tag:theconversation.com,2011:/au/topics/foreign-investment-2208/articlesForeign investment – The Conversation2023-09-10T20:05:50Ztag:theconversation.com,2011:article/2121862023-09-10T20:05:50Z2023-09-10T20:05:50ZHow much did Chinese investors drive up Sydney home prices? It’s less than you might think<figure><img src="https://images.theconversation.com/files/546804/original/file-20230907-15303-fxewci.png?ixlib=rb-1.1.0&rect=71%2C844%2C3437%2C1532&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>When China cracked down on money leaving the country in 2017, some Sydney home prices fell 3%, while in other suburbs the restrictions had next to no impact.</p>
<p>This finding – from research <a href="https://www.australiachinarelations.org/content/xunpeng-shi">Xunpeng Shi</a> and I recently published in the journal <a href="https://www.tandfonline.com/doi/full/10.1080/02673037.2023.2222675">Housing Studies</a> – shows Chinese investors have had some effect on local house prices. However, our research also shows the impact has been much less – and less widespread – than <a href="https://www.australiachinarelations.org/content/utsacribida-poll-2023">many Australians</a> think. </p>
<p>We found the only Sydney suburbs in which Chinese buyers appeared to have had a strong impact on prices were those with large concentrations of Chinese residents.</p>
<h2>Getting money out of China used to be easy</h2>
<p>Australia’s rules make it harder for foreigners to buy Australian homes, among other things limiting purchases to <a href="https://www.canstar.com.au/home-loans/australian-property-market-foreign-investment-rules/">new dwellings and vacant land</a>. </p>
<p>But until 2017, it was fairly easy to get money out of China.</p>
<p>Among the channels commonly used were AliPay, WeChat, UnionPay, credit cards and underground banks specialising in foreign exchange and holding properties on behalf of Chinese citizens.</p>
<p>On December 30 2016, the People’s Bank of China published an order entitled <a href="https://www.cecc.gov/resources/legal-provisions/measures-on-the-administration-of-reporting-of-large-value-and-suspicio-0">Administrative Measures on Reporting for Large-Value Transactions and Suspicious Transactions</a>, limiting foreign currency conversions to US$50,000 per person and explicitly banning the purchase of foreign properties.</p>
<p>It came into effect on July 1 2017.</p>
<h2>Tighter controls made buying Sydney property harder</h2>
<p>Before the order, in 2016, Chinese overseas direct foreign investment in Australia totalled US$11.5 billion. </p>
<p>By 2019 it had slid to <a href="https://kpmg.com/au/en/home/insights/2022/04/demystifying-chinese-investment-in-australia-april-2022.html">US$2.4 billion</a>.</p>
<p>A real estate agent specialising in the Sydney CBD high-end dwellings was quoted in 2020 as saying Chinese buyers dominated the market between 2013 and 2017, but bought only <a href="https://www.news.com.au/finance/economy/australian-economy/experts-debate-impact-of-chinese-buyers-on-australian-property-market/news-story/265d865b94b231b72a56e550ef6e9252">one or two</a> in 2018.</p>
<p>Our study used this rare <a href="https://www.britannica.com/science/natural-experiment">natural experiment</a> to estimate the effect Chinese buyers had had on Sydney home prices.</p>
<p>We did this by comparing what happened to prices in the suburbs with a high concentration of Chinese owners to what happened in those with few Chinese owners. </p>
<p>To do so, we split Sydney’s 678 suburbs into “Chinese” and “non-Chinese”, based on their populations in the 2016 Census.</p>
<h2>Prices fell 3% in these suburbs – with little impact elsewhere</h2>
<p>We compared prices 18 months before and 18 months after the change, using a number of different cutoff points to define “Chinese” and “non-Chinese” suburbs.</p>
<p>We found China’s restrictions pushed down prices in what we defined as Sydney’s “Chinese” suburbs by around 3%. In contrast, the restrictions had next to no impact on prices in other suburbs.</p>
<p>This remained the case when we checked our results against the ten most “Chinese” suburbs identified by the publication <a href="https://sydneysuburbreviews.com/10-most-chinese-sydney-suburbs/">Sydney Suburb Reviews</a>: Haymarket, Carlingford, Chippendale, Zetland, Chatswood, Ultimo, Eastwood, Rhodes, Burwood, and Hurstville. </p>
<p>It also remained the case when we took into account other changes in Australian foreign investment rules during the period.</p>
<h2>Overall, Chinese buyers had a limited impact</h2>
<p>Our findings have important implications. They suggest <a href="https://www.theguardian.com/australia-news/2021/jul/08/more-than-80-of-australians-mistakenly-believe-chinese-investors-are-driving-up-house-prices">ongoing concerns</a> about Chinese capital and Chinese investors driving up Australian home prices and exacerbating affordability problems are overstated.</p>
<p>Foreign investment should be welcomed to the extent that it helps boost Australia’s housing supply. Our study found its effect on housing affordability is marginal and limited to particular suburbs.</p>
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Read more:
<a href="https://theconversation.com/think-curbing-overseas-migration-will-end-the-housing-crisis-it-wont-and-we-cant-afford-to-do-it-211120">Think curbing overseas migration will end the housing crisis? It won't – and we can't afford to do it</a>
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<p class="fine-print"><em><span>Song Shi receives funding from Australia-China Relations Institute at University of Technology Sydney. Song Shi has an honorary appointment of ACRI Research Associate.</span></em></p>China made it much harder for money to leave the country in 2017. Our study looked at Sydney home prices before and after that crackdown – and these are the suburbs where we found prices changed.Song Shi, Associate Professor School of Built Environment, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2062792023-05-31T12:38:36Z2023-05-31T12:38:36ZAmid fears of Chinese influence, the Committee on Foreign Investment in the United States has grown more powerful<figure><img src="https://images.theconversation.com/files/528124/original/file-20230524-29-gqrmoj.jpg?ixlib=rb-1.1.0&rect=21%2C0%2C4824%2C3094&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Business deals by foreign countries in the U.S. can be reviewed by the government for national security risks.</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/SAYzxuS1O3M">Jason Leung for Unsplash</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>A Chinese private equity firm, <a href="https://www.primavera-capital.com/">Primavera Capital Group</a>, <a href="https://www.wsj.com/articles/princeton-review-and-tutor-com-are-now-owned-by-a-chinese-company-58ebea38">acquired</a> the well-known test preparation company <a href="https://www.princetonreview.com/">Princeton Review</a> and an online learning platform, <a href="https://www.tutor.com/">Tutor.com</a>, in May 2023. </p>
<p>The move, like other Chinese investments in tech and those that deal with personal information, is increasingly drawing the attention of <a href="https://www.foxnews.com/politics/republican-demands-china-american-education">politicians,</a> the <a href="https://www.wsj.com/articles/princeton-review-and-tutor-com-are-now-owned-by-a-chinese-company-58ebea38">U.S. government and national security experts</a> – especially as tensions rise between the U.S. and China.</p>
<p>What remains unclear, however, is if this seemingly routine business acquisition was reviewed by the <a href="https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius">Committee on Foreign Investment in the U.S.</a>, which has authority to examine transactions involving foreign investment. The committee is largely prohibited from publicly <a href="https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius">disclosing any information filed with it</a>, including if it is reviewing a transaction or if one was referred for review. </p>
<p>While the committee is hardly a household name, its mission and <a href="https://www.cfr.org/backgrounder/what-happens-when-foreign-investment-becomes-security-risk">expanding oversight</a> have important implications for the U.S. economy and national security. </p>
<h2>Government oversight</h2>
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<a href="https://images.theconversation.com/files/528130/original/file-20230524-27-rcavor.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The dark grey dome of the U.S. Capitol Building against a light grey sky." src="https://images.theconversation.com/files/528130/original/file-20230524-27-rcavor.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/528130/original/file-20230524-27-rcavor.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/528130/original/file-20230524-27-rcavor.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/528130/original/file-20230524-27-rcavor.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/528130/original/file-20230524-27-rcavor.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/528130/original/file-20230524-27-rcavor.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/528130/original/file-20230524-27-rcavor.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Congress strengthened the Committee on Foreign Investment’s powers, allowing it to scrutinize foreign investments in areas including cybersecurity, microelectronics and artificial intelligence.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/SYHi8oX0JC8">joshua sukoff for Unsplash.com</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p><a href="https://www.archives.gov/federal-register/codification/executive-order/11858.html">The Committee on Foreign Investment</a>, a U.S. government interagency committee established in 1975 by <a href="https://www.whitehouse.gov/about-the-white-house/presidents/gerald-r-ford/">President Gerald Ford</a>, is tasked with studying and <a href="https://www.everycrsreport.com/reports/RL33388.html">coordinating the implementation of policy</a> on foreign investment in America.</p>
<p>Investment by foreign countries <a href="https://www.cfr.org/backgrounder/what-happens-when-foreign-investment-becomes-security-risk">greatly benefits</a> the U.S., supporting <a href="https://www.trade.gov/sites/default/files/2022-04/IndirectJobsSelectUSABrief.pdf">10.1%</a> of the total labor force in 2019. Yet beginning in the 1980s, the federal government grew increasingly concerned about potentially harmful effects of foreign investment in the U.S. For example, if a foreign firm gets control of <a href="https://www.cfr.org/backgrounder/what-happens-when-foreign-investment-becomes-security-risk">sensitive technologies</a>, it could hurt national competitive advantages or even threaten national security.</p>
<p>The primary objective of the committee is to review selected foreign investments and some real estate transactions by foreigners in the U.S. for their national security implications. Real estate transactions are generally scrutinized only when a transaction involves land that is either close to a <a href="https://www.morganlewis.com/pubs/2022/08/revisiting-cfius-jurisdiction-over-real-estate-transactions">military base or near an airport or seaport</a>. </p>
<h2>Vetting foreign investments</h2>
<p>In the 1980s, political concern grew about <a href="https://www.gao.gov/assets/nsiad-91-140.pdf">Japanese investment</a> and, specifically, the proposed purchase by Japanese computer giant <a href="https://www.fujitsu.com/global/products/computing/pc/notebooks/">Fujitsu</a> of chipmaker <a href="https://www.businesswire.com/news/home/20160919005796/en/Semiconductor-Successfully-Completes-Acquisition-Fairchild-Semiconductor-2.4">Fairchild Semiconductor</a>. The purchase of Fairfield Semiconductor was considered a sensitive industry, with potential defense applications, and prompted Congress in 1988 to pass the <a href="https://www.gao.gov/products/gao-06-135t#:%7E:text=The%201988%20Exon%2DFlorio%20amendment,President%20has%20taken%20only%20once.">Exon-Florio amendment</a> to the <a href="https://www.fema.gov/sites/default/files/2020-03/Defense_Production_Act_2018.pdf">Defense Production Act of 1950</a>. </p>
<p>This amendment empowered the committee to not just review foreign investment deals but also to recommend rejecting them. Acting on its recommendation, a U.S. president could <a href="https://www.cooley.com/services/practice/export-controls-economic-sanctions/cfius-overview">block a foreign transaction</a> on “national security” grounds. For instance, in 1990, President George H. W. Bush <a href="https://nuke.fas.org/guide/china/contractor/90020112.html">voided the sale</a> of MAMCO Manufacturing, which made metal parts for airplanes, to a Chinese agency, ordering the China National Aero-Technology Import & Export Corporation to <a href="http://www.usa.com/frs/mamco-manufacturing-inc.html">divest itself of the Seattle-based company</a>. </p>
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<a href="https://images.theconversation.com/files/528134/original/file-20230524-21-znbif1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A teal-green schematic on a black background computer screen." src="https://images.theconversation.com/files/528134/original/file-20230524-21-znbif1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/528134/original/file-20230524-21-znbif1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/528134/original/file-20230524-21-znbif1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/528134/original/file-20230524-21-znbif1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/528134/original/file-20230524-21-znbif1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/528134/original/file-20230524-21-znbif1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/528134/original/file-20230524-21-znbif1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Foreign investments scrutinized by the U.S. can range from agricultural supply chains to biotechnology and quantum computing.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/EUsVwEOsblE">adi goldstein for Unsplash.com</a></span>
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<p>In the context of a committee review, the term <a href="https://www.cfr.org/backgrounder/what-happens-when-foreign-investment-becomes-security-risk">national security</a> typically refers to foreign transactions that could cause significant outsourcing of jobs, a loss of control over agricultural supply chains, the sharing of sensitive technologies, control of a firm that satisfies <a href="https://www.gibsondunn.com/wp-content/uploads/documents/publications/West-NatlSecImplicationsOfForeignInvestment.pdf">defense needs</a>, or the impairment of critical infrastructure.</p>
<h2>Strengthening the committee</h2>
<p>In 2006, <a href="https://www.dpworld.com/">Dubai Ports World</a>, owned by the United Arab Emirates government, was about to gain managerial control of six U.S. ports in a major deal. Because of <a href="https://www.npr.org/2006/02/22/5228645/new-york-senator-wants-to-halt-ports-deal">terrorism-related concerns</a>, <a href="https://www.schumer.senate.gov/">Sen. Chuck Schumer</a> led a <a href="https://uscpublicdiplomacy.org/pdin_monitor_article/dubai-ports-controversy-uproar-heard-round-world">campaign against this proposal</a> and the transaction was eventually called off, even though it had initially been approved by both the committee and <a href="https://www.whitehouse.gov/about-the-white-house/presidents/george-w-bush/">President George W. Bush</a>.</p>
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<a href="https://images.theconversation.com/files/528129/original/file-20230524-25-gch40s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="White sand beach in the foreground with Abu Dhabi skyscrapers in the background." src="https://images.theconversation.com/files/528129/original/file-20230524-25-gch40s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/528129/original/file-20230524-25-gch40s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=480&fit=crop&dpr=1 600w, https://images.theconversation.com/files/528129/original/file-20230524-25-gch40s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=480&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/528129/original/file-20230524-25-gch40s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=480&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/528129/original/file-20230524-25-gch40s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=603&fit=crop&dpr=1 754w, https://images.theconversation.com/files/528129/original/file-20230524-25-gch40s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=603&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/528129/original/file-20230524-25-gch40s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=603&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Political concern scuttled a United Arab Emirates deal to manage U.S. ports and triggered greater power for the Committee on Foreign Investment.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/DDMFhAPS19Y">Damian Kamp for Unsplash.com</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>In <a href="https://www.nytimes.com/2006/03/10/politics/under-pressure-dubai-company-drops-port-deal.html">the aftermath of this controversy</a>, lawmakers passed the <a href="https://www.congress.gov/110/plaws/publ49/PLAW-110publ49.pdf">Foreign Investment and National Security Act</a> in 2007, giving Congress greater oversight of the committee to ensure that potential acquisitions were adequately reviewed. In addition, it required the committee to <a href="https://www.cfr.org/backgrounder/what-happens-when-foreign-investment-becomes-security-risk">scrutinize all foreign investment deals</a> in which the pertinent overseas entity is either owned or controlled by a foreign power. </p>
<h2>National security concerns</h2>
<p>Over time, the Committee on Foreign Investment has been given more power to reflect and act on the political and economic concerns of the U.S.</p>
<p>China, for example, appears to have <a href="https://www.brookings.edu/essay/the-long-game-chinas-grand-strategy-to-displace-american-order/">global ambitions</a> to replace the <a href="https://www.foreignaffairs.com/united-states/why-american-power-endures-us-led-order-isnt-in-decline-g-john-ikenberry">U.S.-led world order</a>. As it gains geopolitical power, China has come under <a href="https://www.pewresearch.org/global/2023/04/12/americans-are-critical-of-chinas-global-role-as-well-as-its-relationship-with-russia/">increased scrutiny</a> by the U.S., with public support to <a href="https://www.pewresearch.org/global/2021/03/04/most-americans-support-tough-stance-toward-china-on-human-rights-economic-issues/">get tough with China on economic issues</a>. In response to these concerns, concrete steps have been taken by U.S. lawmakers to increase the scope of what the committee is able to do. </p>
<p>In 2018, <a href="https://www.whitehouse.gov/about-the-white-house/presidents/donald-j-trump/">President Donald Trump</a> signed the <a href="https://www.congress.gov/bill/115th-congress/house-bill/5841/text">Foreign Investment Risk Review Modernization Act</a>, giving the committee new powers over certain types of foreign investment that affect many <a href="https://illinoislawreview.org/print/vol-2023-no-2/superpower-rivalry-and-the-modernization-of-foreign-investment-risk-review/">Chinese investors</a>. In the two-year period after the passage of the act, transaction registrations from Chinese investors <a href="https://www.cfr.org/backgrounder/what-happens-when-foreign-investment-becomes-security-risk">fell by 43%</a>.</p>
<p>In 2022, <a href="https://www.whitehouse.gov/administration/president-biden/">President Joe Biden</a> signed an executive order directing the committee to sharpen its <a href="https://www.reuters.com/world/us/biden-tells-foreign-investment-panel-screen-deals-data-cyber-risks-2022-09-15/">investigation of foreign investment deals</a> that could negatively affect cybersecurity, quantum computing, biotechnology and sensitive data. The Committee on Foreign Investment is now <a href="https://www.forbes.com/sites/harrybroadman/2022/09/30/cfius-under-biden-just-got-tougher/?sh=78e4d4931a49">more powerful</a> than it has ever been, and <a href="https://www.nytimes.com/2018/03/05/business/what-is-cfius.html">it is a gatekeeper</a> on major foreign investment deals. </p>
<p>The U.S. is not alone in examining foreign investment deals for national security implications. In recent times, the United Kingdom, the European Union and Australia have either created or strengthened existing regulations to <a href="https://www.cfr.org/backgrounder/what-happens-when-foreign-investment-becomes-security-risk">more carefully police</a> foreign investment deals, particularly those <a href="https://www.industryweek.com/the-economy/article/22026697/eu-set-to-tighten-rules-on-foreign-investment-to-fend-off-china">originating in China</a>. </p>
<p>It remains to be seen what the long-term implications of these expanding powers of the Committee on Foreign Investments in the U.S. will be.</p><img src="https://counter.theconversation.com/content/206279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amitrajeet A. Batabyal does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>President Joe Biden signed an executive order in 2022 tightening the rules for foreign investment in the US.Amitrajeet A. Batabyal, Distinguished Professor, Arthur J. Gosnell Professor of Economics, & Interim Head, Department of Sustainability, Rochester Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1859062022-07-11T14:31:18Z2022-07-11T14:31:18ZWhy factory jobs for Ethiopian women haven’t translated into greater participation in politics<figure><img src="https://images.theconversation.com/files/471871/original/file-20220630-20-jzjz6e.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ethiopian women at a garment factory at the Hawassa Industrial Park in the country's southern region. </span> <span class="attribution"><span class="source">Eyerusalem Jiregna/AFP via Getty Images</span></span></figcaption></figure><p>Until the <a href="https://www.bbc.com/news/world-africa-54964378">war in Tigray</a> started in November 2020, Ethiopia was a favoured investment destination. It had experienced strong <a href="https://www.worldbank.org/en/country/ethiopia/overview">economic growth</a> for the previous decade.</p>
<p>The country gave foreign investors preferential access to American and European markets, favourable customs and tax policies, and relative political stability. Labour costs were also low – around half of what they were in China. </p>
<p>The Ethiopian government had <a href="https://www.tandfonline.com/doi/full/10.1080/00220388.2018.1443211">invested US$1 billion annually</a> in industrial parks since 2010 – almost one-third of its total net <a href="https://web.archive.org/web/20180112102846/http://www.oecd.org:80/statistics/datalab/oda-recipient-sector.htm">foreign aid</a>. </p>
<p>Investors from across the world, including China, India, the US and South Korea, started industrial production in these parks, creating job opportunities for thousands of citizens.</p>
<p>And most of them were women who entered the labour force as never before. Before the COVID-19 crisis in 2020, firms in the new industrial parks in Ethiopia employed about 86,000 workers – around <a href="https://www.sciencedirect.com/science/article/pii/S0305750X20303065#fn1">80%</a> of them women. They were hired for light manufacturing, making products like shoes, textiles and garments. Employers saw women as diligent and disciplined. </p>
<p>The entry of women into Ethiopia’s work force provided a rare opportunity to study the impact of jobs on women’s empowerment, especially participation in politics. </p>
<p>A <a href="https://academic.oup.com/sp/article-abstract/26/2/299/5480423">study</a> I conducted with colleagues yielded unexpected results that have implications for the understanding of political agency in a non-democratic and developing context. </p>
<h2>Work and political activity</h2>
<p>Research in democratic and developed countries shows a <a href="https://www.sciencedirect.com/science/article/abs/pii/S0049089X16300667">strong correlation</a> between increased female labour force participation and women’s political participation.</p>
<p>Wage labour tends to <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1141499">boost the status of women</a>. This influences their effectiveness in getting power in other realms of society, including politics. It also increases the number of women with professional experience and resources to mount credible campaigns and challenge negative voter attitudes towards women.</p>
<p>We wanted to know whether this trend would be the same in a developing country but also one as authoritarian as Ethiopia. </p>
<p>The 2020 <a href="https://www.undp.org/ethiopia/gender-equality">Human Development Report</a> shows that gender inequalities persist in Ethiopia, denying women the opportunity to participate in development projects. A lot more needs to be done to increase women’s empowerment in the country. </p>
<p>Starting in 2017, we collected data from 27 large factories that make shoes and garments across five industrial parks in Ethiopia. The firms agreed to randomly assign 1,498 applicant women to two groups. One group of women was offered jobs and a control group was not offered jobs. </p>
<p>This unique research design made it possible to compare groups and identify the impact of employment. We asked both groups of women the same questions to measure a variety of indicators of women’s empowerment. These questions were around economic decision making (bargaining power), their influence on number of children they would have, and their levels of political interest and participation. </p>
<p>The study followed up with participants at intervals of six, 12, 18 and 36 months after they had applied for the job. We combined this with extensive qualitative data and phone surveys conducted with women’s partners.</p>
<p>Our study investigated if women’s status as workers made them more interested in politics – and more likely to participate in politics – than women who did not work. </p>
<p>Contrary to expectations, our research found no evidence to suggest that the job offers had any positive effect on political participation. We saw no effect of employment on women’s bargaining power or gender equality norms. We even found a reduction in women’s participation in community meetings.</p>
<p>We see this as an outcome of female factory workers’ long working hours, poor working conditions and lack of labour rights. A gendered division of labour in factories, and the belittling and derogatory attitudes of factory owners and supervisors towards women, further limits their political agency.</p>
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Read more:
<a href="https://theconversation.com/pasha-19-how-seeing-women-in-power-can-inspire-ethiopias-girls-117126">Pasha 19: How seeing women in power can inspire Ethiopia's girls</a>
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<p>In our interviews, women said they had no time to attend political meetings. They often had to work long hours to reach production targets. There was no minimum wage and attendance bonuses were lost on the first day of an absence. </p>
<p>Almost all women had experienced abusive behaviour from their supervisors. This included being shouted at, insulted or subjected to physical force to get them to work faster or as a punishment for mistakes. </p>
<p>The opportunity to unionise was nearly non-existent. Out of the 27 companies in our study, only two had labour unions. The investors and factory owners we interviewed expressed their resistance to such unions. </p>
<p>Government officials and representatives of the national labour union told us that labour laws were not enforced for fear of investors leaving the country. Most factories were in practice exempted from basic labour regulations. Even if inspectors uncovered health and security violations, for instance, they would be unlikely to take these cases to court. </p>
<h2>Authoritarian settings</h2>
<p>Our findings correspond with studies of women’s political participation in other African autocracies, such as <a href="https://academic.oup.com/afraf/article/107/428/361/12456">Rwanda</a> and <a href="https://www.routledge.com/Manipulating-Political-Decentralisation-Africas-Inclusive-Autocrats/Aalen-Muriaas/p/book/9781138203037">Uganda</a>. </p>
<p>Income and job status have less of an impact on women in authoritarian contexts than in advanced democracies. Having an income and a job, especially if the job does not come with labour rights, doesn’t give an individual the kind of power it would in an advanced democracy. </p>
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Read more:
<a href="https://theconversation.com/many-african-countries-had-a-surprise-manufacturing-surge-in-2010s-it-bodes-well-for-the-years-ahead-155405">Many African countries had a surprise manufacturing surge in 2010s – it bodes well for the years ahead</a>
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<p>The Ethiopian government and the investors creating employment have a long way to go to offer Ethiopian women what the International Labour Organisation terms <a href="https://www.ilo.org/global/topics/decent-work/lang--en/index.htm">decent work</a>.</p>
<p>Our research shows that the main actors determining labour conditions in Ethiopian factories have little concern for the potential damage that poor working conditions can have on their reputations. </p>
<p>But recent developments may support a change. In <a href="https://agoa.info/news/article/15941-us-president-terminates-agoa-preferences-for-ethiopia-mali-and-guinea.html">2021</a>, Ethiopia’s preferential access to American markets through the <a href="https://agoa.info/about-agoa.html">African Growth and Opportunity Act</a> was terminated. This has been a big blow for investors and the government. Investors have left the country. </p>
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<a href="https://theconversation.com/ethnic-conflict-could-unravel-ethiopias-valuable-garment-industry-152844">Ethnic conflict could unravel Ethiopia's valuable garment industry</a>
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<p>Being more open to unionisation could have benefits for industries. Better working conditions might improve manufacturers’ image among western consumers. The Confederation of Ethiopian Labour Unions told us in research interviews that unionising would facilitate more peaceful industrial relations. It is already <a href="https://addisfortune.news/industrial-parks-finally-see-labour-unions-emerge/">seeing progress</a> in industrial parks. </p>
