Dissenting report by Government Senators
This dissenting report reflects the views of Government senators to the
issues raised in the majority's interim report and the majority's final report
of the committee's inquiry into the Foreign Investment Review Board National
We acknowledge the work of the Committee in this inquiry and note the
majority's report on this issue. Government senators have significant concerns
with the assertions of the majority’s report and its recommendations.
The Committee has received detailed testimony from a number of sources
over the course of this inquiry. However, the majority's report does not
adequately balance the weight of evidence before the Committee.
Foreign investment has helped build Australia’s economy and will
continue to enhance the wellbeing of Australians by supporting economic growth
The issue of foreign investment has received significant attention in
the last few years and has been the subject of numerous inquiries from both the
Senate and Australian Government agencies. These reports have provided
significant amounts of information and analysis upon which Australia’s foreign
investment policy should be guided.
Government senators suggest that the majority failed to pay due regard
to much evidence before the Committee and, most significantly, the findings of
many of these thorough and well-researched reports in coming to its
Regulatory regime for foreign investment in Australia
Australia has a rigorous and robust foreign investment screening
regime. The Foreign Acquisitions and Takeovers Act 1975 provides the
legislative framework for the Government to review significant foreign
investment proposals on a case-by-case basis. It enables the Treasurer to
block proposals that he finds contrary to the national interest or impose
conditions on an investor to address national interest concerns. All foreign
governments and their related entities must notify the Foreign Investment
Review Board and receive approval for direct investments, new businesses and
land acquisitions, irrespective of the value of the investment.
This case-by-case approach under the screening process maximises
investment flows while protecting Australia’s national interest. In the
agricultural sector, it helps ensure that investments do not adversely affect
the sustainability of Australia’s national agricultural resources, including
their economic, social and environmental contribution to Australia.
It is also important to note that investors are not only subject to the
national interest test under the Foreign Acquisitions and Takeovers Act, they
are also subject to all Australian and State and Territory laws, including in
regards to taxation, land use, the environment and competition.
There have been numerous inquiries into foreign investment, and in
particular in the agriculture sector, over the last few years. These reports
have consistently endorsed the current foreign investment screening process
under the Foreign Acquisitions and Takeovers Act and administered by the
Foreign Investment Review Board.
In 2009, the Senate Economics References Committee inquiry into Foreign
investment by state-owned entities, Chaired by Liberal Senator Alan Eggleston,
found that the current arrangements were adequate in protecting the national
The Committee believes that the current regulatory framework
for assessing foreign investment proposals, whether they are made by private
commercial interests, sovereign wealth funds or state-owned entities, is
The committee went on to say:
The Committee is also of the belief that, having considered
all the evidence, the system of case-by-case assessment, based on the national
interest, has also served Australia well.
This view was reaffirmed in June 2011 when the Senate Economics
Legislation Committee, looked at a bill to change the foreign investment rules
in relation agricultural land. In its report, the Committee concluded that
current laws, including the Foreign Acquisitions and Takeovers Act had served
Australian well in protecting the national interest, stating:
The Committee continues to hold the view that the current
regulatory framework for assessing foreign investment proposals is adequate.
The combined powers of the Foreign Acquisitions and Takeovers Act 1975,
the Foreign Acquisitions and Takeovers Regulations 1989, the Competition
and Consumer Act 2010 and the system of case-by-case assessment based on
the national interest, has served Australia well.
Finally, in 2010 the Government asked the Australian Bureau of
Agricultural Resource Economics and Sciences to look at and report on foreign
investment in agriculture. The report, released in January 2012, found that the
current laws were providing a considerable level of scrutiny that was
sufficient to protect the national interest.
These mechanisms amount to a considerable level of scrutiny
of foreign investment proposals and operations of foreign-owned agribusinesses
in Australia. With such scrutiny, it appears Australia’s regulatory framework
is likely to be sufficient to ensure Australia’s national interest in relation
to new foreign investment in agribusiness and the competitive behaviour of
foreign owned agribusinesses in the Australian market.
These three reports are a sample of the in-depth analysis that has
looked at this issue. Their consistent findings illustrate the strong
protections in place and the adequacy in protecting the national interest.
There are areas though where the Government can improve transparency
around foreign investment and the foreign investment screening process. Much of
the anxiety around foreign investment in agriculture appears to be based on
misunderstandings of the levels of investment and the motives of foreign
investors in Australia.
To address these concerns and provide the community with more information
the Government has made a number of improvements to Australia’s Foreign
In 2008, the Treasurer released six national interest principles to
apply to foreign government investors.
