Banking on foreign investment

It has been said that we tend to use statistics as a drunken man uses a lamp-post — for support rather than illumination. But one set of figures just out throws some light on how WA is very much on the map for foreign investors.

The Australian Bureau of Statistics says foreign-owned firms account for 25 per cent of private new capital expenditure in the state totaling almost $7 billion. This sort of analysis has never been done before. The figures are for the year to June 30 1999, which included some of the darkest months of the Asian financial crisis.

Colin Nagle, ABS regional director for WA, says the statistics are needed to measure the impact of globalisation, particularly the degree to which foreign investment is funding large capital projects. The mining industry accounted for $3,645 million of private new capital investment, of which Australian owned businesses supplied 76 per cent. By contrast, foreign companies stumped up 53 per cent of the $1,285 million in private investment conducted by manufacturing companies.

During the most recent financial year, the Australian dollar began its chronically weak performance. It will be interesting to discover if that has acted as an impediment to direct investment, or a stimulus.

The current year will also be impacted by the London-based Rio Tinto takeover of North, the likely sale of Ashton to the UK or South Africa, and perhaps by other resource companies falling into overseas hands.

Foreign investment is a touchy subject. Many Australians do not like to see cherished trophy icons carted off abroad.

As you might expect, Rio Tinto Zinc managing director Clifford Leigh says it is good for us. Leigh told The Australian Financial Review that foreign investment used to expand our mining business is preferable to foreign bank debt. There is little doubt that he is right. Australian institutional investors have given our mining sector the cold shoulder and virtually invited in the overseas players.

The US was created by foreign investment. Natural resource poor places like Hong Kong have flourished by encouraging a flow of overseas money into every sector of their economy. India, on the other hand, has been most reluctant to accept foreign capital and has paid the penalty.

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