reforms at those times? He opposed them. Was he correct? No, he was wrong and has been proven wrong on all those occasions. Were his economic views proven correct? No they were not, they have been proven wrong. I am puzzled by the fact that a former Treasury Secretary could have had those incorrect economic views, but I am content that his views have reflected his experience of a National Senator in the 1980s when it might have been fashionable to have those protectionist views politically, particularly from the National point of view.
What about multiculturalism in Australia? Again, main stream Australians would disagree with Mr Stone on his critical views of multiculturalism. On this there is no need for me to say anything more at all. Everyone but Mr Stone, and possibly Pauline Hanson, understands that point. But all Australians understand what Pauline Hanson has been standing for - one white Australian nation! That idea has been burried by main stream Australians many many years ago.
From all these I can’t help form the view that Mr Stone, though well respected during the time as the head of the Treasury Department, has changed and now has had a very narrow, old fashioned, closed and nationalistic view of the economy and society. That view is very much outdated and does not sit well at all with main stream economics of free trade and investment, economic integration and globalisation.
He appears to have forgotten the benefit to Australia and Australians of our trade with Asia and the role of investment made by and capital inflow from Japan and other countries in or to Australia to complement the insufficient savings we Australians have compared to Australia’s investment needs. That is not strange since new memories can take the place of old ones.
After this research and analysis, I don’t feel that, as the Australian reporter claimed, Mr Stone's attack on the proposed Rio deal will undermine the fact that it is possible to protect the Australian national interest through the traditional sort of concessions aimed at maintaining Australian control as Swan did on other deals recently.
His views regarding the floating of $A, the GST and multiculturalism in the past, were completely ignored and thrown to the dust bin by both sides of Australia’s main political parties. I will be surprised at all that his opposition to the proposed deal will now have little weight either, even though Mr Barnaby Joyce a current National Senator from Queensland has been very vocal in opposing the deal too.
Does Mr Stone’s claim that “The resource assets under Rio's control are so potentially enormous the company has barely scratched the surface," hold any water? The answer is no. Mr Stone seems to suggest that he is much better than the market in determining the value of a company.
If he is to use that in his personal investment, good luck to him, but very few investors do not agree with him at the moment. He is dreaming gold beneath Rio’s mines! Yes, there is some in some mines, but for that investors don’t know any less than him, I would assume.
So, based on these facts, I could not disagree with Mr Stone more on his view of the proposed Rio deal! In fact, I wouldn’t risk in listening to his view regarding investment at all. I might have done that when he was the head of Treasury, but not when he had become a Nationals Senator. And definitely not now!
Mr Stone is still very much in the Nationals shoes now.
The Australian reported that Mr John Stone had condemned the proposed Rio Tinto-Chinalco deal as against the national interest, warning that any government conditions imposed on the giant Chinese company would prove "utterly worthless".
It is reported that Mr Stone’s attack on the proposed deal undermines the claim that it is possible to protect the Australian national interest through the traditional sort of concessions aimed at maintaining Australian control. The Australian said that he was one of the most powerful Treasury Secretaries of recent decades, and his vehement criticism would add to the political pressure on the Rudd Government over the issue.
Is that the true? Let’s have a look at Mr Stone’ background to put his attacks in the appropriate context. I searched the web and found the following information from Wikipedia (http://en.wikipedia.org/wiki/John_Stone_(Australian_politician:
John Owen Stone (born 31 January 1929) is a former Australian politician. He served as Secretary to the Treasury between 1979 and 1984,[1] and as a Senator for Queensland representing the National Party in the Senate from 1987 to 1990.
After gaining First Class Honours in Mathematical Physics for his Bachelor of Science degree and representing Western Australia (under 21) at hockey, Stone was selected as the Rhodes Scholar from Western Australia for 1951.
At Oxford he was awarded First Class Honours in Politics, Philosophy and Economics (PPE) and won the James Webb Medley Prize for Economics before joining the Treasury in 1954.
