When Chinese multi-billion dollar investors say it’s easier to do a rail deal in Mongolia than it is in WA we have to wonder where we’re going wrong
By Anna Game-Lopata | May 9, 2011
When Chinese multi-billion dollar investors say it’s easier to do a rail deal in Mongolia than it is in WA we have to wonder where we’re going wrong.
According to leading supply chain infrastructure investment lawyer Adam Handley of Corrs Chambers Westgarth, foreign north Asian investors, particularly in China are being put off by regulatory barriers and cultural insensitivity in their business dealings in Australia.
Handley, who is currently advising on $14.5 billion dollars worth of rail infrastructure development
for Chinese clients, was speaking at the 2011 Chartered Institute for Transport and Logistics (CILT) International conference last week.
“Despite what regulators and bureaucrats tell you it’s far from easy advising Chinese clients on how to invest in Australia,” Handley says.
In particular, Handley points a finger at Australia’s Foreign Investment Review Board (FIRB) system which regulates foreign capital expenditure in Australia through an application and assessment process he says is far too complex and time-consuming.
“Foreign investors must make an application to FIRB, stating how their investment will be in the national interest,” Handley says.
“The government may argue the majority of applications are approved without conditions, but this doesn’t to take into account the many, many applications that fail to get submitted because the investment deemed too hard.”
“The first thing I’m always asked whenever I arrive in Beijing is whether it’s getting any easier for Chinese to make investments in Australia, whether FIRB processes are more transparent and in fact, whether Chinese investment is really welcome in Australia.”
In addition Handley says another critical issue is that of approvals, which are literally a minefield to identify, understand and complete at all levels of government.
“I am currently advising a Chinese client on a $7.3 billion iron ore project for which there are more than 500 approvals to obtain,” Handley reveals.
“There is supposed to be a coordinated approach from government to help investors through the process but in reality there isn’t one.
“Despite the glossy websites, the reality is the system doesn’t work, and clients are told by commonwealth, state and local governments they have to navigate approvals themselves.
“So my clients are left to engage specialists who can guide them through the process.”
Funding is another issue Handley says is obstructing multi-billion dollar resources infrastructure projects.
He gives an embarrassing example of a project where negotiations couldn’t progress with infrastructure providers until a mining lease was granted in WA. However the key mining court could not hear the case due to a funding crisis.
“The Chinese investor said, ‘can that be true that you don’t have the funding to run your court system to grant tenures for private development projects?’”
Handley calls on government and business to make Australian policy and regulation clearer and to engage with our foreign investors in a faster, more proactive and transparent way.
“Because Australia is relatively competitive, being the second most stable developed economy, we tend to be a little apathetic,” Handley says.
While Hadley acknowledges attempts by resources boom states like Western Australia, South Australia and Queensland to address foreign investors by having documents explaining the mechanics of mining tenure on their website in a number of different languages, he says much more needs to be done.
“The reality on the field today is that a majority of investment in the energy and resources infrastructure space comes from north Asia, but we as a people, both culturally and politically are not geared to dealing with them in an effective way.”
According to Handley, Australian business needs to be a lot more savvy in engaging with north Asian investors on a cultural level, starting with education in our schools.
“If we can’t develop an affinity for the way Asian investors want to do business, then at least we need to seek and develop an understanding, because the current cultural disconnect is causing us to lose opportunities.”
“North Asian capital investment is critical for our prosperity,” Handley warns.
“Australia got through the GFC better than other OECD nations because of north Asian investment where Europe and the US were ripping capital out.
“If we don’t embrace the north Asian flow of capital into Australia it will go elsewhere, and despite the obvious advantages Australia offers in terms of proximity, there are significant resource opportunities in other parts of the globe.
“We can’t afford to assume the capital will just come here.”