In 2010, the Government released a publicly available Foreign Investment
Policy to provide guidance to investors and the community on Australia’s
foreign investment screening regime.
In 2011, the then Assistant Treasurer, the Hon Bill Shorten MP,
commissioned a survey from the ABS on ownership of agricultural land and water.
This survey showed that the overwhelming majority of agricultural land and
businesses are Australian owned. This survey was conducted according to the
Australian Bureau of Statistics’ high standards of data collection.
In January 2012, the Government released a new policy statement on
foreign investment in agriculture, which outlined the national interest
considerations for foreign investments in the agriculture sector.
The Government has also announced that it will introduce a register of
foreign ownership of agricultural land to provide even greater transparency
over agricultural land holdings.
There is, however, a balance to be struck between providing greater
transparency and the disclosure of private or commercially sensitive investor
information, which may impact on investor perceptions of Australia as an
attractive destination for investment. Transparency also needs to be balanced
against trade obligations under international agreements. The Government should
continue to look at ways to improve transparency, mindful that such measures
should not discourage foreign investment or breach our international trade
The Government should continue to look at ways to ensure the community
has more and accurate information about foreign investment, particularly in
In considering these initiatives, the Government should be careful to
avoid disclosing private or commercially sensitive information or breaching
Australia’s international obligations.
Motivations of investors in the agricultural sector
Government Senators note that there is concern in the community about
the motivations behind investment from some state-owned entities.
Evidence presented to the Committee shows that this investment is
commercially motivated, including the following testimony from Hassad
when they [Hassad Food company] put the plan together–and I
have to advise that most of the key advisers within their company are actually
Australian–they realised that it would not be successful if it did not have a
commercial outcome. To invest just for the purposes of producing food is not
sustainable in the long term.
This statement is reinforced by the expert ABARES report, which found
that suggestions that investors are coming to Australia to invest on a
non-commercial basis does not stand up to scrutiny. Their conclusion was that
such an approach would be unsustainable in the long term, much more expensive
than alternative options and would need to take place on a scale that vastly
exceeds present levels of investment:
But the suggestion that the purchase of farmland in a foreign
country is an effective means of increasing the supply of food at home demands
some analysis. Australia and many other world food suppliers have
well-established and efficient marketing institutions for food exports, and
bypassing these to make direct shipments from one or a few farms would be an
expensive way to move produce abroad. To achieve economies in this process, and
to have a significant impact on the food supply in the investing country, would
require land purchases on a scale that vastly exceeds present levels. The cost
would be extreme – purchasing food from the world market, even with the aid of
government subsidies if required, is likely to be a significantly cheaper
option. There is also considerable uncertainty as to whether such a strategy
would be fiscally sustainable in the long term, if no consideration is given to
Contribution of foreign investment to Australia
Government members are conscious that many of the recommendations from
Coalition members would put at risk beneficial foreign investment in Australia.
This is because the further barriers on foreign investment will create uncertainty
and increase risk for investors. In a competitive investment environment, this
capital will flow to other nations, boosting their competitiveness and further
disadvantaging the Australian agriculture sector.
According to the expert ABARES report,
Any measures that put further barriers in the way of foreign
investors and reduce the flow of foreign capital into Australian agriculture
would adversely affect the performance of the agricultural sector. Lower
investment would result in lower output, exports and incomes than would
otherwise be the case. Opportunities for improved efficiencies could be lost,
and distortions, such as increased use of foreign credit, would be encouraged.
This finding reinforces data from the Australian Bureau of Statistics,
the Organisation for Economic Cooperation and Development, the Australian
Bureau of Agricultural and Resource Economics and Sciences and private
organisations. This data dispels many of the myths propagated in the community
by opponents of foreign investment. Some of these key facts include:
The overwhelming majority of businesses are entirely Australian
owned - 96.8 per cent as at June 2011.
Our agriculture sector is overwhelmingly Australian owned - 99
per cent of agricultural businesses and 89 per cent of agricultural land was
entirely Australian owned as at 2010.
Chinese investment is hugely overstated - out of a total of $2.2
trillion of foreign investment in Australia in 2012, investment from China made
up less than 1.1 per cent of that.
Our economy needs additional investment to keep growing – the gap
between our national savings and our investment needs has averaged around 4 per
cent of GDP over the past few decades, which means we need around $50–70 billion
of new capital from overseas every year to supplement this deficit.
The agriculture sector is one sector in particular that needs significant
capital investment – an ANZ Research Report suggests that the agriculture
sector could generate up to $1.7 trillion in export revenue by 2050.
Businesses with foreign ownership make a huge contribution to the
economy - 12 per cent of private sector employment, 25 per cent of gross fixed
capital formation and 21 per cent of total value added in Australia, according
to a 2004 ABS study.
