In the grain fields near Horsham
Joe Hockey has just announced he is blocking the foreign takeover of Graincorp by Illinois-based Archer Daniels Midland. It’s a lousy decision. But it at least has the virtue of being an illuminating lousy decision.
People often underestimate the damage done by barring foreign takeovers. They focus on the idea that foreigners are getting something. So they miss the fact that those same foreigners are giving up something too – money. And that money doesn’t disappear. Like all money, it gets invested or it gets spent. Either way, foreign takeovers put new money in the hands of existing Australian investors. Many of the people invested in Graincorp are presumably people who know about investment in the farming sector (and if they’re not, Graincorp is in even greater need of takeover). If Graincorp’s foreign buyer had handed those people a pile of money, some of it would have ended up invested in new rural ventures. That won’t happen now. That money has to stay where it is, courtesy of Hockey.
Foreign takeovers also bring new management practices, and new links to global supply chains, and frequently a greater willingness to invest in people and equipment. That plus the money that goes to local investors usually makes a compelling case to approve foreign investment.
And it was compelling as ever in the Graincorp case.
If you think I’m just ignoring Hockey’s well-considered arguments in favour of blocking this particular takeover, can I plead with you to read read the announcement yourself.
OK. So you’ve read it now. Welcome back. Did you notice that Hockey’s justification for the decision seemed very thin? Much thinner than, say Peter Costello’s arguments for blocking the Shell takeover of Woodside or (particularly) Wayne Swan’s arguments against the Singapore Exchange’s takeover of the ASX?
Hockey claimed that the Graincorp case was among the most complex ever presented to FIRB. But his statement leaves exactly the opposite impression. By the very absence of even half-decent reasoning, it suggests that at a policy level, the case was open-and-shut: there was never any national-interest reason to block the bid. There was just the opposition of what might be called the Barnaby Joyce faction, with the agreement of at least one FIRB member. To make the inevitable pun, Joe Hockey acted not in the national interest but in the Nationals’ interest.
Maybe a FIRB member found a terrific reason not to wave the Graincorp bid through. If so, though, you’d think they’d have let the treasurer’s office know what that great reason was, so it could at least be reflected in the official announcement. Apparently not. The announcement was bad reasons from top to bottom. Let’s see what we got.