In response to the proposed deal between Rio Tinto and major shareholder Chinalco, which will allow the Chinese aluminium company to increase its stake in Rio to 18%, Crikey asked HSBC Chief Economist and former Keating economic advisor John Edwards: who has the final say on foreign investment decisions?
It is the Treasurer, if we’re talking about the government’s role. Obviously the decision to invest is made by the foreign investor. The only government role is a regulatory one; under the legislation the decision about whether to permit a proposal to go ahead is up to the Treasurer.
The basic requirement is that the foreign investment proposal is in the national interest. The most relevant consideration in respect of the national interest regarding China’s investment in Australian based resource businesses is if a consumer or buyer of a resource such as iron ore also wants to own the resource in Australia. The Treasurer indicated last year that this issue will attract special scrutiny in the national interest test. There might be a number of other considerations, but in respect of Chinalco and Rio, that’s the main one.
The Foreign Investment Review Board has the responsibility to advise the treasurer; it has a procedure of notification and response. But unless delegated by the treasurer the board has no authority to decide, although more often than not the advice of the Board or the relevant board member will be accepted. The Board is assisted by an executive which is part of the Treasury.
The treasurer will veto if he disagrees with the board or member of the board’s view. An obvious example is Costello’s 2001 decision to reject Shell’s bid for the remainder of Woodside it did not already own.
Current FIRB board members are: Mr John Phillips AO, Ms Lynn Wood, The Hon Chris Miles and Mr Patrick Colmer.