Foreign investment brings innovation, a key factor in
productivity – firms with foreign ownership spend more on innovation than the
average Australian-owned firm. A 2010 ABS study found that firms with some
foreign ownership accounted for 42 per cent of Australia’s research and
Claims that we have the most liberal regime simply aren't true -
at a national level, regulation of foreign investment in Australia is greater
than that of most other OECD countries.
Raising barriers to foreign investment will hurt Australian
farmers – places that do have high restrictions on foreign investment, like
Alberta Province in Canada, generate lower incomes for farmers.
Limiting foreign investment will hurt wages and shrink the
economy - Treasury analysis shows a reduction of investment of 1 per cent of
GDP will see unemployment increase by 0.5 per cent in the first year and over a
decade will see the economy 0.7 per cent smaller, wages 2.0 per cent lower, and
investment 3.1 per cent lower.
This data shows that foreign investment has been crucial to the
Australian economy for a number of years. It provides significant benefits and
will continue to do so and the impact of raising barriers to foreign investment
will be hard felt, particularly in agricultural communities.
Australia has a high level of food security and there are steps being
taken to further secure our food supplies and opportunities for Australia
farmers to supply world food markets.
For a start, Australia produces enough to feed the country twice over.
In fact, we are in the top five countries in the world for access to affordable
The recently announced National Food Plan lays out a strategy for Australians
to continue to have access to safe and nutritious food and contribute to global
food security. Progress towards the goals laid out in the National Food Plan
will be assessed every five years in a State of the Food System report. This
will ensure Australians are kept well informed about food security issues.
As part of the National Food Plan, the government has also established
the Australian Council on Food, a high-level policy advisory body bringing
together Government Ministers and non-government members from a range of
sectors. This Council will meet bi-annually and ensure that food policy issues
– including food security issues – are placed at the centre of government
policy making. Similarly, the government will also ask the Productivity
Commission to identify priority areas for reform of food supply chain
regulations looking from the paddock to the plate in Australia. This will make
it easier for our farmers and food manufacturers to focus on what they do best
– produce high quality food instead.
The greater risk to food security comes from barriers which will reduce
investment in our agriculture sector. The expert ABARES report found that,
Australia’s food security is likely to be further enhanced by
ongoing foreign investment in agriculture.
The ABARES report goes on to find that restrictions which lowered the
level of investment ‘would result in lower output’(emphasis added).
The first ever National Food Plan will ensure our agriculture sector
remains at the forefront of technology and innovation, and has access to the
capital needed to grow and invest in the industry. It’s clear from the evidence
that cutting off reliable and stable sources of investment would have many
impacts on our food security and our economy.
Tax revenues are an important way that foreign investors contribute to
the Australian community. Tax can be a complex area of law and is easily
susceptible to misinterpretation or misunderstanding.
There have been some concerns from the majority of the committee that
foreign government investment in rural land could lead to Australia not receiving
tax revenue related to the production that takes place here. There are a
number of safeguards in place to prevent this. Most importantly revenue
implications are an important element of the national interest test and the
Australian Taxation Office is regularly consulted to advise on proposed
Importantly, neither the Australian Taxation Office nor the Foreign
Investment Review Board could point to a single case where investment in rural
land by overseas entities has involved arrangements that potentially circumvent
Australia’s tax laws.
Australia’s transfer pricing rules also play an important role in
ensuring appropriate income is assessable in Australia. Australia’s transfer
pricing laws seek to ensure that Australia receives an appropriate return for
the economic contribution made by Australian operations. There is currently a
bill before the Senate, the Tax Laws Amendment (Countering Tax Avoidance and
Multinational Profit Shifting) Bill 2013, which implements reforms to ensure
these important rules continue to be robust and effective.
The doctrine of sovereign immunity has also been raised as a possible
area of risk in relation to the tax outcomes of proposed investment in rural
land. The doctrine of sovereign immunity has very limited application and
again the Australian Taxation Office could not point to a single case where
farming activities have satisfied the criteria for concessional treatment under
the sovereign immunity rules. Further the Government has released a discussion
paper on reforms to the sovereign immunity regime that would specifically
preclude concessional tax treatment of investments in land of any kind as a
result of sovereign ownership.
The Senate should pass unamended the Tax Laws Amendment (Countering Tax
Avoidance and Multinational Profit Shifting) Bill 2013 to ensure that
Australia’s transfer pricing rules are robust and effective.
|Senator Glenn Sterle
the Hon. Lin Thorp
Senator from Tasmania
Navigation: Previous Page | Contents | Next Page