Friday, 5 June 2009

If at first you can't decide, put it off for a bit longer

Wayne Swan did not need the appearance of those funny little television ads urging him not to allow the Chinese to get their hands on part of Rio Tinto to know that he had a political difficulty. As the Minister charged with making a decision on foreign takeovers he was going to have problems if he said yes or if he said no to the offer from the government owned Chinalco. The charge of selling off the farm is always emotive and his predecessor as Treasurer, Peter Costello, was poised to play on the combination of anti communist and anti Chinese feeling in the community. Over the last year other members of the Opposition, not just Mr Costello,have been laying the foundation for an attack on the Treasurer's Prime Ministerial colleague Kevin Rudd as being too pro the Chinese. Approving the Chinalco purchase, even if it came recommended by the Foreign Investment Review Board, would elevate the yellow peril into an election issue. Not that saying no would be any easier. Australia's prosperity over the last decade has been built on demand from China for the resources of which Rio Tinto is a major producer. Upsetting such a major customer would not be a wise thing to do.
Fortunately for Wayne Swan, the FIRB knows how to take a long time to make an investigation and then a recommendation. As the months passed by, and opponents to the proposal emerged among major shareholders in Rio Tinto, the government could see a way out of its political dilemma. Creating the impression that changes would be needed for the deal to finally pass muster and that negotiating such changes would take time aided the cause of the shareholder opponents to the extent where the proceedings were called off overnight.

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