BBC " MONEY" PROGRAMME
TV INTERVIEW WITH THE PRIME MINIST
THE KTM90N7JHN. ,, T
Interviewer: Mr. John Tusa r
Recorded on 24 April 1969 for screening on 8 May 196
Q. What do you see Prime. Minister as the dangers from a
completely " open door" policy towards foreign investment?
PM. I suppose a possible danger would be something which
was, in its effects even greater than the effects, say, of American
investment in Canada. Those, I suppose, one could indicate in this
way. First, I think it is true to say that in Canada about fifty per cent
of the earnings, or dividends at any rate, made by companies leave
Canada. And, secondly, there is a possible danger in the control by
some headquarters company outside a country of companies operating
inside a country. An example of that sort of control and I am not
saying it is a bad thing that happened but an example, I think, was
the instruction, as it were, given by a motor car company in the United
States to a motor car con-pany which it owned in Canada that its
products were not to be sold in a particular area. That is the sort of
problem that one might run into and I say might.
Q. What made you raise this sort of storm warning about
the dangers of foreign investment at this particular time?
PM. I don't think I raised a storm warning so much about
the dangers of foreign investment because we must have foreign
investment we must have it and we must have it in large quantities
in order to develop at all. What I did raise was the desire of the
Australian Government that Australians should be allowed to participate,
and be given an opportunity to participate, in the enterprises which
foreign investment made possible. I flagged that desire quite strongly.
Q. But do you think that even doing this has scared off any
foreign investment?
PM. No, I don't think it has scared off any at all. I've seen
no figures to indicate that the foreign investment has dropped or foreign
interest in investment has dropped. And I draw your attention to the
announcement made just the other day of this huge investment in the
Robe River development project, which I am glad to say is to be at
least 25 per cent in regard to equity offered to Australians.
Q. Could you define your Government's attitude to the
question of foreign takeovers of existing Australian companies? What
would you like to see happen there? / 2
72-
PM. Well, the first thing I would like to see happen is for
companies to know whether in fact they were in the process of being
taken over by foreign companies. In other words, I would like to see
that shares in Australian companies held in the -names of nominees,
once they reached a certain percentage of the total shares, had by law
to be openly described as being in the beneficial ownership of the
particular overseas company, or indeed the internal company that
owned them. This, think, is in line with what is done in the United
Kingdom and in the United States. That is one of the first things, so
one would know what was going on, so that the companies would know
what was going on. Secondly, one would want to see that an approach
to take over an Australian company was properly made and was not
made on a basis of " first come first served" offers, but made on the
basis which . all the shareholders would know about and. all the shaxeholders
could consider and all the sh~ treholders could decide upon. Those are
a couple of points.
Q. But you said you were concerned about efficient
Australian companies being taken over just because they were a good
going concern. Is there anything you can do about this in practice?
PM. Well, I am not sure whether legally at the moment there
is anything one can do about it in practice. Also, of course, one has
some difficulty obviously in saying, " Well, this is efficient. This is
inefficient". In the broad, it is easy enough to see in particular cases.
It is also possible to imagine that even efficient companies could, by
partnership rather than takeover I would sooner see it done by
partnership with some other company bring in more technological
expertise, more managerial expertise. So it is very difficult thoroughly
to define. But there is in the United Kingdom power, at any rate. under
I think the Exchange Control, for a government to say, no matter what
the shareholders may want, " This particular company is so important
to the United Kingdom nationally that we would not allow it to be taken
over. We will use our Exchange Control". We, to some extent, do
this in Australia now. We do not allow foreign banks to come into
Australia. We do not allow civil aviation companies from abroad to
operate in Australia or to take over Australian companies. I think
the same applies to our television companies. So there are areas
already where the Government has said, " Well, we don't believe that
these areas should be allowed to be invaded". I don't see us extending
areas but it would be worth looking at, and is being looked at to see
whether there should be some legal capacity for a government to say,
in a case of a particular company let's, for example, take BHP, an
enormous Australian company to say, " Well, we wouldn't want this
company to be taken over. We would wish to be able to stop it". It
would have to be an ad hoc decision in each case and very rarely made
and publicly known. / 3
3-
Q. Now, what about the question of equity participation in
new developments. You say you want a greater Australian equity
participation. Now, how are you going to get this?
PM. Well, I think that in the case of any reputable company,
clear statements of the government's requirements do have an effect.
Indeed I believe they have had an effect, since we have been making it
clear that this is what we want. We have some examples even before
saying so strongly what we would like of the sort of things that
Australia would wish to see. I believe that the fifty per cent partnership
between ESSO and BHP in discovering oil is one example of that. I
believe the sixty per cent ownership by Australia of Mt. Newman is an
example of that. The participation in the Robe River, which, I
understand, is going to be 25 per cent. There does seem to have been
a realisation by foreign companies that a government, having expressed
a desire for an offer and I stress the word " offer" of Australian
equity ( because we are not going to make the development of some
great industry dependent on Australians taking up what is offered;
Australians might not have enough money and might not wish to do it),
there does seem to be evidence that this is now being offered in greater
amounts than previously.
