Evidence in support of the current legislative and regulatory framework
This chapter considers the evidence to the committee in support of the
current legislative and regulatory framework.
In its submission to the committee, the Australia and New Zealand
Banking Group (ANZ) highlighted the importance of foreign direct investment for
Australia's continued economic growth and future prosperity. ANZ argued that
many sectors in the Australian economy, such as agriculture, require very high
levels of capital investment. It noted that foreign direct investment is a
significant source of much-needed capital, yet attracting capital investment
from foreign entities and individuals is a competitive process. Highlighting
that Australia is one of many mid-sized economies competing for the attention
of potential investors, ANZ made the point that Government policy settings can
do a great deal to help or hinder foreign investment in this country.
ANZ estimated that, by 2050, the shortfall between capital requirements
and available domestic capital in the agricultural sector is likely to be $850
billion. Given the mismatch between available domestic capital and the
projected investment needs of the sector, attracting foreign investment is a
workable solution to the lack of a sufficient domestic pool of capital.
ANZ argued that, in an increasingly competitive global environment, the
Government's foreign investment review framework needs to ensure that Australia
remains an internationally attractive destination for foreign direct
Australia needs to be an attractive destination among the
nations competing for capital. In relation to the agricultural sector,
Australia is estimated to account for less than five per cent of global
institutional investment. Competition for institutional agricultural investment
is increasing with nations in Asia, South America and Africa seeking investment
to develop their economies.
ANZ further suggested that the current foreign investment review
framework, in which the Treasurer determines whether a proposed investment
satisfies the national interest criterion, strikes an appropriate balance
between the legitimate demands of national security and the need to attract
sufficient levels of foreign direct investment. Therefore, ANZ highlighted the
point that any changes to the framework must ensure that foreign investment is
In its submission to the Northern Territory Legislative Assembly's Port
of Darwin Select Committee, the Port of Darwin Project Steering Committee
echoed many of the key points raised by the ANZ. According to the Steering
Committee, the expansion of the Port of Darwin was not only vital to future
economic development in the Northern Territory, but was imperilled by the fact
that the territory government has limited capacity to raise sufficient capital.
The Northern Territory had assessed the strategic opportunities for the
Port of Darwin and the need for capital investment to increase its capacity in
2012 with the release of the Greater Darwin Plan 2012. The Plan identified the
future of the Port of Darwin as '[a]n international hub for exports, education
and health services, tourism, operations and maintenance'. A subsequent
submission to the Joint Parliamentary Committee on Northern Australia by the
Darwin Port Corporation included recommendations that the Federal Government
assists in identifying opportunities to secure funding for the Port's expansion.
Subsequent applications to Infrastructure Australia for funding were not
successful. The NT Government was advised by the Commonwealth to consider
privatisation of the Port. In response to this advice, the NT Government
established the Port of Darwin Select Committee to investigate other ways of
securing funding for the Port:
To be able to address the infrastructure need, the Northern
Territory must be prepared to test and investigate alternative forms of
infrastructure funding and financing, including private investment. This is
critical if we want to be in a position to meet the infrastructure requirement
of the future and be well positioned to seize economic opportunities as they
For the Project Steering Committee, in the absence of public funds
becoming available, private capital investment, including from international
sources, represented the best possible avenue for the future development of
both the Port of Darwin and those elements of the Northern Territory economy,
such as the livestock industry, that are critical to the territory's future
The NT Government concluded that a viable partnership with a private
sector investor should be its chief aim. In particular, the viability of any
leasing arrangement would require the development of an effective regulatory
regime, one that balances the longer term interest of the NT with the
commercial imperatives faced by a private port operator.
In order to achieve a balance between public and private interests, the
steering committee recommended that the NT Government adopt a hybrid regulatory
regime by combining a generally light-handed approach to regulation with the
introduction of an independent price and access regulator. The steering
committee suggested that this entity should have the right to recommend that
the Minister adopt a more heavy-handed approach to regulating the port
operator. The final decision would rest with the Minister, rather than the
According to the steering committee, a hybrid regulatory framework,
which combined light regulation with the threat of a more heavy-handed approach,
would help to ensure the NT Government's dual aims: attracting private
investment to ensure the viability of the Port of Darwin into the future, while
ensuring that the interests of Territorians are also protected by effective
The light-handed regulatory framework sets the high level
parameters within which a port operator is expected to operate while at the
same time providing the flexibility and autonomy for the operator to make
commercial decisions aimed at increasing the value of its investment through
trade growth and business expansion. The threat of more heavy-handed regulation
has been demonstrated to work in other jurisdictions in managing reckless
pricing or access behaviour.