<p>If this leads to better working conditions for female factory workers, the country may see positive changes in women’s political interest and participation.</p><img src="https://counter.theconversation.com/content/185906/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lovise Aalen receives funding from Research Council of Norway: the Young Research Talent scheme (2015-2018) and the Norglobal programme for development research (2019-2022). </span></em></p>In democratic contexts, getting women into work empowers them. In autocracies like Ethiopia’s, this doesn’t hold. We found out why.Lovise Aalen, Senior Researcher, Political Science, Chr. Michelsen InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1788622022-03-15T12:16:22Z2022-03-15T12:16:22ZSmall oil producers like Ghana, Guyana and Suriname could gain as buyers shun Russian crude<figure><img src="https://images.theconversation.com/files/451928/original/file-20220314-118290-sywzv4.jpg?ixlib=rb-1.1.0&rect=11%2C0%2C2485%2C1665&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A woman sells drinks on a street in Georgetown in Guyana, one of South America's poorest countries, March 1, 2020. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/woman-sells-water-and-soda-in-a-street-stall-in-georgetown-news-photo/1204536568">Luis Acosta/AFP via Getty Images</a></span></figcaption></figure><p>As the <a href="https://www.nytimes.com/2022/03/07/business/russia-us-trade-relations.html">U.S.</a> and <a href="https://www.reuters.com/markets/rates-bonds/eu-phase-out-russian-gas-oil-coal-imports-leaders-draft-2022-03-07/">Europe</a> cut back purchases of Russian oil, and energy traders <a href="https://www.cnn.com/2022/03/03/investing/russia-oil-sanctions-ukraine/index.html">shun it for fear of sanctions</a>, the search is on for other sources. Attention has focused on <a href="https://www.cnn.com/2022/03/08/politics/joe-biden-saudi-arabia-venezuela-iran-russia-oil/index.html">Iran and Venezuela</a>, both of which are led by governments that the U.S. sought until recently to isolate. But emerging and less-developed producers could also play roles. </p>
<p>Among the world’s <a href="https://www.eia.gov/international/data/world/petroleum-and-other-liquids/annual-petroleum-and-other-liquids-production">many oil-producing countries</a>, a few are positioned to jump the list and become increasingly active. They include the West African nation of Ghana (No. 33), along with Guyana (No. 42) and Suriname (No. 69), two small adjoining countries on the north Atlantic coast of South America. All three nations have become oil producers within the past 12 years, working with large companies like <a href="https://corporate.exxonmobil.com/News/Newsroom/News-releases/2022/0105_ExxonMobil-makes-two-discoveries-offshore-Guyana">ExxonMobil</a>, <a href="https://www.tullowoil.com/our-operations/africa/ghana/">Tullow Ltd</a>, <a href="https://www.reuters.com/business/energy/suriname-state-oil-firm-chevron-sign-offshore-oil-output-sharing-contract-2021-10-13/">Chevron</a>, <a href="https://www.nytimes.com/2021/01/20/business/energy-environment/suriname-oil-discovery.html">Apache, Total and Royal Dutch Shell</a>. </p>
<p>I study factors that influence <a href="https://www.linkedin.com/in/jennapher-lunde-seefeldt-455a52113/">levels of democracy and social justice within nations</a>, especially as they relate to natural resources and <a href="https://doi.org/10.1111/polp.12365">economic structures</a>. As I see it, these newer producers are in a unique position compared to other oil-exporting nations, such as Nigeria and Ecuador. </p>
<p>In too many cases, developing nations opening their economies to oil production have been expected to accept the terms companies demand, with little room for <a href="https://www.theguardian.com/global-development/2021/nov/09/a-wealth-of-sorrow-why-nigerias-abundant-oil-reserves-are-really-a-curse">negotiation</a> and <a href="https://law.stanford.edu/wp-content/uploads/2018/05/kimerling.pdf">continued</a> <a href="https://www.brookings.edu/blog/africa-in-focus/2021/11/24/nigerias-petroleum-industry-act-addressing-old-problems-creating-new-ones/">exploitation of host communities</a>. In contrast, Guyana, Suriname and Ghana are better situated to obtain favorable terms. </p>
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<figcaption><span class="caption">Social scientists coined the term “resource curse” to describe countries that are rich in natural resources such as oil, but have poor economic growth or development. One challenge for these nations is negotiating equitable deals with foreign investors.</span></figcaption>
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<h2>Striking better deals</h2>
<p>As world markets grapple with the current oil price shock, niche producers are in especially favorable positions to secure advantageous contracts and more favorable terms from international energy companies. For example, oil companies typically pay host countries royalties on their revenues that average <a href="https://www.nytimes.com/2021/01/20/business/energy-environment/suriname-oil-discovery.html">about 16%</a>. To date, Guyana and Suriname have accepted fees of less than 6.5% in an effort to attract investors. Under current conditions, they may be able to ask for more during new contract negotiations. </p>
<p>Oil production started in Guyana in late 2019, and currently the country produces over <a href="https://corporate.exxonmobil.com/News/Newsroom/News-releases/2022/0211_ExxonMobil-starts-production-at-Guyanas-second-offshore-development">340,000 barrels per day</a>. Guyana learned from its first block contract with ExxonMobil to demand more “<a href="https://www.forbes.com/sites/davidblackmon/2020/08/20/guyanas-new-government-makes-plans-for-more-demands-on-exxonmobil/">local content</a>” – a key condition in oil negotiations that refers to hiring local workers and using locally made goods and equipment. Natural resources minister Vickram Bharrat has called that agreement, made by a previous administration, “one of the worst ever between a government and an oil company,” and Guyanese officials say they <a href="https://www.argusmedia.com/en/news/2299461-guyana-seeks-bigger-take-from-new-oil-contracts">will seek more-favorable terms in future agreements</a>. </p>
<p>Suriname’s new offshore oil discoveries offer potential. Small operations are currently producing about <a href="https://oilnow.gy/featured/suriname-oil-discoveries-estimated-at-1-4-billion-barrels-rystad-energy/">20,000 barrels per day</a>, and major projects are <a href="https://www.worldoil.com/magazine/2021/may-2021/features/guyana-suriname-basin-rise-from-obscurity-to-super-potential">expected to start by 2025</a>. </p>
<p>Suriname is <a href="https://www.kaieteurnewsonline.com/2021/12/23/suriname-does-continuous-reviews-of-companies-oil-spill-response-plans/">demanding increased insurance</a> from oil companies in the event of an oil spill, along with prepared emergency cleanup procedures. These processes are continually reviewed and criticized, keeping companies on their toes. </p>
<p>Ghana started oil development in 2007 and now produces about <a href="https://hawilti.com/uncategorized/ghana-bets-on-higher-oil-revenues-despite-production-decline-over-2022-2025/">163,000 barrels per day</a>. However, ExxonMobil pulled out of the country in 2021, reportedly to <a href="https://www.theafricareport.com/98380/exxons-exit-from-ghana-may-be-first-sign-of-majors-quitting-africa/">focus on higher-value projects elsewhere</a>, and depressed demand during the COVID-19 pandemic cut into Ghana’s oil exports. </p>
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<a href="https://images.theconversation.com/files/451909/original/file-20220314-19-1co98vw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Men on an offshore oil platform in coveralls and helmets, smiling" src="https://images.theconversation.com/files/451909/original/file-20220314-19-1co98vw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/451909/original/file-20220314-19-1co98vw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/451909/original/file-20220314-19-1co98vw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/451909/original/file-20220314-19-1co98vw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/451909/original/file-20220314-19-1co98vw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/451909/original/file-20220314-19-1co98vw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/451909/original/file-20220314-19-1co98vw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Ghanaian President John Atta Mills turns a valve to symbolically open oil production in the Jubilee field off Ghana’s west coast, Dec. 15, 2010.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/ghanaian-president-john-atta-mills-turns-the-valve-to-flag-news-photo/107606452">Pius Utomi Ekpei/AFP via Getty Images)</a></span>
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<p>Now, Ghana’s national oil company, Ghana National Petroleum Corp., is <a href="https://www.bloomberg.com/news/articles/2021-10-18/ghana-s-gnpc-on-acquisition-drive-to-better-control-oil-assets">taking a larger role</a>, buying shares in oil fields from companies like Occidental Petroleum. Greater state involvement is raising uncertainty about how much access Ghana will offer to foreign oil companies. Some, including Tullow Oil and Aker Energy, are producing there now, but <a href="https://www.theguardian.com/business/2019/dec/09/tullow-oil-shares-ghana-stock-market-value">Tullow’s shares have plummeted</a> in recent years, and there has been speculation that it may leave Ghana.</p>
<h2>Managing oil income</h2>
<p>Nations and states that produce oil or other natural resources often put their royalties into <a href="https://www.swfinstitute.org/research/sovereign-wealth-fund">sovereign wealth funds</a> instead of simply adding them to general treasury funds. A sovereign wealth fund is essentially a rainy day pot that the government can use in times of economic stress to continue funding major priorities, such as infrastructure projects and social programs. </p>
<p>Some of these funds, notably in <a href="https://abcnews.go.com/Business/norwegians-millionaires-norways-sovereign-wealth-fund/story?id=21488085">Norway</a> and <a href="https://www.bbc.com/worklife/article/20181220-why-alaska-sends-each-resident-a-cheque-in-the-mail">Alaska</a>, have produced significant benefits for residents. However, some experts argue that they <a href="https://doi.org/10.1016/j.erss.2021.102048">aren’t necessarily well suited for developing nations</a>.</p>
<p>According to this view, the success of these funds <a href="https://openknowledge.worldbank.org/handle/10986/17313">depends on many hard-to-control variables</a>, such as whether the country has a diversified economy, its level of corruption and global events like commodity price collapses. And managing the funds <a href="https://globalswf.com/news/png-s-struggle-to-establish-swf-illustrates-challenges-facing-resource-rich-least-developed-countries">requires significant technical skills</a>. </p>
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<p><a href="https://doi.org/10.1080/02646811.2017.1329120">Ghana</a> created an Oil Heritage Fund in 2011, and <a href="https://oilprice.com/Latest-Energy-News/World-News/Guyana-Votes-To-Set-Up-Oil-Wealth-Fund.html">Guyana</a> and <a href="https://suriname-energy.com/en/article/top-three-things-suriname-must-learn-guyanas-oil-boom">Suriname</a> are in the process of doing so. All three may need assistance to manage these funds effectively and maximize benefits for their citizens.</p>
<h2>Transparency and peer support</h2>
<p>Recognizing that it can be challenging for developing countries to negotiate with major corporate investors, a number of nongovernmental organizations have become active in this sector. One that’s particularly relevant to oil production is the <a href="https://eiti.org/About">Extractive Industries Transparency Initiative</a>, which seeks to publicize information about extraction practices, contracts, taxing and spending processes, and more. This benefits the public by tracking where revenue goes and promoting accountability. </p>
<p>The <a href="https://www.newproducersgroup.online/what-we-do/">New Producers Group</a> works to help countries manage resources effectively through peer-to-peer relationships and knowledge exchange. Emerging producers can learn from other nations’ experiences and collaborate with other governments on issues that affect them all. For example, the organization has held several events recently, analyzing <a href="https://www.newproducersgroup.online/event/cop26-side-event-climate-change-and-new-petroleum-producing-countries/">what the global transition away from fossil fuels means for emerging oil producers</a>, and how these countries can manage the transition while working to end poverty.</p>
<p>As members of both organizations, Ghana, Guyana and Suriname have access to tools that many early producers did not. All three countries have participated in <a href="https://www.newproducersgroup.online/members-area/">multilateral meetings and exchanges</a> with peers and <a href="https://eiti.org/public-benefit">shared information</a> with local citizens. </p>
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<p>Keeping the public informed helps to hold government officials and corporations accountable and promotes public involvement. Citizens and civil society watchdogs <a href="https://www.transparency.org/en/blog/in-depth-guyanas-oil-makes-the-case-for-publishing-public-contracts">criticized</a> ExxonMobil’s first contract in Guyana for not including citizen feedback and being created behind closed doors. </p>
<p>Public involvement and transparency also reduce the potential for corruption, a common problem in resource-rich nations. Transparency International’s <a href="https://www.transparency.org/en/cpi/2021">Corruption Perceptions Index</a> measures perceived levels of public sector corruption in nations worldwide. On a scale with 100 as the worst score, Guyana and Suriname scored 39 and Ghana scored 43, so all three states have significant room for improvement. </p>
<p>As the world slowly transitions away from fossil fuels, emerging producers are acutely aware of the need to seize the moment for development’s sake, but also seek to meet climate change pledges. Guyana and Suriname may have an <a href="https://www.worldpoliticsreview.com/articles/30258/to-develop-oil-guyana-and-suriname-could-set-back-climate-goals">asset</a> in the fight against climate change: dense forests that can absorb large quantities of carbon, helping to offset emissions. </p>
<p>[<em>Over 150,000 readers rely on The Conversation’s newsletters to understand the world.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-150ksignup">Sign up today</a>.]</p>
<p>Guyana has unveiled a <a href="https://www.thedialogue.org/wp-content/uploads/2021/11/LEA211119.pdf">Low Carbon Development Strategy for 2030</a> and has <a href="https://www.stabroeknews.com/2022/02/19/news/guyana/guyana-looking-to-market-at-least-8m-carbon-credits-by-july/">partnered with Norway to generate carbon credits</a> for protecting its forests. I see partnerships like these as ways to advance environmental goals alongside the social and economic development that these nations desperately need.</p><img src="https://counter.theconversation.com/content/178862/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jennapher Lunde Seefeldt is affiliated with American Political Science Association. </span></em></p>Buyers are avoiding Russian oil in response to the war in Ukraine. Can smaller producers leverage this moment to strike favorable deals with big oil companies?Jennapher Lunde Seefeldt, Assistant Professor of Government and International Affairs, Augustana UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1782692022-03-03T13:26:16Z2022-03-03T13:26:16ZShell, BP and ExxonMobil have done business in Russia for decades – here’s why they’re leaving now<figure><img src="https://images.theconversation.com/files/449591/original/file-20220302-17-234t11.jpg?ixlib=rb-1.1.0&rect=7%2C0%2C4941%2C3294&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Pumps at a Shell fueling station in Tatarstan, Russia, Nov. 20, 2017.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/pump-nozzles-at-a-shell-petrol-station-in-kazan-tatarstan-news-photo/876639322">Yegor Aleyev\TASS via Getty Images</a></span></figcaption></figure><p>In response to Russia’s invasion of Ukraine, British energy giant BP announced on Feb. 27, 2022, that it will <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">sell its nearly 20% ownership in Russian state-owned energy giant Rosneft</a>. BP’s rival Shell is also <a href="https://www.reuters.com/business/energy/shell-exit-russia-operations-after-ukraine-invasion-2022-02-28/">pulling out of all of its operations in Russia</a>, as are U.S. energy giant <a href="https://www.ft.com/content/76db0e18-7c7e-4b96-9ee5-81dcfca18f34">ExxonMobil</a> and Norway’s state-controlled company, <a href="https://www.equinor.com/en/news/20220227-equinor-start-exiting-joint-ventures-russia.html">Equinor</a>.</p>
<p>These breakups will not be cheap. BP’s stake in Rosneft is <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">worth US$14 billion</a>. In various projects, Shell has about <a href="https://www.forbes.com/sites/jonathanponciano/2022/02/28/shell-joins-bp-abandons-3-billion-russia-investments-after-senseless-ukraine-invasion/?sh=3f7769636a44">$3 billion in assets in Russia</a>. ExxonMobil has over <a href="https://www.wsj.com/articles/exxon-to-shut-down-oil-production-in-russia-after-ukraine-attack-11646180028">1,000 employees</a> and more than <a href="https://www.reuters.com/business/energy/exxon-mobil-begins-removing-us-employees-its-russian-oil-gas-operations-2022-03-01/">$4 billion in assets</a> there. Pulling out will inflict significant financial hits on all of these companies.</p>
<p>Western energy companies have invested and operated in Russia for a long time – <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">over 30 years for BP</a> and <a href="https://www.ft.com/content/76db0e18-7c7e-4b96-9ee5-81dcfca18f34">more than 25 years for ExxonMobil</a>. They are accustomed to managing international political risks. </p>
<p>In my view, Russia’s invasion of Ukraine has completely changed Western energy companies’ cost-benefit analysis of doing business in Russia. I have researched <a href="https://scholar.google.com/citations?user=7lfhUj0AAAAJ&hl=en">multinational companies’ foreign direct investments</a> <a href="https://business.rice.edu/person/yan-anthea-zhang">in emerging markets</a> for over two decades and have closely followed Western energy companies’ investments in Russia. I expect that other Western oil majors, such as French company <a href="https://totalenergies.com/">TotalEnergies</a>, are also likely to pull out of Russia, and that it may take many years for these companies to reengage there. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two men in suits smile and extend hands." src="https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=476&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=476&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=476&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=598&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=598&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=598&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">BP CEO Bob Dudley (left) shakes hands with Russian President Vladimir Putin during the Russian Energy Week forum in Moscow on Oct. 2, 2019.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/russian-president-vladimir-putin-shakes-hands-with-ceo-of-news-photo/1173086765">Mikhail Svetlov/ Getty Images</a></span>
</figcaption>
</figure>
<h2>Big risks, big payoffs</h2>
<p>Foreign investment in Russia has never been easy. For example, in 2003, BP and a consortium of Russian <a href="https://www.thestreet.com/markets/emerging-markets/what-exactly-is-a-russian-oligarch">oligarchs</a> formed the joint venture TNK-BP, which became one of the largest oil producers in Russia. However, disputes ensued over the venture’s leadership, operations and international expansion. </p>
<p>The situation became so fraught that Bob Dudley, then the head of TNK-BP and later BP’s chief executive officer, was forced to <a href="https://www.ft.com/content/8b4968fa-40d8-40ae-b2f9-f12cd8b23f9c">flee from Russia in 2008</a>. To resolve the disputes, BP sold its 50% equity in TNK-BP to Rosneft in 2013 for <a href="https://www.bloomberg.com/news/articles/2022-02-28/first-bp-now-shell-big-oil-walks-away-after-decades-in-russia-as-war-rages">$12.5 billion in cash and a nearly 20% share in Rosneft</a>. </p>
<p>Shell got involved in the early 1990s in the <a href="https://www.shell.com/about-us/major-projects/sakhalin/sakhalin-an-overview.html">Sakhalin-2 project</a> to develop natural gas reserves in Russia’s Far East, and built Russia’s first liquefied natural gas facility there. As the project neared completion in 2006, at a cost of more than $20 billion, Shell and its Japanese partners were forced to sell a 50% share to Russia’s state-owned natural gas giant, Gazprom, for $7.45 billion because Putin’s government was unhappy with the <a href="https://www.bloomberg.com/news/articles/2022-02-28/first-bp-now-shell-big-oil-walks-away-after-decades-in-russia-as-war-rages">easy terms previously offered by the Yeltsin administration</a>. </p>
<p>During crises like these, Western energy companies weighed the potential gains and costs of operating in Russia and concluded that staying in was worth it. It’s easy to see why: Russia holds <a href="https://www.worldometers.info/gas/russia-natural-gas/#">24% of the world’s total natural gas reserves</a>. It has comprehensive pipeline networks to the west to move natural gas to European countries, and large reserves to its east that are close to some of the world’s hungriest energy markets, including Japan, South Korea and China. </p>
<p>For years, Western energy companies viewed compromise with the Russian government as part of the cost of doing business there. As long as expected gains exceeded costs, they stayed.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/Tc8VjfKCoGs?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Oil companies aren’t the only businesses cutting ties with Russia in response to its invasion of Ukraine.</span></figcaption>
</figure>
<h2>Reputations matter</h2>
<p>Russia’s invasion of Ukraine has changed those calculations. Now, executives at oil majors need to assess possible broader damage to their corporate reputations and to relationships with their home country governments, shareholders and other interest groups if they stay in Russia. Unlike controversies within the energy industry, invading an independent sovereign nation is much too high profile of a development for companies to ignore.</p>
<p>Academic research shows that there is a positive correlation between <a href="https://doi.org/10.1002/csr.1480">companies’ socially responsible behaviors and financial performance</a>. Simply put, companies that do good tend to do well financially. The invasion of Ukraine represents a critical shift in Russia’s business environment. As BP Chief Executive Bernard Looney stated on Feb. 26, the situation unfolding in Ukraine “has caused us to <a href="https://www.reuters.com/business/energy/britains-bp-says-exit-stake-russian-oil-giant-rosneft-2022-02-27/">fundamentally rethink BP’s position with Rosneft</a>.” </p>
<p>In particular, Western energy companies that partner with the Russian government now may be perceived as weakening their own governments’ sanctions and helping to finance Russia’s war in Ukraine. Russia owns 40% of BP’s Russian partner, Rosneft; the company’s CEO and board chair, Igor Sechin, is <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">Russia’s former deputy prime minister and a close Putin ally</a>. Shell’s primary partner in Russia is <a href="https://www.investopedia.com/articles/markets/082615/5-biggest-russian-natural-gas-companies.asp">Gazprom, the state-run natural gas giant</a>. </p>
<p>To maintain their corporate reputations and relationships with key interest groups, BP, Shell, Equinor and ExxonMobil clearly have decided that it is important to cut their ties in Russia completely, immediately and publicly. BP’s current and former chief executive officers <a href="https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-to-exit-rosneft-shareholding.html">resigned from Rosneft’s board of directors on Feb. 27, three days after the invasion began, “with immediate effect</a>.”</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1498975166151409665"}"></div></p>
<p>While the Western world is imposing severe and united sanctions on Russia in sectors ranging from <a href="https://www.cnet.com/how-to/what-is-swift-banking-ukraine-russia-crisis/">finance</a> to <a href="https://www.reuters.com/business/airspace-closures-after-ukraine-invasion-stretch-global-supply-chains-2022-03-01/">aviation</a>, Western governments have <a href="https://www.reuters.com/business/energy/us-has-not-sanctioned-russian-oil-traders-are-avoiding-it-2022-03-01/">avoided sanctioning energy exports from Russia</a>, seeking to protect their citizens from price spikes. Nonetheless, if Western energy companies remain in Russia and continue partnering with Russian state-owned companies, they could be perceived as undermining the Western response. Indeed, BP’s exit decision reportedly came under <a href="https://www.theguardian.com/business/2022/feb/25/bps-ties-to-russia-draw-uk-government-concern">pressure from the British government</a>. </p>
<p>None of these companies have many viable potential buyers for their Russian holdings. Russian firms, facing sanctions, don’t have the resources to acquire foreign investors’ assets, and other Western energy companies are unlikely to pursue them. The only potential investors are private equity firms that face less scrutiny than publicly traded companies, or companies from countries that don’t join Western sanctions on Russia. </p>
<p>Russia’s energy sector depends heavily upon Western companies’ technologies, especially for <a href="https://www.ft.com/content/fc354a6a-5dcb-11e4-b7a2-00144feabdc0">hard-to-recover oil projects and offshore projects</a>. BP, Shell and ExxonMobil will leave significant technological voids that could be hard for newcomers to fill. </p>
<p>Corporate leaders are used to making high-level strategic decisions that require weighing costs and benefits. What has changed the calculus for Western energy companies is the broad potential damage to their companies’ reputations and relationships with various interest groups if they stay in Russia. Clearly, executives cannot limit benefit-cost calculations to specific investments. Their overall corporate reputations can be worth billions of dollars.</p>
<p>[<em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-youresmart">You can read us daily by subscribing to our newsletter</a>.]</p><img src="https://counter.theconversation.com/content/178269/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yan Anthea Zhang is affiliated with the Strategic Management Society and the Academy of Management. </span></em></p>The world’s largest energy companies are used to doing business in risky places with difficult partners. But with war in Ukraine, preserving their reputations outweighs profits.Yan Anthea Zhang, Professor and Fayez Sarofim Vanguard Chair of Strategic Management, Rice UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1774272022-02-21T14:15:30Z2022-02-21T14:15:30ZAU-EU Summit: private sector partnerships are where real change can happen<figure><img src="https://images.theconversation.com/files/447194/original/file-20220218-21-cr29nj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">African Union leaders and their European Union counterparts held their 6th Summit meeting in Brussels. DOMINIQUE FAGET/AFP via </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/view-of-the-berlaymont-building-headquarters-of-the-news-photo/74843768?adppopup=true">Getty Images</a></span></figcaption></figure><p>Five years since the African Union (AU) leaders and their European Union (EU) counterparts held their 5th meeting in 2017, the two regional organisations have met again. The February 2022 meeting – 16 months overdue because of COVID – was significant given the actual and potential size of the two blocs. </p>
<p>The relationship between the two continents (the subject of a <a href="https://www.routledge.com/Africa-Europe-Relationship-A-Multistakeholder-Perspective/Marchetti/p/book/9780367467197">book</a> I have edited) has been tested in recent months. Africa has felt neglected by Europe as it struggled to <a href="https://www.africa-newsroom.com/press/au-statement-on-au-vaccines-financing-strategy">access COVID vaccines</a>. Europe has been <a href="https://www.europarl.europa.eu/RegData/etudes/IDAN/2015/549031/EXPO_IDA(2015)549031_EN.pdf">uncomfortable</a> with China’s rising influence in Africa.<br>
But their future depends on the relationship. The current dialogue between the two blocs is about priority areas of economic cooperation, job creation and climate change. Others are migration management, investment in youth, and peace and security.</p>
<p>If they can build real partnerships, both continents can prosper. Conversely, entering into a competitive relationship or seeking partnership elsewhere represents a significant loss of opportunity.</p>
<h2>Important connections</h2>
<p>Europe remains Africa’s largest foreign aid provider. The flow of <a href="https://www.routledge.com/An-Emerging-Africa-in-the-Age-of-Globalisation/Mudida/p/book/9780367673871">trade and investments</a> between the two continents is high. Africa’s exports to <a href="https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Africa-EU_-_international_trade_in_goods_statistics">the European Union</a>, for instance, totalled US$146 billion in 2021 compared to its imports of US$142 billion. </p>
<p>Technological transfer is similarly robust, with recent new lines open on <a href="https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_22_1184">pharmaceuticals</a>. Africa provides a significant amount of raw materials and labour to Europe. Much of Africa’s diaspora population live in Europe. </p>
<p>The two continents are also connected in <a href="https://www.uclga.org/news/intensification-of-cultural-exchange-between-african-cities-and-european-capitals-of-culture-call-for-participation/">cultural terms</a>, at times passing through the <a href="https://www.press.umich.edu/11991803/city_diplomacy">city cultural diplomacy</a>. The level of cultural exchange is remarkable: from university system to religious integration; and from a linguistic commonality to the arts scene. </p>
<p>Security threats are also shared by the two continents. From terrorism to cyber-attacks, Africa and Europe face <a href="https://www.theparliamentmagazine.eu/news/article/africa-and-europe-facing-common-challenges">common problems</a>, and need to find common responses. </p>
<p>In short, Africa needs Europe, just as Europe needs Africa.</p>
<hr>
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<strong>
Read more:
<a href="https://theconversation.com/the-eu-africa-summit-is-now-the-au-eu-summit-why-the-upgrade-matters-88185">The EU-Africa summit is now the AU-EU summit. Why the upgrade matters</a>
</strong>
</em>
</p>
<hr>