Q. But you aren't going to lay down say a firm figure of
say 25 per cent of Australian equity participation as a condition of the
development starting?
PM. I don't think you could. I don't think you could lay that
down for a thing like that because there would be so many enormously
differing propositions. There might be one proposition for a billiondollar
development. Another proposition for a $ 200, 000 development.
Well, clearly, trying to lay down there must be 25 per cent Australian
participation or that that must be offered would be so different in each
of those cases that I don't think you could definitely lay it down. But
there is something one could call a code of good corporate behaviour
which one could say that one expected foreign companies to follow.
That originated, I think, in Canada, and is well known to the significant
and reputable companies who want to work with governments. It
includes participation in management by, in our case, Australians,
it includes the offering of equity initially and the indication that further
equity will be offered, and indeed it approaches a partnership which is
really what one wants.
Q. Now, when it comes to starting developments like the
exploitation of mineral resources from scratch, is there a larger
part that Australian institutions especially insurance companies can
be persuaded to play, and this is what the Labor Opposition wants,
isn't it? / 4
4-
PM. Well, I don't think from listening to the Leader of the
Opposition I would agree that what he said was that they should be
persuaded to play a greater part. I rather understood him to say that
they should be compelled to play a greater part. And I would not by
any means wish to say to an insurance company, which is after all
holding the premiums of people from all over Australia who are
expecting to be paid if they have to make a claim, I would think it quite
wrong to say to them, " We will compel you to invest in this enterprise
whether you wish to or not or whether you think you will get a good
enough return or not on your income".
Q. But what about persuading the insurance companies to
play a more positive role not to be investing in city centre buildings
but in mineral resources?
PM. I wouldn't think that insurance companies would need
to be persuaded to invest their funds in areas where they were going
to get a good return. They are being run by their hardheaded business
directors, and I believe that the opportunities for investment are ones
which they will judge and into which they will channel the funds they
hold.
Q. You said earlier, Prime Minister, that you were
worried about the question of excessive dividends leaving the country.
Have you considered or are you considering limiting the rights of
foreign companies to repatriate dividends?
PM. No.
Q. Would you say that you are an economic nationalist?
PM. I would like somebody to define " economic nationalist"
before I felt I could properly answer that question. But if wanting an
Australian participation of the greatest possible amount is being an~
economic national ist, then I would say I was an economic nationalist.
On the other hand, if wanting the greatest possible amount of overseas
investment, without which we can't develop as quickly as we need to
develop, is not being an economic nationalist, then I am not an economic
nationalist. I want we must have this overseas development. We
must have this development and we must have overseas capital. But
I want Australian opportunity to participate at the beginning, if possible,
of new enterprises, and to continue to participate as the enterprises
grow.
Q. Haven't you modified your views on this since the
controversy first started over the MLG about six months ago?
PM. No, I don't think so. You see, the MLC matter was
this that large numbers of shares ( from memory something over
per cent) were being held in the names of nominees and nobody
knew who was holding them and nobody could find out who was holding
them. But we suspected they were being held by an overseas company.
It appeared that still more shares were being sought. Now the first
thing one wanted to discover was who was in fact seeking to buy control
of the MLC if they were seeking to buy control of it. The second
thing was that this was an insurance company, an Australian insurance
company with enormous assets, with assets which grow very largely
each year, and that is the sort of company which one might very well
wish to keep in Australian hands, and in fact would wish to keep in
Australian hands.
Q. Many people seem to have got the impression that you
started at that time with a wish to be fairly tough on foreign investment
but that you have been back-pedalling ever since?
PM. Well, I don't quite know what you mean by being fairly
tough. Do you mean that it is tough to say we want Australian
participation? To say to companies who are seeking to come here
from abroad, " The Government wants you to do this; the Government
wants you to follow a code of good corporate behaviour; you will be
operating in this country for a very long period of time and you don't
need to be told that it is to your advantage to co-operate with the
Government?" If that is tough, then I was and am being tough. But I
don't believe I ever indicated that I was going to legislate for a
particular percentage, because one can't do that. One flags the course,
one says what one expects and in some instances, such as companies
who are holding shares in the names of nominees, I think we must act
and must see that beneficial ownership is disclosed when it reaches a
certain percentage.
Q. In the last resort, Prime Minister, you are saying that
for a Government to express its wishes that this is going to be an
effective enough way of getting the policy that you want? It looks as if
you are not going to legislate on any of these matters. Now do you
think it is going to be effective?
PM. I didn't say I wasn't going to legislate on any of these
matters. We have discussed the question of the nominee ownership
of shares. We have discussed the question of methods of takeover.
We have discussed the question of whether there could be some ultimate
reserve power for a government to protect some very significant
Australian company. All those matters we have discussed, and I
haven't said that we wouldn't legislate on those. What you may be
asking about was were vie going to legislate to insist that something
couldn't go ahead unless there was an offer to Australians of a
particular percentage of equity. And I have indicated I wasn't going
to legislate on that.
Q. Prime Minister, thank you very much.
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