Perception of control excludes HK firm from lighting Australia
The $13 billion bid by Cheung Kong Infrastructure (CKI) for the APA Group's gas pipeline assets may have been scuppered for more reasons than meets the eye. But, could it be saved and what lessons can be learned for future Hong Kong and Chinese bids to invest in key infrastructure assets and projects in Australia.
*By Alistair Nicholas
Few should be surprised by Treasurer Josh Frydenberg's preliminary decision to block the CKI bid for APA's critical infrastructure gas pipeline. In his statement of yesterday the Treasurer said he had advised CKI that its bid "would be contrary to the national interest".
While the Treasurer has indicated that the main reason for blocking the deal (his final decision is due in two weeks time) would be the fact that it would place a significant proportion of Australia?s gas infrastructure into the hands of a single foreign player, other concerns continue to linger about China's possible influence over CKI. Although the Treasurer pointed out that CKI is a significant investor in other Australian infrastructure, including gas and electricity, and that the government welcomes its ongoing commitment to investing in Australia, the fact remains that many in the Coalition continue to hold concerns about CKI and other Hong Kong companies. They feel Hong Kong companies are increasingly coming under the control of Beijing. A number of Coalition backbenchers have indicated their concerns in private conversations with me. And, Senator Jim Molan was quick to welcome the Treasurer's decision yesterday.
That would suggest that even if CKI were to find an Australian joint venture to partner with it on the deal it may still be blocked by the government, especially in the context of a federal election that is due to take place in the next six months. The issue is too much of a hot potato to carry into an election. The Australian Strategic Policy Institute (ASPI) is already sounding alarm bells about Hong Kong companies acting as Trojan horses for Beijing. And a number of crossbench parties, particularly One Nation, could make approval of a re-configured CKI bid an election issue in key seats, particularly in the Liberal National Party base of Queensland.
The real question is what can CKI and other Hong Kong companies do to demonstrate that they are not beholden to Beijing. Old China hands and China watchers, like your current correspondent, know that CKI is a genuine Hong Kong company with global institutional investors amongst its shareholders. But few backbenchers realise or understand that. If anything there is a need for CKI and other Hong Kong based companies to engage more with the Australian polity and demonstrate that not all Hong Kong businesses are controlled by Beijing even as the Chinese Communist Party may be strengthening its grip on the Special Administrative Region that is Hong Kong.
What they need to do is undertake a comprehensive government relations and public affairs campaign in order to win the support they need for future investments. To be sure, it is probably too late for CKI to obtain that support for its APA bid; but other Hong Kong companies need to think about the long-game and focus on winning a social licence now so they can invest and operate in Australia in the future, including in sensitive areas such as energy generation and transmission, ports and telecommunications.
With the possibility of a change of government at the next federal election they would be well advised to seek advice and guidance from a bipartisan government and public affairs consultancy firm.
*Alistair Nicholas is the CEO of Cornerstone Group Australia. He was based in Beijing China from 2000 to 2013, and has advised Chinese companies investing in Australia since his return to Sydney in 2013. Last year he authored a study on how Chinese investors can obtain a social licence to operate in the market.