<p>The Africa Union-European Union meeting in Brussels stated its areas of focus as: growth financing; health systems and vaccine production, agriculture and sustainable development; education, culture and vocational training; migration and mobility; private sector support and economic integration; peace, security and governance; climate change and energy transition, and digital and transport connectivity.</p>
<p>These focus areas are well chosen but the question is how best to unlock the potential of this partnership.</p>
<h2>What’s missing?</h2>
<p>With the signing of the <a href="https://afcfta.au.int/en">African Continental Free Trade Area</a> in 2018, the continent laid the ground for significant growth through trade. The COVID pandemic that delayed this growth is <a href="https://news.un.org/en/story/2021/10/1102282">slowly</a> fading away. The time is ripe for a takeoff. </p>
<p>The <a href="https://www.worldbank.org/en/region/afr/overview#1">African market</a> of 1.2 billion people, with an average age of 27 and a gross domestic product of more than US$3,000 billion, is ready for an enabling partnership.</p>
<p>Beyond political cohesion and stability, Africa lacks growth financing and active support of its private sector. Governments and international organisations can certainly support regional growth. But in my opinion it is from partnerships with the private sector that most resources can be generated.</p>
<p>Local companies should make long-term investments to enhance their capabilities and position themselves as key players in national development. But this cannot happen until governments set up adequate normative frameworks for good business practices. For instance, Kenya has a <a href="https://ppp.worldbank.org/public-private-partnership/library/ppp-legal-framework-snapshot-kenya">public-private partnership</a> law that gives incentives and guarantees continuity (in case of political transition) to investors who put money in public projects. </p>
<p>Such interventions would swell the middle class to drive growth. That, in turn, could deliver economic and political stability, as the history of modern state building shows.</p>
<p><a href="https://theconversation.com/why-africa-should-turn-to-capital-markets-to-fund-its-infrastructure-deficit-50782">Infrastructure development</a> is another key area for investment. Land, air, and maritime transportation is still severely limited across the continent. More roads, rails and flight connections are needed in order to achieve the full potential of economic growth in the region. </p>
<p>Strengthening of intercontinental value chains (step-by-step activities that transform raw material or ideas into products) is a priority area for the partnership between Africa and Europe. Functioning value chains could have spillover effects on the domestic industrial sector, and help boost national self-sufficiency. This is particularly critical for sectors such as pharmaceuticals where the COVID pandemic has <a href="https://theconversation.com/south-african-case-study-sheds-light-on-how-vaccine-manufacturing-can-be-developed-158436">exposed</a> weakness. </p>
<p>The continental project for free trade is an <a href="https://theconversation.com/why-africas-free-trade-area-offers-so-much-promise-93827">essential component</a> for the growth and industrial transformation of Africa. Its building blocks are the various <a href="https://au.int/en/organs/recs">regional economic communities</a> that currently exist across Africa. The cooperation between Africa and Europe needs to strengthen these groupings.</p>
<p>Connected to the search for a single market is the need for investment in human capital. Empowering young people could bring <a href="https://www.imf.org/external/pubs/ft/fandd/2006/09/basics.htm">demographic dividends</a> (economic growth resulting from a change in the age structure of a population). This can be accelerated through mobility between the two continents, and collaboration between European and African universities. </p>
<h2>Genuine cooperation</h2>
<p>Genuine cooperation between Europe and Africa must be inclusive and mutually beneficial. Otherwise, the partnership will not hold. </p>
<p>If properly developed, the relationship between Africa and Europe could constitute a very significant component of <a href="https://rowman.com/ISBN/9781498510134/Global-Strategic-Engagement-States-and-Non-State-Actors-in-Global-Governance">global inclusive development</a>.</p><img src="https://counter.theconversation.com/content/177427/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Raffaele Marchetti does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The cooperation should strengthen institutions and rally private entities to fund public projects.Raffaele Marchetti, Deputy Rector for Internationalization and Full Professor of International Relations, LUISS Universita Guido CarliLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1599312021-04-28T08:49:27Z2021-04-28T08:49:27ZPolitics with Michelle Grattan: former ASIO head David Irvine on the cyber threats Australia faces<p>“The warfare of the 21st century” is going to be “fought in cyberspace before kinetic shots are fired” says leading national security expert David Irvine. </p>
<p>And perhaps the fight has already begun, with Australia’s institutions, businesses, and citizens subject to a near constant barrage of cyber attacks.</p>
<p>Previously chair and now a board member of the Cyber Security Cooperative Research Centre, Irvine has a deep knowledge of the cyber risks posed to Australia and Australians by both nation states and criminals. </p>
<p>His career has included heading both ASIS, which manages Australia’s overseas spying activities, and ASIO, responsible for domestic protection.</p>
<p>Irvine describes cybercrime as a “massive issue”, and say that compared to countries like “China, Russia,[…]Iran, and North Korea” the West is lagging behind in its defensive cyber capability. </p>
<p>“I think almost every Western country is probably behind the game in its defences.”</p>
<p>Part of this is the nature of cyber incursions. “One of the rules in cybercrime is that the criminal is always half a step ahead of the protector.”</p>
<p>What can be done? Last year the government committed $1.67 billion over 10 years to combating cybercrime, but Irvine calls in particular for a “public awareness campaign” to get the message through strongly.</p>
<p>“I think back to the old days of HIV and the Grim Reaper, and my sense is that we actually need a very hard hitting campaign that brings home to individuals and businesses[…] the threat that they are under and the sort of resilience that they need to develop as individuals, as companies, and as a nation.”</p>
<p>Irvine is also chair of the Foreign Investment Review Board, and is a former ambassador to China. He says of the current tensions with China, and warnings about <a href="https://www.theaustralian.com.au/commentary/the-drums-of-war-are-growing-louder/news-story/bf29fb3cf94b89f84eaeb22fd32d9724">“the drums of war”</a>: </p>
<p>“Ultimately, I think we depend on China and the United States to develop a modus vivendi which concedes some interests but protects others. Because the alternative is really too horrendous to contemplate.”</p>
<p><a href="https://itunes.apple.com/au/podcast/politics-with-michelle-grattan/id703425900?mt=2"><img src="https://images.theconversation.com/files/233721/original/file-20180827-75984-1gfuvlr.png" alt="Listen on Apple Podcasts" width="268" height="68"></a> <a href="https://www.google.com/podcasts?feed=aHR0cHM6Ly90aGVjb252ZXJzYXRpb24uY29tL2F1L3BvZGNhc3RzL3BvbGl0aWNzLXdpdGgtbWljaGVsbGUtZ3JhdHRhbi5yc3M"><img src="https://images.theconversation.com/files/233720/original/file-20180827-75978-3mdxcf.png" alt="" width="268" height="68"></a></p>
<p><a href="https://www.stitcher.com/podcast/the-conversation-4/politics-with-michelle-grattan"><img src="https://images.theconversation.com/files/233716/original/file-20180827-75981-pdp50i.png" alt="Stitcher" width="300" height="88"></a> <a href="https://tunein.com/podcasts/News--Politics-Podcasts/Politics-with-Michelle-Grattan-p227852/"><img src="https://images.theconversation.com/files/233723/original/file-20180827-75984-f0y2gb.png" alt="Listen on TuneIn" width="318" height="125"></a></p>
<p><a href="https://radiopublic.com/politics-with-michelle-grattan-WRElBZ"><img class="alignnone size-medium wp-image-152" src="https://images.theconversation.com/files/233717/original/file-20180827-75990-86y5tg.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" alt="Listen on RadioPublic" width="268" height="87"></a> <a href="https://open.spotify.com/show/5NkaSQoUERalaLBQAqUOcC"><img src="https://images.theconversation.com/files/237984/original/file-20180925-149976-1ks72uy.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" width="268" height="82"></a> </p>
<h2>Additional audio</h2>
<p><a href="http://freemusicarchive.org/music/Lee_Rosevere/The_Big_Loop_-_FML_original_podcast_score/Lee_Rosevere_-_The_Big_Loop_-_FML_original_podcast_score_-_10_A_List_of_Ways_to_Die">A List of Ways to Die</a>, Lee Rosevere, from Free Music Archive.</p><img src="https://counter.theconversation.com/content/159931/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan discusses cyber security with former chairman of the Cyber Security Cooperative Research Centre, David IrvineMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1436222020-07-30T19:58:02Z2020-07-30T19:58:02ZPost-COVID, there’ll be less of a reason to cut company tax than before<figure><img src="https://images.theconversation.com/files/350378/original/file-20200730-21-hkt66o.jpg?ixlib=rb-1.1.0&rect=0%2C140%2C3079%2C1356&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Andrey Bayda/Shutterstock</span></span></figcaption></figure><p>They’re at it again, pushing lower <a href="https://www.cis.org.au/publications/policy-papers/lower-company-tax-to-resuscitate-the-economy/">company tax</a> as a way to resuscitate the economy.</p>
<p>The arguments were well ventilated at the time the government pushed for <a href="https://www.theaustralian.com.au/national-affairs/jobs-lost-without-taxcut-plan-turnbull/news-story/0c39ef828553734b0e94c7cf2eadb2a7">company tax cuts</a>, failed to get support in the Senate, and then <a href="https://theconversation.com/government-puts-tax-cuts-for-big-companies-on-back-burner-again-99076">abandoned them</a> in favour of personal income tax cuts in the leadup to the last election, declaring “<a href="https://www.afr.com/politics/company-tax-cuts-consigned-to-the-never-never-20190506-p51kdr">we’re not coming back to the company tax cuts</a>”.</p>
<p>The new argument is that they’ll help get us out of recession, but in the same sense that Leo Tolstoy observed that while all happy families resemble each other, each unhappy family is unhappy <a href="https://www.britannica.com/biography/Leo-Tolstoy/Anna-Karenina">in its own way</a>, each recession is different.</p>
<p>This recession is the result of the forced hibernation of large parts of the economy in order to reduce the spread of COVID-19.</p>
<h2>This recession is about households</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/350383/original/file-20200730-17-14n6v9d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/350383/original/file-20200730-17-14n6v9d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/350383/original/file-20200730-17-14n6v9d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/350383/original/file-20200730-17-14n6v9d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/350383/original/file-20200730-17-14n6v9d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/350383/original/file-20200730-17-14n6v9d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/350383/original/file-20200730-17-14n6v9d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/350383/original/file-20200730-17-14n6v9d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The first priority will be household spending.</span>
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<p>When the time is right, it will be households that hold the key to reversing the effects of hibernation. </p>
<p>Australian households account for 60 cents in every dollar spent in the Australian economy, and they accounted for a disproportionate share of the fall in GDP in the first half of 2020.</p>
<p>With shops and cafes shut, the need for investment in new facilities is low. </p>
<p>The first step to recovery has to be reopening the businesses that exist and are closed or are operating well below capacity. </p>
<p>This means getting households spending, supported by stimulus.</p>
<h2>Company tax cuts benefit foreigners</h2>
<p>Our modelling in 2018 showed that while a company tax cut would stimulate investment and economic activity, in both the short run and the long run the benefits would accrue to <a href="https://www.copsmodels.com/elecpapr/g-287.htm">foreign investors</a> rather than to Australians.</p>
<p>In theory, all investors should respond positively to a lower company tax rate, but under Australia’s system of <a href="https://theconversation.com/words-that-matter-whats-a-franking-credit-whats-dividend-imputation-and-whats-retiree-tax-111423">dividend imputation</a> local investors are shielded from company tax, meaning the cuts matter most for those overseas.</p>
<p>Those overseas investors would be likely to invest more in Australia after a company tax cut, boosting Australia’s capital stock (buildings and equipment) making workers more valuable, pushing up wages.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/big-business-doesnt-want-to-talk-about-it-but-smes-lose-from-a-company-tax-cut-57965">Big business doesn't want to talk about it, but SMEs lose from a company tax cut</a>
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<p>While sold as a plus, higher wages would make it harder for locally-owned businesses. Our modelling found the biggest losers would be in the retail, <a href="https://theconversation.com/big-business-doesnt-want-to-talk-about-it-but-smes-lose-from-a-company-tax-cut-57965">health care and education industries</a>.</p>
<p>With foreign investors paying less tax, the local population would bear the consequences of spending cuts or higher taxes, broadly negating the benefit of higher wage growth.</p>
<h2>COVID makes the case weaker</h2>
<p>As well, much of the company tax cut would be ‘wasted’ providing a windfall gain to foreign investors already in Australia.</p>
<p>The case for a company tax cut is now weaker, not stronger, than it was in 2018.</p>
<p>Budget deficits will reach new highs in 2019-20 and 2020-21. It is the right policy for the circumstances we are in, but it will leave future governments with difficult decisions about budget repair. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-temporary-income-tax-hike-is-the-bitter-but-equitable-pill-australia-should-swallow-135037">A temporary income tax hike is the bitter but equitable pill Australia should swallow</a>
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<p>When the economy is strong enough, taxpayers could face deficit repair levies, bracket creep, new taxes, and the broader application of existing ones. </p>
<p>It is for this reason that the <a href="https://www.imf.org/%7E/media/Files/Publications/covid19-special-notes/special-series-on-covid-19-tax-law-design-considerations-when-implementing-responses.ashx">International Monetary Fund</a> warned against knee-jerk tax changes during the crisis and said:</p>
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<p>a premium should be placed on measures that move the tax system in desirable directions – specifically: refrain from tax holidays; keep environmental taxes; do not cut corporate income tax rates</p>
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<p>If the company tax rate was to be cut now, it would be difficult later to restore it to where it was when it was needed.</p>
<p>The smaller tax contribution by foreign investors would mean more of the adjustment would fall on us.</p>
<h2>And investors may well find us increasingly attractive</h2>
<p>Another fresh reason to be cautious about a cut in company tax is that Australia’s relative attractiveness as an investment destination might well improve. </p>
<p>We have suffered, but most of the world has suffered the same or worse. </p>
<p>Deciding where to invest their next dollars, investors might well form the view that our response to the pandemic has been better than those of other destinations such as the United States, Britain and Brazil.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/morrison-government-toughens-foreign-investment-scrutiny-to-protect-national-security-140100">Morrison government toughens foreign investment scrutiny to protect 'national security'</a>
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<p>One of the benefits of being a peaceful, well-managed resource-rich Western democracy is that when things are bad elsewhere foreign investors look here.</p>
<p>We might continue to find (as we have in the past) that we get all the foreign investment we can handle with our company tax rate as it is.</p><img src="https://counter.theconversation.com/content/143622/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia will be in the box seat for foreign investment, with or without a company tax cut.Janine Dixon, Economist at Centre of Policy Studies, Victoria UniversityJason Nassios, Senior Research Fellow, Centre of Policy Studies, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1387172020-06-19T12:51:08Z2020-06-19T12:51:08ZWhy countries should leverage universities as a new force in global diplomacy<figure><img src="https://images.theconversation.com/files/340913/original/file-20200610-34666-1dzbti5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Universitas Gadjah Mada (above) in Yogyakarta, Indonesia, has joined the ranks of the world’s top 300 universities in the 2021 QS World Rankings.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>States have long been the <a href="https://dl1.cuni.cz/pluginfile.php/486328/mod_resource/content/0/Kenneth%20N.%20Waltz%20Theory%20of%20International%20Politics%20Addison-Wesley%20series%20in%20political%20science%20%20%20%201979.pdf">main actors in international relations</a>. But they are finding it increasingly difficult to deal by themselves with multiple contemporary issues – such as climate change, pandemics, terrorism and economic inequality – due to <a href="https://www.greeneconomycoalition.org/news-analysis/climate-change-and-corruption">inefficiency and corruption</a>.</p>
<p>This has led to the emergence of a number of new non-state actors. For example, terror groups such as ISIS have managed to heavily <a href="https://www.wilsoncenter.org/article/trump-administration-isis-al-qaeda">affect other countries’ foreign policies on terrorism</a>. In very different ways, other actors such as K-Pop group BTS have single-handedly <a href="https://thediplomat.com/2019/03/bts-and-the-global-spread-of-korean-soft-power/">influenced how the world perceives South Korea</a> as a nation.</p>
<p>Universities and higher education institutions have also <a href="http://www.rochelleterman.com/ir/sites/default/files/Barnett%20and%20Duvall%202005.pdf">started challenging the role of states as the dominant force</a> in attracting foreign investment – particularly in terms of human talents and technological resources.</p>
<p>The successful management of higher education has helped countries such as <a href="https://www.topuniversities.com/student-info/university-news/how-much-do-international-students-bring-uk-economy">the United Kingdom (UK) and China</a> raise their international profiles and draw in not only bright researchers but also billions of dollars for their economy.</p>
<p>The global higher education market itself is enormous and is continuing to grow. In 2017, <a href="https://migrationdataportal.org/themes/international-students">over 5.3 million</a> students studied outside their home countries. That’s nearly triple the 2 million total in the 2000s.</p>
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<p>
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<strong>
Baca juga:
<a href="https://theconversation.com/universities-and-government-need-to-rethink-their-relationship-with-each-other-before-its-too-late-139963">Universities and government need to rethink their relationship with each other before it's too late</a>
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<h2>The ‘soft power’ of higher education</h2>
<p>To explain the huge potential of universities, we first need to understand the concept of “soft power”.</p>
<p>Harvard political scientist <a href="http://forum.mit.edu/articles/soft-power-and-higher-education/">Joseph Nye</a> defines it as the ability to get what you want through attraction rather than through coercion or payment. According to Nye, the currency of a country’s attractiveness includes culture, political values and foreign policy.</p>
<p>Higher education institutions can become tools of diplomacy by making a country or culture attractive through intellectual excellence. </p>
<p>Based on the <a href="https://softpower30.com/wp-content/uploads/2019/10/The-Soft-Power-30-Report-2019-1.pdf">Soft Power 30 index</a>, the influence of a country’s higher education is assessed by the following indicators: the number of top global universities, academic papers published and international students in the country.</p>
<p>Countries that rate highly on these indicators end up exerting more influence and global attractiveness.</p>
<p>For instance, <a href="http://data.uis.unesco.org">UNESCO</a> reports that the UK, Germany and China are among the top ten destinations for international students. </p>
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<p>
<em>
<strong>
Baca juga:
<a href="https://theconversation.com/how-universities-came-to-rely-on-international-students-138796">How universities came to rely on international students</a>
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<p><a href="https://www.researchgate.net/publication/327747453_Conceptualizing_Soft_Power_Conversion_Model_of_Higher_Education_Globalization_and_Universities_in_China_and_the_World">A 2018 study</a> from Indiana University in Bloomington, US, suggests the Chinese government’s higher education policies – including providing opportunities to students in developing countries and establishing partner institutions overseas – has helped attract a huge flow of talent into China.</p>
<p>In the UK, international students have contributed a whopping <a href="https://www.topuniversities.com/student-info/university-news/how-much-do-international-students-bring-uk-economy">US$4 billion to the economy over the past ten years</a> through income tax and national insurance payments. This does not even include tuition and post-study work visa fees. </p>
<p>The extra returns from harnessing this market not only subsidise domestic students and research, but also encourage cross-culture collaboration and foster a more peaceful society.</p>
<h2>To boost ‘soft power’, invest in global research</h2>
<p>Within the past two decades, Southeast Asian scientific giant Singapore has developed its higher education system as a hub of <a href="https://www.a-star.edu.sg/Collaborate/collaboration-models">international research collaboration</a> and intensive exchange of <a href="https://www.scmp.com/tech/enterprises/article/3026044/creating-innovation-culture-singapores-not-so-secret-formula">innovation and enterprise</a>. Its investment in global research and development <a href="https://www.nrf.gov.sg/docs/default-source/default-document-library/rie2020-publication-(final-web).pdf">has grown tenfold over the last 25 years</a>. Over US$19 billion has been allocated to its 2020 plan.</p>
<p>Through the National Research Foundation, Singapore offers international scientific grants and even research funding to Singaporean companies, universities and foreign scientists – such as through the <a href="https://www.nrf.gov.sg/docs/default-source/default-document-library/rie2020-publication-(final-web).pdf">Industry Alignment Fund</a>.</p>
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<p>
<em>
<strong>
Baca juga:
<a href="https://theconversation.com/a-better-research-funding-model-for-indonesia-learning-from-singapore-121770">A better research funding model for Indonesia: learning from Singapore</a>
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<p>As a result, Singapore is the only Asian country to have its universities in the <a href="https://www.topuniversities.com/university-rankings/world-university-rankings/2020">Top 15 of the World University Rankings</a> – a key metric of the Soft Power 30 index. </p>
<p>However, the story is different for its more populous neighbour and the largest economy in the region, Indonesia.</p>
<p>Even though it boasts <a href="https://www.share-asean.eu/sites/default/files/SHARE%20Infographic%20HE%20in%20ASEAN_Apr%202019.pdf">the largest number of universities</a> in South East Asia, a lack of <a href="http://dx.doi.org/10.1080/03050068.2015.1112566">academic freedom</a> and <a href="https://theconversation.com/moving-indonesian-research-forward-with-more-private-sector-support-lessons-from-germany-109382">ineffective research funding policies</a> have hampered Indonesia’s higher education for decades.</p>
<p><a href="http://uis.unesco.org/apps/visualisations/research-and-development-spending/">Latest UNESCO data</a> show the country allocated only 0.24% of GDP to research funding compared to Singapore’s 2.2%.</p>
<p>This has diminished the world’s interest in engaging academically with Indonesian universities.</p>
<p>In 2017, the number of foreign students in Indonesia amounted to <a href="https://wenr.wes.org/2019/03/education-in-indonesia-2#_ftn1">just 0,1% of total tertiary education enrolment</a>, which is the lowest among other Southeast Asian countries such as Singapore (27,2%), Malaysia (8%), Thailand (1,3%) and Vietnam (0,24%).</p>
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<p>
<em>
<strong>
Baca juga:
<a href="https://theconversation.com/indonesia-races-against-its-asean-neighbours-but-science-needs-more-collaboration-83840">Indonesia races against its ASEAN neighbours, but science needs more collaboration</a>
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<p>This shows that to achieve global influence or even enter the <a href="https://softpower30.com/wp-content/uploads/2019/10/The-Soft-Power-30-Report-2019-1.pdf">Soft Power 30</a> index, it is important for governments to do a better job of investing in their higher education’s ability to attract foreign talent.</p>
<p><a href="http://aei.pitt.edu/63496/1/WP23-HigherEducation-EUSG.pdf">Extensive studies</a> show that promoting avenues for global research – through scholarship and grant funding – increases a country’s attractiveness at a much higher rate than other education-related factors that affect soft power. </p>
<p>Unless they make improvements, countries such as Indonesia will be left behind in the race to empower higher education institutions as a force of global diplomacy.</p>
<hr>
<p><em>EDITOR’s NOTE: We’ve made a correction to the previous version which misstated the number of foreign students in Indonesia.</em></p><img src="https://counter.theconversation.com/content/138717/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ayu Anastasya Rachman is the adjunct-director of the International Office in Universitas Bina Mandiri Gorontalo.</span></em></p>Higher education institutions have started challenging the role of states as the dominant force in attracting foreign investment – particularly in terms of human talents and technological resources.Ayu Anastasya Rachman, PhD Student in International Relations, Universitas PadjadjaranLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1401002020-06-04T12:38:09Z2020-06-04T12:38:09ZMorrison government toughens foreign investment scrutiny to protect ‘national security’<p>The Morrison government will significantly strengthen its scrutiny of foreign investment to protect sensitive national security technology and information and further ring fence the nation’s critical infrastructure.</p>
<p>It will insert a new “national security test” on bids, in a sweeping overhaul of the foreign investment regime.</p>
<p>The action follows mounting public concern about Chinese investment, although the government - already under harsh criticism from China - will seek to play down suggestions it relates to any one country, and point out it has been a long time in the pipeline.</p>
<p>Planned new legislation will also strengthen compliance provisions to ensure foreign investors follow conditions attached to approvals.</p>
<p>During the pandemic, all foreign investment bids are being scrutinised to ensure unfair advantage is not taken of distressed companies.</p>
<p>But in normal circumstances those under certain thresholds escape examination by the Foreign Investment Review Board (FIRB), the body that makes recommendations to the treasurer.</p>
<p>While all bids from foreign governments are screened, most private investments under $275 million - or $1.2 billion if the country has a free trade agreement with Australia, as China and a number of other major trading partners do – are not scrutinised.</p>
<p>The government is concerned investments in some very sensitive sectors are escaping screening even when there are national security concerns. Of particular worry is the vulnerability of small and medium sized companies that have specialised expertise, but fall below the threshold in value.</p>
<p>Under the new test, foreign investors will have to notify FIRB if they propose to start or acquire an interest – generally 10% or a position of control - in a “sensitive national security business”.</p>
<p>This will mean all foreign investments in sensitive national security businesses will be examined.</p>
<p>Businesses which raise sensitive national security concerns are those involved in critical infrastructure, including telecommunications, energy, ports and water, as well as those which service defence and national security organisations. </p>
<p>The national security test will also involve new powers.</p>
<p>The treasurer will be able to “call in” an investment before, during or after an acquisition for review if it raises risks which were not picked up earlier.</p>
<p>The treasurer will also have a new “last resort” power enabling them to apply or vary conditions or order disposal of an investment where national security concerns emerge after approval. This last resort power would not be retrospective - it would only apply to future approvals under the revised regime.</p>
<p>The government will release draft legislation next month for consultations. It wants it passed this year, to apply from January 1 next year.</p>
<p>It is estimated the new security arrangements will affect only a very small proportion of total foreign investment.</p>
<p>The tougher compliance measures follow complaints that some foreign investors ignore the conditions that are attached to approved bids. Recently fingers were pointed at Alinta for not implementing conditions about information storage. The company was told to comply.</p>
