Committee's view and recommendation
Australia's foreign investment framework must deliver investment that is
in the national interest. To achieve this objective, the framework itself must
be robust and consistent in its application. It should instil confidence in the
Australian public that the systems and processes in place to consider foreign
investment applications are effective. It must also provide foreign investors
with the confidence that the process for evaluating investment proposals is
both efficient and transparent.
The committee recognises that the key concerns raised in relation to the
foreign investment review framework, which came to the fore during the Port of
Darwin lease process, relate to the transparency, adequacy, comprehensiveness
and timeliness of the review process itself.
In particular, the committee notes that one of the most significant
points of contention in respect of the review framework is the extent to which
the facilitation of foreign direct investment overrides national security
The capacity of FIRB to provide informed and effective national
security-related advice to the Treasurer is a matter of concern.
The committee recognises that the processes followed by FIRB in
assessing proposals for foreign investment require more detailed consideration.
As a case in point, the inquiry into the Port of Darwin lease brought to light
a number of concerns in relation to the Foreign Investment Review Framework
that currently governs decision-making in Australia:
FIRB, as a non-statutory authority, does not have independent
authority to review proposed acquisitions in relation to Australia's long term
The FIRB process appears to be ad hoc, run on a case by case
basis. Consistency in approach and decision making along with the desired
transparency and certainty that investors require, was not demonstrated.
It remains the case under the new regulations that State,
Territory and Local Government owned assets, irrespective of their strategic
importance, remain exempt from Foreign Investment Review Board scrutiny.
The Port of Darwin lease announcements indicated that strategic
partners such as the US were not necessarily fully advised of developments.
The committee recognises that regulating foreign investment is a complex
and constantly changing policy area that will continue to challenge Australian
governments in managing the balance between securing the benefits of such
investments without jeopardising Australia's long term strategic interests. As
such, the Foreign Investment Review arrangements need to be strengthened in
their capacity to support assessments while also ensuring that they can
continue to be responsive to new and emerging challenges.
In light of these concerns, the committee intends to undertake a full
review of the current arrangements with a view to considering whether FIRB should
be strengthened by being made into a statutory authority with a permanent,
dedicated specialised staff. Consideration should also be given to the overall
process and stakeholder engagement around such decisions.
Furthermore, the committee notes that 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 first task of a statutory Foreign
Investment Review Board could be to develop a clear definition of what is meant
by the 'national interest' and on this basis to review the regulations,
restrictions and exemptions of the current framework.
The committee also intends to
investigate the current thresholds guiding Government scrutiny of foreign
investments in the agricultural sector to ensure that clear and transparent
principles can be demonstrated to justify specific thresholds and eligibility
In relation to agricultural investments, concerns have been raised
regarding the investment screening threshold for agricultural land and
agribusiness. What requires further consideration is whether these are likely
to curtail the flow of investment into Australia's agricultural industry.
In order to continue its examination of the foreign investment review
framework and comprehensively review the current arrangements as well as consider
the remaining inquiry terms of reference, the committee recommends that the
Senate extend the inquiry reporting date.
The committee recommends that the Senate extend the inquiry reporting
date to 8 April 2016.
Senator Chris Ketter
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