Agreement between the Government of Australia and the Government of Malaysia on Film Co-Production
Introduction
2.1
This chapter examines the Agreement between the Government of Australia and the Government of Malaysia on Film Co-Production (the proposed Agreement). The treaty action was signed in Sydney on 29 November 2019 and tabled in the Parliament on 2 February 2021.
2.2
The proposed Agreement would be the thirteenth co-production arrangement that Australia has entered into under Australia’s International Co-Production Program (the Program), the principal purpose of which is to foster industry development and cultural exchange between cooperating countries.
2.3
Within the Program’s framework, co-production arrangements are negotiated bilaterally with the aim of sustaining and developing Australian creative resources and production. Australia is currently party to ten bilateral film co-production treaties (with the United Kingdom, Canada, China, Italy, Ireland, Israel, Germany, Republic of Korea, Singapore and South Africa) and two Memoranda of Understanding (with France and New Zealand).
2.4
Since the Program began in 1986, 194 co-productions with a total budget of approximately A$2 billion have either been completed or have commenced production (as at 10 February 2020). A breakdown of co-productions made under the Program was provided to the Committee, including by country and the type of production.
2.5
The National Interest Analysis (NIA) states the purpose of the proposed Agreement with Malaysia is to stimulate industry, employment, technical development and cultural exchange between Australia and Malaysia by facilitating screen co-productions between the two countries. The proposed Agreement provides a framework within which the relevant authorities of each country may cooperate to approve the making of a broad range of films including feature films, television, video recordings, animations and digital format productions.
2.6
According to the NIA, the proposed Agreement aims to facilitate co-productions which:
increase the output of high-quality productions, by sharing equity investment with Malaysia;
open up new markets both in Malaysia and internationally for Australian film, television, animation and digital format productions;
share the risk (and cost) of screen production;
establish links with Malaysian production and distribution interests;
facilitate interchange between Australian and Malaysian screen professionals, particularly those in principal creative positions;
create employment opportunities for Australian industry personnel; and
strengthen existing diplomatic ties between Australia and Malaysia.
Reasons for Australia to take the proposed treaty action
2.7
According to the NIA, Malaysia is an attractive market for Australian co-productions, due to the numerous government-funded schemes in place to support Malaysian local film production and the potential to reach a very large audience (Malaysia has a population of 32 million, over 1,000 cinemas nationwide, and there is a growing appeal of Malaysian films in China). The Malaysian government allocated Malaysian Ringgit (MYR) 30 million (A$10 million) and MYR 20 million (A$6.5 million) for the development of the local film industry for 2019 and 2020 respectively. Fifty-four locally-produced films were released in 2018, with gross takings over MYR 170 million (A$60 million), and Malaysia’s participation in the 2019 edition of the International Market of Communications Programs (MIPCOM) generated MYR 20.7 million (A$7 million) worth of local film exports and investments.
2.8
Ms Michele McDonald from Screen Australia told the Committee that from her organisation’s perspective:
… the treaty is very positive and is a great opportunity for Australian producers. … it does provide access to a new market where producers are sharing resources and the risk of financing a film, and it provides access to audiences in both markets. The co-production program encourages creative collaboration between producers from both countries and can really increase the scale of a film. So from our point of view and from the industry's point of view it's a very positive agreement.
2.9
The NIA also states the proposed Agreement expects to build on existing partnerships between Australian and Malaysian producers and provide the impetus to develop high-quality projects that may not otherwise have been undertaken.
2.10
Commenting on industry interest in the proposed Agreement, Ms Caroline Fulton from the Department of Infrastructure, Transport, Regional Development and Communications said that ‘there was consistent interest from the Australian sector in having a co-production agreement in place’.
Given that there is already interest between Malaysian producers and Australian producers, we would be hoping that, when this agreement comes into force, should it do so, it will foster the development of cultural projects, particularly cultural projects of scale, for both markets.
2.12
Ms McDonald from Screen Australia submitted:
We know of one television series that is interested in utilising the treaty when it's in force, and we've had a couple of other general queries over the past year or so. Generally, I would say that industry is very positive about new opportunities across the board. We definitely have one that's looking at moving forward into production if the treaty goes through, and I believe that's a TV live-action series.
2.13
The NIA explained that the proposed Agreement is underpinned by the notion of reciprocity, a principle applied to ensure that over time there is an overarching balance of financial and creative participation by both countries, and that the proposed Agreement is of comparable benefit to both countries. This includes an overall balance in relation to respective production costs, studio and laboratory usage, and the employment of nationals of both Parties in major creative (i.e. directors, writers), performing, craft and technical positions related to screen co-productions made under the proposed Agreement.
2.14
Ms Angela Corcoran from the Department of Foreign Affairs and Trade (DFAT) explained how the proposed Agreement would affect Australia’s broader relationship with Malaysia, submitting that the proposed Agreement ‘is very much consistent with our overall bilateral relationship with Malaysia, which is at a very strong point’.
2.15
Ms Corcoran went on to explain the importance of Australia’s ‘comprehensive strategic partnership’ with Malaysia:
We've got a very significant and mutually beneficial trade and investment relationship. In 2019, Malaysia was our second-largest trading partner in ASEAN and our ninth-largest trading partner overall, and around 3,800 Australian companies trade with Malaysia, of which around 300 have a physical presence there. We have strong economic complementarities and two FTAs [Free Trade Agreements]—the Malaysia-Australia FTA and the ASEAN-Australia-New Zealand FTA, AANZFTA. So this agreement offers us new opportunities to expand those trade and investment relationships.