The steering committee also pointed out that, in addition to the NT Government's
own regulatory regime, the ACCC possesses the authority to intervene if a port
client requests a review of a decision taken by the operator.
On the basis of the steering committee's recommendation, the NT
Parliament passed the Port of Darwin Act 2015 and the Ports
Management Act 2015. Together, these acts are intended to allow for the
creation of an independent pricing and access regulator.
National security and national interest considerations
In evidence at the committee's hearing on 15 December 2015, Mr Dennis
Richardson, Secretary of the Department of Defence, strongly defended the role
of the department in providing due diligence in relation to the lease of the
Port of Darwin and the sale of the port operator. In particular, Mr Richardson
defended the department's contribution to the process of evaluation that
eventually led to the FIRB's determination that the lease of the Port land and
sale of the Port Corporation would be exempt under the Act.
Mr Richardson informed the committee that, after becoming aware of the
Northern Territory Government's decision to lease the Port of Darwin, the
department closely examined the implications of a private company leasing and operating
the port. The evaluation involved contributions from the Australian Signals
Directorate (ASD) and the Defence Security Agency (DSA).
Mr Richardson also noted that, after criticisms of the lease were raised in the
media, he tasked the directors of the Defence intelligence agencies to
re-examine the issue:
That [the review process] involves consultation with the
Australian Signals Directorate. I think ASIO were separately approached by the
Treasury and, of course, they have statutory responsibility in that area. It
involved consultation with the Australian Defence agencies and it involved
consultation with the three services. Then, as I said, after it became public
and there was a lot of criticism of it, I became concerned that we might have
missed something. So as a backstop, I specifically tasked the directors of the
Defence intelligence agencies to bring together some people from different
parts of the intelligence community to make sure we had not missed anything.
Further, Mr Richardson maintained that the department fully completed
its due diligence obligations on a range of strategic and operational matters,
examining whether the lease could expose the Port of Darwin to
whether the lease increased the risk of the theft of intellectual
the risk of the Port being shut down in a time of heightened
internal tensions; or
the risk that the lease could facilitate a degradation, through
asymmetrical means, of elements of Australia's national security systems or infrastructure.
Mr Richardson also confirmed that the department signed a comprehensive
deed of licence with the NT Government in respect of Australian naval interests
at the Port of Darwin. Further, Mr Richardson pointed out that the deed is one
of the most comprehensive contracts of its type negotiated by the department. He
noted that, precisely because the Port of Darwin is of strategic significance,
the department 'exercised great care with the deed of licence'.
According to Mr Richardson, the due diligence carried out by the
department, across the full range of issues raised by the decision to lease the
Port of Darwin, ensured that FIRB was provided with comprehensive and accurate
strategic and operational advice.
In his evidence to the committee, Mr Duncan Lewis, Director-General of the
Australian Security Intelligence Organisation (ASIO), reiterated Mr
Richardson's contention that all due diligence was appropriately conducted, and
that the proposed lease raised no security-related concerns. Mr Lewis also
confirmed that ASIO, as a contributing agency to FIRB's review process,
provided security advice to the Treasury and the Department of Defence.
In particular, Mr Lewis observed that ASIO, as part of the Australian
Government's collective knowledge base, was closely involved in assessing the
potential national security issues raised by the proposed lease.
On the basis of a thorough security assessment, which also included an
examination of the security risks posed by the Landbridge Group itself, ASIO
concluded that the proposal did not raise any concerns. Mr Lewis continued:
I am satisfied that all of my officers who were involved—and
they were involved, as I described, for a very long time—took into
consideration all of the aspects that are likely and that we could foresee, at
any rate, might present a security problem. That would include all of the ways
in which the port was operating, including its management structures, its
ownership structures and so on. We came to the conclusion, as I think I have
made plain, that there was no reason, based on security consideration at any
rate, as to why this transaction should not go forward with the two deeds in
question and with the mitigations in place.
Navigation: Previous Page | Contents | Next Page