The UK is one of the least protectionist countries in the world, when it comes
to foreign companies buying domestic assets. A French utility wants to buy a
UK water company or railroad? No problem. A Mexican cement company wants to
buy a UK competitor? Come right in. But now, the foreign investors with their
eye on the UK are not private, but public. And that’s making people nervous.
Observer wrote, in a leader yesterday:
Last week Sainsbury’s looked ready to succumb to takeover by the investment
arm of the Qatar government. Last year, ferry operator P&O was taken over
by the government of Dubai. Gazprom, the Russian state gas monopoly and a
tool of Kremlin foreign policy, is reportedly planning to bid for Centrica,
owners of British Gas. That would follow its purchase of Pennine Natural Gas
last year.
The Chinese government has set up a $300 billion fund to buy Western companies,
with British assets top of the list. There are sound reasons to keep Britain’s
economy attractive to foreign investment, but embracing liberal global markets
should not be a cover for nationalisation under foreign flags.
The editorial set off an interesting debate chez Tim
Worstall, who reckons, basically, that money is fungible and that it therefore
doesn’t matter who’s doing the buying. But clearly a line has to be drawn somewhere.
Turner notes:
Tim himself draws the line at defence contracters (presumably not the US
or other allies though) and North Korea (for anything). Issues of national
security led some commenters to say they wouldn’t want Russia to be in charge
of our energy generation. Hands-off governments could become hands-on ones
if it comes to a decision between shutting a factory in the UK and one in
their home country.
My view is that national security matters, and that Russian ownership of UK
gas assets comes very close to posing a national-security problem, given Russia’s
demonstrated willingness to use its gas assets to political ends. On the other
hand, a lot of foreign takeovers do not pose any kind of national-security problem
at all. “How on earth can it be in Britain’s interest to allow Sainsbury’s
to become the nationalized property of a Gulf state?’’ asks
Unite’s Brian Revell – to which the answer is that if Qatar pays more
money than anybody else is willing to offer for the UK supermarket, then Sainsbury’s
present shareholders can use that money to generate better domestic returns
elsewhere.
Similarly, in the US, the proposed acquisition of foreign-owned ports by Dubai
was not a major security threat, overheated
Senatorial rhetoric notwithstanding, and the same thing can be said of the
proposed acquisition of Unocal by China’s CNOOC, especially considering the
fact that the overwhelming majority of Unocal’s assets are overseas to begin
with.
Which brings us to the news
that Barclays is getting a major cash injection from the governments of China
and Singapore. This is only natural, and nothing to be concerned about. Singapore
has been investing its enormous foreign reserves globally for decades, and China
can’t be expected to invest its own trillion dollars of reserves in nothing
but Treasury bonds. China and Singapore are part of the global financial system,
and it makes perfect sense that they’d like a minority stake in a global bank.
In fact, it makes much more sense than China’s stake in Blackstone.
Generally, then, I have little sympathy with those who complain of "nationalisation
under foreign flags". If finance can knit the world together more tightly,
then so much the better. There will always be exceptions, of course. But they
are fewer than most people might think.
Update: Chris
Dillow weighs in, forcefully.