could aussie rules block chinalco's rio bid?

Following is background on the deal's chances of approval.


WHY IS THE BID BEING SCRUTINISED?

Australia's Foreign Investment Review Board (FIRB) examines
all direct investments by foreign governments or their agencies.
The board also examines investments worth A$100 million ($66
million) or more in Australian companies or foreign companies
with major Australian assets.

Chinalco's bid is the biggest overseas investment by a
Chinese company.



WHAT ARE THE POLITICAL OBJECTIONS?

Independent Senator Nick Xenophon said he was concerned about
the Chinalco bid as it would give the state-owned group an
important stake in a strategic industry.

Conservative politician Barnaby Joyce, National Party leader
in the Senate, has said Chinese ownership of Australian resources
is the issue -- and asserted that China would never allow the
Australian government to buy a mine in China.

The Greens oppose the deal because of China's human rights
record.



WHO MAKES THE DECISION?

The FIRB reviews the deal and advises Treasurer Wayne Swan,
who makes a final decision based on whether the deal is in the
national interest.

"The national interest" is not defined, but last February
Swan outlined six general principles he would consider on foreign
investment decisions.



WHAT ARE THEY?

* An investor's operations are independent from the relevant
foreign government.

* An investor is subject to and adheres to the law and
observes common standards of business behaviour.

* An investment may hinder competition or lead to undue
concentration or control in the industry or sectors concerned.

* An investment may impact on Australian government revenue
or other policies.

* An investment may impact on Australia's national security.

* An investment may impact on the operations and directions
of an Australian business, as well as its contribution to the
Australian economy and broader community.



HAS AUSTRALIA APPROVED SIMILARLY CONTROVERSIAL DEALS?

Singapore Telecommunications' $A14 billion ($9.2 billion)
takeover of Australia's No.2 phone operator Optus was delayed by
considerable opposition before passing in 2001. Critics cited
security concerns, as the deal allowed a Singapore state-owned
company to control Australia's surveillance satellite platform.

Approval came with conditions, including an agreement between
Singtel and the Defence Department on security matters.



HAS AUSTRALIA BLOCKED BIG OVERSEAS DEALS?

The biggest to be turned down was a A$10 billion hostile bid
for Australian oil major Woodside Petroleum by Royal
Dutch Shell in March 2001.

Former Treasurer Peter Costello rejected the bid due to
concerns Shell, with competing projects in other parts of the
world, might not maximise the development of, and sales from,
Australia's North West Shelf project.



WHAT'S THE TIMETABLE FOR RIO-CHINALCO?

A decision is unlikely before mid-June. The FIRB said on
Monday it extended its review for another 90 days. It could then
be prolonged for an additional 60 days, if necessary.



Sources: Reuters, FIRB (http://www.firb.gov.au), Australian Treasurer