31/07/2019 - 14:14

Variety, outcome equity key for foreign direct investment

31/07/2019 - 14:14

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A Committee for Perth report has confirmed the importance of foreign trade and investment in WA, but flagged concerns about wealth distribution.

Variety, outcome equity key for foreign direct investment
Business News’ WA major projects list had reported 13 lithium projects in the pipeline worth a total of $6.45 billion, including the $2.2 billion Wodgina Refinery project

A Committee for Perth report has confirmed the importance of foreign trade and investment in WA, but flagged concerns about wealth distribution.

A Commitee for Perth report has pointed to the need for greater diversification of foreign direct investment in Western Australia, which it found to be the state most dependent on foreign trade.

Reviewing the impact of foreign investment since 2001, the ‘Investment and Trade: Drilling Down into our Global Attractiveness’ report found that foreign direct investment had reached a record $967 billion in the Australian economy in 2018.

That has helped the nation return a capital account surplus for years and indicates high levels of global interest in investment in Australia.

While the country benefited from foreign investment throughout the period studied, the most significant increase occurred during the resources boom between 2003 and 2007, with the US alone increasing its investments by more than $50 billion between 2003 and 2004.

The high levels of investment in the resources sector during that period were good news for WA’s resources-based economy, which grew exports by more than $40 billion.

That continued to be the case in 2018, when 37.8 per cent ($365 billion) of FDI in Australia had accumulated in the mining and quarrying sector.

Though the report highlighted WA’s economic strength on the back of investment in the resource sector, it also drew attention to the state’s high trade dependence index rating, the highest of any state.

WA has been the largest exporting state since 2008.

Conversely, NSW and Victoria showed a reliance on imports indicating greater economic diversification in IT, advanced manufacturing and medical industries.

While WA’s economy was comparable to the similarly mining-dependent Queensland, WA’s TDI rating was about 30 points higher.

“This latest research reaffirms the importance of foreign trade in WA, as it is shown to lead to increases in jobs, economic prosperity, infrastructure and technology,” Committee for Perth chief executive Marion Fulker said.

Despite WA’s exporting $145 billion in 2018, the report indicated its status as a resources economy may benefit from more diversified investments going forward.

“A lot of [countries] are now into real estate, they are looking for infrastructure work and they are looking for technology transfers,” said Tony Chong, partner at global law firm Squire Patton Boggs.

Representing clients from the ASEAN region, Mr Chong said appeals for foreign investment should focus on Japan and South Korea, as well as countries in South-East Asia such as Vietnam, Singapore and Indonesia.

“Our state government is pushing quite a big agenda on foreign investment and they are actually getting quite a good reaction now from overseas,” he said.

“The message is out that we are open for business, that there are things to invest in here in WA, and also people are starting to see money moving from the east coast to here.

“They are not coming in and investing immediately, but they are all starting to look for opportunities.”

The report also highlighted a growth in lithium mining as a further source for foreign investment.

Previously, Business News’ WA major projects list had reported 13 lithium projects in the pipeline worth a total of $6.45 billion.

That includes the $2.2 billion Wodgina Refinery project led by Mineral Resources and Albemarle Corporation.

Regardless, the report emphasised the need to avoid creating a dual economy, citing the last resource boom in which wealth became concentrated in specific, socio-economically advantaged regions.

That will create pressure for the state government to ensure the benefits of any forthcoming boom are evenly disbursed across the state.

“This data shows us that, as a resource-abundant state, we are uniquely positioned to capitalise on the many benefits that FDI brings,” Ms Fulker said.

“However, we must learn from the previous resources boom and continue to implement strategies to facilitate and leverage high levels of foreign investment in WA,” she said.

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