Na­tion can learn from Fry­den­berg’s re­jec­tion of CK Group

The Weekend Australian - - INQUIRER - PETER JEN­NINGS

Six lessons stand out fol­low­ing Josh Fry­den­berg’s de­ci­sion to stop Hong Kong’s CK Group from tak­ing over the gas gi­ant APA on the grounds that it “would be con­trary to the na­tional in­ter­est”.

First, re­la­tions with Bei­jing haven’t col­lapsed. It’s not clear how well syn­chro­nised the Trea­surer’s an­nounce­ment was with For­eign Min­is­ter Marise Payne’s visit to Bei­jing. But con­trary to months of Can­berra ag­o­nis­ing about how badly Bei­jing would re­act to a re­fusal of the takeover, re­la­tions con­tinue as nor­mal.

For all of the anti-Aus­tralian rhetoric one reads in the Chi­nese Com­mu­nist Party’s English­language news­pa­per, the Global Times, the party will not trash re­la­tions with Aus­tralia sim­ply be­cause we put na­tional se­cu­rity in­ter­ests be­fore bi­lat­eral re­la­tions.

China needs Aus­tralia’s com­mod­ity ex­ports and is suf­fi­ciently wor­ried about Don­ald Trump’s tough-minded trade pol­icy that it can’t af­ford to alien­ate ev­ery po­ten­tial part­ner in the Asi­aPa­cific. Aus­tralia can have an ef­fec­tive re­la­tion­ship with China with­out cring­ing or ca­pit­u­la­tion.

The sec­ond les­son is that Fry­den­berg has made a de­fin­i­tive judg­ment that the “un­due con­cen­tra­tion of for­eign own­er­ship” in Aus­tralia’s crit­i­cal in­fra­struc­ture is con­trary to the na­tional in­ter­est. That seems like a com­mon­sense judg­ment and it re­flects pre­cisely how coun­tries such as China and the US pro­tect their crit­i­cal in­fra­struc­ture from for­eign con­trol.

But Fry­den­berg’s view runs against the ide­o­log­i­cal mind­set in his Trea­sury Depart­ment, which pri­ori­tises for­eign in­vest­ment over na­tional se­cu­rity. Yes, for­eign in­vest­ment is im­por­tant, but it’s well past time that some sen­si­ble lim­its were placed around the ex­tent to which crit­i­cal in­fra­struc­ture can be put in the hands of en­ti­ties that are ul­ti­mately sub­ject to the ten­der mer­cies of the Chi­nese Com­mu­nist Party and its in­tel­li­gence ser­vices. The third les­son is that Aus­tralia has a new and nec­es­sary fo­cus on pro­tect­ing crit­i­cal in­fra­struc­ture, specif­i­cally in the form of the Crit­i­cal In­fra­struc­ture Cen­tre in the Depart­ment of Home Af­fairs, which Fry­den­berg de­scribes as “a key source” of ad­vice.

This mat­ters be­cause in­fra­struc­ture such as the elec­tric­ity grid, gas pipe­lines, ports and air­ports and key med­i­cal fa­cil­i­ties in­creas­ingly are run us­ing in­dus­trial con­trol de­vices linked by the in­ter­net. Th­ese are vul­ner­a­ble, of­ten re­mark­ably so, to hack­ing. Frankly, Aus­tralia is sev­eral years be­hind the pace of the ad­vanced economies in terms of build­ing greater cy­ber pro­tec­tion for es­sen­tial in­fra­struc­ture. The cen­tre’s role in re­view­ing for­eign in­vest­ment is im­por­tant and wel­come.

Les­son four is about the man­i­fest fail­ure of the For­eign In­vest­ment Re­view Board to per­form ad­e­quately its re­spon­si­bil­i­ties in vet­ting the pro­posed CK Group ac­qui­si­tion. Fry­den­berg’s me­dia re­lease says: “The FIRB was un­able to reach a unan­i­mous rec­om­men­da­tion, ex­press­ing its con­cerns about ag­gre­ga­tion and the na­tional in­ter­est im­pli­ca­tions of such a dom­i­nant for­eign player in the gas and elec­tric­ity sec­tors over the long term.” If this de­ci­sion wasn’t a no-brainer for the FIRB, what for­eign in­vest­ment would it ever be happy say­ing no to? The record of FIRB de­ci­sions across the past decade is 169,178 in­vest­ment ap­provals and four re­fusals — now five count­ing the APA de­ci­sion.

The meth­ods the FIRB uses to eval­u­ate in­vest­ment pro­pos­als are not dis­closed and mys­tify the busi­ness com­mu­nity. The board re­ports to the Trea­surer but evades any broader and more sys­tem­atic cab­i­net de­ci­sion-mak­ing.

Fry­den­berg’s me­dia state­ment quite clearly shows that the FIRB failed one of the most fun­da­men­tal tests of pub­lic ad­min­is­tra­tion. This should lead to a whole­sale re­design of the FIRB. It should be re­moved from Trea­sury and op­er­ate as a stand-alone statu­tory au­thor­ity un­der its own act of par­lia­ment, with the obli­ga­tion to fac­tor na­tional se­cu­rity into its rec­om­men­da­tions, or be re­lo­cated into the Depart­ment of Home Af­fairs, which doesn’t treat se­cu­rity as a di­ver­sion from “eco­nom­i­cally ra­tio­nal” in­vest­ment de­ci­sions.

Les­son five: clear po­lit­i­cal lead­er­ship is a won­der­ful thing. The fact the FIRB could not reach a unan­i­mous rec­om­men­da­tion starkly shows Fry­den­berg made the de­ci­sion him­self. This is what we elect gov­ern­ments to do. Fry­den­berg’s de­ci­sion is an im­por­tant marker for fu­ture pol­icy think­ing about na­tional se­cu­rity and for­eign in­vest­ment de­ci­sions.

Fi­nally, the sound­ness of this pol­icy out­come stands in stark con­trast to the Vic­to­rian gov­ern­ment’s se­cret mem­o­ran­dum of un­der­stand­ing with China on the Belt & Road Ini­tia­tive.

How could it ever be ac­cept­able that an Aus­tralian state gov­ern­ment could keep se­cret from its own elec­tors the un­der­tak­ings that it has given to China’s com­mu­nist rulers?

There are only two pos­si­bil­i­ties for what the se­cret MOU con­tains: ei­ther there are spe­cific un­der­tak­ings for busi­ness deals or there are sim­ply gen­eral ex­pres­sions of in­tent about what might hap­pen in the fu­ture.

If it’s the first op­tion, the MOU is dan­ger­ous and should be re­leased. If it is the sec­ond, with non­bind­ing gen­er­al­i­ties, then the MOU is use­less — and that’s some­thing Aus­tralians have a right to know about as well.

Over­all, it’s clear that only the fed­eral gov­ern­ment can de­liver pol­icy sub­stance on for­eign re­la­tions and for­eign in­vest­ment, a point that hope­fully now is be­ing bet­ter un­der­stood by Vic­to­rian politi­cians. Peter Jen­nings is the ex­ec­u­tive di­rec­tor of the Aus­tralian Strate­gic Pol­icy In­sti­tute and a for­mer deputy sec­re­tary for strat­egy in the De­fence Depart­ment.

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