<p>Increasingly, conditions have been applied to allow bids to pass. In 2018-19, 4149 applications were approved with conditions attached. This was 47.6% of total approvals. By value, more than 80% of investment was approved subject to conditions.</p>
<p>The government says the monitoring and enforcement powers of Treasury and the Australian Taxation Office need expansion because of the extensive use of conditions and “emerging risks caused by global developments and rapid advances in technology”.</p>
<p>It notes that apart from residential property investments, the treasurer’s enforcement powers are limited to taking civil action or seeking a criminal prosecution. This inhibits the government’s ability to respond proportionately, for example to a minor breach.</p>
<p>Under the changes, the government will have a wider range of tools for enforcement, including access to premises to collect information and powers to give directions to investors in order to prevent or address suspected breaches.</p>
<p>While most of the announced changes are about toughening the scrutiny regime, the government will at the same time streamline the approval process for investments that do not raise national interest concerns.</p>
<p>Aware of the need to attract passive investment as part of the post COVID recovery, it will narrow the definition of a foreign government investor to exclude certain passive investments in funds where the investors have no influence over the investment or operational decisions of the entity.,</p>
<p>The government is committing $54 million over four years to step up compliance and monitoring capability. Funding will go to Treasury, the ATO and “relevant agencies such as the Department of Home Affairs”.</p>
<p>Treasurer Josh Frydenberg said the changes were the most significant made to the foreign investment regime since it was introduced in 1975.</p>
<p>“The reforms will ensure that our foreign investment regime is able to respond to emerging risks and global developments,” he said.</p>
<p>“Through the introduction of a new national security test, stronger enforcement powers and enhanced compliance obligations, we will ensure that Australia can continue to benefit from foreign investment while safeguarding our national interest.”</p>
<p>The reforms were developed with the support of FIRB whose chairman David Irvine has a national security background, including as head of ASIO.</p>
<p>Irvine said the package “appropriately addresses increasing risks to the national interest whilst ensuring Australia remains welcoming and open to foreign investment”.</p><img src="https://counter.theconversation.com/content/140100/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Under a new national security test the foreign investment review board will have to be notified by foreign investors hoping to secure a ‘sensitive national security business.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1243332019-10-01T12:28:02Z2019-10-01T12:28:02ZUkraine’s President Zelenskiy may come to regret his discussion with President Trump<figure><img src="https://images.theconversation.com/files/294900/original/file-20190930-194819-1ri1e1j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Donald Trump meets with Ukrainian President Volodymyr Zelenskiy on Sept. 25, 2019, in New York. </span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/APTOPIX-Trump/7526a48d3a4d42b6b886311a7eef589a/2/0">AP/Evan Vucci</a></span></figcaption></figure><p>The scandal that erupted in response to the July <a href="https://www.cnn.com/2019/09/25/politics/donald-trump-ukraine-transcript-call/index.html">phone conversation</a> between President Donald Trump and Ukraine’s President Volodymyr Zelenskiy has had obvious consequences for Trump. </p>
<p>But there also are consequences for the newly elected Zelenskiy and his team, as well as for Ukraine more generally. </p>
<p><a href="https://www.cnn.com/2019/09/25/politics/donald-trump-ukraine-transcript-call/index.html">In the phone call</a>, Trump <a href="https://www.nytimes.com/2019/09/25/us/politics/ukraine-transcript-trump.html">urged Zelenskiy to investigate Joe Biden</a> – a leading Democratic candidate to challenge Trump in 2020 – and his son for corruption related to the son’s business dealings in Ukraine. Much of the conversation seemed focused on Ukraine’s history of corruption and attempts to root it out.</p>
<p>During <a href="https://www.washingtonpost.com/politics/2019/09/25/trumps-news-conference-with-ukraines-president-annotated/">his press conference with Donald Trump in New York</a> on Sept. 25, during the U.N. summit, Zelenskiy attempted to remind the world that Ukraine is a sovereign nation with its own national interests, which he, as president, is charged to defend. </p>
<p>He also said that he cannot be forced or pressured to do anything and refused to be drawn in the middle of U.S. politics. </p>
<p>“Sure, we had – I think good phone call. It was normal,” said Zelenskiy. “We spoke about many things, and I – so I think and you read it <a href="https://www.vox.com/2019/9/25/20883928/trump-ukraine-zelensky-transcript-united-nations">that nobody pushed me</a>.”</p>
<p>Whether Zelenskiy likes it or not, Ukraine is in the middle of a U.S. political scandal. </p>
<p>Regardless of the results of the political process in the U.S., Ukraine’s reluctant role in the scandal reinforced the <a href="https://www.jsonline.com/story/news/2019/09/25/ukraine-prosecutor-hailed-trump-achieved-little/2447650001/">notion of deeply entrenched corruption in Ukraine</a>. At the time when the new Ukrainian administration is trying to fight corruption and <a href="https://www.atlanticcouncil.org/blogs/ukrainealert/finally-a-new-window-of-investment-opportunity-in-ukraine/">attract foreign investment</a>, this incident might prove damaging. </p>
<p>And as has been the case throughout history, Ukraine appears to be the victim of international politics rather than an equal player.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/294902/original/file-20190930-194824-1cir6eh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/294902/original/file-20190930-194824-1cir6eh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/294902/original/file-20190930-194824-1cir6eh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/294902/original/file-20190930-194824-1cir6eh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/294902/original/file-20190930-194824-1cir6eh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/294902/original/file-20190930-194824-1cir6eh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=500&fit=crop&dpr=1 754w, https://images.theconversation.com/files/294902/original/file-20190930-194824-1cir6eh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=500&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/294902/original/file-20190930-194824-1cir6eh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=500&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In 2014, Russian troops like those shown here in trucks annexed Ukraine’s Crimean peninsula.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Ukraine-Protests/5856ed64826e4bc7b2738755091a4faf/216/0">AP/Darko Vojinovic</a></span>
</figcaption>
</figure>
<h2>Managing European allies</h2>
<p>To understand how damaging the Trump-Zelenskiy phone call could be to Ukraine, some history is necessary for context.</p>
<p>Following mass pro-democracy protests in 2014 in Ukraine, known as <a href="https://www.brookings.edu/testimonies/five-years-after-the-revolution-of-dignity-ukraines-progress-russias-malign-activities/">the Revolution of Dignity</a>, president Viktor Yanukovich was deposed and fled to Russia. <a href="https://edition.cnn.com/2014/02/27/world/europe/ukraine-politics/">Russia then seized the Crimean peninsula from Ukraine</a>. Later that year <a href="https://www.washingtonpost.com/news/monkey-cage/wp/2018/04/09/the-war-in-ukraine-is-more-devastating-than-you-know/">a war between Russian-backed militants and Ukrainian forces</a> erupted in the eastern regions of Ukraine, collectively known as Donbas.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/294909/original/file-20190930-194866-q7acut.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/294909/original/file-20190930-194866-q7acut.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/294909/original/file-20190930-194866-q7acut.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=306&fit=crop&dpr=1 600w, https://images.theconversation.com/files/294909/original/file-20190930-194866-q7acut.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=306&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/294909/original/file-20190930-194866-q7acut.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=306&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/294909/original/file-20190930-194866-q7acut.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=384&fit=crop&dpr=1 754w, https://images.theconversation.com/files/294909/original/file-20190930-194866-q7acut.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=384&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/294909/original/file-20190930-194866-q7acut.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=384&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A map of Ukraine – shaded areas are territory Russia has claimed.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Ukraine_map_(disputed_territory).png">Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Ukraine has been forced into a costly war to defend its sovereignty and territorial integrity against what it sees as Russian aggression. Diplomatic, economic and military <a href="https://www.arcgis.com/apps/Cascade/index.html?appid=8dad6c865bed491ead3190c7ffb2fafe">support from the U.S. and Europe</a> have been crucial in this effort.</p>
<p>On the economic and geopolitical side, <a href="https://europa.eu/rapid/press-release_STATEMENT-14-349_en.htm">Ukraine’s previous leaders steered a pro-European course of development</a> with an eye to future integration with the European Union. Zelenskiy pledged to support this course.</p>
<p>So when Zelenskiy made critical comments towards the European Union and European partners in the phone call with Trump, he was placing those crucial alliances at risk. </p>
<p>In his response to Trump’s comments that Europe “should be helping you more than they are. Germany does almost nothing for you,” Zelenskiy said that he agrees with Trump “not only 100%, but actually 1000%” and that “the European Union should be our biggest partner but technically the United States is a <a href="https://www.cnn.com/2019/09/25/politics/donald-trump-ukraine-transcript-call/index.html">much bigger partner than the European Union</a>.”</p>
<p>European financial institutions contributed <a href="https://www.apnews.com/868ee37ff93a468e993452f8d1b30fb3">US$16 billion in economic aid to Ukraine since 2014</a>. These funds were aimed at reforming Ukraine’s economy, which has been damaged further by the conflict with Russia. The EU has also contributed military equipment. In addition, from 2011 to 2019, <a href="https://www.factcheck.org/2019/09/trump-wrong-on-european-aid-to-ukraine/">NATO contributed $43.8 million to Ukraine’s</a> defense. </p>
<p>It will require diplomacy to control the possible consequences for Ukrainian security. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/294904/original/file-20190930-194862-1imrv0t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/294904/original/file-20190930-194862-1imrv0t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/294904/original/file-20190930-194862-1imrv0t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=449&fit=crop&dpr=1 600w, https://images.theconversation.com/files/294904/original/file-20190930-194862-1imrv0t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=449&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/294904/original/file-20190930-194862-1imrv0t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=449&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/294904/original/file-20190930-194862-1imrv0t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=564&fit=crop&dpr=1 754w, https://images.theconversation.com/files/294904/original/file-20190930-194862-1imrv0t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=564&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/294904/original/file-20190930-194862-1imrv0t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=564&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Zelenskiy may have damaged relations with European allies by his phone call with Trump. Here, Zelenskiy, right, is seen with French President Emmanuel Macron, in Paris, June 17, 2019.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/APTOPIX-France-Ukraine/c9c5f587633342f48e7c433f7676cffb/16/0">AP/Christophe Ena</a></span>
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<h2>Commitments in doubt</h2>
<p>Zelenskiy attempted to <a href="https://www.vox.com/world/2019/9/24/20882359/trump-impeachment-ukraine-president-zelensky">retract his critical comments</a> last week. </p>
<p>But behind his revealing comments about the EU in the phone call with Trump are newly growing doubts among the Ukrainian public <a href="https://www.ecfr.eu/publications/summary/zelensky_unchained_what_ukraines_new_political_order_means_for_its_future">about the commitments of European allies to Ukraine</a>. That’s particularly the case when it comes to sanctions on Russia, which Ukraine sees as crucial in restoring Ukraine’s occupied territories and applying pressure on pro-Russian militants.</p>
<p>Feeding those doubts is the continued joint Russian-German construction <a href="https://www.bloomberg.com/news/articles/2019-09-12/germany-confident-of-nord-stream-2-completion-by-year-s-end">of a controversial</a> natural gas pipeline from Russia to Germany that would bypass Ukraine. That project is predicted to damage Ukraine both <a href="https://www.forbes.com/sites/arielcohen/2018/06/18/russias-nord-stream-ii-pipeline-is-ukraines-worst-nightmare/#4e7236473524">politically and economically</a> because Ukraine has been the major transit country for Russian gas, which brings its government billions in fees and economic activity.</p>
<p>In June, Russia was allowed to return to the <a href="https://www.rferl.org/a/explainer-will-russia-return-to-pace-next-week-/30007097.html">Parliamentary Assembly of the Council of Europe</a>, after being suspended in 2014 as response to its Crimean annexation. France supported this return, <a href="https://www.france24.com/en/20190626-russias-return-europe-rights-assembly-ratified">despite Ukraine’s objections</a>. </p>
<h2>Reactions in Ukraine</h2>
<p>Inside Ukraine, the Trump conflict has produced a mixed response. </p>
<p>Zelenskiy <a href="https://theconversation.com/a-comedian-who-played-a-president-on-tv-just-became-ukraines-president-115100">ran on the platform of fighting corruption</a>, which has long plagued Ukraine’s government. He will likely have to answer for his statement to Trump that the new prosecutor general, who was investigating corruption, is “100% his man,” rather than an independent investigator.</p>
<p>In the press conference with Trump, Zelenskiy said that he merely meant that he trusts the professionalism and independence of the new prosecutor.</p>
<p>“He is my friend (comrade), it is true,” Zelenskiy said. “All my team are my people. They are not my property. <a href="https://gordonua.com/news/politics/zelenskiy-ryaboshapka-moy-tovarishch-vsya-moya-komanda-moi-lyudi-no-oni-ne-moya-sobstvennost-1300883.html">I can not tell them what to do.”</a> </p>
<p>However, his guarantee of independence for the prosecutor may not have been enough to satisfy domestic critics. The day after the press conference, <a href="https://www.pravda.com.ua/rus/news/2019/09/26/7227381/">a member of the opposition party in the Ukrainian parliament</a> requested a full transcript of the phone conversation in Ukrainian. </p>
<p>The conversation has given his political adversaries powerful ammunition. Luckily for Zelenskiy, his party has a super-majority in the parliament, which will offer him a degree of political protection. </p>
<p>Zelensky’s critics are likely to point out his <a href="https://www.nbcnews.com/news/world/comedian-volodymyr-zelensky-leads-ukraine-s-presidential-vote-n989386">lack of political and diplomatic experience</a> at a time when he needs both. His response to that criticism? He says that he will “<a href="https://www.currenttime.tv/a/ukraine-elections-debates/29892276.html">learn on the job</a>.</p>
<h2>And then there is Russia</h2>
<p>Ukraine remains in a vulnerable position when it comes to Russia. </p>
<p>Since the start of the conflict in 2014 the Global Conflict Tracker with the Council on Foreign Relations estimates its consequences as <a href="https://www.cfr.org/interactive/global-conflict-tracker/conflict/conflict-ukraine">more than 10,000 dead civilians and 1.5 million displaced persons.</a> </p>
<p>President Zelenskiy ran on the platform of ending the war in Donbas and initiated a well-publicized <a href="https://www.npr.org/2019/09/07/758652882/russia-and-ukraine-conduct-prisoner-exchange-renewing-hopes-for-talks">prisoner exchange with the Russian Federation</a> in early September in hopes of softening tensions with Moscow. </p>
<p>Prior to his visit to New York, Zelenskiy’s administration was working on various formulas in preparation <a href="https://www.rferl.org/a/trump-says-ready-to-join-normandy-talks-on-east-ukraine-conflict/30156143.html">for possible peace talks with Russia</a> that would include France, Germany and perhaps the U.S. and the U.K. </p>
<p>But Ukraine might lose support from its strategic partners in this and other efforts. Without the support of the Western allies, Russia will gain the upper hand to pressure Ukraine to accept the <a href="https://www.reuters.com/article/us-russia-ukraine-talks/russia-ready-for-ukraine-peace-talks-but-sets-preconditions-idUSKCN1VY1KH">peace on Russia’s terms</a>. That could include giving up Crimea and/or giving greater political autonomy to the breakaway region by amending the Ukrainian Constitution.</p>
<p>Moreover, Russian propaganda has long suggested that Ukraine is a pawn in the hands of the West. The Ukrainian political elite, according to the <a href="https://www.motherjones.com/politics/2019/09/trump-response-ukraine-russia-zelensky-putin/">Moscow propagandists</a>, is controlled by the Western interests. </p>
<p>This scandal fits right into that narrative.</p><img src="https://counter.theconversation.com/content/124333/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lena Surzhko Harned does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The fallout for President Trump from his conversation with Ukrainian President Zelenskiy was swift and harsh. The consequences for Zelenskiy and his country could also be serious.Lena Surzhko Harned, Assistant Teaching Professor of Political Science, Penn StateLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1233432019-09-11T20:04:41Z2019-09-11T20:04:41ZWorried about agents of foreign influence? Just look at who owns Australia’s biggest companies<figure><img src="https://images.theconversation.com/files/291877/original/file-20190911-190026-1suz2pm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Most of Australia's biggest companies are majority-owned by US investors.</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>The attention being given to possible covert influence being exercised by China in Australia shouldn’t distract us from recognising that very overt foreign influence now occurs through investment. </p>
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<p>
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<strong>
Read more:
<a href="https://theconversation.com/inside-chinas-vast-influence-network-how-it-works-and-the-extent-of-its-reach-in-australia-119174">Inside China's vast influence network – how it works, and the extent of its reach in Australia</a>
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<p>Right now US corporations eclipse everyone else in their ability to influence our politics, through their investments in Australian stocks. </p>
<p>Using company ownership data from Bloomberg, I analysed the ownership of Australia’s 20 biggest companies a few days after the 2019 federal election in May. Of those 20, 15 were majority-owned by US-based investors. Three more were at least 25% US-owned. </p>
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<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/291900/original/file-20190911-190065-v9pit2.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/291900/original/file-20190911-190065-v9pit2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/291900/original/file-20190911-190065-v9pit2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=648&fit=crop&dpr=1 600w, https://images.theconversation.com/files/291900/original/file-20190911-190065-v9pit2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=648&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/291900/original/file-20190911-190065-v9pit2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=648&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/291900/original/file-20190911-190065-v9pit2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=814&fit=crop&dpr=1 754w, https://images.theconversation.com/files/291900/original/file-20190911-190065-v9pit2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=814&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/291900/original/file-20190911-190065-v9pit2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=814&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><span class="source">https://datawrapper.dwcdn.net/x0ODc/2/</span></span>
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<p>According to my analysis, all four of our big banks are majority-owned by American investors. The Commonwealth Bank of Australia, the nation’s biggest company, is more than 60% owned by American-based investors. </p>
<p>So too are Woolworths and Rio Tinto. BHP, once known as “the Big Australian”, is 73% owned by American-based investors.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/_e6KdnGQ8ZY?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">In the 1980s BHP advertised itself as ‘The Big Australian’. Now that’s all history.</span></figcaption>
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<p>The ASX’s top 20 companies make up close to half of the market capitalisation of the Australian Securities Exchange.</p>
<p>Such a concentration of foreign ownership should be a concern regardless of how much we see the US as an ally committed to liberal-democratic values, and appreciate that US corporate interests are not necessarily monolithic or necessarily exercised in accordance with a government agenda.</p>
<p>Nonetheless, under so-called investor-state dispute settlement (ISDS) clauses, which the US government has systematically pushed in its trade deals with other nations, US corporate investors are getting unprecedented rights in foreign markets. </p>
<p>ISDS provisions mean a foreign investor can sue a government for compensation in an international tribunal if the government makes <a href="https://theconversation.com/investor-rights-to-sue-governments-pose-real-dangers-40004">any change in law or policy</a> that “harms” an investment. This is something no Australian citizen can do.</p>
<h2>Philip Morris’ smoking gun</h2>
<p>Since I did my analysis, the composition of the ASX top 20 has changed. The bottom four companies – Unibail-Rodamco-Westfield, Fortescue Metals Group, ResMed and Newcrest Mining – have made way for Insurance Australia, Suncorp, Amcor and South32. </p>
<p>This, however, has not signficantly altered the dominance of US investor interests. </p>
<p>It should also be noted that US investment firms also manage the wealth of foreign clients. But data from CapGemini and Merrill Lynch suggest the majority of assets the firms manage are American-owned, even if the precise number cannot be determined. </p>
<p>There are arguably good grounds to include ISDS clauses in free-trade agreements, but the potential downside is exemplified by the case of tobacco giant Philip Morris, which challenged Australia’s plain-packaging laws for cigarette packs. </p>
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<p>The US company did so by moving ownership of its Australian operations to Hong Kong and then using the ISDS clause embedded in an investment treaty between Australia and Hong Kong. It used the clause to argue the Australian government’s law amounted to unjust confiscation of trademarks and intellectual property.</p>
<p>The ISDS clause gave Philip Morris privileges no Australian company or individual had. Even though it lost, having its case thrown out on the grounds it was <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">an abuse of process</a>, it only had to pay half of Australia’s costs, which added up to almost A$24 million.</p>
<p>Jonathan Bonnitcha and his co-authors argue in their book <a href="https://global.oup.com/academic/product/the-political-economy-of-the-investment-treaty-regime-9780198719557?cc=au&lang=en&">The Political Economy of the Investment Treaty Regime</a> that when states take legal action against each other, they have an incentive not to advance legal arguments that may backfire on them down the track. They have defensive interests. </p>
<p>Under ISDS clauses, though, private investors don’t have defensive interests. States cannot commence proceedings against them. They can attack with adventurous legal arguments, and not worry about defending themselves from those same arguments down the road.</p>
<p>Unlike courts, ISDS arbitrations lack standardised rules of procedure. Predictability of outcomes is much lower. Proceedings are private, not public. Only the final outcome is routinely available, and only if the parties agree. </p>
<h2>Transparency matters</h2>
<p>Under <a href="https://www.ag.gov.au/transparency">foreign influence transparency laws</a> that came into effect in March, “foreign principals” must declare their role in influencing governmental and political decision-making. Foreign principals include governments, organisations, individuals and “entities”. </p>
<p>A company falls within the definition of a “foreign government-related entity” if its directors are accustomed or under an obligation to being influenced by a foreign government or political organisation, or if these governments and organisations hold more than 15% of the company’s shares or voting power, or can appoint at least 20% of the company’s board of directors; or otherwise exercise substantial control.</p>
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Read more:
<a href="https://theconversation.com/agents-of-foreign-influence-with-china-its-a-blurry-line-between-corporate-and-state-interests-112403">Agents of foreign influence: with China it's a blurry line between corporate and state interests</a>
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<p>All well and good. Australian democracy benefits when foreign efforts to influence policies are conducted in an open and transparent manner. </p>
<p>But should not there be equal accountability and transparency over who owns our most powerful companies, the privileges they have under ISDS provisions, and what happens in any dispute proceedings?</p><img src="https://counter.theconversation.com/content/123343/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Clinton Fernandes received funding from the Australian Research Council.</span></em></p>Most of Australia’s biggest companies are majority-owned by US investors. This concentration of overt foreign influence should concern us.Clinton Fernandes, Professor, International and Political Studies, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1128062019-03-05T14:15:13Z2019-03-05T14:15:13ZNigeria: what Muhammadu Buhari’s re-election means for Africa’s biggest economy<p>Muhammadu Buhari was <a href="https://www.theguardian.com/world/2019/feb/26/muhammadu-buhari-to-claim-victory-in-nigerias-presidential-election">re-elected as president</a> of Nigeria in late February, winning 56% of the vote share in a poll shrouded in controversy. After polling day was <a href="https://theconversation.com/nigerias-election-delay-why-and-what-next-111962">delayed by a week</a> on the eve of the election, the result was met with <a href="https://www.aljazeera.com/news/2019/02/buhari-reelected-nigeria-president-electoral-commission-190227033031779.html">allegations of election irregularities</a>. Turnout was low, and only <a href="https://www.bbc.co.uk/news/world-africa-47381382">35% of those registered voted</a>, compared to 44% when Buhari was elected in 2015. </p>
<p>The competition was fierce. The race for the presidency was between the incumbent, Buhari, and a pro-market multimillionaire, Atiku Abubakar, the opposition leader. Before the poll, <a href="https://www.bloomberg.com/news/articles/2019-02-12/election-may-mark-turning-point-for-nigeria-s-battered-stocks">investors predicted</a> victory for Abubakar could have boosted Nigeria’s medium-term economic growth, though there were concerns over historic <a href="https://www.bloomberg.com/news/articles/2019-02-08/nigeria-s-tough-decision-former-dictator-or-alleged-kleptocrat">allegations of corruption</a> surrounding him. He denies any wrongdoing.</p>
<p>Buhari, a former military general, focused his first term in office on tackling <a href="https://www.cfr.org/blog/nigeria-sees-more-high-level-corruption-convictions-under-buhari">corruption</a> and security issues but was <a href="https://theconversation.com/buhari-failed-to-fix-nigerias-economy-but-he-may-still-have-the-edge-110196">widely criticised</a> for neglecting the economy. Some of his economic policies drove investors away and <a href="https://www.bloomberg.com/news/articles/2017-06-19/nigeria-s-half-measures-on-currency-regime-are-only-half-working">were detrimental to growth</a>. </p>
<p>In 2015, Nigeria introduced <a href="https://www.bloomberg.com/news/articles/2019-01-10/oil-fell-unemployment-soared-and-now-nigeria-votes-quicktake">capital controls</a>, measures to limit the flow of foreign capital in and out of the domestic economy. This was of concern to investors who feared they may not be able to repatriate funds out of the country. In the same year, the government pegged Nigeria’s currency, the naira, to the US dollar, which <a href="https://www.reuters.com/article/us-nigeria-currency/nigerian-naira-tumbles-30-percent-after-peg-removed-idUSKCN0Z61F7">significantly reduced foreign currency reserves</a>. The peg was eventually removed in 2016 – a decision welcomed by investors, though it <a href="https://www.ft.com/content/b0753e96-36cd-11e6-a780-b48ed7b6126f">sharply devalued the naira</a> against the dollar.</p>
<p>Since Buhari was first elected in May 2015, Nigeria’s stock market has been the world’s worst performer, losing <a href="https://www.bloomberg.com/news/articles/2019-02-27/nigeria-s-vote-the-numbers-the-surprises-the-market-reaction">almost half its value</a> in dollar terms, according to Bloomberg. And stocks <a href="https://www.bloomberg.com/news/articles/2019-02-28/bank-stocks-in-nigeria-fall-most-since-2016-after-buhari-victory">fell immediately</a> after Buhari’s re-election was announced. This came after the Nigerian stock exchange suffered a <a href="http://businesselitesafrica.com/trending/nse-loses-540-6-million-after-election-delays/">$540.6m loss</a> in one day after the elections were postponed by a week. </p>
