The Australian Greens support these bills and the improvements they make to the framework for reviewing foreign investment. In particular, we support:
the creation of a specific test for proposed foreign investment that has national security implications;
the Treasurer being given clear powers to enforce conditions placed on foreign investment; and
the creation of a consolidated register of foreign owned assets.
However, one of the major issues with the existing framework is the lack of transparency around foreign investment approvals. This issue remains unaddressed in these Bills.
Foreign investment approval in Australia largely occurs in the dark. Publication of any decision to approve a foreign investment, the reasons for approving a foreign investment, and any conditions placed on the approval of a foreign investment are at the discretion of the Treasurer. If the government of the day wants to keep quiet who, from where, is buying what, and on what condition, then that’s entirely up to them.
The lack of transparency around foreign investment approvals affects potential foreign investors' expectation of what is or isn’t acceptable. It creates a system that is intrinsically politically biased. In turn, this creates opportunities for the government to extract from foreign investors an arrangement, free from public scrutiny, that suits its political ends rather than the national interest. In a country where there is no independent national integrity commission, this creates an environment where corruption can flourish.
The decision to grant proposed foreign investments a ‘no objection notification’ (approval) or an ‘exemption certificate’ should be made public, along with a statement of reasons, with an exemption from this publication requirement being available on national security grounds.
Another example of this lack of transparency is inadequate reporting of the levels and origin of foreign ownership in Australia, particularly in relation to land.
The new Register of Foreign Ownership of Australian Assets consolidates existing registers. This includes the existing Register of Foreign Ownership of Agricultural Land which was established by the Government with the support of the Australian Greens in 2015. Both the existing register, and the new consolidated register as established by these bills, are required to generate an annual publicly available report containing aggregate statistical information on foreign ownership.
To date, these statistical reports, prepared by the Australian Taxation Office, have only included information on the area of agricultural land in which there is a foreign interest, and not the value of agricultural land in which there is a foreign interest. This presents a distorted picture of the level of foreign ownership, particularly given the variation in quality of agricultural land in Australia. The current approach fails to adequately represent the importance of the amount of land in which there is a foreign interest.
The annual statistical report contains information on the area, value, tenure and use of land, including agricultural land, in which there is a foreign interest.
Critical infrastructure and renewable energy
The definition of a notifiable national security action in these bills includes infrastructure defined as a critical infrastructure asset under the Security of Critical Infrastructure Act 2018. The Department of Home Affairs is undertaking consultation on the Exposure Draft of the Security Legislation Amendment (Critical Infrastructure) Bill 2020. In respect of critical electricity assets, the Explanatory Document states that:
It is likely that an expanded set of generator assets will be captured, building on the existing approach in the rules.
Currently, the Security of Critical Infrastructure Rules 2018 establish thresholds for electricity generation stations in each state and territory proportional to population, starting with 1,400MW for NSW, down to 300MW for the Northern Territory.
Renewable energy advocates have raised concerns that a large reduction in the thresholds for electricity generators is being considered (i.e. as low as 30MW). Such a change would disproportionately affect renewable energy as individual generation facilities are usually smaller.
The National Electricity Market connects about 50GW of generation capacity. A 30MW generation facility would account for about 0.06% of the NEM. The Exposure Draft does not make the case for why a reduction in threshold of this magnitude is necessary to ensure the integrity of Australia’s electricity supply.
Although the Senate will have the opportunity to consider the Security Legislation Amendment (Critical Infrastructure) Bill 2020 directly, it is prudent to express a view on the potential impact that these proposed changes in the definition of critical infrastructure would have on the working of the foreign investment laws under consideration here.
The threshold for critical electricity assets be set at a level that does not have a disproportionate impact on renewable energy.