It’s difficult to overstate how awful Scott Morrison’s decision to block State Grid and Cheung Kong Infrastructure from bidding for the NSW government’s electricity transmission provider Ausgrid is. It defies logic, evidence and good sense.
Hong Kong company Cheung Kong Infrastructure — which is privately owned — has controlling stakes in companies providing power in South Australia and Melbourne. It runs major transmission networks in the UK, Canada and New Zealand as well as Hong Kong and China. Its parent company owns 50% of Vodafone and ports in Sydney and Brisbane. If it’s a national security risk, as Morrison claims it is, then we’re already screwed.
And Chinese government-owned State Grid, which also owns electricity assets in Australia already, was given the all-clear by Morrison himself just last November when he gave it the thumbs up to bid for … NSW government electricity provider TransGrid. No national security concerns about Chinese ownership of electricity transmission infrastructure back then.
Asked to explain what had changed when he announced the decision yesterday, Morrison made what he thought was a joke. “The only person who’s security-cleared in this room to be able to hear the answer to that question is me.” That’s the Treasurer of Australia, trying to be funny about blocking foreign investment for reasons he won’t explain. For Cheung Kong Infrastructure, in particular, it’s not so much a bad joke as an insult to a company that has undertaken billions in investments in Australia.
Morrison refused to say what has changed but the answer is obvious: the election has turned a dithering government into a badly wounded one that even before parliament sits is constantly looking over its shoulder. It was already inclined to investment protectionism — witness Morrison’s rejection of a Chinese-led consortium’s bid for S.Kidman in April — but now faces a xenophobic junior Coalition partner which is expressly hostile to Chinese investment, a definitionally xenophobic gatekeeper in the Senate in the form of One Nation and an economic nationalist in Nick Xenophon — while it is just one House of reps vote away from oblivion.
The signal this decision sends to foreign investors is shocking. When Wayne Swan in 2009 rejected Minmetals’ bid for OZ Minerals, he explained the national security concern — it was right next door to the Woomera weapons testing range. The previous year, he had issued guidelines on how investment bids involving foreign governments would be assessed; a few months after the Minmetals decision, he significantly increased the threshold applying to consideration of investment bids, freeing up investment. In contrast, Morrison offers wildly inconsistent decisions that vary from month to month, more red tape for foreign investors and a childish joke when asked for an explanation.
Worse, while the NSW Liberals rightly savaged the disgraceful NSW Opposition Leader Luke Foley for his xenophobic campaign against privatisation in last year’s state election campaign (race discrimination commissioner Tim Soutphommasane also attacked the CFMEU for its ad campaign), Morrison has now in effect endorsed those campaigns.
Compounding the problem is that, in losing Andrew Robb, the government no longer has a strong advocate for foreign investment in its ranks, willing to publicly push back against xenophobia and economic nationalism. And it is being egged on by a clutch of anti-China hawks who will find a reason for national security concerns in any Chinese investment. There’s no doubt that China is a destabilising regime with contempt for human rights and ambitions to exercise hegemony over the region — but if we’re going to start blocking investment because a government’s policies are not complementary to our own then we’ll be blocking an awful lot of incoming money.
But in trying to look like it has not made a politically inspired, anti-Chinese government decision, the government has made it worse. As John Durie pointed out, Cheung Kong Infrastructure appears to have been knocked out simply to make sure the decision didn’t look so directly targeted at the Chinese government (a case of “sorry guys, but you’re Asian too, so you’re out”). But the normally sensible Finance Minister Mathias Cormann exacerbated that problem today by saying that the national security concerns would have applied to any foreign bidder — casting all future infrastructure investment by foreign investors under a cloud.
The Turnbull government has made much of agility, innovation and the need to attract foreign investment — its case for a huge tax cut for multinationals is based on the need to secure investment. It has also encouraged state governments to privatise assets in order to reinvest the proceeds in new projects. But it is sending a signal, loud and clear, to the world’s investors, that they face an uncertain, unpredictable and politicised investment environment — especially if they happen to be Chinese, whether they’re owned by the Chinese government or not.