<p>Still, international bond markets <a href="https://www.nasdaq.com/article/nigerian-bonds-rally-after-buhari-wins-reelection-20190227-00695">reacted positively</a> to the election result, and there was a rise in dollar-denominated bonds, often favoured by international investors. Naira bonds <a href="https://www.bloomberg.com/news/articles/2019-02-27/nigeria-s-vote-the-numbers-the-surprises-the-market-reaction">also rose</a> after the results were announced, indicating bond traders are more focused on the currency and bond yields on offer. </p>
<h2>Buhari’s priorities</h2>
<p>In his first term, Buhari focused a great deal on Nigeria’s security challenges. Knowing he faces a strong political opposition and that people are desperate for economic growth and its benefits, he now needs to turn his attention more squarely on the economy. This requires a shift in the government’s economic policy to embrace much more market-driven policies, such as the decision his government took in 2016 to remove the naira peg against the dollar. </p>
<p>To boost domestic business and investment, the government also needs to encourage private sector investment in infrastructure. So far, the government has permitted the private sector to invest in some infrastructure projects, particularly <a href="https://www.vanguardngr.com/2019/02/dangote-5-others-partner-fg-on-road-construction-across-states/">road building</a>, but this needs to be expanded to others, including rail.</p>
<h2>Finance and industry</h2>
<p>Buhari’s victory is likely to mean stability for the financial sector, particularly if the Central Bank of Nigeria governor, Godwin Emefiele, retains his position. Abubakar had <a href="https://www.bloomberg.com/news/articles/2019-01-16/abubakar-will-change-nigeria-s-central-bank-governor-if-elected">threatened</a> to remove the governor if he won. If Emefiele stays and his term, which comes to an end in June, is renewed, this would support stability in the financial markets. It would mean no radical changes to monetary and exchange rate policies, which can affect the price and value of financial assets, are likely to occur. Also, no major changes are expected to occur in the industrial sector, although there is continuing urgency to develop Nigeria’s manufacturing base to boost employment. </p>
<p>The country’s <a href="https://www.reuters.com/article/nigeria-budget-idUSL5N16V360">high fiscal deficit, debt levels</a> and <a href="https://tradingeconomics.com/nigeria/corruption-rank">corruption levels</a> could no doubt dampen investor confidence in Nigeria. Buhari also faces <a href="https://theconversation.com/buhari-failed-to-fix-nigerias-economy-but-he-may-still-have-the-edge-110196">criticism</a> over his inexperienced policy advisers, which could diminish the credibility of new policy announcements in the future. It’s also unclear whether there is going to be a cabinet reshuffle, or if key ministers, such as the finance minister, will remain in post. </p>
<p>Still, major changes in the policy environment are not expected under Buhari’s second term in office. As investors like predictability, policy continuity could help improve investor sentiment.</p>
<p>Nigeria’s governance also needs to be underpinned by principles built around the rule of law, which are critical for building any viable market economy. The six dimensions of governance, coined by the World Bank’s <a href="http://info.worldbank.org/governance/wgi/#home">World Governance Indicators Project</a>, speak to the heart of the challenges Nigeria faces. These are: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law and control of corruption. Strengthening these six dimensions could help set Nigeria along the path of recovery and then growth again.</p>
<p>With all its woes, Nigeria still remains the largest economy in Africa and the largest oil producer on the continent. With a huge market and a huge potential for foreign investment, every wise investor should have their eyes on this country.</p><img src="https://counter.theconversation.com/content/112806/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Iwa Salami does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Investors favoured Muhammadu Buhari’s opponent, Atiku Abubakar. So what are the Nigerian president’s economic priorities?Iwa Salami, Senior Lecturer in Financial Law and Regulation, University of East LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1119472019-02-18T13:16:32Z2019-02-18T13:16:32ZTrump may seek more punishment of Cuba<figure><img src="https://images.theconversation.com/files/259405/original/file-20190217-56232-1g3m074.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">If Cuban exiles can sue businesses operating in Cuba, it could affect flights to the country, like this JetBlue landing in Havana.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Cuba-U-S-/085608a155c04bf5b52d6f19a246548c/12/0">AP/Desmond Boylan</a></span></figcaption></figure><p>President Donald Trump may soon do a huge favor for Cuba’s wealthy, upper-class exiles, many of whom are now U.S. citizens living in Miami.</p>
<p>Some of them <a href="https://www.miamiherald.com/news/nation-world/world/americas/cuba/article213916384.html">still dream</a> of recouping their lost fortunes in Cuba, and Trump may try to make that possible.</p>
<p>Much of that wealthy upper class went into exile in Miami in the 1960s, when the Cuban revolution turned to socialism and Fidel Castro’s government <a href="https://www.britannica.com/event/Cuban-Revolution">nationalized their businesses and confiscated</a> their property.</p>
<p>More than 20 years ago, Congress passed a sanctions law that included a provision to help these Cuban exiles who are now U.S. citizens. The <a href="https://www.mcclatchydc.com/news/nation-world/world/latin-america/article224646995.html">provision would allow them to sue in U.S. courts</a> companies that operate using property that the exiles lost in the 1959 revolution. </p>
<p>The lawsuit provision, known as Title III, was <a href="https://www.everycrsreport.com/files/19991214_RL30386_714aa7ff79cec8fc7f29926c448f6d1bc1d6bef2.pdf">put on hold because it triggered immense opposition</a> from U.S. allies, whose companies operating in Cuba would become targets of litigation in U.S. courts. </p>
<p>If Trump activates the provision, it could reignite that opposition, complicating already rocky relations with Mexico, Canada, the European Union – and obviously Cuba – at a time when the U.S. needs <a href="https://www.nytimes.com/aponline/2019/02/04/world/europe/ap-eu-venezuela-political-crisis.html">their help</a> to deal with the crisis in Venezuela.</p>
<p>As a <a href="https://www.american.edu/spa/faculty/wleogra.cfm">scholar of U.S. relations with Latin America</a>, especially Cuba, I’ve closely followed the Trump administration’s growing antagonism toward Havana. But activating Title III would represent a quantum leap in hostility.</p>
<h2>Triggering new sanctions</h2>
<p>The people who stand to benefit from activating this law are Cuba’s pre-revolutionary rich – what was once <a href="https://www.pbs.org/wgbh/americanexperience/features/castro-cuban-exiles-america/">Cuba’s “One Percent.”</a></p>
<p>They arrived in the U.S. expecting Washington to quickly overthrow Fidel Castro and restore their power, property and privilege. Instead, the revolutionary government survived and by the <a href="https://repositorio.cepal.org/bitstream/handle/11362/1139/1/S0900391_en.pdf">1990s was attracting foreign direct investment</a> from Canada, Europe and Latin America.</p>
<p>In 1996, Sen. Jesse Helms, R-N.C., and Rep. Dan Burton, R-Ind., sponsored the <a href="https://www.treasury.gov/resource-center/sanctions/documents/libertad.pdf">Cuban Liberty and Democratic Solidarity Act</a>. It passed after anti-Cuba sentiment in the U.S. was galvanized when the <a href="http://www.cnn.com/US/9602/cuba_shootdown/25/">Cuban Air Force shot down two civilian planes piloted by Cuban-Americans</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/259406/original/file-20190217-56220-1ka7vl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/259406/original/file-20190217-56220-1ka7vl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/259406/original/file-20190217-56220-1ka7vl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=723&fit=crop&dpr=1 600w, https://images.theconversation.com/files/259406/original/file-20190217-56220-1ka7vl8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=723&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/259406/original/file-20190217-56220-1ka7vl8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=723&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/259406/original/file-20190217-56220-1ka7vl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=908&fit=crop&dpr=1 754w, https://images.theconversation.com/files/259406/original/file-20190217-56220-1ka7vl8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=908&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/259406/original/file-20190217-56220-1ka7vl8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=908&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Cuban women who fled their country in an Immigration Service room in Jacksonville, Fla., while arrangements are made to grant them political asylum in the U.S., Jan. 1, 1959.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Watchf-AP-A-FL-USA-APHS460141-Cuba-Revolution-C-/cfa63ac7d7ac445d95673fabb8324785/12/0">AP</a></span>
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</figure>
<p><a href="https://www.reuters.com/article/us-usa-cuba/us-considering-allowing-lawsuits-over-cuba-confiscated-properties-idUSKCN1PA30I">Title III</a> of the law specifically targeted foreign investors in Cuba.</p>
<p>It gave naturalized Cuban Americans permission to <a href="https://www.law.cornell.edu/uscode/text/22/6023">sue in U.S. federal court anyone “trafficking” in (that is, using or profiting from) property</a> the exiles lost in the 1959 revolution, when they were Cuban citizens. </p>
<p>Normally, U.S. courts have no jurisdiction over property owned by non-citizens that is nationalized by a foreign government. For U.S. courts to sit in judgment of another government’s actions towards its own citizens would be a challenge to that government’s sovereignty.</p>
<p>Since virtually all property in pre-revolutionary Cuba was privately held, the foreign companies operating there, including many that also do business in the U.S., fear <a href="https://www.reuters.com/article/us-venezuela-cuba-economy/investors-in-cuba-wary-of-impact-from-u-s-threats-venezuela-crisis-idUSKCN1PW2UJ">being accused of profiting</a> from confiscated property and getting caught up in Title III lawsuits.</p>
<p>Consequently, U.S. allies bitterly opposed the law as illegal U.S. interference in their commerce with Cuba. </p>
<p>The European Union <a href="https://www.wsj.com/articles/SB931464187753635502">filed a complaint</a> against the U.S. with the World Trade Organization in 1996 and adopted a statute prohibiting EU members and their companies from complying with Title III. <a href="https://www.nytimes.com/1996/06/13/world/canada-and-mexico-join-to-oppose-us-law-on-cuba.html">Mexico, Canada</a> and the <a href="http://www.legislation.gov.uk/uksi/1996/3171/contents/made">United Kingdom</a> passed similar legislation.</p>
<p>In response, President <a href="https://www.nytimes.com/1998/04/21/world/europeans-drop-lawsuit-contesting-cuba-trade-act.html">Bill Clinton suspended</a> Title III of the act for six months, which the law allowed. The suspension has to be renewed every six months. Since then, every president, Democrat and Republican, has renewed the suspension. Donald Trump has already renewed it three times.</p>
<p>But recently, there have been indications that the longtime practice of suspending Title III’s provisions may end soon.</p>
<p>In November 2018, National Security Adviser John <a href="https://www.miamiherald.com/news/nation-world/world/americas/cuba/article220976370.html">Bolton threatened to activate Title III</a>, saying, “This time, we’ll give it a very serious review.” In January, Secretary of State Mike <a href="https://www.washingtonpost.com/world/the_americas/trump-weighs-dramatic-tightening-of-us-embargo-on-cuba/2019/01/17/4f8e3da0-1a8f-11e9-b8e6-567190c2fd08_story.html?utm_term=.5d3741640c7a">Pompeo announced</a> a short 45-day suspension while the administration studied the issue. </p>
<p>The president has until the end of February to notify Congress if he decides to extend the suspension. Otherwise, Title III takes effect automatically.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/259411/original/file-20190217-56212-10rq0o1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/259411/original/file-20190217-56212-10rq0o1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/259411/original/file-20190217-56212-10rq0o1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=404&fit=crop&dpr=1 600w, https://images.theconversation.com/files/259411/original/file-20190217-56212-10rq0o1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=404&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/259411/original/file-20190217-56212-10rq0o1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=404&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/259411/original/file-20190217-56212-10rq0o1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=508&fit=crop&dpr=1 754w, https://images.theconversation.com/files/259411/original/file-20190217-56212-10rq0o1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=508&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/259411/original/file-20190217-56212-10rq0o1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=508&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Sen. Marco Rubio, R-Fla., at a Miami event in 2017 where President Trump announced the revised policy against Cuba.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Trump-Cuba/02e2bcf00f64494795fdf45389daf850/27/0">AP/Lynne Sladky</a></span>
</figcaption>
</figure>
<h2>Politics in command</h2>
<p>According to <a href="https://www.newyorker.com/magazine/2018/11/19/the-mystery-of-the-havana-syndrome">The New Yorker</a> magazine, Trump gave White House staff paltry guidance on Cuba policy at the beginning of his administration. </p>
<p>“Make Rubio happy,” he told them. </p>
<p>Sen. <a href="https://www.elnuevoherald.com/noticias/mundo/america-latina/cuba-es/article224693495.html">Marco Rubio</a>, R-Fla., and Rep. <a href="https://www.reuters.com/article/us-usa-cuba/us-considering-allowing-lawsuits-over-cuba-confiscated-properties-idUSKCN1PA30I">Mario Díaz-Balart</a>, R-Fla, are <a href="https://www.mcclatchydc.com/news/nation-world/world/latin-america/article224646995.html">the principal advocates for Title III</a>. They are Cuban-Americans who represent the oldest, most conservative and wealthiest segment of the Miami Cuban community. From their mansions in Miami, that elite still wields disproportionate influence over U.S. policy through these legislators.</p>
<p>Most Cuban-Americans will gain nothing from Title III. It exempts private residences from compensation. So, if an exile’s main asset was their home, they are out of luck. </p>
<p>The provision also <a href="http://cubantriangle.blogspot.com/2019/01/more-on-title-iii.html">exempts businesses worth less than US$50,000 in 1959 </a> – $433,000 today, adjusted for inflation. The exiled owners of thousands of <a href="https://havanatimes.org/?p=74021">small mom-and-pop shops nationalized in 1968</a> are out of luck, too.</p>
<p>Still, a 1996 <a href="https://crsreports.congress.gov/product/pdf/R/R44822">State Department analysis</a> estimated that Title III could flood U.S. federal courts with as many as 200,000 lawsuits, creating a legal morass that would take years to sort out. </p>
<p>In the meantime, most U.S. firms and some foreign ones would likely <a href="https://money.usnews.com/investing/news/articles/2019-02-07/investors-in-cuba-wary-of-impact-from-us-threats-venezuela-crisis">hesitate to enter</a> into commercial relations with Cuba for fear of becoming litigation targets in the United States. That’s a major purpose of Title III – to stymie Cuba’s economic development. </p>
<p>Cuban American families have already voiced claims for the <a href="https://www.miamiherald.com/news/nation-world/world/americas/cuba/article213916384.html">port of Havana</a> and <a href="https://www.tampabay.com/news/cuba/us-might-allow-lawsuits-over-us-properties-nationalized-in-cuba-20190117/">José Martí International Airport</a>, putting cruise ship companies and airlines on notice that they could face potential legal jeopardy over their use of these properties. </p>
<p>If these companies pull out of the Cuban market, Americans would still have a right to travel to Cuba, but no way to get there. </p>
<p>If Title III reduces foreign investment in Cuba, it will damage Cuba’s already <a href="https://www.reuters.com/article/us-cuba-economy/cuba-lowers-economic-growth-forecast-as-trade-continues-to-drop-idUSKCN1N90JO">fragile economy</a>, which in turn would hurt the standard of living of ordinary Cubans. </p>
<p>In retaliation, Havana might well stop buying agricultural goods from U.S. farmers. That’s a market of over <a href="https://ustr.gov/countries-regions/americas/cuba">$250 million</a> annually that American farmers can ill afford to lose when exports are down due to Trump’s <a href="https://www.politico.com/story/2019/02/06/farm-crisis-trump-trade-policies-1147987">trade wars</a>.</p>
<p><a href="https://www.miaminewtimes.com/news/donald-trump-says-cuban-voters-love-him-but-hes-wrong-9146019">Trump believes</a> he won Florida in 2016 because of the Cuban-American vote, and he thinks Rubio can deliver it again in 2020. </p>
<p>I think Trump is miscalculating. </p>
<p>The remnants of Cuba’s pre-revolutionary “One Percent” no longer represent the Cuban-American community as a whole. By decisive majorities, <a href="https://cri.fiu.edu/research/cuba-poll/2018-fiu-cuba-poll.pdf">Cuban-Americans support</a> free travel between the U.S. and Cuba, broader commercial ties and President Obama’s decision to normalize relations. Every year, they send <a href="https://www.nytimes.com/2018/04/17/opinion/cuba-castro-united-states.html">$3 billion</a> to family on the island, and hundreds of thousands of them travel there to visit.</p>
<p>Those Cuban-American voters may not want to inflict more economic pain on ordinary Cubans, including their friends and family. Come 2020, they may punish a president who does.</p><img src="https://counter.theconversation.com/content/111947/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William M. LeoGrande does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Cuban exiles in the US may soon be able to sue companies that use property seized from them in the Cuban revolution. If Trump moves to allow that, it could slow economic development in Cuba.William M. LeoGrande, Professor of Government, American University School of Public AffairsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1039022018-11-22T18:49:49Z2018-11-22T18:49:49ZBlocking Chinese gas takeover won’t damage Australia’s foreign investment pipeline<figure><img src="https://images.theconversation.com/files/246604/original/file-20181121-161621-4s3rkd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A single foreign company having sole ownership and control over Australia’s most significant gas transmission business, says Australia's treasurer, is not in the national interest.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The Morrison government’s decision to block Hong Kong’s largest infrastructure company from buying one of Australia’s key infrastructure companies seems to make a complicated relationship with China even more fraught. </p>
<p>Rejections of foreign takeover bids are extremely rare. This is just the sixth such decision in nearly two decades.</p>
<p>It might be argued the blocking of the A$13 billion bid for gas pipeline operator APA Group by Cheung Kong Infrastructure (CKI) Holdings reflects increasing politicisation of Australia’s process for reviewing foreign investment. </p>
<p>But this is not a political shot across the bows like China’s announced <a href="https://theconversation.com/barley-is-not-a-random-choice-heres-the-real-reason-china-is-taking-on-australia-over-dumping-107271">anti-dumping probe</a> into imports of Australian barley. This takeover proposal was always doubtful. News of its knock-back potentially damaging relations with China, or foreign investment more generally, are greatly exaggerated. </p>
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Read more:
<a href="https://theconversation.com/as-tensions-ratchet-up-between-china-and-the-us-australia-risks-being-caught-in-the-crossfire-107178">As tensions ratchet up between China and the US, Australia risks being caught in the crossfire</a>
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<h2>Always unlikely</h2>
<p>APA Group owns 15,000 km of natural gas pipelines and supplies about half the gas used in Australia. It owns or has interests in gas storage facilities, gas-fired power stations, and wind and solar renewable energy generators. </p>
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<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/246609/original/file-20181121-161641-ceb4os.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/246609/original/file-20181121-161641-ceb4os.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/246609/original/file-20181121-161641-ceb4os.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=550&fit=crop&dpr=1 600w, https://images.theconversation.com/files/246609/original/file-20181121-161641-ceb4os.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=550&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/246609/original/file-20181121-161641-ceb4os.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=550&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/246609/original/file-20181121-161641-ceb4os.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=691&fit=crop&dpr=1 754w, https://images.theconversation.com/files/246609/original/file-20181121-161641-ceb4os.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=691&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/246609/original/file-20181121-161641-ceb4os.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=691&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">APA Group’s infrastructure assets.</span>
<span class="attribution"><a class="source" href="https://www.apa.com.au/about-apa/apa-overview/">APA</a></span>
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<p>Back in September, after APA accepted the takeover offer from a CKI-led consortium, the investment research company Morningstar <a href="https://www.morningstar.com.au/stocks/article/ckis-bid-for-apa-unlikely-to-succeed-mornings/170229">judged it unlikely</a> that Australia’s <a href="http://firb.gov.au/about/">Foreign Investment Review Board</a> would approve the bid.</p>
<p>The board is only an advisory body. The final decision rests with the federal treasurer. Josh Frydenberg signalled his intention to block the deal in early November, giving CKI a few weeks to change its proposal, either by selling assets or finding other investment partners, enough to change his mind.</p>
<p>That did not happen. Frydenberg’s final decision to block the bid was based, he said, on “a single foreign company group having sole ownership and control over Australia’s most significant gas transmission business”. </p>
<p>He emphasised the government remained committed to <a href="http://jaf.ministers.treasury.gov.au/media-release/055-2018/">welcoming foreign investment</a>: “foreign investment helps support jobs and rising living standards.”</p>
<h2>It’s not all about CKI</h2>
<p>CKI is not state-controlled. It is headed by the son of Hong Kong’s richest man, Li Ka-shing, and has a history of considerable success in investing in Australia. </p>
<p>Nonetheless speculation about the rejection damaging the Australia-China relationship has ensued. In the words of the <a href="https://www.scmp.com/business/companies/article/2172159/hong-kong-conglomerate-ck-groups-us94-billion-bid-gas-pipeline">South China Morning Post</a>: “As the most China-dependent developed economy, Australia potentially has a lot to lose should relations with its biggest trading partner deteriorate further.”</p>
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Read more:
<a href="https://theconversation.com/australia-and-china-push-the-reset-button-on-an-important-relationship-106428">Australia and China push the 'reset' button on an important relationship</a>
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<p>Let’s put this into perspective.</p>
<p>First, there is broad bipartisan agreement that foreign investment is crucial to Australia’s economic prosperity. </p>
<p>Second, as already mentioned, this is just the sixth major public foreign investment proposal blocked since 2000. (All but one, notably, have been by Liberal treasurers.) </p>
<p>Third, all six rejections have been case-specific. Each bid has been considered on its merits.</p>
<p>This case arguably has less to with CKI being Chinese linked than with the size and significance of APA, whose transmission system includes three-quarters of the pipes in NSW and Victoria. </p>
<p>In 2016 CKI’s A$11 billion bid for NSW electricity distributor Ausgrid was also blocked (by then-treasurer Scott Morrison) on national security grounds.</p>
<p>But in 2017 CKI won approval for its A$7.4 billion bid for West Australian-focused electricity and gas distribution giant DUET. And in 2014 CKI’s acquisition of gas distributor Envestra (now Australian Gas Networks) was also cleared.</p>
<h2>Shifting emphasis</h2>
<p>This is not to deny that politics played a part in Frydenberg’s decision. </p>
<p>The seven-person FIRB board was divided (the exact votes are not known). The Treasurer’s call could have gone either way. </p>
<p>Forces within the Liberal Party that opposed Malcolm Turnbull’s leadership have also been deeply hostile to APA’s sale to CKI. Among the most vociferous was NSW senator Jim Molan, who warned of <a href="https://myaccount.news.com.au/sites/theaustralian/subscribe.html?sourceCode=TAWEB_WRE170_a_GGL&mode=premium&dest=https%3A%2F%2Fwww.theaustralian.com.au%2Fopinion%2Fbeware-the-hidden-chinese-dragon-in-any-energy-deal%2Fnews-story%2Fd2c305afb3b089242652ae026e74cdd3&memtype=anonymous&v21suffix=apaf-b">“hidden dragons”</a> in the deal. </p>
<p>For a minority government lagging in the polls and just months away from an election, such views have assumed inflated importance. </p>
<p>Nonetheless the APA decision was not a surprise. Greater scrutiny is now part and parcel of the Foreign Investment Review Board process. In particular, the emphasis has firmly shifted over the past few years to scrutinising national security and taxation areas. </p>
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Read more:
<a href="https://theconversation.com/how-australia-can-help-the-us-make-democracy-harder-to-hack-102954">How Australia can help the US make democracy harder to hack</a>
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<p>The <a href="https://cicentre.gov.au/">Critical Infrastructure Centre</a> within the Department of Home Affairs, which became fully operational this year, brings together capability from across the federal government to manage national security risks from foreign involvement in Australia’s critical infrastructure. It’s particularly focused on telecommunications, electricity, gas, water and ports. </p>
<p>David Irvine, who has chaired the Foreign Investment Review Board since April 2017, is a former head of the Australian Security Intelligence Organisation. </p>
<p>This shifting emphasis does not equate to a bias against foreign investment per se. There is no evidence investors, including Chinese, are being discouraged or significantly deterred from investing in Australia.</p>
<p>CKI itself demonstrates, by returning to Australia despite previous rejections, that foreign investors will not give up so long as the next deal stacks up. There is already speculation CKI has moved on, and now has its eyes on Spark Infrastructure, an ASX-listed owner of energy asset.</p><img src="https://counter.theconversation.com/content/103902/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon Segal is Editorial Consultant at Dealreporter. The views expressed are his own.</span></em></p>Hong Kong’s CKI taking over Australian infrastructure company APA Group has been ruled against the national interest. That’s rare, but not a huge deal.Simon Segal, PhD research candidate, Business, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1025032018-09-09T10:07:06Z2018-09-09T10:07:06ZExplainer: the role of foreign military forces in Niger<figure><img src="https://images.theconversation.com/files/235213/original/file-20180906-190668-dm6qu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The people of Niger have been protesting against the presence of foreign troops in their country</span> <span class="attribution"><span class="source">Arnaud Roin/EPA</span></span></figcaption></figure><p>Niger is one of the most militarised countries in Africa. In November 2017, this came to wider notice when four American Special Forces soldiers and at least four of their Nigerien counterparts died in an ambush. Since then, the military presence has only intensified. Why are these forces there, whose interests are they serving and are they having the impact that was intended?</p>
<p>The US is not the only nation with a military presence in Niger. <a href="https://www.theatlantic.com/photo/2017/10/operation-barkhane-frances-counter-terrorism-forces-in-africa/543834/">France</a>, <a href="http://www.africanews.com/2016/12/23/german-military-presence-in-africa-the-morning-call/">Germany</a>, <a href="https://www.cbc.ca/news/politics/military-training-niger-1.4016277">Canada</a> and <a href="https://www.reuters.com/article/us-italy-diplomacy-niger-libya/italy-approves-military-mission-in-niger-more-troops-to-north-africa-idUSKBN1F6270">Italy</a> also have troops in the West African country. </p>
<p>In April this year, Niger hosted <a href="http://www.defenceweb.co.za/index.php?option=com_content&view=article&id=51351:exercise-flintlock-2018-begins-in-niger-&catid=50:Land&Itemid=105">Exercise Flintlock</a>, a military exercise that brought together 1900 troops from more than 20 partner countries. <a href="https://www.africom.mil/what-we-do/exercises/flintlock">Sponsored by the US</a>, it purported to <a href="https://www.africom.mil/what-we-do/exercises/flintlock">develop capacity and collaboration</a> among African security forces to protect civilians against <a href="http://cco.ndu.edu/Portals/96/Documents/prism/prism_5-2/PRISM5-2_Security_Threats.pdf">violent religious extremism</a>. </p>
<p>Three main reasons are given for this military presence: countering terrorism, preventing migration of Africans to Europe, and protecting foreign investments.</p>
