australia-china free trade agreement conference brian pilbeam, pr

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6The Chinese Government has set itself the objective of quadrupling China’s GDP by the middleof the century.Telecommunications are a vital ingredient for achieving such an economic objective.From 1997, with the advent of full deregulation, telecommunications had become the country’sfastest growing industry, and tracking by the Australian Bureau of Statistics shows the industrycontinues to grow and at an increasing rate. 1As a result, many foreign-owned carriers, including Chinese-owned telecoms companies, suchas Asia Netcom, are already very active in the Australian market.Supporting the ABS analysis, the Productivity Commission found this year Australia had thefourth highest ICT contribution to GDP in the second half of the 1990s. The commissionobserved Australia’s pro-competitive policies are of particular importance to the ability ofbusiness to realise the potential for ICT-related productivity gains.4. The FTA and telecommunicationsChina has already made some important steps along this pro-competition path. Itscommitments under its entry to the WTO are quite explicit.However, despite these important advances, our experience is that various barriers to entry,both explicit and more subtle bureaucratic hurdles, make any business case difficult.Telecommunications has its own special rules that are more onerous than those covering otherservice sectors, and quite apart from general foreign investment legislation in ChinaAs a result, most of the business opportunities Telstra has explored on the mainland haveultimately been frustrated by a combination of prohibitive regulatory and business factors thatapply to the telecommunications services market.1 From ABS 2001 Special Article: History of Telecommunications in Australia, updated 22/4/04- see at:http://www.abs.gov.au/Ausstats/abs@.nsf/0/B6C38ACB7D28699CCA2569DE0028DE97?Open
7We have looked at quite a number of ventures, but in the end have not invested for a variety ofreasons.In one case it was impossible to determine whether a series of ventures were legal, and therewas no clear path to increase our stake in them over time. In another proposed venture inShanghai, the business would have had to be set up as an entity under China’s ForeignInvested Telecommunication Enterprise Regulations and obtain a licence. This, again, is arequirement specific to telecommunications and would have delayed start-up by a year ormore. In this case, time to market was a critical factor in the business case.Additionally, the rules for foreign investment in Chinese carriers providing basic services will bepermitted only from December this year, and only up to 25%, and only within the geographicalboundaries of Beijing, Shanghai and Guangzhou. The geographical restrictions are to beremoved by the end of 2007, but even then the maximum foreign equity stake will be capped at49%. In effect, China’s regulations permit participation with only a very limited set of potentialpartners, and these potential partners aren’t in any way required to embrace foreign jointventures.These limitations on our opportunity to invest in China are in stark contrast to the almostcomplete freedom available to foreign investors in Australian telecommunications services.There’s also a considerable element of risk that constrains investment in value added servicesin China, with the anachronistic fax services being one of the few things that we know with anyconfidence that we are expressly allowed to do.I should emphasise in this context that any commitment on Telstra’s part would have to meetour investment criteria. We have a clear set of criteria for appraising whether an investmentoption is suitable.One of these concerns is the regulatory environment. In respect of China, we need to besatisfied that its regulatory regime gives sufficient clarity and consistency for us to be confidentabout investing. The fact that, to date, - we have chosen - not to make significant investmentsis telling. Neither we, nor any credible international operators, are willing to play in grey areas.
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australia-china free trade agreement conference brian pilbeam, pr

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