Stone rose within the Public Service to become Secretary to the Treasury under Prime Minister Malcolm Fraser. He penned a severe critique of Fraser's economic policies which was used against the Liberal party once the Australian Labor Party won the 1983 federal election. Stone resigned from the Treasury in 1984, after the election of the Hawke-Keating government, some of whose economic policies he supported.
Following the release of the Coalition's One Australia immigration policy in 1988, John Stone, as Shadow Finance Minister said:
"Asian immigration has to be slowed. It's no use dancing around the bushes" [2]
Despite his economic rationalist views, he initially opposed floating the currency and introducing a consumption tax; indeed he has repeatedly criticised the GST (and Treasurer Peter Costello) in print.
An informal advisor to Joh Bjelke-Petersen, Stone was elected to the Senate from Queensland as a member of the National Party at the 1987 election, and resigned in 1990 to unsuccessfully contested the House of Representatives seat of Fairfax, his place being taken by Bill O'Chee.[3]
Since retiring from the Senate, Stone has been a critic of multiculturalism and a supporter of the Samuel Griffith Society, which he helped found. He formerly had a column, on economics and politics, in The Australian Financial Review. Most recently, Stone has been critical of the Howard Government for its efforts at eroding the power of the states within the Australian federal system, regarding this as a departure from long-standing Liberal/National coalition "states' rights" ideology.
In its March 2008 issue, Quadrant Magazine published an article in which Stone argued that John Howard had been Australia's greatest Prime Minister.[4]
There is no doubt that Mr Stone was a distinguished Australian and was strong in economic policies as his two-decade long services in the Australian Treasury, including as the head of that department for a number of years, indicated. His voices should carry considerable weight in Australia. As an amateur economist, I respect his opinions on economic policies.
Does that mean his attack on the proposed Rio Tinto-Chinalco deal is correct? I have thought about it for a while and came to a negative conclusion. The following shows why.
Although Mr Stone served as the Secretary of Treasury, that experience had predated his role as a National Party Senator, for Queensland from 1987 to 1990. His economic views have much been influenced by his experience as a National Party Senator. This can be seen from his view about immigration, his opposition to floating the currency and the introduction of the GST, as well as a critic of multiculturalism in Australia.
Most economists agree that the floating of the Australian dollar was one of Hawke-Keating Labour government’s main structural reforms that, in conjunction with other reforms like reducing trade barriers and the introduction of enterprise bargaining, improved Australia’s productivity and brought enormous benefit to the nation’s wellbeing. Equally, the introduction of the GST enabled the abolition of a number of inefficient State taxes and the reduction of personal taxes and hence enhanced economic efficiency and productivity in Australia. Majority Australians now have now realised and enjoyed the benefits of those reforms.
What Mr Stone did to those important reforms at those times? He opposed them. Was he correct? No, he was wrong and has been proven wrong on all those occasions. Were his economic views proven correct? No they were not, they have been proven wrong. I am puzzled by the fact that a former Treasury Secretary could have had those incorrect economic views, but I am content that his views have reflected his experience of a National Senator in the 1980s when it might have been fashionable to have those protectionist views politically, particularly from the National point of view.
What about multiculturalism in Australia? Again, main stream Australians would disagree with Mr Stone on his critical views of multiculturalism. On this there is no need for me to say anything more at all. Everyone but Mr Stone, and possibly Pauline Hanson, understands that point. But all Australians understand what Pauline Hanson has been standing for - one white Australian nation! That idea has been burried by main stream Australians many many years ago.
From all these I can’t help form the view that Mr Stone, though well respected during the time as the head of the Treasury Department, has changed and now has had a very narrow, old fashioned, closed and nationalistic view of the economy and society. That view is very much outdated and does not sit well at all with main stream economics of free trade and investment, economic integration and globalisation.