<h2>Terrorism in the region</h2>
<p>North Africa’s Sahel region, which includes Niger, hosts <a href="https://www.cidob.org/en/publications/publication_series/menara_papers/future_notes/the_transmutation_of_jihadi_organizations_in_the_sahel_and_the_regional_security_architecture">a number of Islamic extremist groups</a>. The Sahel has been described as the <a href="http://www.defenceweb.co.za/index.php?option=com_content&view=article&id=35765:trans-sahel-new-frontier-in-global-counter-terrorism-operations&catid=49:National%20Security&Itemid=115">‘new frontier’</a> in global counter-terrorism operations. The US has a <a href="http://afjn.org/u-s-military-presence-and-activity-in-africa-sahel-region/">military presence</a> in Mauritania, Senegal, Mali, Burkina Faso, Nigeria and Chad as well as Niger. As far as we know, only <a href="https://warisboring.com/the-u-s-military-is-cozying-up-to-sudan-of-all-countries/">Sudan</a> and <a href="https://www.voanews.com/a/congressman-pushes-eritrea-us-military-partnership/3972539.html">Eritrea</a> do not host US troops. The Sahel has also hosted <a href="http://www.defenceweb.co.za/index.php?option=com_content&view=article&id=35765:trans-sahel-new-frontier-in-global-counter-terrorism-operations&catid=49:National%20Security&Itemid=115">“a range of second-tier external actors”</a> including armed forces from the <a href="https://www.clingendael.org/pub/2015/clingendael_monitor_2016_en/2_the_eu_as_a_security_actor_in_africa/">European Union</a>, <a href="https://www.aljazeera.com/indepth/features/2017/07/israel-goals-west-africa-170701021641836.html">Israel</a>, <a href="https://www.opendemocracy.net/opensecurity/mabel-gonz%C3%A1lez-bustelo/us-and-colombia-building-exportable-model-of-security">Colombia</a>, and <a href="https://www.brookings.edu/blog/africa-in-focus/2016/08/31/rising-sino-japanese-competition-in-africa/">Japan</a>.</p>
<p>America’s involvement in the Sahel has its roots in the post 9/11 <a href="https://www.aljazeera.com/indepth/opinion/2016/09/911-terror-militarism-war-fear-160911055050615.html">war on terror</a>. In 2003 it set up the <a href="https://openaccess.leidenuniv.nl/bitstream/handle/1887/9538/ASC-1241486-052.pdf?sequence=1">Pan-Sahel Initiative</a>, which brought together Chad, Mali, Mauritania and Niger to train military units. In 2004, the initiative was replaced by the <a href="https://drive.google.com/open?id=1eVMMQ4qMUdMke4zw5o8vnxDkwqo8ronR">Trans-Sahara Counterterrorism Partnership</a>. The <a href="https://www.state.gov/j/ct/programs/index.htm#TSCTP">expanded partnership</a> includes Algeria, Burkina Faso, Cameroon, Morocco, Nigeria, Senegal and Tunisia. Its aim is to address terrorist threats and prevent the spread of violent extremism.</p>
<p>In 2014, the heads of State of Burkina Faso, Mali, Mauritania, Niger and Chad signed a convention establishing the <a href="https://www.diplomatie.gouv.fr/en/french-foreign-policy/defence-security/crisis-and-conflicts/g5-sahel-joint-force-and-the-sahel-alliance/">G5 Sahel</a>, aimed at ensuring “development and security to improve the population’s quality of life.” </p>
<p>In 2017 the same heads of state established the <a href="https://www.csis.org/analysis/understanding-g5-sahel-joint-force-fighting-terror-building-regional-security">Joint</a> <a href="https://www.apnews.com/b251443a01f5468fac90a9071649717d/In-Africa,-US-special-forces-shifting-approach-on-extremism">Force</a> of the G5 Sahel - a decision sanctioned by both the <a href="http://www.peaceau.org/en/article/communique-of-the-679th-psc-meeting-on-the-draft-strategic-concept-of-operations-conops-of-the-joint-force-of-the-g5-sahel">African Union</a> and the <a href="https://www.un.org/press/en/2017/sc12881.doc.htm">United Nations</a>.</p>
<p>The purpose of the Joint Force, which is <a href="https://www.theguardian.com/world/2018/jul/05/foreign-troops-should-not-be-fighting-in-niger-says-countrys-president">now chaired</a> by Nigerien president Mahamadou Issoufou, is more comprehensive in nature when compared to other joint security operations in the region. In addition to improving security along shared borders, its scope encompasses “<a href="http://scientiamilitaria.journals.ac.za/pub/article/view/9/33">soft security</a>” issues. </p>
<p>The US has provided each member state with military support and <a href="https://www.csis.org/analysis/understanding-g5-sahel-joint-force-fighting-terror-building-regional-security">pledged $60 million</a> in bilateral support to the initiative. </p>
<h2>Strategic importance</h2>
<p>Niger occupies a <a href="https://www.google.co.za/maps/place/Sahara+Desert/@25.9258004,6.6623805,4z/data=!4m5!3m4!1s0x13883b64fb267151:0xd6406bdc582d7390!8m2!3d23.4162027!4d25.66283">central geographical position</a> in the Sahel region. Unfortunately for its citizens, the country is surrounded and affected by <a href="https://www.brookings.edu/blog/order-from-chaos/2017/06/13/in-the-eye-of-the-storm-niger-and-its-unstable-neighbors/">instability</a>.</p>
<p>And then there’s the fact that Niger has historically <a href="https://www.theatlantic.com/international/archive/2018/02/niger-europe-migrants-jihad-africa/553019/">served as a gateway</a> for migrants between sub-Saharan Africa and North Africa. And recently, it has become a <a href="https://www.theatlantic.com/international/archive/2018/02/niger-europe-migrants-jihad-africa/553019/">popular transit point</a> for people seeking better opportunities in Europe. Countries like Italy are now deploying troops to Niger to <a href="https://www.reuters.com/article/us-italy-diplomacy-niger-libya/italy-approves-military-mission-in-niger-more-troops-to-north-africa-idUSKBN1F6270">prevent illegal migration</a>. </p>
<p>Foreign armed forces in Niger <a href="https://mg.co.za/article/2017-08-25-00-why-is-the-us-chasing-congolese-rebels-in-the-northern-cape">train African troops</a>, <a href="https://www.nytimes.com/2017/11/30/us/politics/pentagon-niger-drones.html">fly drones</a>, <a href="https://www.nytimes.com/2018/04/22/us/politics/drone-base-niger.html">build bases</a>, <a href="https://daily.jstor.org/why-is-the-u-s-military-occupying-bases-across-africa/">engage in cross-border raids</a> and <a href="https://www.washingtonpost.com/world/national-security/us-expands-secret-intelligence-operations-in-africa/2012/06/13/gJQAHyvAbV_story.html">collect intelligence</a>.</p>
<p>The scope of these activities points primarily to countering terrorism and controlling migration. However, Africa’s <a href="https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/lions-still-on-the-move-growth-in-africas-consumer-sector">growing potential for consumption</a>, which explains the <a href="http://www.globaltrademag.com/global-trade-daily/protect-us-interests-africa">expanding</a> economic and trade relations with the continent, offers a further reason for the increasingly diverse foreign military presence in Niger and in the region more broadly.</p>
<h2>A willing host</h2>
<p>What of Niger’s own interests? Its government has <a href="https://www.theguardian.com/world/2018/aug/14/niger-suppresses-dissent-as-us-leads-influx-of-foreign-armies#img-5">welcomed the presence of foreign troops</a>. President Mahamadou Issoufou is happy to support Washington’s interests in the region as long as the US is willing to mentor and train his armed forces. </p>
<p>US involvement in Issoufou’s military affairs will help him fulfil his election promise to “<a href="https://ewn.co.za/2016/02/22/Niger-holds-tense-vote-with-Issoufou-running-for-2nd-term">crush Islamist militants</a>.”</p>
<p>Niger’s cosy relationship with the US is of particular significance given the recently <a href="https://foreignpolicy.com/2017/10/18/america-should-beware-a-chadian-military-scorned-trump-travel-ban/">strained relations</a> between America and Niger’s neighbour, Chad. In late 2017, US President Donald Trump added Chad to his travel ban - a move that <a href="https://www.independent.co.uk/news/world/americas/us-politics/trump-muslim-ban-chad-travel-countries-list-immigration-restrictions-a7969021.html">baffled foreign policy experts</a> and <a href="https://www.independent.co.uk/news/world/americas/us-politics/trump-muslim-ban-boko-haram-chad-niger-travel-restrictions-a8000451.html">clearly upset</a> the Chadian government. The travel ban has <a href="https://www.independent.co.uk/news/trump-chad-us-travel-ban-muslim-majority-north-korea-venezuela-a8300061.html">since</a> been lifted. </p>
<h2>The cost of foreign military presence</h2>
<p>Has the presence of foreign forces in Niger achieved the aims of combating terrorism and stemming migration? And at what cost? Have there been unintended and potentially dangerous consequences?</p>
<p>There is certainly a view that their presence has had a negative impact on domestic politics in Niger.</p>
<p>A <a href="https://www.theguardian.com/world/2018/aug/14/niger-suppresses-dissent-as-us-leads-influx-of-foreign-armies">report</a> published in the months following the deaths of US troops suggests an increasingly oppressive and undemocratic political culture in Niger.</p>
<p>Civil society and opposition political leaders who offer their testimony in the report argue that the building of <a href="https://www.brookings.edu/blog/order-from-chaos/2017/06/13/in-the-eye-of-the-storm-niger-and-its-unstable-neighbors/">foreign military bases</a> in Niger is <a href="https://theintercept.com/2018/02/18/niger-air-base-201-africom-drones/">unconstitutional</a>. They view the foreign military presence in the country and the concurrent <a href="https://theglobalobservatory.org/2016/02/security-concerns-in-niger-polls/">securitisation</a> of Niger’s political and civil society arenas as a means to strengthen a government lacking in domestic support. </p>
<p><a href="https://www.reuters.com/article/us-niger-election/boycott-helps-niger-president-issoufou-win-re-election-idUSKCN0WO0ZN">Niger’s 2016 elections</a>, which gave Issoufou a second term, were reportedly <a href="https://www.theguardian.com/world/2018/aug/14/niger-suppresses-dissent-as-us-leads-influx-of-foreign-armies">“plagued by serious irregularities”</a>.</p>
<p>Niger’s military build-up is also cause for concern in a country where the <a href="http://secgovcentre.org/2013/03/securing-the-sahel-from-mali-to-niger/">Forces Armées Nigeriennes</a> is “an intensely politicised organisation” with “a distinct distaste for civilian oversight”. Such a force may prove valuable to a president who wishes to entrench his power beyond democratic means. </p>
<p>This year, citizens took to the streets chanting <a href="https://www.dailymaverick.co.za/article/2018-04-29-what-exactly-are-foreign-troops-protecting-in-the-sahel-2/">“French, American and German armies, go away!”</a>. Issoufou responded by cracking down on further protests in March. He defended the move by saying it was important to have a “<a href="https://www.theguardian.com/world/2018/jul/05/foreign-troops-should-not-be-fighting-in-niger-says-countrys-president">democratic but strong</a>” state.</p>
<p>What the future holds is unclear, particularly given a recent report that Washington is considering <a href="https://www.nytimes.com/2018/09/02/world/africa/pentagon-commandos-niger.html">withdrawing most of its troops</a>. For those opposing foreign military presence in Niger, this couldn’t happen soon enough.</p><img src="https://counter.theconversation.com/content/102503/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Craig Bailie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The build-up of foreign armed forces does not bode well for the citizens of Niger.Craig Bailie, Lecturer in Political Science (Mil), Stellenbosch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/919892018-09-04T13:45:21Z2018-09-04T13:45:21ZBeijing’s gains in Latin America leave US foreign policy toward China in need of a rethink<p>The US foreign policy approach to China – from President Donald Trump’s bellicose words and the recent prospect of a trade war, to the administration’s description of China as “<a href="https://www.chathamhouse.org/expert/comment/us-allies-aren-t-buying-its-new-strategies-confront-china">a revisionist power</a>” – has been criticised as ineffectual bluster, particularly in the face of growing uncertainty over Washington’s commitment to its allies. But more, it is based on a misunderstanding of Chinese foreign policy which fails to account for the other means by which Beijing may achieve its goals. One example is China’s increased involvement in Latin America, where its influence is growing.</p>
<p>Popular Western conceptions of Chinese foreign policy come in two versions. The first assumes that it showers corrupt regimes with Chinese money with little discernible aims, as in the depiction of <a href="https://www.reuters.com/article/us-venezuela-debt-china/china-confident-venezuela-can-handle-debt-issue-idUSKBN1DG0YZ">Chinese loans to Venezuela</a>. This also views Chinese foreign policy as being a largely mercenary endeavour.</p>
<p>The second is the perception of China as a <a href="https://thediplomat.com/2014/09/chinas-revisionist-orientation/">revisionist power</a> that seeks to challenge US dominance, focusing largely on the build up of China’s military and reflected in President Trump’s call for a <a href="https://www.theatlantic.com/politics/archive/2017/03/president-trumps-hard-power-budget/519702/">“hard power” budget</a>. This assumes that a clash between China and the US is almost inevitable, as popularised by Graham Allison’s bestseller, <a href="https://www.ft.com/content/0e1ac020-1490-11e7-b0c1-37e417ee6c76">Destined for War</a>. Despite their differences, both views ignore the other approaches China is using to realise its goals abroad.</p>
<p>Honed from its experience in Africa, Chinese foreign policy emphasises “<a href="https://theconversation.com/chinas-soft-power-strategy-cant-keep-up-with-its-fearsome-reputation-68870">soft power</a>” assets, in the form of a global charm offensive. China has become a popular study destination for students from Anglophone Africa, for example, countries which also find appeal in the so-called <a href="http://www.inquiriesjournal.com/articles/134/the-beijing-consensus-chinas-alternative-development-model">Beijing Consensus</a>, or Chinese model of economic development.</p>
<p>Beijing uses <a href="https://books.google.co.uk/books?id=jmg3DAAAQBAJ">shared experiences</a> to further its ties with the developing world, such as recalling the struggles of national liberation to former colonies. China’s leaders are also quick to <a href="https://www.wsj.com/articles/chinas-xi-jinping-defends-globalization-1484654899">exploit the mistakes of the Trump presidency</a>. For example, China stands to gain a greater foothold in Iran’s oil industry as the threat of American sanctions scare away European firms.</p>
<h2>In America’s backyard</h2>
<p>Panama’s <a href="https://www.nytimes.com/2017/06/13/world/asia/taiwan-panama-china-diplomatic-recognition.html">recognition of the People’s Republic of China</a> in 2017 is an indication of Beijing’s growing influence in the region, concerning those worried about the erosion of Washington’s hold over Latin America.</p>
<p>Beijing describes the region as “<a href="https://www.theguardian.com/world/2018/feb/08/latin-america-china-us-trump">vibrant and promising</a>”, exploiting US missteps in the region, such as Trump insulting various nations by describing them as “shitholes”. Such outbursts have alienated many, ensuring that former Secretary of State Rex Tillerson’s warning of China’s “<a href="http://foreignpolicy.com/2018/02/02/tillerson-praises-monroe-doctrine-warns-latin-america-off-imperial-chinese-ambitions-mexico-south-america-nafta-diplomacy-trump-trade-venezuela-maduro/">imperial ambitions</a>” on the continent will cut little ice among Latin American governments.</p>
<p>China is also able to gain influence in Latin America due to its lack of related historical baggage. Tillerson’s warning is surely perceived as hypocritical by many Latin American states, given the <a href="https://www.washingtonpost.com/news/worldviews/wp/2016/10/13/the-long-history-of-the-u-s-interfering-with-elections-elsewhere/?utm_term=.46f138bd159a">long and contentious history</a> of US interference in its neighbours to the south. China on the other hand has been able to use its experience of economic development to position itself as a potential alternative power and influence in the region. </p>
<p>It is telling that the US is mistakenly focusing on hard power at the expense of soft power: Joseph Nye, the founding father of soft power, warned that the Trump administration has <a href="https://www.project-syndicate.org/commentary/trump-american-soft-power-decline-by-joseph-s--nye-2018-02">eroded America’s soft power capabilities</a>. Citing a survey from the Pew Research Centre, among respondents from 134 countries, <a href="https://softpower30.com/country/united-states/?country_years=2015,2016,2017">only 30% had a positive attitude toward the US</a> – the same proportion as toward China.</p>
<h2>Power of the ‘petroyuan’</h2>
<p>Venezuela’s decision to <a href="http://uk.businessinsider.com/venezuela-publishes-oil-prices-in-yuan-2017-9?r=US&IR=T">price its oil reserves in Chinese yuan</a> rather than US dollars has been interpreted as desperation on the part of Venezuela’s government. But it also serves to illustrate China’s growing influence – and its potential to challenge the US in a different way to the traditional approach of a revisionist power.</p>
<p>The petroyuan was well received in Russian state media such as <a href="https://www.rt.com/business/418638-china-yuan-oil-futures/">Russia Today</a>, echoing Moscow’s willingness to forego the dollar in favour of the yuan, part of the Kremlin’s attempts to diminish the petrodollar and economically isolate the US. Trump’s strategies may have augmented US military power in a bid to counter China and Russia, but misinterpretation of Chinese strategy may see the chipping away of this pillar of US economic hegemony. </p>
<p>Another of China’s gains is <a href="https://www.scmp.com/news/china/diplomacy-defence/article/2161166/el-salvadors-diplomatic-switch-beijing-may-hit-economy">El Salvador’s newly forged relations with Beijing</a>, and its concurrent severing of ties with Taiwan. Beijing’s willingness to fund infrastructure projects in El Salvador led to Taipei accusing Beijing of engaging in “dollar diplomacy” in order to isolate it. </p>
<p>While these have long been features of China’s policies towards the developing world, the hostile reaction of the US is unprecedented, having previously been largely indifferent to diplomatic switches from Taiwan to China. This has been to attributed the hawkish <a href="https://en.wikipedia.org/wiki/John_R._Bolton">John Bolton</a>’s influence on the Trump administration, but it also shows Washington’s fears over China’s involvement in a region seen as the American sphere of influence, as expressed as far back as the <a href="https://www.britannica.com/event/Monroe-Doctrine">Monroe Doctrine in 1823</a>. This is likely to end US indifference towards the developing world, given that this attitude has helped cement China’s post-Cold War objectives.</p>
<p>What do China’s manoeuvres in Latin America add up to? The idea of a clash between the US and China as a growing superpower inevitably focuses on China’s military capabilities, but this ignores the other means at Beijing’s disposal. The legendary Chinese strategist Sun Tzu said that “subduing the enemy without fighting is the acme of skill” – China’s foreign policy strategies seem focused on such a goal.</p><img src="https://counter.theconversation.com/content/91989/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Harper does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In the footsteps of US foriegn policy blunders, China is making friends and influencing people in Latin America.Tom Harper, Doctoral Researcher in Politics, University of SurreyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/999062018-07-16T10:39:53Z2018-07-16T10:39:53ZTrade war could chill China’s growing investment in US economy<figure><img src="https://images.theconversation.com/files/227706/original/file-20180715-27042-fhkag9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The U.S. is the biggest destination for Chinese foreign investment.</span> <span class="attribution"><span class="source">Jason Lee/Pool Photo via AP</span></span></figcaption></figure><p>The U.S. and China are currently engaged in an <a href="https://www.brookings.edu/blog/unpacked/2018/07/12/unpacked-the-us-china-trade-war/">ever-escalating trade war</a> with no end in sight. While the focus of the dispute has centered on tariffs, the consequences <a href="https://www.independent.co.uk/news/business/analysis-and-features/trade-war-explained-tariffs-donald-trump-us-china-imports-exports-a8434626.html">are expected to spill</a> well beyond imports and exports to other aspects of the countries’ complex relationship. </p>
<p>One such area is what economists call foreign direct investment, in which companies invest in businesses in another country. The United States’ ability to draw investments from around the world has been a <a href="http://www.areadevelopment.com/LocationUSA/2017-US-inward-investment-guide/importance-of-FDI-to-US-economy.shtml">significant driver</a> of its economic growth. Indeed, the U.S. was the <a href="https://ofii.org/sites/default/files/FDIUS%202017.pdf">top destination</a> for foreign investment in 2016, as it usually is. </p>
<p>China’s investments in the U.S., however, remain relatively paltry, despite the country’s growing clout on the world stage. And while most have been small and low-profile, a few bigger deals have made headlines and even been blocked over “national security” concerns. </p>
<p><a href="https://scholar.google.com/citations?user=eubX-aYAAAAJ&hl=en&oi=ao">I research</a> the international political economy of China’s rise. Even though most Chinese investment in the U.S. has little to do with national security, I believe the current tense environment will put a chill on Chinese-American deals – with severe long-term consequences. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/227686/original/file-20180715-27027-7xzovp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/227686/original/file-20180715-27027-7xzovp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227686/original/file-20180715-27027-7xzovp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227686/original/file-20180715-27027-7xzovp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227686/original/file-20180715-27027-7xzovp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227686/original/file-20180715-27027-7xzovp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227686/original/file-20180715-27027-7xzovp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Tesla CEO Elon Musk greets new owners of his company’s Model S sedans in Beijing in 2014. China’s Tencent took a 5 percent stake in Tesla in 2017.</span>
<span class="attribution"><span class="source">AP Photo/Ng Han Guan</span></span>
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</figure>
<h2>A snapshot of China FDI in the US</h2>
<p>The reality is that the vast majority of the <a href="https://www.aei.org/wp-content/uploads/2018/01/Chinese-Investment-Jan-2018.pdf">232 investments</a> made by Chinese companies in the United States since 2005 have little to do with national security. </p>
<p>A typical example is <a href="https://www.theguardian.com/technology/2004/dec/08/business.china">Beijing-based Lenovo’s acquisition</a> of IBM’s personal computer business in 2004 for US$1.75 billion, which raised little fanfare or objection. Or consumer electronics company <a href="https://www.scmp.com/business/companies/article/2116486/chinas-haier-has-plan-help-continue-turnaround-ge-appliances">Haier’s purchase</a> of General Electric’s home appliance unit in 2016 for $5.6 billion, again without a fuss. </p>
<p>In more recent years, Chinese companies have taken stakes in some well-known Silicon Valley companies. For example, last year, Chinese tech and media investment firm Tencent <a href="https://www.reuters.com/article/us-snap-tencent-stake/chinas-tencent-takes-12-percent-stake-in-snap-as-shares-plunge-idUSKBN1D81G3">acquired</a> a 12 percent stake in the owner of the messaging app Snapchat and <a href="https://www.bloomberg.com/news/articles/2017-03-28/tencent-buys-1-8-billion-tesla-stake-ahead-of-musk-s-model-3">5 percent</a> of Elon Musk’s Tesla. Also in 2017, China’s sovereign wealth fund invested $100 million in room-sharing service Airbnb. </p>
<p>Overall, China remains a minor U.S. investor – and the data suggest the president’s <a href="https://abcnews.go.com/Politics/10-times-trump-attacked-china-trade-relations-us/story?id=46572567">rhetoric on the campaign trail</a> may have already had a disruptive impact. Last year, China <a href="https://www.aei.org/wp-content/uploads/2018/01/Chinese-Investment-Jan-2018.pdf">invested</a> $24 billion in the U.S., down from $54 billion in 2016, excluding deals under $100 million in size. </p>
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<p>While that’s a sharp rise from just $5 billion a decade ago, it’s barely a drop in the bucket for the U.S. economy. <a href="https://ofii.org/sites/default/files/FDIUS%202017.pdf">China’s cumulative investments</a> in 2016 made up less than 2 percent of all $3.7 trillion invested in the U.S., ranking it 11th, a fraction of the U.K.’s $598 billion and Canada’s $454 billion, the top sources of funding.</p>
<p>California and New York alone <a href="https://www.bloomberg.com/news/articles/2017-04-25/chinese-investment-creates-and-protects-u-s-jobs-rhodium-says">received</a> the lion’s share of China’s $171 billion in investments from 2005 to 2017, or 51 percent. All but 14 states have received at least one investment in the period. </p>
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<p>By sector, the biggest chunk has gone into property investments – such as prime real estate in New York along Park Avenue – which tallied $26 billion, or 15 percent, in the period. Financial firms such as BlackRock took in the next largest share of 14 percent, while 13 percent went to technology businesses like IBM and Motorola. </p>
<h2>National security and politics</h2>
<p>Two of the reasons Chinese investment in the U.S. isn’t higher are national security and politics. A number of high-profile deals have rung alarm bells among U.S. officials and politicians and ended up getting killed as a result. </p>
<p>For example, in 2003, Hong Kong conglomerate Hutchison Whampoa <a href="https://www.wsj.com/articles/SB105168669140493600">withdrew</a> from a joint bid for fiber-optic carrier Global Crossing after the <a href="https://fas.org/sgp/crs/natsec/RL33388.pdf">Committee on Foreign Investment</a> opened an investigation of the deal as some defense officials grew concerned the company’s chairman was too close to Chinese government officials. </p>
<p>Two years later, China oil producer CNOOC <a href="https://www.wsj.com/articles/SB112295744495102393">dropped its effort</a> to buy U.S. rival Unocal for $18.5 billion. In this case, it was lawmakers in Congress who managed to scuttle the deal. CNOOC <a href="https://www.wsj.com/articles/SB112298888643902543">blamed</a> a “political environment.”</p>
<p>The Committee on Foreign Investment, <a href="https://fas.org/sgp/crs/natsec/RL33388.pdf">established</a> by President Gerald Ford in 1975, has the power to veto investments if they might damage U.S. national security. Proposed Chinese investments get reviewed more often than those from any other country. Though the launch of an investigation is often enough to stop a deal – as was the case with Hutchison – the committee has only vetoed five deals, four of which involved China. </p>
<p>One came in 2012, when <a href="https://www.nytimes.com/2012/09/29/us/politics/chinese-company-ordered-to-give-up-stake-in-wind-farms-near-navy-base.html">President Barack Obama cited the committee’s recommendation</a> as he ordered Ralls Corp., a U.S. company owned by Chinese nationals, to divest its interests in wind turbines being built close to a Navy military site in Oregon. It was the first time the power was used since 1990, when President George Bush blocked the sale of an American aircraft manufacturing company to a Chinese agency. </p>
<p>And last year, President Donald Trump <a href="https://www.reuters.com/article/us-lattice-m-a-canyonbridge-trump/trump-bars-chinese-backed-firm-from-buying-u-s-chipmaker-lattice-idUSKCN1BO2ME">prevented</a> Chinese investment firm Canyon Bridge Capital Partners from acquiring U.S. chipmaker Lattice Semiconductor. </p>
<p>And the president <a href="https://www.nytimes.com/2018/06/27/us/politics/cfius-expansion-trump.html">supports a bipartisan bill</a> in Congress that would grant the Committee on Foreign Investments even more power. </p>
<h2>FDI as foreign policy</h2>
<p>While China may not make up a significant portion of the U.S. total, its spending there makes up the <a href="https://www.aei.org/wp-content/uploads/2018/01/China-Tracker-Jan2018.pdf">largest share</a> of Chinese outbound FDI by country. </p>
<p>From 2005 to these days, China invested $171 billion of its $1.87 trillion in total foreign investment in the U.S. </p>
<p><a href="https://www.cambridge.org/core/journals/business-and-politics/article/dissuasive-effect-of-us-political-influence-on-chinese-fdi-during-the-going-global-policy-era/34345FFDB008BD612F7469857CBCA10C">My own research</a> into China’s investments shows that state-owned companies are very sensitive to the government’s foreign policy goals. An agency known as the <a href="https://www.bloomberg.com/news/videos/2018-04-12/sasac-s-xiao-on-soe-reform-china-soe-investment-in-u-s-video">State-owned Assets Supervision and Administration Commission</a> of the State Council coordinates all foreign investments by major Chinese businesses. </p>
<p>Any drop in investments to the U.S. will probably be compensated by more spending in other destinations, especially those countries that are part of the <a href="https://theconversation.com/us/topics/one-belt-one-road-33049">One Belt, One Road</a> initiative such as Australia, Singapore and Vietnam. </p>
<h2>Going forward</h2>
<p>And in fact, the current trade dispute between the U.S. and China will most likely lead to less Chinese investment as deals will encounter increased scrutiny and resistance. </p>
<p>The president has said he <a href="https://www.express.co.uk/news/world/986966/trump-news-trade-war-us-china-tariffs">launched</a> the trade war because Chinese companies <a href="https://www.wsj.com/articles/china-started-the-trade-war-not-trump-1521797401">have a track record</a> of “stealing” Western technology and not respecting intellectual property. Hence, the administration will likely block investments that look along these lines or threaten national security.</p>
