MMG Managing Director and CEO, Andrew Michelmore shares his views with Sophie Loras on the challenges companies with Chinese links face when doing business in Australia.
MMG is the subsidiary of Hong Kong-listed Minmetals Resources Limited (MMR). Although the company is headquartered out of Melbourne, MMR’s controlling shareholder is China’s Minmetals Corporation. MMG’s Managing Director and CEO, Andrew Michelmore, discusses the perceptions in Australia for companies with Chinese links.
Q: Is Australia “ready for business” – especially in terms of welcoming Chinese investment?
Mr Michelmore: As Australia’s largest trading partner there is a lot of discussion around Chinese foreign direct investment in Australia. There are some concerns around foreign control of Australian assets and resources, some misconceptions about what this means for Australia and some examples of poor Chinese investment that have influenced public perception.
At the same time there are also those who share a view of optimism about the opportunities that Chinese investment might bring. Australia does not have the internal capital to finance the development of its resources alone. We have always relied on foreign direct investment from the British, Americans, Japanese and Koreans. We are now fortunate that China has the capital and interest to support Australia’s development.
In the case of MMG, we see a number of benefits that China Minmetals Corporation has brought to our business including financial stability, a long-term strategic view, market insights and the opportunity to leverage existing relationships.
Q: What are the challenges for Chinese companies operating in Australia?
Mr Michelmore: Many of the challenges faced by Chinese companies entering the Australian market relate to perceptions or misconceptions about what Chinese foreign direct investment means for Australia.
One of the negative perceptions stems from a fear of Chinese control of Australian resources and the concern that these would be directed to China rather than serving the needs of the Australian population.
In the case of MMG, although our ultimate controlling shareholder China Minmetals Corporation is a Chinese state-owned enterprise, only 24 percent of our products are sold to China. The remainder is sold to customers in Australia, Europe and Asia.
Another concern relates to the transparency of pricing arrangements when selling to China. MMG sales contracts are always carried out in accordance with the Hong Kong listing rules for connected transactions. These rules vigorously regulate that such transactions are carried out on normal commercial terms.
Other challenges for Chinese companies entering the Australian market include negative perceptions around poor sustainability practices, importation of foreign labour and poorly-managed projects.
In the case of MMG, we are committed to achieving long-term sustainable growth and shareholder value. We seek to align with international best practice in sustainability and benchmark our performance against the sustainability criteria of the International Council on Mining and Metals (ICMM)’s Sustainable Development Framework.
Equally, we believe that our sustainability principles align with those of China Minmetals Corporation. China Minmetals’ philosophy is to ‘cherish limited resources and pursue sustainable development’.
In relation to foreign labour, when China Minmetals acquired the MMG assets from OZ Minerals in 2009 it retained the workforces at all operations. We aim to employ local people wherever we operate, but also acknowledge that there will be instances of a genuine shortage of local skilled labour. This may require us to search for talent internationally to support the development of local skills.
Q: What strategies is MMG employing to enhance its global brand?
Mr Michelmore: Our brand is a reflection of how we operate. Wherever we operate globally we apply the same international standards and procedures whether it’s operationally or in the fields of safety, health, environmental management or community engagement. We are also members of the International Council on Mining and Metals and are currently working to align ourselves with their principles on sustainable development. Most importantly we focus on delivering on our commitments.
Q: What have been the keys to success for MMG in operating in Australia?
Mr Michelmore: A major contributing factor to MMG’s success is the strength of our relationship with China Minmetals Corporation.
We see this as a mutually beneficial relationship in which market knowledge and operational expertise is shared.
China Minmetals has openly acknowledged the strengths of an international management team and retained the executive leadership team as part of the creation of MMG. Over the past few years, this team has expanded, now representing a diverse set of skills and experience in operating projects around the globe.
Q: Does having key Australians on the boards of the Australian arms of Chinese ventures in Australia help with success?
Mr Michelmore: It is important to have a range of experienced and skilled people on any board to ensure a diversity of views and opinions leading to good corporate governance. In the case of MMG we have independent non-executive directors with experience working in Australia, China and elsewhere in the world.
Q: What role does CSR play in facilitating success?
Mr Michelmore: Corporate social responsibility is an integral part of the way we do business at MMG. We recognise that our social licence is to operate is equally important to our legal or financial obligations. Without the support of our communities and stakeholders, our business would not survive. We also believe that good corporate citizenship is strongly linked to reputation and a good reputation is essential for success. This extends to recruiting and retaining employees, working with partners, liaising with government, attracting investors and dealing with customers among other things. ■
*To read about the marketing strategies of Chinese companies entering the Australian market, click here.