The Productivity Commission (PC) has released a new draft report, entitled Regulation of Agriculture, which has hit-out at laws restricting foreign ownership:
The Australian Government has stated publicly that it welcomes foreign investment because of the important and beneficial role it plays in the Australian economy. However, it recently made changes to Australia’s foreign investment framework (in response to community concerns) that impose additional costs on foreign investors, create uncertainty, and could discourage investment in the agricultural sector. Government policy on foreign investment has at times been dissonant…
The benefits of foreign investment to Australia’s agricultural sector, including access to new technology, skills, knowledge and global supply chains, were readily acknowledged by participants. However, there is substantial public concern surrounding foreign investment in the agricultural sector. A number of public surveys, including the ABC’s Vote Compass surveys and annual polls conducted by the Lowy Institute for International Policy, show that many Australians do not support foreign investment, and that they are particularly concerned about foreign investment in agriculture.
Some of the concerns, including fears that foreign investment will reduce Australia’s food security, or result in a ‘land grab’ and loss of sovereign control over prime agricultural land, appear misplaced and may have arisen in part because of a lack of information and informed debate about foreign investment in Australian agriculture.
Australia’s foreign investment review framework aims to balance the benefits of foreign investment against potential risks to Australia’s national interest. The Treasurer’s prior approval is required for foreign acquisitions of agricultural businesses and land valued above prescribed thresholds (which trigger review of foreign investment proposals by the Foreign Investment Review Board).
In 2015, the Australian Government made a number of changes to the foreign investment review framework for the agricultural sector. These included:
• significantly lowering the screening thresholds for agribusiness (to $55 million) and agricultural land (to $15 million, based on cumulative land holdings) for investors from most countries
• establishing a national register of foreign ownership of agricultural land
• introducing application fees for all foreign investment proposals.
Some participants raised concerns about these changes, including that:
• lower thresholds could deter foreign investment in Australian agriculture and contribute to delays in processing investment proposals (as more proposals now require screening)
• the lower and cumulative screening threshold (combined with the introduction of application fees) for proposed investments in agricultural land could deter investment, impeding improvements to the sector’s competitiveness and productivity.Do the benefits of increased scrutiny outweigh the costs?
The lower screening thresholds (combined with different thresholds depending on the investor’s country of origin) will increase the cost and complexity of investing in Australian agriculture. There is a risk that this will ultimately deter foreign investment in the sector without offsetting public benefits, particularly as other measures (such as the agricultural land register) are in place to increase transparency and public confidence about foreign investment in Australian agriculture. It is also unclear that national interest considerations are different for foreign investors proposing to invest in agriculture compared to other sectors of the economy that have a higher screening threshold of $252 million (including acquisitions in sensitive businesses, such as telecommunications, transport, defence and military related industries).
The Australian Government should raise the screening thresholds for agricultural land and agribusiness to $252 million — in line with the thresholds that applied for agriculture prior to 2015, and those that currently apply to business acquisitions and developed commercial land for investors from most countries.
Transparency (to the extent that it is consistent with national interest considerations) of the Treasurer’s decisions on proposed foreign investments is important as it provides information to the public about foreign investment in agriculture. The register of foreign ownership of agricultural land should go some way towards increasing transparency and addressing public concerns about foreign investment in agriculture, although this will depend on the content of the Australian Tax Office reports derived from the register…
DRAFT Recommendation 12.1
The Australian Government should increase the screening thresholds for examination of foreign investments in agricultural land and agribusinesses by the Foreign Investment Review Board to $252 million (indexed annually and not cumulative)…
DRAFT Recommendation 12.2
The Australian Government should set application fees for foreign investment proposals at the level that recovers the costs incurred by the Foreign Investment Review Board in reviewing proposals, and should closely monitor the fees to ensure no over- or under‑recovery of costs.
Fairly typical analysis by the PC – exactly what one would expect.
Like so many other commenting in this space, the PC has failed to differentiate between the transfer of ownership of agricultural assets to foreigners, whereby no real investment (capital deepening) takes place, with genuine foreign investment in agriculture.
The former (which is the dominant source) is akin to “selling the farm”, and should be discouraged, whereas the latter actually adds to the nation’s productive capacity, and should be encouraged.
If a foreign entity wants to buy-up some land to create (or expand) new farm products, fantastic. But if all they are doing is buying an existing farm and not undertaking any productive enhancements, then it should be disallowed. Otherwise, we are ‘selling-off’ the country and our children’s future, pure and simple.
I am also concerned by the surge of Chinese “investment” following the China FTA. There is the real risk that the Chinese will vertically integrate entire food production processes in Australia – purchasing our farms as well as the whole distribution and logistics production line – and then import temporary labour from China under the FTA to work on its farms. If such instances eventuate, then Australians could be cut-off from the food export business, and in turn cut-out from the economic benefits.
These are legitimate concerns shared by the overwhelming majority of Australians.