<p>But politics will also play a role as members of Congress and others <a href="https://www.bbc.com/news/av/world-us-canada-42405458/trump-china-and-russia-rivals-in-new-era-of-competition">regard China</a> warily as a growing rival that must be confronted. One risk is that <a href="http://www.pewglobal.org/2013/07/18/chapter-3-attitudes-toward-china/">anti-China sentiment</a> in the U.S. increases and makes it harder for the country to use “soft power” via cultural and economic means to achieve its ends – which is preferable to hard power at the end of a bayonet. </p>
<p>It’s unfortunate because <a href="https://dash.harvard.edu/bitstream/handle/1/3450062/helpman_tradewars.pdf?sequence=4">years on international political economy research</a> suggest trade wars and discouraging investment <a href="http://www3.nccu.edu.tw/%7Elorenzo/Ikenberry%20Rise%20of%20China.pdf">are exactly the wrong ways</a> for the U.S. to deal with China’s rise. The U.S. can find other strategies to challenge any unfair trading or business practices without jeopardizing good economic relations, which <a href="https://www.cambridge.org/core/books/renegotiating-the-world-order/B0878F74F44B1F08F3C7535019FBAEE3">have always been</a> the best way to prevent clashes and even war among great powers. </p>
<p>Beyond that, deeper business ties lead to better relations and stronger economies. Economic interdependence raises the costs of direct confrontation, leading to a more peaceful international system.</p>
<p>What concerns me from the current trade war is that it could make geopolitical clashes between China and U.S. stronger and more frequent in the long run.</p><img src="https://counter.theconversation.com/content/99906/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Francisco Urdinez does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Chinese investment in the US has never been high, but the ongoing trade war could dampen it further, with significant long-term repercussions.Francisco Urdinez, Professor of International Political Economy, Universidad Católica de ChileLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/984302018-06-18T21:02:40Z2018-06-18T21:02:40ZBeyond NAFTA: Canada must find new global markets<figure><img src="https://images.theconversation.com/files/223604/original/file-20180618-85863-17evsmq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Plans for a new bridge between Detroit and Windsor, Ont., named after hockey great Gordie Howe, will increase the flow of goods between Canada and the U.S. But Canada's current trade war with the United States means the country should diversify its economy by relying less on its southern neighbour.</span> <span class="attribution"><span class="source">HE CANADIAN PRESS/Dave Chidley</span></span></figcaption></figure><p>Canada’s Senate Committee on Banking, Trade and Commerce is undertaking yet another study on Canadian trade, this time looking at <a href="https://sencanada.ca/content/sen/committee/421/banc/rms/2jun16/NewsRelease-e.htm">the potential impact of the NAFTA renegotiation on the Canadian economy</a>. </p>
<p>In <a href="https://sencanada.ca/en/Content/Sen/Committee/421/BANC/34mn-53816-e">testifying before the committee recently</a>, I argued it’s truly a sad state of affairs that the prosperity of millions of Canadians can be impacted by the decision of one man — U.S. President Donald Trump.</p>
<p>As many have argued for the past 20 years, the Canadian government and businesses must deploy strategies to globalize the Canadian footprint beyond the United States. It’s time to move beyond simple rhetoric and move to action. </p>
<p>Theory and experience tell us that such change is very difficult without a sense of urgency. More importantly, however, implementing the needed change gets more difficult the longer it is delayed.</p>
<h2>Preparing for an end to NAFTA</h2>
<p>There is now a <a href="https://www.thestar.com/news/world/2018/06/12/we-just-shook-hands-trump-confused-by-trudeaus-pushed-around-comment-after-g7-summit.html">very real possibility NAFTA could end</a>. While there is tremendous uncertainty on what the economic impact would be, one thing is clear: it’s not good. In contrast, the importance of having a more diversified global footprint is crystal clear.</p>
<p>Had Canada deployed and effectively pursued strategies to deepen its trade and investment relationships with fast-growing emerging markets over the past few decades — instead of its stubborn fixation on the U.S. market — the risk to the prosperity of Canadians would be mitigated.</p>
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Read more:
<a href="https://theconversation.com/trump-trudeau-tiff-is-the-latest-in-a-history-of-president-pm-disputes-98272">Trump-Trudeau tiff is the latest in a history of President-PM disputes</a>
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<p>Both a smaller share of Canada’s trade would be with the United States and, more importantly, the networks would be in place to buffer trade disruptions with the U.S. market. Instead, we have neither.</p>
<p>It’s incumbent upon the Canadian government to focus its efforts on emerging markets, including China, India and elsewhere. At the same time, policies must be created to help Canadian firms access those markets. This involves improving the innovative capacity and productivity of Canadian companies.</p>
<h2>Ottawa doesn’t get it</h2>
<p>Even in the midst of perhaps the most significant threat to Canadian prosperity in the post-war era, the Canadian government still doesn’t get it. Ottawa’s <a href="http://business.financialpost.com/pmn/business-pmn/opposition-mps-back-federal-governments-rejection-of-planned-aecon-takeover?utm_campaign=magnet&utm_source=article_page&utm_medium=related_articles">refusal to allow a deal that would see construction firm Aecon Group Inc. be taken over</a> by a Chinese state-owned company on national security grounds has not helped the case for a potential free trade agreement with the Chinese. The decision sends all the wrong signals. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/223611/original/file-20180618-85834-8g271o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/223611/original/file-20180618-85834-8g271o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/223611/original/file-20180618-85834-8g271o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/223611/original/file-20180618-85834-8g271o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/223611/original/file-20180618-85834-8g271o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/223611/original/file-20180618-85834-8g271o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/223611/original/file-20180618-85834-8g271o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Prime Minister Justin Trudeau and Chinese President Xi Jinping greet each other at a meeting in Beijing in 2017. The Trudeau government has sent China mixed messages about its willingness to build stronger economic ties.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span>
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</figure>
<p>The Aecon ruling comes at a time when Canada must deepen its trade and investment ties with China to diversify trade away from the United States. Instead of embracing this opportunity, the Canadian government decided to essentially tell the Chinese that Canada doesn’t trust them. How is Canada going to seriously develop a trade and investment agreement with China with this attitude?</p>
<h2>Harper limited Chinese investment</h2>
<p>This, of course, is not new. The previous government of Stephen Harper had similar concerns about China — after approving the takeover of Calgary-based Nexen Inc. by China’s CNOOC Ltd. in 2013, <a href="https://www.thestar.com/news/canada/2012/12/07/prime_minister_stephen_harper_vows_chinese_takeover_of_oil_firm_nexen_the_end_of_a_trend.html">it simultaneously announced it would rule out further investments into the energy sector by state-owned enterprises</a>. That policy essentially focused on excluding Chinese investment.</p>
<p>We are well beyond the point where diversifying Canada’s global footprint can be considered urgent. What may be most surprising to Canadians is that in the years to come, this is exactly what will happen — but no longer by choice.</p>
<p>As NAFTA collapses, there will be no choice but to find new markets. Change will be forced upon Canadians with far worse outcomes than had a strategy been deployed well in advance.</p>
<p>The sooner Canada truly realizes the global economy has changed and there are tremendous opportunities beyond the United States, the sooner Canada’s over-dependence on just one increasingly protectionist market will fall.</p>
<p>Regardless of the outcome of the current trade tensions, let’s not remain vulnerable going forward.</p><img src="https://counter.theconversation.com/content/98430/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Walid Hejazi does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Is Canada ready for a scenario where the North American Free Trade Agreement is scrapped? The tense negotiations with the United States are a chance for Canada to diversify its trade partnerships.Walid Hejazi, Associate Professor of International Business, Rotman School of Management, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/981442018-06-12T20:34:32Z2018-06-12T20:34:32ZChinese investment in Australia falls as political debate hits confidence<p>Chinese direct investment in Australia has declined, according to a <a href="http://sydney.edu.au/business/__data/assets/pdf_file/0009/362763/Demystifying-Chinese-Investment-in-Australia-report-June-2018.pdf">new report</a> by the University of Sydney and KPMG. In 2017, the value of investment fell by 11% in US dollar terms, from $11.5 billion in 2016 (A$15.4 billion) to $10.3 billion (A$13.3 billion).</p>
<p>In early 2018, we also surveyed nearly 50 Chinese executives in Australia. The responses show Chinese investors are feeling apprehensive and reluctant to engage in a climate of insecurity created by current debate about China’s role in Australia.</p>
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<p>
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<strong>
Read more:
<a href="https://theconversation.com/when-it-comes-to-chinas-influence-on-australia-beware-of-sweeping-statements-and-conflated-ideas-94496">When it comes to China's influence on Australia, beware of sweeping statements and conflated ideas</a>
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<p>The investment drop occurred in nearly all areas of Chinese investment in Australia, including:</p>
<ul>
<li>commercial real estate, where investment was down 22%</li>
<li>infrastructure (-89%)</li>
<li>food and agribusiness (-8%)</li>
<li>renewable energy (-64%)</li>
<li>oil and gas (-84%). </li>
</ul>
<p>Growth occurred in mining and energy, with a 448% increase in investment, health care (20%), transport (2%) and smaller areas such as services and manufacture (38%).</p>
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<p>The decline in Chinese investment does not come as a surprise. Chinese outbound investment in all countries was down 29% in 2017. Chinese investment in the United States fell by 35%
and in the European Union by 17% after large increases in 2016. </p>
<p>Some of this is a result of actions by Chinese regulators since late 2016. They have targeted speculative “irrational” investment and capital flight, grouped outbound
investment into three categories – prohibited, restricted and encouraged – and directly intervened in some high-profile international transactions. However, the new regulations and the curb on speculative investments only marginally affect Australia.</p>
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<p>
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<strong>
Read more:
<a href="https://theconversation.com/why-china-is-cracking-down-on-overseas-investment-82763">Why China is cracking down on overseas investment</a>
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<p>The more important news is Australia did not pick up increased Chinese investment in the encouraged industries, namely services, agriculture and infrastructure. These are areas where Australia has strong competitive advantages and is highly complementary to Chinese economic interests. </p>
<p>Combined Chinese investment in Australia’s agribusiness, infrastructure, renewable energy and services halved in 2017. Commercial real estate, the second-largest area behind mining in 2017, has fallen two years in a row. </p>
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<p>The only two growth areas in the encouraged category were mining and health care. <a href="http://www.abc.net.au/news/2018-06-06/lithium-booms-shows-no-sign-of-slowing-as-new-refinery-announced/9840914">Lithium mining</a> and <a href="https://www.australianmining.com.au/news/rio-tinto-waves-goodbye-coal-allied/">Yancoal’s A$3.4 billion acquisition of Rio Tinto’s thermal coal assets</a> boosted mining investment. Health-care investment rose by 20% with several large investments in health service providers and supplements.</p>
<p>Two structural trends have underpinned the decline in investment volume. First, private investors with smaller investment volumes are crowding out larger investments by state-owned enterprises. Second, investment by new entrants is declining in favour of repeat investors.</p>
<p>The report adds fuel to the debate about the Australian government’s political stance towards China and its impact on economic relations. If the intent was to slow down Chinese investment in Australia, this has been achieved. </p>
<h2>Feeling less welcome</h2>
<p>In our survey, more than half of our respondents either agreed (48%) or strongly agreed (4%) that they felt less welcome in Australia, compared to just over one-third (35%) of respondents in 2014. </p>
<p>Asked about the level of support from major stakeholders, Australian media received the lowest rating overall. Business leaders were seen as the most supportive group. State governments and local councils were also given
positive ratings. </p>
<p>Local communities were seen as less supportive, ahead of the federal government. The Foreign Investment Review Board (FIRB) received the lowest government rating. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/sydneysiders-blame-foreign-investors-for-high-housing-prices-survey-77959">Sydneysiders blame foreign investors for high housing prices – survey</a>
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<p>Two-thirds (67%) of respondents strongly agreed (17%) or agreed (50%) agreed that the federal government was less supportive of Chinese investment than previously. A slightly higher number (70%) stated that the political debate about China had made their company more cautious about investing in Australia.</p>
<p>Half of the respondents (52%) felt that Australia was a safer place to invest than many other countries, down from 63% in 2014. The majority view was in spite of problems such as higher business costs than in the United Kingdom, United States and Canada, difficulties in finding qualified staff, and communication issues with local staff and management.</p>
<p>The Chinese investors’ evaluation of business success over the past three years and the outlook for the year ahead confirms their overall positive attitude towards Australia. Growth in turnover and profitability was reported by 65% percent and 45% of respondents respectively. </p>
<p>For 2018, a similar number of respondents expect growth in turnover (64%) and profitability (42%). Half of the respondents (49%) expressed optimism about business prospects for the year ahead.</p>
<h2>Politics plays into business</h2>
<p>Personal interviews with a smaller number of local Chinese companies confirmed the prevailing feelings of insecurity and apprehension. Chinese investors discuss the political situation among each other and with head offices in China, which are concerned about negative reporting.</p>
<p>In the absence of positive signals from the federal government, larger investments by state-owned enterprises – in infrastructure building, for example – are unlikely to go ahead.</p>
<p>The report highlights the potential business implications of trying to separate business from politics in the relationship with China. Business co-operation between Australia and China is strategic rather than purely transactional. This means bilateral diplomatic relations have an important signalling function for long-term and large-scale investments. </p>
<p>Australia needs to build up supply chains and infrastructure to maintain its competitive advantage and to increase capacities in growing export industries such as agriculture and services. This in turn requires substantial investments.</p>
<p>So far, state governments and business are seen as supportive, but a more predictable diplomatic environment is indispensable for securing long-term strategic investment.</p><img src="https://counter.theconversation.com/content/98144/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Interviews with Chinese executives confirm the political debate about China is creating feelings of being unwelcome and apprehensive about investing in Australia.Hans Hendrischke, Professor of Chinese Business and Management, University of SydneyWei Li, Lecturer, Business School, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/976302018-06-03T17:22:58Z2018-06-03T17:22:58ZWhat the Kinder Morgan decision says about investing in Canada<figure><img src="https://images.theconversation.com/files/221378/original/file-20180601-142072-piyvs6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">People listen during a protest against the Kinder Morgan Trans Mountain pipeline expansion on May 29, 2018. The federal government's decision to buy the project doesn't inspire confidence for potential investors eyeing Canada. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Darryl Dyck</span></span></figcaption></figure><p>Would you invest a billion or two in Canada right now?</p>
<p><a href="http://business.financialpost.com/commodities/energy/newsalert-canada-to-spend-4-5b-to-buy-trans-mountain-pipeline-b-c-terminal">By buying the Trans Mountain pipeline</a>, the government of Canada has made a stunning admission. They cannot assure a major company, one with a long and successful track record in Canada, that a legal, comprehensively reviewed and fully authorized major project will proceed to completion.</p>
<p>Let’s park the conversation about the relative merits of the pipeline itself and think about the message that this decision sends to the investment community, particularly relating to natural resource development.</p>
<p>Canada has, for generations, <a href="https://www.mentorworks.ca/blog/market-trends/foreign-direct-investment-canadian-economy/">been a major beneficiary of foreign and domestic investment</a> in resource projects and related infrastructure. That investment flow is now at risk.</p>
<p><a href="https://globalnews.ca/news/4197187/kinder-morgan-water-protest/">The protests against Kinder Morgan</a> are fully understandable. In a properly functioning democracy, people debate with passion and conviction the major issues of the day, including energy policy and pipeline construction.</p>
<p>The opponents have many different and honourable motivations, from concerns about the pipeline itself and Indigenous rights to worries about protecting the coastal waters from a potential tanker disaster. </p>
<p>Others see the struggle with Kinder Morgan as an existential battle against climate change and, specifically, <a href="http://business.financialpost.com/commodities/energy/oil-sands-face-major-blow-as-kinder-pipeline-thrown-into-doubt">the exploitation of the oilsands.</a></p>
<p>These are perfectly legitimate concerns and, to date, the overwhelming majority of the protests and tactics used by opponents of the project have been well within acceptable bounds.</p>
<h2>Canada’s Standing Rock?</h2>
<p>But with continued push-back from the government of British Columbia and provincial municipalities, <a href="http://vancouversun.com/news/local-news/burnaby-to-escalate-kinder-morgan-pipeline-battle-to-supreme-court-of-canada">particularly Burnaby and Vancouver,</a> and with promises from other opponents to turn the construction project <a href="http://www.cbc.ca/news/world/standing-rock-evacuation-1.3995407">into Canada’s Standing Rock</a> (a lengthy confrontation over the construction of the Keystone XL pipeline in the U.S.), Kinder Morgan had had enough.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/221382/original/file-20180601-142066-pzy46j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/221382/original/file-20180601-142066-pzy46j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=704&fit=crop&dpr=1 600w, https://images.theconversation.com/files/221382/original/file-20180601-142066-pzy46j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=704&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/221382/original/file-20180601-142066-pzy46j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=704&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/221382/original/file-20180601-142066-pzy46j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=884&fit=crop&dpr=1 754w, https://images.theconversation.com/files/221382/original/file-20180601-142066-pzy46j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=884&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/221382/original/file-20180601-142066-pzy46j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=884&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An Indigenous man raises his drum above his head during a protest against the Kinder Morgan Trans Mountain Pipeline expansion in Vancouver on May 29, 2018. Kinder Morgan feared the expansion could become Canada’s Standing Rock.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Darryl Dyck</span></span>
</figcaption>
</figure>
<p>Without government assurances that the pipeline project could proceed in full accordance with the law and duly secured permits and approvals, <a href="http://www.burnabynow.com/news/kinder-morgan-suspends-non-essential-work-on-trans-mountain-pipeline-expansion-1.23259871">the company was going to shut construction down.</a></p>
<p>Ignore, if you can, all of the related concerns about the employment of construction workers, financial commitments to First Nations along the route, increased or decreased federal and provincial government revenues and the national and international debates about climate change and oil sands development.</p>
<p>Focus instead on what this says about Canada’s <a href="http://www.cbc.ca/news/business/trans-mountain-pipeline-1.4682682">investment environment.</a></p>
<p>By buying the pipeline, the government of Canada has essentially agreed with Kinder Morgan — a private company could not build a fully authorized project in a timely and commercially effective manner.</p>
<p>And so the federal government is going to build it, assume the risks with taxpayer money and somehow deal with the continuing protests, including the potential for violence and for citizen arrests. </p>
<p>This is a staggering admission and one with potentially serious long-term financial consequences for the country. </p>
<p>Canada and British Columbia have been down this path before. In the mid-1990s, the province’s NDP government slammed the brakes on the <a href="https://www.theglobeandmail.com/report-on-business/rob-magazine/gimme-smelter/article18178591/">Kemano Completion Project,</a> a major hydro-dam expansion in northern central B.C. Alcan, the project’s proponent, had spent $500 million by the time the government cancelled construction.</p>
<h2>Important twist</h2>
<p>More than 20 years later, and Canada has found itself in another profoundly difficult situation. </p>
<p>Ottawa’s decision to purchase Kinder Morgan’s pipeline was seemingly intended to show that the country is a safe and reliable place to invest, but it may in fact convince major companies to put their money in other countries that are easier to deal with. </p>
<p>To return to the question posed at the outset, and given the controversy surrounding Kinder Morgan: Would you invest in a major energy project in Canada right now?</p>
<p>There is an important twist at the end of this story. </p>
<p>The current debate has brought <a href="https://www.mccarthy.ca/en/insights/blogs/canadian-energy-perspectives/pursuit-sustainable-communities-survey-finds-indigenous">Indigenous influence in the energy sector</a> to the forefront of the national conversation. </p>
<p>There are several Indigenous-led infrastructure initiatives – to say nothing of Indigenous interest in <a href="http://www.cbc.ca/news/canada/british-columbia/canadian-banks-eye-indigenous-investment-in-kinder-morgan-pipeline-expansion-1.4646690">taking equity positions</a> in Kinder Morgan – that could break the current logjam and change the national conversation.</p>
<p>Given the long and unhappy history of Canada/Indigenous relations, wouldn’t that be ironic?</p><img src="https://counter.theconversation.com/content/97630/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The decision of the Canadian government to purchase the $4.5 billion Kinder Morgan pipeline expansion project doesn’t exactly instil confidence in Canada’s investment climate.Carin Holroyd, Associate Professor, University of SaskatchewanKen S. Coates, Canada Research Chair in Regional Innovation, University of SaskatchewanLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/974602018-05-30T20:08:29Z2018-05-30T20:08:29ZAustralia’s foreign real estate investment boom looks to be over. Here are five things we learned<p>Australia’s Foreign Investment Review Board (FIRB) reported this week that foreign residential real estate approvals dropped significantly in the 2016-17 period.</p>
<p>Whereas 2015-16 saw 40,149 approvals granted, totalling A$72.4 billion, the figure for the following year was just 13,198 approvals, totalling A$25.2 billion. On these numbers, the foreign property investment boom looks to be over.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/220901/original/file-20180530-120505-1nrqx6t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/220901/original/file-20180530-120505-1nrqx6t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/220901/original/file-20180530-120505-1nrqx6t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=370&fit=crop&dpr=1 600w, https://images.theconversation.com/files/220901/original/file-20180530-120505-1nrqx6t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=370&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/220901/original/file-20180530-120505-1nrqx6t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=370&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/220901/original/file-20180530-120505-1nrqx6t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=465&fit=crop&dpr=1 754w, https://images.theconversation.com/files/220901/original/file-20180530-120505-1nrqx6t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=465&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/220901/original/file-20180530-120505-1nrqx6t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=465&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption"></span>
<span class="attribution"><span class="source">FIRB</span></span>
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<p>This is bad news for the property and financial industries, who are already feeling the pressure of weak household income growth, tighter lending restrictions on local borrowers, and a slowing in housing market activity in key Australian cities.</p>
<p>FIRB suggests that declining demand from China is a factor in the overall decline in overseas approvals. Chinese demand may have been weakened by a range of factors, including the new FIRB application fees, <a href="https://www.businessinsider.com.au/australian-house-price-growth-looks-set-to-slow-as-foreign-demand-drys-up-2017-7">Chinese overseas direct investment capital controls</a>, and the changing global economy.</p>
<p>But if the cycle is moving from boom towards bust, we have learned several things along the way.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/essays-on-air-australias-property-boom-and-bust-cycle-stretches-back-to-colonial-days-96415">Essays On Air: Australia's property boom and bust cycle stretches back to colonial days</a>
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<h2>Lesson 1: We still need more data</h2>
<p>In 2014 the House of Representatives Standing Committee on Economics undertook an <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Foreign_investment_in_real_estate/Tabled_Reports">inquiry</a> into foreign investment in residential real estate. It acknowledged the growing public disquiet about the level of this foreign investment, adding that:</p>
<blockquote>
<p>…there is no accurate or timely data that tracks foreign investment in residential real estate. No one really knows how much foreign investment there is in residential real estate, nor where that investment comes from.</p>
</blockquote>
<p>Four years on, FIRB is still flagging the limitations of data collection and analysis. Without fine-grained data, it’s hard to forecast how much, if at all, the injection of foreign capital can push up local house prices.</p>
<p>The latest figures come with a caveat. The approvals data represent potential investment, rather than actual investment. There are key differences between the two. Potential investors might, for example, seek approval for multiple properties while only intending to buy one of them.</p>
<p>We need the government to collect <a href="https://dallasrogersblog.files.wordpress.com/2016/03/rogers-dufty-jones-2015-21st-century-australian-housing_new-frontiers-in-the-asia-pacific_-toc.pdf">more extensive and detailed data</a> on individual foreign real estate investment, and make it publicly available. This needs to cover more than approvals data at the city level, but data on investment levels in <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1745-5871.12280">neighbourhoods or even individual</a> housing developments. </p>
<h2>Lesson 2: People on the property ladder are less hostile to foreign buyers</h2>
<p><a href="https://www.tandfonline.com/doi/full/10.1080/00049182.2017.1317050">Data from Sydney</a> reveals widespread concern about foreign investment. Almost 56% of Sydneysiders believed foreign investors should not be allowed to buy residential real estate in Sydney. Only 17% of respondents in our study thought the government’s regulation of foreign housing investment was effective.</p>
<p>Just over half of Sydneysiders say they would not want Chinese investors buying properties in their suburb. And 78% thought foreign investment was driving up housing prices in greater Sydney.</p>
<p>Yet those who have <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1745-5871.12280">real estate investments</a> were more likely to support foreign investment than those who don’t. This suggests that Sydneysiders with equity in the housing market, such as homeowners or investors, might view foreign buyers pushing up housing values as positive. And they might fear that the new decline in foreign investment might depress their assets.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/sydneysiders-blame-foreign-investors-for-high-housing-prices-survey-77959">Sydneysiders blame foreign investors for high housing prices – survey</a>
