Two polls this week confirm that Australians take a largely negative view of foreign direct investment. On Monday, an Essential Media poll reported that only 25% of respondents agreed with the proposition that Chinese investment in mining companies should be welcomed because it helps our economy and provides jobs. Yesterday’s Newspoll, as reported in The Australian, found a small majority against any foreign company being allowed to acquire shares in Australian mineral companies.
As Tom Switzer’s recent paper on attitudes to foreign investment showed, there is nothing new in these attitudes. There also seems to be a particularly xenophobic flavour to some opposition. The Lowy Institute found stronger opposition to investment from Asian countries than from the UK or US.
While there are some political concerns in this as well as ethnic – state-owned companies raise slightly different issues to privately owned companies, particularly when the state involved is not democratic – ethnic or cultural factors do seem to influence attitudes. Japanese investment is strongly opposed along with that from undemocratic countries such as China.
Years ago, Wolfgang Kasper criticised controls on foreign direct investment as ‘capital xenophobia’, an argument that Stephen Kirchner recently updated in a CIS paper. As Stephen points out, foreign direct investment has benefits not associated with other forms of investment, as it is
typically accompanied by the transfer of technology, improved management techniques, intellectual property rights and other forms of intangible capital, all of which may yield productivity gains and spillover benefits, in addition to the direct contribution made by FDI to the expansion of the domestic capital stock.
This is one of those areas in which I think politicians are right to ignore the specifics of public opinion in favour of achieving broader aims. It’s not at all clear that domestic ownership brings real benefits and there are clear opportunity costs in not permitting foreign investment. Restrictions on foreign ownership are likely to reduce Australian living standards, for which governments will be politically suffer more in the long run than from short-term disapproval when foreign companies take control of Australian companies.