This study involves foreign investment in Australia by Chinalco, a 1Government-owned corporation. In this study, I have acquired knowledge about international foreign investment, and the various aspects involved. The Chinalco deal is of great economic importance, but the management is in a dilemma due to the political issues involved in the issue, which reflects the situation on the ground regarding Australia as an investment destination.
The bid by the foreign, government-owned investor, Chinalco has triggered a wave of emotions among the Australian citizens. In essence, Australia is known to be quite dependent on foreign investments to put in place infrastructure, avert rampant unemployment and build industries. However, the regulatory framework that governs foreign investment in Australia has a difficult task ahead in deciding whether or not to approve the Chinalco deal.
Australians are aware of the benefits that come hand in hand with globalization, but the perception of an investment by the foreign, government-owned corporation, Chinalco has not been hailed by the majority. Acceptance of the Chinalco bid is perceived as a way of permitting foreigners to buy an asset that belongs to the nation. The federal government ought to make effective arrangements for foreign investors to explore natural resources. In this case, the Chinalco corporation is a customer of the iron produced in Australia. Thus, this issue has several points of view since the investor, Chinalco is a state-owned corporation, and implies that the 2The Chinese government is buying another government’s assets.
Critically, there are foreseen complications that are likely to occur in future once the investor has influence pertaining the iron mines. In this context, the beneficiaries are Chinese local iron consumers. The impact will lead to drastic changes in the iron market since China is a world economy. Given the competitive nature of the iron market, some producers will renounce iron production, but this will lead to a rise in the price of iron. Consequently, Rio Tinto would have to take measures to remain a competitive player in the iron industry. This is not practical since the iron market is influenced by various iron producers across the globe.
Another concern is that the foreign, government-owned corporation could be used to pursue other goals that are contradictory to the development of national resources. However, the rejection of the Chinalco deal is a colossal loss for Australia since its economy would have benefited in copious ways. The Chinalco deal has divergent consequences, which can be avoided for the overall good of the nation by opting to award the bid to a private investor. In the long run, Australia is in search of a capable investor to facilitate the exploration of its natural resources.
In conclusion, the situation of the mining industry in Australia is yet to open to the modern globalized market, which is indiscriminate of government-owned corporations without bias on certain critical issues. The majority of the Australian population is opposed to the Chinalco deal despite their awareness of the economic benefits that come along with the investment. However, it is important to consider all factors in order to arrive at a sober decision on whether or not to approve the Chinalco the deal.
Bibliography
Findlay, Christopher, “Public opinion on Chinalco’s investment in Rio Tinto,” EastAsiaForum. Web.
Woetzel, Jonathan. “Reassessing China’s state owned Enterprises.” The McKinseyQuarterly, July 2008.
Switzer, Tom. “Public attitudes toward foreign investment.” Institute of Public Affairs, December 2008.
Footnotes
- Christopher, Findlay. “Public opinion on Chinalco’s investment in Rio Tinto.” 2009.
- Jonathan Woetzel. “Reassessing China’s state-owned Enterprises.” The McKinseyQuarterly, 2008.
- Christopher, Findlay,. “Public opinion on Chinalco’s investment in Rio Tinto.” 2009.
- Tom Switzer. “Public attitudes toward foreign investment.” Institute of Public Affairs, 2008.