Argus targets foreign interests - BHP boss points the way to $18 billion boost in exports

Age
Friday 23/10/2009 Page: 1

BHP Billiton chairman Don Argus has warned that changes need to be made in four key areas if Australia is to capitalise on its unique position to benefit from the "unprecedented" growth fuelled by demand by China and India.

His f plan - covering greater funding options for the $80 billion in minerals and energy projects, supportive policy setting, and improved labour market flexibility and regulatory reforms - is aimed at ensuring Australia captures an additional $18 billion in annual export revenue by 2015. In one of his last major speeches ahead of his retirement early next year, Mr Argus also suggested a radical "Australianisation" edict to deal with the encroachment of state owned Chinese enterprises in the local mining sector.

Mr Argus suggested at the Melbourne Mining Club luncheon that one response from the Federal Government could be to allow foreigners to acquire "green fields" or early stage resource projects, but only on the basis that half of the project is floated off to Australian investors, say, 15 years later. Mr Argus has long raised concerns about the lack of policy on the ability of state owned enterprises and sovereign wealth funds to buy up the resource endowment of a host nation without there being reciprocal investment rights.

His 50%, 15-year suggestion is his "lateral" response. "We can't get complacent from a competitive point of view because we have had a good run with China," Mr Argus said. "China is now going out and branching out to try and lock in resources themselves." He emphasised that he was not anti-Chinese investment or anti-foreign investment "because Australia does need foreign investment". But lie does not want Australia to end up like Canada, where foreigners have replaced local owners of the resources industry. "Canadian investors certainly don't have the same holdings in their endowment assets that they might have had 10 years ago," he said.

Mr Argus is also worried that volatility in the carbon pricing caused by opportunistic traders in the proposed emissions trading scheme could threaten investment in Australia and reduce international competitiveness. Mr Argus questioned the Federal Government's cap-and-trade policy, saying it might not take any carbon out of the atmosphere and had the potential to distort the market. "The price of carbon will depend on the relationship between the supply and demand of permits," he said.

"This may be good for market traders but it adds to the complexity of investment decisions for businesses generally. We should not discount that enterprising traders will be seduced to buy permits from nations where the pricing mechanism may vary." Mr Argus stopped short of endorsing a carbon tax over a cap-and-trade scheme, saying he was "still half and half"' on which provided the best emissions abatement strategy.

"We do not want to make carbon and energy prices increasingly volatile in a way that could negatively impact investment decisions," he said. "The degree of volatility and the extent to which it may compromise a cap-and-trade system will depend on whether there is a global commitment to this system and whether the operating regulations are consistent," he said.