This was published in TODAY (Singapore) 11 Apr 2011
by Simon Tay and Hank Lim
Asia's rapid rise leaves Aussies little time to shed an antiquated nationalism and accommodate emerging realities
It may be a disappointment that the Singapore Exchange's (SGX) proposal to merge with the Australian Stock Exchange (ASX) seems fated to be rebuffed, even after major changes from the original deal. But it should not surprise.
Indeed for some Asians, the refusal simply confirms their suspicion that Asian acquisitions in Australia face resistance for reasons beyond rational economics. The full picture, however, seems more complex.
Australians do not always say "no". There is instead a fluctuating record, depending on domestic resistance from industry and major political constituencies. The Australians are not objecting to a Chinese bid to buy into copper mining company Equinox for US$6.5 billion (S$8.2 billion) but rejected an earlier bid by the same Chinese company, MinMetals, for another mining company. Chinalco's bid for a hefty stake in resource giant Rio Tinto was also turned down.
For Singaporean investments, some have been accepted, like SingTel's acquisition of Optus, even if the path was not always smooth.
What explains these fluctuations? Treasurer Wayne Swan was quoted as explaining that all proposals have to be in Australia's national interest. An appeal to the national interest is common to all countries. But how that national interest is calculated is not a simple and absolute arithmetic.
Elements vary from case to case and from time to time. The business and economic viewpoint may not coincide with domestic political sentiment, especially when the government in power is a minority government. Australians do want to take part in the growth of Asia, yet tend to try to preserve their traditional political and economic domains.
In the SGX bid, many Australian businesses and analysts were said to favour the deal. The merger would have created a formidable exchange. Although vastly different in size, Singapore and Australia have many common elements in their legal system and business practices and could have combined for mutual advantage. On their own, neither the SGX nor ASX are able to compete with top exchanges in the region, let alone the world.
Former ASX chairman Maurice Newman backed the merger and called this a critical decision, when writing for Asialink, a non-profit organisation that deepens engagement with the region. He warned his fellow Australians that to be a high-value adding regional centre requires a different mind-set and approach to policy settings.
The market collectively signalled their judgment as the ASX shares fall after Treasurer Swan's statement, while the SGX shares rose.
For the longer term, some like Australia and New Zealand Banking Group chief executive officer Mike Smith believe there will be negative consequences and fear that the rejection could decrease foreign investment in Australia.
While some Australians wish to engage Asia and indeed have centred their business plans on tapping into regional growth, others have consciously rejected integration.
Ms Pauline Hanson, the former member of Federal Parliament who voiced anti-foreigner sentiment, is attempting a political comeback. Even if she is defeated as most predict, the sentiment she has voiced has discernibly coloured a spectrum in Australian politics. This harks back to "white Australian" policies that lasted until the 1970s.
Even among Australians who seek to engage Asia, they differ on the accepted terms for that engagement. More will accept Asia as a market to enter for their future growth. For example, ANZ Bank seeks to expand across the region and beyond to compete with local banks to serve the emerging rich.
Fewer Australian accept that this engagement will be more equal and reciprocal, much less that Asians might expand and "conquer" Australia. Some Australian may embrace Asia, but it is another thing to be embraced in return.
Australians are going through an adjustment process due to Asia's rapid rise. Some Asians have already risen to parity and more will do so in the coming years, and even run ahead. Many Australian elites and most economists understand this and will seek to both compete and cooperate.
The Australian economy is currently booming due to the surging demand from the growing economies of Asia. Yet while this economic interdependence is real, economic growth can create a misplaced sense of security and assertive insularity from some Australians.
The rapidity of Asia's rise leaves many other Australians with little time to accommodate the emerging realities. In such times of change, it would be ideal to have politicians who do not pander to a narrow and increasingly antiquated sense of nationalism. While reassuring their countrymen, their task should instead be to usher in new attitudes of win-win, and a renewed willingness to embrace Asians, and accept a reciprocal embrace.