Additional comments by Coalition Senators
1.1
Coalition Senators do not support the position set out in the majority
interim report that the scope of the current inquiry be expanded to encompass a
re-examination of the recent legislative changes to Australia's Foreign
Investment Review Framework.
1.2
In justifying this decision, the committee states that (6.8) ‘... a number
of recent legislative and policy changes, which significantly alter Australia’s
foreign investment regime, have been introduced with seemingly arbitrary
thresholds introduced for different investors and types of investments.’ The
committee also implies that the recent changes to Australia’s foreign
investment regime lack clarity and transparency and threaten to curtail the
flow of investment into Australia’s agricultural industry (6.9–10).
1.3
Before addressing these claims we note that given the focus of this
inquiry on foreign investment in Australian assets of strategic or national
significance it is curious that nowhere in the interim report is there clear
reference to the Treasurer’s public statements making clear his intention to
introduce further amendments to the Foreign Acquisitions and Takeovers
Legislation Amendment Bill 2015 to ensure proper federal government oversight
of foreign investment proposals in critical national infrastructure. For
example, at his 10 December 2015 press conference Treasurer Morrison said:
[T]he Government will be proceeding with our regulatory
change to ensure that strategic critical infrastructure assets at a state and
territory level will be subject to FIRB processes regardless of whether it's a
state owned enterprise, foreign investor or otherwise. This is a process we put
in place some months ago and have been consulting with the states and
territories. ... This will mean, of course, that we will seek to work very
promptly with the states and territories where there are acquisitions that
relate to those types of assets and there needs to be, I think, a very
professional and efficient and high-priority response from FIRB to those
requests and some preparatory work done with states and territories also to
ensure that the process moves as smoothly as possible. We welcome foreign
investment in this country, but it must be consistent with the national
interest and state and territory Treasurers certainly support those principles
and I think there was very good consensus on having a very workable system.
1.4
The Treasurer went on to note the appointments to the FIRB board in
early December, in particular, David Irvine and David Peever, both of whom, the
Treasuer noted, bring great experience in the area of security and the
strategic national interest and add to the existing very strong commercial
expertise on the board. Mr Morrison stated that:
When you have a strong FIRB doing its job, applying the
rules, protecting the national interest, that can only build confidence in
foreign investment in this country and that's what the Government is doing.[1]
1.5
This oversight notwithstanding, the claims by the committee (6.8-10)
about the changes introduced via the Foreign Acquisitions and Takeovers
Legislation Amendment Bill 2015 highlight a lack of appreciation of the
rigorous and extensive policy development processes underpinning the recent
changes, which included widespread public consultation and consideration of a
range of views from stakeholders.
1.6
For example, the lowering of the threshold for foreign investment in
agribusiness — from $252 million (as at 1 January 2015, indexed) to $55 million
(as at 1 January 2016, indexed) — is based on a commonsense definition of
agribusiness that captures primary production businesses and first stage
processors (including meat, poultry, seafood, dairy, fruit & vegetable
processing, and sugar, grains and oils & fat manufacturing). This change,
along with the other changes to Australia’s foreign investment regime were
developed and examined through a number of mechanisms including:
-
the development of the Coalition policy discussion paper on
foreign investment in 2011-2012;
-
the Senate Rural Regional Affairs and Transport References
Committee inquiry which endorsed the key elements of the current policy in its
June 2013 report Foreign Investment and the National Interest;
-
the Senate Economics Legislation Committee inquiry and report of
October 2015, Foreign Acquisitions and Takeovers Legislation Amendment Bill
2015; and
-
a Regulation Impact Statement (RIS) was prepared and certified by
the Treasury under the Australian Government’s best practice regulation
requirements. As part of this process, extensive additional public consultation
was undertaken with a broad range of stakeholders on all elements, the details
of which are set out in the RIS. The RIS was assessed as compliant and
consistent with best practice by the Office of Best Practice Regulation.
1.7 In June 2011, in response to growing community
expressions of unease about the apparent increase in foreign investment in
agricultural land and agribusinesses, the Coalition Opposition formed a
Coalition Working Group to investigate options to strengthen the rules
governing the sale of agricultural land and agribusinesses to foreign entities.
This led to the Coalition Opposition put out a public discussion paper in
August 2012, “Foreign Investment in Australian agricultural land and
agribusiness”.
1.8 The paper looked at examples of Australian
agricultural land values, which made it clear that the then $244 million
threshold that applied was far too high. The paper also looked at foreign
investment rules in a range of other countries - for example, that in NZ any
proposed acquisition of agricultural land over 5 hectares had to be approved.
The Coalition WG discussed a range of possible new scrutiny threshold levels
for agricultural land, and settled on $15 million (cumulative) as a more
realistic but also reasonable level. The $53 million threshold recommended for
agribusinesses was chosen to correlate with the then $53 million level used for
FIRB scrutiny of proposed foreign purchases of commercial real estate. With
annual indexation, this $53 million has been adjusted to $55 million (as at 1 January
2015).
1.9 The exceptions to the new thresholds for
agricultural and agribusiness are those related to foreign investment
thresholds included in FTAs (or the specific investment agreement with NZ)
already in existence before the September 2013 election of the Coalition
Government with:
-
USA, NZ and Chile: $1,094 million (as at 1 January 2015, indexed
annually)
-
Singapore and Thailand: $50 million (fixed minimum level).
1.10 Given that any change to these thresholds in these
pre-existing FTAs would require renegotiation of each agreement and possible
request for compensation in case of changing the thresholds, it was recognised
that this could be a time-consuming and possibly expensive exercise. However,
in all the FTAs concluded by the Coalition government, the lower thresholds for
agricultural land and agribusiness have been included, namely in KAFTA, JAEPA
and ChAFTA, and are also expected to apply to TPP partners who do not already
have pre-existing FTAs with Australia which allow higher thresholds. (The 12
countries party to the Trans-Pacific Partnership Agreement are: Australia,
Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand,
Singapore, the United States and Vietnam.)
1.11 In addition, it is surprising that the Committee
interim report appears to find credible the claims by some that the lower FIRB
scrutiny thresholds for agricultural land and agribusiness will deter genuine
foreign investors in Australian agricultural assets. Over the past decade,
agricultural assets have become increasingly attractive to global investors as
an asset class, and Australia remains one of the most attractive destinations
for such foreign investment. In today’s twenty-first century world, the story
of agriculture has changed dramatically, with global food and fibre demand
projected to almost double by 2050 to feed and clothe a world population of
almost 10 billion. Good quality agricultural and water assets in stable
geographical locations will become increasingly scarce resources, and foreign
investors and many foreign governments can see this.
1.12 The Opposition, and some vested interests, have made
the assertion that these new measures by the government would deter foreign
investment in Australian agriculture. Anyone who follows trends in investment
in Australian agriculture would know that there has been no diminution of
foreign investor interest which continues apace. Finally it should be noted
that it was not the purpose of the Coalition changes to deter foreign
investment — rather the purpose was to provide greater clarity and certainty
about foreign investment trends to reassure the Australian community, and as
noted above, represents the Coalition Government delivering on its September
2013 election commitments.
1.13 In conclusion, given the extensive, rigorous and
transparent public policy development and assessments processes associated with
the Coalition’s broader foreign investment changes highlighted above, the only
realistic conclusion that can be drawn from the majority committee’s stated
intention to re-examine the recent changes to Australia’s Foreign Investment
Review Framework is unlikely to be an effective use of scarce committee
resources.
Senator Matthew Canavan Senator
Sean Edwards
Committee Member Deputy
Chair
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