UPDATE 4-Australia defends blocking ASX-SGX deal, says open to investment

* Treasurer: Australia welcomes foreign investment

* Treasurer Swan says investment has to be in national

* Details of ASX/SGX deal decision to be released later

* ASX shares flat, SGX edges higher

* SGX to await FIRB recommendation on bid

(Adds comment on FIRB, pitfalls of cross-border deals in Asia,
updates share price)

By Michael Smith and Rachel Armstrong

SYDNEY/SINGAPORE, April 6 (Reuters) – Australia defended its
preliminary decision to block Singapore Exchange’s
$7.8 billion bid for Australia’s ASX Ltd , but criticism
is growing that the decision could hurt future foreign
investment in the country.

Treasurer Wayne Swan, speaking a day after saying he
intended to block the deal on unspecified national-interest
grounds, said Australia continued to welcome foreign investment
and described the approval process as fair and transparent.

“I welcome foreign investment, but ultimately all foreign
investment proposals have to be in the national interest,” he
told ABC radio on Wednesday.

Swan declined to spell out his reasons for initially
blocking the deal, which was agreed by the two exchanges to cut
costs, combat alternative trading platforms and avoid being
overtaken by North American and European exchange mergers.

Critics however, have jumped on the decision as a case of
politics trumping business.

“This rhetoric walks on a thin political line and may be
deemed to be pandering to sectors of the electorate,” said
Krishna Ramachandra, managing director of law firm Duane Morris
& Selvam in Singapore.

Australia has gained a reputation as a sometimes-fickle
recipient of foreign capital in recent years, despite the fact
it runs a chronic current-account deficit and needs foreign
investment to develop its huge resources sector.

“This deal would have added significant strategic
positioning for outbound Australian investments, so much work