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</em>
</p>
<hr>
<h2>Lesson 3: Housing is built with specific buyers in mind</h2>
<p>When Chinese real estate investment started to rise significantly in 2013-14, property developers scrambled to model this new emerging market. The real estate media rushed to map out where Chinese investors were keenest to buy, and how best to design and market property developments to this new foreign client base.</p>
<p>In early 2012, Larry Schlesinger <a href="https://www.propertyobserver.com.au/finding/residential-investment/15696-feng-shui-will-influence-the-direction-of-australias-property-markets-bernard-salt.html">quoted the demographer Bernard Salt</a> as saying: </p>
<blockquote>
<p>The growing numbers of Chinese and Indian migrants in Australia means property investors need to consider the cultural sensitivity of the residential property they purchase to ensure they maximise the resell value.</p>
</blockquote>
<p>Between 2013 and 2017, property developers, both local and foreign, regularly contacted me to ask if I had any up-to-date research on foreign investors’ consumer preferences and market forecasts. I did not. But there was no shortage of advice out there, covering everything from feng shui-informed housing design to the key needs of foreign university students.</p>
<p>Some global real estate agents suggested to their clients that they could buy an Australian home to accommodate their child while they were studying at an Australian university, and then use the capital gain from the property sale to pay back the tuition fees. </p>
<p>Many property developers were formulating medium- to long-term development pipelines that included the foreign capital and consumer preferences of foreign investors. It is unclear, now, whether much of this housing stock will ever be built. If it is, will it suit the changing future needs of our cities, or address our ongoing housing affordability problems? </p>
<p>In other words, what sorts of properties will be left as the legacy of the recent foreign real estate investment mania?</p>
<h2>Lesson 4: Racialised housing debates are simplistic and harmful</h2>
<p>We need to take care not to conflate domestic Chinese-Australian buyers with international Chinese investors. Much of the <a href="https://www.news.com.au/finance/real-estate/brisbane-qld/foreign-investment-in-australias-housing-market-collapses-firb/news-story/1c312a82d39e892d03c3efd556e3c08f">media coverage</a> of the new report features stereotyped images of Asian families buying an Australian home. But given the foreign investment rules and logistics involved, these pictures are far more likely to depict Chinese-Australians than foreigners.</p>
<p>Understanding the long-term migration and education plans of the investors is important too. Different investor groups will interact with the city in different ways, and their impact on society can be vastly different too. For example, super-rich absentee investors will have a different impact on neighbourhood life compared with that of middle-class migrants or international students.</p>
<p>If the federal government wants to court foreign investment, then better education about the possible risks and benefits of individual foreign real estate investment is needed. <a href="https://www.tandfonline.com/doi/full/10.1080/00049182.2017.1317050">Our research</a> suggests that the government’s pro-foreign investment stance must be accompanied with strategies to protect intercultural community relations in Australia.</p>
<h2>Lesson 5: The boom-bubble-bust cycle goes on</h2>
<p>In 1982, Maurice Daly wrote in his classic book <a href="https://www.amazon.com/Sydney-Boom-Bust-Property-1850-1981/dp/0868611565">Sydney Boom, Sydney Bust</a> that the:</p>
<blockquote>
<p>…fluctuation in property prices recorded for Sydney have been caused by the forces linking the city to the Australian economy and to the remainder of the world.</p>
</blockquote>
<p>Daly charted the influx of foreign people and capital into Sydney between 1850 until 1981, as wealth was channelled through the financial services sector and into urban real estate. Along the way, he observed that one “group to attract the abuse of the general population were the Chinese”.</p>
<p>Domestic and foreign real estate investment have long been connected to the financial services industries, and the built environment is central to creating and storing surplus capital. Australian cities continue to be heavily influenced by global money today.</p>
<p>A key lesson is that domestic and foreign housing booms, bubbles and busts are thus better understood as cycles within our housing and financial system, rather than as a set of short-term ruptures to this system. </p>
<p>We need to think about the collective impacts of domestic and foreign real estate investment over the long-term in our cities if we are serious about addressing housing inequality.</p><img src="https://counter.theconversation.com/content/97460/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dallas Rogers recently received funding from The Henry Halloran Trust, Australian Housing and Urban Research Institute (AHURI), Urban Growth NSW, Landcom, University of Sydney, Western Sydney University, and Community Broadcasting Association of Australia (CBAA).</span></em></p>Foreign investment in Australian property has plummeted by more than half, signalling an apparent end to the China-fuelled real estate frenzy. Along the way we learned some useful lessons about boom and bust.Dallas Rogers, Program Director, Master of Urbanism. School of Architecture, Design and Planning, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/922592018-04-22T19:15:52Z2018-04-22T19:15:52ZBeing a property investor or house hunter makes Sydneysiders more supportive of foreign investment<p>Property investors are more likely to support foreign investment in the property market than people without such investments, we have found in <a href="http://dx.doi.org/10.1111/1745-5871.12280">a survey of Sydneysiders’</a> views about foreign real estate investment. Perhaps more surprising, would-be buyers, who might be expected to worry about demand pushing up prices, were also more likely to be supportive than those who were not looking to buy a property. </p>
<p>We <a href="https://theconversation.com/sydneysiders-blame-foreign-investors-for-high-housing-prices-survey-77959">reported previously</a> that over 60% of Sydneysiders do not want more individual foreign investment in residential real estate in Sydney. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/sydneysiders-blame-foreign-investors-for-high-housing-prices-survey-77959">Sydneysiders blame foreign investors for high housing prices – survey</a>
</strong>
</em>
</p>
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<p>Within this context, we surveyed almost 900 people in Sydney to examine the relationships between home ownership, real estate investment, housing stress and views about foreign investment. Our analysis shows: </p>
<ol>
<li><p>Those who have property market investments are more likely to be supportive of foreign investment than those who don’t have such investments.</p></li>
<li><p>Comparing those who are in housing stress to those who are not in housing stress, there are no significant differences in the two groups’ beliefs about foreign real estate investment.</p></li>
</ol>
<h2>Property investors’ views</h2>
<p>We know that rising <a href="https://www.tandfonline.com/doi/full/10.1080/00049182.2017.1317050?src=recsys">house prices</a>, the era of <a href="https://theconversation.com/moving-on-from-home-ownership-for-generation-rent-71628">Generation Rent</a> and <a href="https://www.tandfonline.com/doi/abs/10.1080/02673037.2015.1006185">foreign real estate investment</a> are creating the social conditions that could increase <a href="https://www.tandfonline.com/doi/abs/10.1080/02673037.2015.1006185">cultural tension</a> between foreign and local buyers. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/moving-on-from-home-ownership-for-generation-rent-71628">Moving on from home ownership for 'Generation Rent'</a>
</strong>
</em>
</p>
<hr>
<p>One group with a strong interest in Sydney’s real estate market are local real estate investors. We were interested in whether those with investment properties and those without differed in their views about individual foreign investment in residential real estate.</p>
<p>We found those with investment properties were likely to be more supportive of foreign investment in Sydney’s housing market than those without investment properties. </p>
<p>For example, 29% of the investment property owners agreed that “foreign investors should be able to buy properties in Sydney” compared to 17% of those without investment properties. They were similarly supportive of foreign students being allowed to buy properties while studying in Australia, with 32% agreeing with this compared to 19% among those without investment properties.</p>
<p>Property investors were more positive about the government’s regulation of foreign investment as well: 28% agreed it has been effectively regulated, compared to 16% of those without investment properties.</p>
<h2>House hunters’ views</h2>
<p>House prices in Greater Sydney have increased rapidly over the <a href="https://www.tandfonline.com/doi/full/10.1080/00049182.2017.1317050?src=recsys">last decade</a> and household debt has grown too. </p>
<p>We might expect people who are actively looking to buy a property to be particularly concerned about foreign real estate investment, as they may feel they are competing against and being priced out of the market by foreign buyers.</p>
<p>For this reason, we asked survey participants whether they were actively looking to buy a property. In response, 23% said they were. Of this group, 31% agreed that foreign investors should be able to buy properties in Sydney, compared to 15% of those not looking for a property.</p>
<h2>Housing-stressed households’ views</h2>
<p>Increasing <a href="https://www.tandfonline.com/doi/full/10.1080/00049182.2017.1317050?src=recsys">mortgage and rental costs</a> are a source of discontent within Sydney’s population. Measurements of housing stress are disputed, but are nonetheless used to give a comparative value to how hard it is for a household to meet housing costs. A ratio of housing costs to income of 30% and above is a common benchmark for housing stress.</p>
<p>Using this measure, we found that more than half (52%) of our survey participants were experiencing housing stress. Another 33% spent less than 30% of their income on their housing and 15% indicated they did not know.</p>
<p>Comparing those over the 30% threshold with those who spend less of their income on housing, we found no significant differences in beliefs about foreign real estate investment.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/mounting-housing-stress-underscores-need-for-expert-council-to-guide-wayward-policymaking-84196">Mounting housing stress underscores need for expert council to guide wayward policymaking</a>
</strong>
</em>
</p>
<hr>
<h2>Other drivers of concern</h2>
<p>We found those who are active in the local real estate market <a href="https://www.tandfonline.com/doi/full/10.1080/00049182.2017.1317050?src=recsys">remain concerned</a> about foreign investment in general.</p>
<p>If housing stress levels do not lead to differences in attitudes to foreign investment, as our findings suggest, cultural or other factors may be at work in the general discontent about foreign investors in Sydney. </p>
<p>We need to investigate further how being active in the housing market informs Sydneysiders’ views about the <a href="https://www.tandfonline.com/doi/full/10.1080/19491247.2016.1270618?src=recsys">right of foreign investors</a> to use real estate as a vehicle for growing capital. </p>
<p>Sydneysiders with equity in the housing market, such as home owners or investors, might view foreign buyers pushing up housing values as positive. As a result, they might fear that restricting foreign investors might depress their assets.</p>
<p>If this type of shared commitment to real estate investment were present across the domestic-foreign investor divide, this could reinforce the idea of <a href="https://theconversation.com/explainer-the-financialisation-of-housing-and-what-can-be-done-about-it-73767">treating real estate as an asset class at the global scale</a>, while cultural tensions between foreign and local investors remain at the local level.</p><img src="https://counter.theconversation.com/content/92259/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dallas Rogers recently received funding from Western Sydney University, Australian Housing and Urban Research Institute (AHURI), Urban Growth NSW, University of Sydney, and Community Broadcasting Association of Australia. This study was funded by Western Sydney University and the University of Technology Sydney. </span></em></p><p class="fine-print"><em><span>Alexandra Wong receives funding from the Australian Research Council, City of Sydney and Western Sydney University. This study was funded by Western Sydney University and the University of Technology Sydney.</span></em></p><p class="fine-print"><em><span>Jacqueline Nelson receives funding from the Australian Research Council. This study was funded by Western Sydney University and the University of Technology Sydney.</span></em></p>You’d perhaps expect property investors not to mind foreign investors who might push up prices. More surprisingly, house hunters are also more supportive than those who are not looking to buy.Dallas Rogers, Program Director, Master of Urbanism. School of Architecture, Design and Planning, University of SydneyAlexandra Wong, Engaged Research Fellow, Institute for Culture and Society, Western Sydney UniversityJacqueline Nelson, Chancellor's Postdoctoral Research Fellow, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/870892017-11-21T19:28:41Z2017-11-21T19:28:41ZForeign ownership of housing – how do Australia and New Zealand compare?<p>Foreign national ownership of property is a <a href="https://www.rba.gov.au/speeches/2017/sp-so-2017-11-20.html">growing concern</a> for many countries, including New Zealand and Australia. From 2018, New Zealand is banning foreign ownership of residential property in an attempt to curb housing inflation and high vacancy rates. </p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/sydneysiders-blame-foreign-investors-for-high-housing-prices-survey-77959">Sydneysiders blame foreign investors for high housing prices – survey</a></em></p>
<hr>
<h2>What’s going on in New Zealand?</h2>
<p>New Zealand residential property inflation reached 10.46% last year. Prices <a href="https://www.domain.com.au/news/new-zealanders-defeated-by-crazy-house-prices-are-tackling-it-at-their-upcoming-elections-20170829-gy6ujd/">rose by 34% over the past three years</a>. </p>
<p>As a consequence, New Zealanders are increasingly concerned that people on low and medium incomes are being locked out of the property market. Home ownership in New Zealand has reached its <a href="https://www.domain.com.au/news/new-zealanders-defeated-by-crazy-house-prices-are-tackling-it-at-their-upcoming-elections-20170829-gy6ujd/">lowest level in 65 years</a> – only a <a href="http://m.stats.govt.nz/browse_for_stats/population.aspx">quarter of adults under 40 years</a> own their own home compared to half in 1991.</p>
<p>Immigration to New Zealand <a href="http://www.mbie.govt.nz/info-services/immigration/migration-research-and-evaluation/trends-and-outlook">grew by 19%</a> in the last financial year. Strong immigration, low interest rates and limited housing supplies, particularly in areas affected by recent earthquakes, have fuelled the rise in house prices.</p>
<p>Jancinda Ardern’s new Labour government went to the election with a comprehensive housing platform that included a <a href="http://www.labour.org.nz/cracking_down_on_speculators">crackdown on speculative investors</a>. Labour stated that <a href="http://taxpolicy.ird.govt.nz/publications/2015-ip-property-bright-line-test/overview">2015 tax changes</a> applying to investor earnings were not having the desired effect of limiting price growth.</p>
<h2>How does Australia compare?</h2>
<p>When it comes to housing, New Zealand is both leading the way while behind Australia in other areas of housing policy. The incoming New Zealand legislative changes emphasise the banning of foreign ownership of residential property. Australia’s Foreign Investment Review Board (FIRB) already <a href="http://firb.gov.au/real-estate/">applies a ban on foreign ownership</a> for existing (as opposed to new) housing. Like Australia, the New Zealand legislation will continue to allow permanent residents to buy existing homes. </p>
<p>However, there are some significant differences. New Zealand’s law will also apply to foreign trusts and foreign corporations. Australian still allows some foreign trusts and corporations to buy existing homes where staff need to be accommodated. In Australia, overseas residential investment is largely <a href="https://theconversation.com/why-chinese-investors-find-australian-real-estate-so-alluring-76310">channelled into building new homes</a>.</p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/why-chinese-investors-find-australian-real-estate-so-alluring-76310">Why Chinese investors find Australian real estate so alluring</a></em></p>
<hr>
<p><a href="https://theconversation.com/sydneysiders-blame-foreign-investors-for-high-housing-prices-survey-77959">Many in Australia</a> consider that temporary residents such as students and those here for work should not be allowed to buy existing residential properties. The FIRB <a href="https://www.rba.gov.au/speeches/2017/sp-so-2017-11-20.html">allows this</a>. The proposed New Zealand legislation, in its current form, does not. </p>
<p>New Zealand anticipates that removing investor demand by excluding foreign nationals from the market will help stabilise house prices. However, there is little evidence that such measures have successfully slowed price inflation in Australia. </p>
<p><a href="http://www.revenue.nsw.gov.au/taxes/spd">Increases in stamp duty rates</a> for some foreign residential purchases are at odds with the FIRB’s long-standing need to encourage investment to offset <a href="https://tradingeconomics.com/australia/balance-of-trade">foreign trade deficits</a>. In the 2015/16 year, for example, approvals for foreign investment in real estate <a href="https://cdn.tspace.gov.au/uploads/sites/79/2017/04/1516-FIRB-Annual-Report.pdf">totalled A$72.4 billion</a>. </p>
<p>However, the <a href="http://www.revenue.nsw.gov.au/taxes/spd">New South Wales</a> and <a href="http://www.sro.vic.gov.au/foreignpurchaser">Victorian</a> governments both increased stamp duty surcharges for foreign investors in residential real estate to make it less attractive to them. The difference here between the two countries is that in Australia the surcharge is being levied as a state initiative rather than a federal one. </p>
<p>Not all states apply a surcharge to foreign investments in real estate. For this reason, the impact is less likely to antagonise Australia’s major trading partners and investors <a href="https://theconversation.com/why-china-is-cracking-down-on-overseas-investment-82763">such as China</a>. </p>
<p>The New Zealand surcharges will be applied nationally. Therefore, the surcharge may be viewed as a protectionist measure. </p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/why-china-is-cracking-down-on-overseas-investment-82763">Why China is cracking down on overseas investment</a></em></p>
<hr>
<h2>Protectionism and the Productivity Commission</h2>
<p>Concern is growing that a global <a href="https://www.pc.gov.au/research/completed/rising-protectionism/rising-protectionism.pdf">increase in protectionism</a> (favoured by the Trump administration) could lead to a worldwide recession and lower living standards, including in Australia. </p>
<p>However, although foreign ownership restrictions could hurt New Zealand’s reputation as an open economy, they are unlikely to do so. This is because <a href="http://www.stats.govt.nz/browse_for_stats/economic_indicators/balance_of_payments/BalanceOfPaymentsYearEnded_HOTPYe31Mar17.aspx">58.5% of the funds</a> coming into New Zealand are from Australia, the United Kingdom and the United States. These are also the countries that New Zealand most heavily invests in. Where the surcharge remains reasonable, it is unlikely to impact upon investment or be seen as a protectionist measure. </p>
<p>New Zealand has been much slower than Australia to introduce rules on residential property ownership. Its proposed legislation closely mirrors Australia’s legislation in regard to who may buy existing homes. These measures have not significantly slowed housing price rises in Australia. </p>
<p>However, New Zealand also plans to limit residential ownership of property by temporary residents and apply a surcharge nationally. These additional measures may have greater effect on limiting housing price rises than Australia’s restrictions have had so far.</p><img src="https://counter.theconversation.com/content/87089/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Erika Altmann does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Concerns about foreign investors driving up housing prices have been growing. Australia was first to bar foreign purchases of existing residential property, but New Zealand is set to go further.Erika Altmann, Property and Housing Management Researcher, University of TasmaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/839592017-09-18T20:04:59Z2017-09-18T20:04:59ZAirbnb and empty houses: who’s responsible for managing the impacts on our cities?<figure><img src="https://images.theconversation.com/files/186314/original/file-20170918-24099-4l5h9j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The impact of Airbnb varies from city to city and suburb to suburb.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/krakow-poland-july-2017-travel-around-682056094?src=p9n8acqY0K-Ps8uM-nigXg-1-8">AlesiaKan/shutterstock</a></span></figcaption></figure><p>The Airbnb and empty house phenomena and their presumed links to housing and rental prices have attracted considerable media and political attention. The ABC points to the “<a href="http://www.abc.net.au/news/2017-06-18/airbnb-in-australia-the-sharing-economy-has-a-dark-side/8624122">dark side</a>” of Airbnb and its effect on long-term rental prices. Empty houses are being linked to higher housing prices and to foreign investment, most often Chinese investment. The Australian headlines that “<a href="https://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwj2uJWmta3WAhWIsJQKHWnrAVYQFggmMAA&url=http%3A%2F%2Fwww.theaustralian.com.au%2Fbusiness%2Fproperty%2Fproperty-boom-china-buyers-raise-ghost-town-fears%2Fnews-story%2F4d8d44f7761bc42933ecc9ab5e8abe7b&usg=AFQjCNFuTQ0WMi-c-nBvG0_5hCo0U2wIEw">China buyers raise ghost town fears</a>”.</p>
<p>The Commonwealth and state governments are seeking to regulate the phenomena. It is questionable whether they should and even whether they understand the data and trends.</p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/how-airbnb-is-reshaping-our-cities-63932">How Airbnb is reshaping our cities</a></em></p>
<hr>
<h2>The Airbnb question</h2>
<p>Airbnb involves renting an entire home, a room or a shared room. Short-term rental of an entire house or flat that is available all year is equivalent to reducing long-term rental options.</p>
<p>Airbnb poses a possible threat to rental affordability. The income Airbnb generates in areas of cities popular with tourists causes owners of rental properties to withdraw these from the long-term rental market. It also causes investors to acquire property and enter the Airbnb market, and to increase the cost of long-term rental. </p>
<p>This may create a ripple effect as relatively high-income households are displaced to adjacent neighbourhoods. The scale of Airbnb impacts on rents, displacement of long-term renters and neighbourhood fragmentation has led cities such as Barcelona, New York and Amsterdam to attempt to ban, or strictly regulate, the extent and location of Airbnb. </p>
<p>Should similar effects be anticipated in parts of Australian cities that are popular with tourists? Data on Airbnb accommodation in Melbourne and Sydney as of December 2016 are:</p>
<ul>
<li><p>Melbourne: 12,174 listings, of which <a href="http://insideairbnb.com/melbourne/">57% are for entire homes</a></p></li>
<li><p>Sydney: 24,078 listings, of which <a href="http://insideairbnb.com/sydney/">61% are for entire homes</a>.</p></li>
</ul>
<p><a href="http://sydney.edu.au/news-opinion/news/2017/01/19/the-community-impact-of-airbnb-calls-for-closer-scrutiny.html">Reportedly</a>,</p>
<blockquote>
<p>The number of Airbnb properties potentially removed from Sydney’s permanent rental market with an average vacancy rate of around 3% amounts to approximately half of the available rental properties. </p>
</blockquote>
<p>The scale of the Airbnb phenomenon is increasing. So, too, is the company’s influence, with its <a href="http://www.sydney.org.au/members/current-members/">membership of the Committee for Sydney</a> and its <a href="https://www.qantasnewsroom.com.au/media-releases/qantas-and-airbnb-team-up-to-make-frequent-flyers-feel-right-at-home/">status</a> as a source of Qantas Frequent Flyer points. </p>
<p>Government may well have to consider regulating Airbnb. The question is whether Airbnb is best managed by state government, or metropolitan or local government. </p>
<p>For example, the Victorian government has <a href="https://theconversation.com/how-airbnb-is-reshaping-our-cities-63932">designated the Melbourne suburbs of Fitzroy and St Kilda</a> for Airbnb development. Why should this be a state decision? Might the residents of already costly rental Fitzroy and St Kilda have their own views?</p>
<h2>The empty housing question</h2>
<p>On the night of the 2016 Census, <a href="https://theconversation.com/taxing-empty-homes-a-step-towards-affordable-housing-but-much-more-can-be-done-80742">1,089,165 dwellings were empty</a> – <a href="https://www.corelogic.com.au/news/three-unique-housing-insights-2016-census#.Wb8SHtMjFBw">11.2% of all Australian dwellings</a>. It’s widely assumed that these empty dwellings, by not contributing to housing supply, increase house prices.</p>
<p>Supposing that this is the case and presuming that foreign investors contribute significantly to the empty house phenomenon, the Australian government’s 2017-18 budget <a href="http://www.budget.gov.au/2017-18/content/glossies/factsheets/html/HA_16.htm">introduced a levy</a> on foreign investors who leave properties vacant for more than six months.</p>
<p>Not solely blaming foreign investors and also looking at domestic speculative investment, the State of Victoria has <a href="http://www.sro.vic.gov.au/node/5816">introduced a vacant residential property tax</a>. This “is intended to encourage these owners to make their property available for purchase or rent … [but] will only apply to vacant properties located in the inner and middle suburbs of Melbourne”.</p>
<p>However, empty house data should be seen in context: over the previous 35 years, <a href="http://www.sgsep.com.au/publications/why-was-no-one-home-census-night">between 9.2% and 11.2%</a> of houses were empty. Vacancy rates have changed little over this time. <a href="http://www.sgsep.com.au/publications/why-was-no-one-home-census-night">Almost two-thirds</a> of empty dwellings on census night are holiday houses or dwellings where owners were absent. Among the capital cities, only in metropolitan Perth did the empty dwelling rate exceed 10%.</p>
<p>SGS Economics and Planning <a href="http://www.sgsep.com.au/publications/why-was-no-one-home-census-night">estimates</a> about 110,000 of the vacant dwellings – 10.6% of the total – were available for short and long-term rental. This small proportion available for rent, amounting to 1.2% of Australia’s houses, would probably not attract media and political attention.</p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/taxing-empty-homes-a-step-towards-affordable-housing-but-much-more-can-be-done-80742">Taxing empty homes: a step towards affordable housing, but much more can be done</a></em></p>
<hr>
<p>Nonetheless, foreign investment in housing is a global phenomenon that focuses on specific cities, such as Vancouver, New York, Miami, London, Paris, Auckland and Sydney. Blaming foreign investors for its 107,000 empty dwellings, the Parisian government “<a href="https://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjuppDGt63WAhXDNpQKHaWvCmEQFggmMAA&url=http%3A%2F%2Fwww.telegraph.co.uk%2Fnews%2F2017%2F01%2F27%2Fbritons-property-paris-hit-new-tax-hike%2F&usg=AFQjCNFk4_kErjs1ub0mOHZSdgoJlneayw">tripled the current 20% extra</a> that non-resident owners have to pay in council tax, or <em>taxe d’habitation</em>, to 60%”. Vancouver imposed a 15% tax on foreign investment in housing. Following this, “the <a href="https://grattan.edu.au/report/hot-property/">number of foreign buyers dropped by 80%</a>. That helped dampen house-price inflation there but pushed up demand in nearby Victoria.”</p>
<h2>What level of government should manage these issues?</h2>
<p>It is unclear whether Sydney and Melbourne will come to have a level of empty dwellings that warrants federal and state attention. Should this be required, the question is which tier of government can best manage the phenomenon.</p>
<p>It is difficult to argue that taxes should be applied at federal and state levels because foreign investment, property speculation and Airbnb affect some cities and not others. They affect some suburbs and not others. </p>
<p>For example, due in part to “a soft residential property market” and “lower land values”, tax revenue for Western Australia is in its <a href="http://static.ourstatebudget.wa.gov.au/16-17/factsheets/money-from-goes.pdf">third year of decline</a>. The state government and Perth homeowners might welcome foreign investment and Airbnb to sustain tax revenue and house prices.</p>
<p>Would a <a href="https://theconversation.com/our-cities-need-city-scale-government-heres-what-it-should-look-like-55873">metropolitan government</a>, learning from <a href="https://theconversation.com/metropolitan-governance-is-the-missing-link-in-australias-reform-agenda-55872">metropolitan interventions elsewhere</a>, not be better placed to manage the effects of Airbnb and empty houses?</p>
<p>Cities around the world are seeking to manage these phenomena and sharing experiences of how best to do this. In Australia, though, the Commonwealth and state governments presume to know best.</p><img src="https://counter.theconversation.com/content/83959/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Tomlinson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>About 10% of empty dwellings on census night – 1.2% of all housing – were available for rental and vacancy rates have changed little in 35 years. Could governments be overreacting?Richard Tomlinson, Professor of Urban Planning, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.