Sovereign Wealth Funds in an Evolving Global Financial System

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Sovereign Wealth Funds in an Evolving Global
Financial System

• 25 September 2008
• Greg Golding and Rachael Bassil

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Propositions for Today

• Proposition 1
• Australia has a byzantine regulatory regime for
  assessing foreign investment proposals. How SWF
  issues fit in had been obscure before February
  2008.

Proposition 2 Progress to date in 2008
illustrates the difficult policy issues the
Australian Government has been grappling with.
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A byzantine edifice.
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Complicated gateways
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The process ..
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Sovereign wealth funds
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Sovereign wealth funds

• The 6 issues (17 February 2008)

1. operations independent of government
2. complies with law and common business
behaviour
3. competition issues
4. tax issues
5. national security issues
6. impact on Australia
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Chinalco/Rio Tinto
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Chinalcos acquisition of shares in Rio Tinto
24 August 2008
Today I approved the proposal by the Aluminium
Corporation of China Limited (Chinalco) to
acquire up to 14.99 per cent of the shares in Rio
Tinto Plc, the London Stock Exchange listed arm
of Rio Tinto Group. A 14.99 per cent stake
equates to an interest of around 11 per cent in
the Group, which includes the Australian listed
Rio Tinto Limited. First, Chinalco has undertaken
to me that it would not raise its shareholding
above this level without notifying and receiving
fresh approval from the Government under
Australias foreign investment review
arrangements. Second, Chinalco has also
undertaken that it will not seek to appoint a
director to Rio Tinto Plc or Rio Tinto Limited
for as long as it holds a shareholding of below
15 per cent. Any future proposal to increase its
level of ownership above 14.99 per cent would
require re-assessment at that time against
Australias national interests under the Foreign
Acquisition and Takeovers Act 1975. While
Australia welcomes foreign investment in our
economy, we will carefully examine national
interest issues where these arise in relation to
foreign sovereign ownership.
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Sino Steel/Midwest/Murchison
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Foreign Investment Approval SinoSteels
Interests in Murchison Metals Ltd
21 September 2008
Today I approved an application by Sinosteel
Corporation to acquire up to 49.9 per cent of
Murchison Metals Ltd (Murchison) under the
Foreign Acquisitions and Takeovers Act
1975. Sinosteel had previously sought to acquire
up to 100 per cent of Murchison, which was the
subject of an Interim Order under the Act.
Sinosteel withdrew that application. In approving
Sinosteels application, I have determined that a
shareholding of up to 49.9 per cent in Murchison
will maintain diversity of ownership within the
Mid-West region. The Government considers the
development of such potentially significant new
resource areas should occur through arrangements
that are open to multiple investors. This
approach is consistent with the national interest
principles we released in February and with the
approach I have outlined previously, including in
discussions with my Chinese counterparts. The
Governments objective is that development of our
considerable natural resource endowment occurs in
a manner that allows Australia to remain a
reliable supplier in the future to all current
and potential trading partners. This ensures the
maximum development of our resources and a fair
return to all of the Australian community.
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Sovereign Wealth Funds in an Evolving Global
Financial System

• 25 September 2008
• Greg Golding and Rachael Bassil

lt9626956gt