He appears to have forgotten the benefit to Australia and Australians of our trade with Asia and the role of investment made by and capital inflow from Japan and other countries in or to Australia to complement the insufficient savings we Australians have compared to Australia’s investment needs. That is not strange since new memories can take the place of old ones.
After this research and analysis, I don’t feel that, as the Australian reporter claimed, Mr Stone's attack on the proposed Rio deal will undermine the fact that it is possible to protect the Australian national interest through the traditional sort of concessions aimed at maintaining Australian control as Swan did on other deals recently.
His views regarding the floating of $A, the GST and multiculturalism in the past, were completely ignored and thrown to the dust bin by both sides of Australia’s main political parties. I will be surprised at all that his opposition to the proposed deal will now have little weight either, even though Mr Barnaby Joyce a current National Senator from Queensland has been very vocal in opposing the deal too.
Does Mr Stone’s claim that “The resource assets under Rio's control are so potentially enormous the company has barely scratched the surface," hold any water? The answer is no. Mr Stone seems to suggest that he is much better than the market in determining the value of a company.
If he is to use that in his personal investment, good luck to him, but very few investors do not agree with him at the moment. He is dreaming gold beneath Rio’s mines! Yes, there is some in some mines, but for that investors don’t know any less than him, I would assume.
So, based on these facts, I could not disagree with Mr Stone more on his view of the proposed Rio deal! In fact, I wouldn’t risk in listening to his view regarding investment at all. I might have done that when he was the head of Treasury, but not when he had become a Nationals Senator. And definitely not now!
2009-05-06
Be rational - we are not monopoly in minerals!
This is comments on Professor Christopher Findlay's article on Public opinion on Chinalco’s investment in Rio Tinto April 19th, 2009, on http://www.eastasiaforum.org/2009/04/19/public-opinion-on-chinalcos-investment-in-rio-tinto/ I put it here, since it looks at the issue from another angle, often seldom mentioned in the media or by politicians.
While it is perfectly normal to have a range of views, some even very influential at high levels, especially when the issues involved can stir up strong emotions and the real interests are ill defined or difficult to define, one needs to realise an important point that the world mineral market is reasonably competative and Australia does not have the monoply power over world natural minerals, even though it is a very important player.
The Chinese investors want to invest in Australia when they see value in such investments. Equally, they will want to invest in mining in other mineral rich countries when they see value in investing there. Further, if they are not allowed to invest in Australia when they have the fund to do so, they can and probably will move to other countries, although it may be a second best outcome to them.
As in all investments, investors move down the ladder of investment opportunities, starting from the highest return to the point either their funds are exhausted completely or the benefit from such investment equals the cost of their funding at the margin. So although they may be dispointed if their applications are disallowed, they will move on to find other opportunities outside Australia.
After the dust of high emotions finally settles, one has to live with the hard and sometimes maybe very uncomfertable reality, bearing the consequential benefit or cost.
While it is perfectly normal to have a range of views, some even very influential at high levels, especially when the issues involved can stir up strong emotions and the real interests are ill defined or difficult to define, one needs to realise an important point that the world mineral market is reasonably competative and Australia does not have the monoply power over world natural minerals, even though it is a very important player.
The Chinese investors want to invest in Australia when they see value in such investments. Equally, they will want to invest in mining in other mineral rich countries when they see value in investing there. Further, if they are not allowed to invest in Australia when they have the fund to do so, they can and probably will move to other countries, although it may be a second best outcome to them.
As in all investments, investors move down the ladder of investment opportunities, starting from the highest return to the point either their funds are exhausted completely or the benefit from such investment equals the cost of their funding at the margin. So although they may be dispointed if their applications are disallowed, they will move on to find other opportunities outside Australia.
After the dust of high emotions finally settles, one has to live with the hard and sometimes maybe very uncomfertable reality, bearing the consequential benefit or cost.
Subscribe to:
Posts (Atom)
Posts