Obligations
2.16
Pursuant to Article III of the proposed Agreement, proposals for the making of co-productions must be submitted to the Competent Authorities of each Party for provisional approval prior to the commencement of production. Where such approval is withheld by one of the Competent Authorities, a project would not be approved as a co-production under the proposed Agreement.
2.17
In approving co-productions, Article IV of the proposed Agreement requires the Competent Authorities to ensure that none of the co-producers are linked to one another, either directly or indirectly, by common management, ownership or control, unless the common management relates to the making of the co-production itself.
2.18
Article V of the proposed Agreement further requires the Competent Authorities to ensure that contractual arrangements between co-producers include certain details, such as the date of completion of the co-production.
2.19
Once a co-production is approved, Article VII of the proposed Agreement requires that each co-production be entitled to all the benefits that are or may be accorded in Australia or Malaysia to national productions.
2.20
Article VIII of the proposed Agreement provides that Australia shall, subject to its laws, facilitate the entry and temporary stay in Australia of Malaysian nationals or nationals of the country of any third co-producer, for the purpose of producing the film. Malaysia would be under the same obligations in corresponding circumstances.
2.21
Article IX of the proposed Agreement obliges Australia, subject to its laws, to permit the import and re-export, free of import duties and taxes, of cinematographic and technical equipment for the making of co-productions.
2.22
Articles X of the proposed Agreement requires that each co-producer contribute a minimum of 20 per cent of the total financial and creative contributions, and that the creative contribution is in reasonable proportion to that co-producer's financial contribution.
2.23
Pursuant to Article XVIII of the proposed Agreement, each Competent Authority would monitor and ensure that an overall balance of contributions is achieved over each three-year period, consistent with the aims of the proposed Agreement.
2.24
Articles XI to XIV and Article XVI of the proposed Agreement set out obligations and powers of each Party and their Competent Authority in relation to various aspects of film production, including location filming in third countries (Article XI), participation of nationals of a Party in the making of a film co-production (Article XII), the language of the soundtrack and footage (Article XIII), the location of the majority of film making and processing (Article XIV), and acknowledgements and credits (Article XVI).
2.25
Article XV of the proposed Agreement requires that each Party satisfy itself that the working conditions in each of the countries of the participating co-producers are generally comparable and the working conditions for approved location filming in countries other than those of the co-producers is, generally, no less favourable.
2.26
Article XVII of the proposed Agreement obliges both Parties to apply their respective laws for the purposes of taxation, subject to the provisions of any tax treaty between Australia and Malaysia.
2.27
Article XXI of the proposed Agreement requires that the Parties conform with their respective national laws, rules and regulations, and any respective international legal obligations regarding the protection of intellectual property rights.
2.28
Article XXII of the proposed Agreement requires that the processing, treatment, recording, distribution, or transmission of documents, data and information under the proposed Agreement be consistent with the respective domestic laws of each Party on confidentiality, and any respective international legal obligations.
2.29
Pursuant to Article XX of the proposed Agreement, any dispute concerning the interpretation, implementation and/or application of any of the provisions of the proposed Agreement shall be settled amicably through mutual consultation and/or negotiations between the Parties through diplomatic channels, without reference to any third party or international tribunal.
2.30
In the event of termination, Article XXIV provides that the proposed Agreement shall continue as if in force in respect of any co-production approved by the Competent Authorities, but not yet completed prior to the termination.
Implementation
2.31
The NIA states that no new legislative measures are required to implement the obligations under the proposed Agreement.
2.32
According to the NIA, the Income Tax Assessment Act 1997 already allows access to tax incentives for official co-productions (the Producer Offset), and the Migration Act 1958 and its regulations allow for entry into Australia of co-production teams as envisaged by the proposed Agreement.
2.33
For goods that are the subject of a ‘relevant intergovernmental agreement’, the NIA confirms the Customs Act 1901 provides for their delivery into home consumption as goods temporarily imported, without the need for the goods to be entered for that purpose, or the payment of applicable duty, provided that a security or undertaking is established. Corresponding provisions in A New Tax System (Goods and Services Tax) Act 1999 extend these arrangements to the otherwise applicable Goods and Services Tax. The NIA also confirms that once in force, the proposed Agreement would constitute a ‘relevant intergovernmental agreement’ for the purposes of both these Acts.
2.34
As set out above, under the proposed Agreement both Parties are to apply their domestic tax laws, subject to the provisions of any tax treaty in force between Australia and Malaysia (Article XVII). The current tax treaty in force between Australia and Malaysia is the Agreement between the Government of Australia and the Government of Malaysia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, which entered into force in 1981.
Costs
2.35
The NIA advises that, while there would be some costs associated with the administration of the proposed Agreement, these costs would be absorbed by Screen Australia.
2.36
The NIA further advises that direct agency funding of Australia-Malaysia co-productions through Screen Australia would be provided from existing funds.
2.37
According to the NIA, Producer Offset claims under the Income Tax Assessment Act 1997 that would be incurred because of the proposed Agreement were considered in the broader context of the associated Trans-Pacific Partnership Agreement.
Conclusion
2.38
The Committee notes the interest amongst both Australian and Malaysian producers to develop co-productions between the two countries, and welcomes the proposed Agreement as an effort to further deepen the already close cultural and economic relationship with Malaysia.
2.39
The Committee considers the proposed Agreement should be ratified and recommends that binding treaty action be taken.
2.40
The Committee supports the Agreement between the Government of Australia and the Government of Malaysia on Film Co-Production and recommends that binding treaty action be taken.