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Foreign ownership no threat

A new series of purchases by sovereign wealth funds (SWF) in recent months has caused many in the West to raise concerns about the increased participation of foreign firms in key companies. Dubai International Capital, for example, recently made a serious investment in Sony, while the Abu Dhabi Investment Authority injected $7.5 billion in capital into Citigroup. Those who have concerns about foreign investment in national firms should rest assured, however. There is little to fear and much to gain from money which comes from abroad.

 

Foreign investments of considerable sums are nothing new to the West, but hopefully the West will react more sanely in this day and age than they did 20 years ago. When the Kuwaiti Investment Office wanted to spend some of their petrodollars in British Petroleum in 1987, the Mergers and Monopolies Commission declared their 22 per cent share in the company was 'not in the pubic interest' and forced them to sell out.

 

Today, for many companies, investments by SWFs bring firms stability and a more long term investment base. Looking back over the history of such investments, the majority of the foreign shareholders have been remarkably hands-off, not interfering at all with corporate strategy, as many local shareholders had feared. To date, there is little hard evidence to show that foreign investment and ownership is a threat to national interest.

 

One of the best known examples of our times is the recent purchase of the British Airport Authority by a Spanish group, Ferrovial. The criticism that has been heaped upon the Spanish construction company has nothing to do with it's origins and everything to do with the quality of the service the company provides.

 

It's a difficult area to discuss and any introduction of guidelines or regulations in this matter should certainly be very carefully considered before any laws or legislations restrict the inflow of capital which has been so crucial to the survival of many major companies in the West.

 


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Jennifer Jones Editorial


12/12/2007



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