It’s hard to find a politician in Canberra who doesn’t support foreign investment. You certainly won’t find one amongst those from the major parties.
Indeed the overwhelming majority of both political and business leaders understand that as an island trading continent with a small population and limited savings capacity, we have always been – and always will be – heavily dependent on the money of others to fund our projects and businesses.
Historically most of those funds have come from western economies like the United Kingdom and the United States of America. But increasingly, investment is coming from other nation-states including the emerging economies of Asia. While you won’t hear them say it in as many words, Coalition MPs and Senators seem to harbour concerns over Asian investment, concerns they don’t always hold for investments coming from our traditional sources. In no case was this more evident than when the Chinese company, Shandong Ruyi acquired an 80% interest in Cubbie, right on the doorstop of Barnaby Joyce’s residence at St George.
Unfortunately rather than showing leadership, Tony Abbott and his team seem intent on recklessly capitalising on their own fears for political gain. For example, his Government has insisted that for investment in agriculture land and agri-businesses, thresholds for Foreign Investment Review Board (FIRB) screen be lower for South Korea, Japan and China, than they are for the US and New Zealand.
But it’s about to get worse. In the coming months the Abbott Government will ask the Parliament to retrospectively approve lower thresholds for all countries other than the US, New Zealand and Chile. Further, the Bill to impose these new low thresholds will also introduce application fees that bear little resemblance to the cost of assessment, effectively amounting to a tax on foreign investment of up to $100,000 per application.
The Government is determined to pursue these changes even though one of its own investment specialists has confirmed the increase in red tape is already acting as a disincentive to offshore investment in agriculture. According to Austrade investment specialist David Watson: “the new fees have fuelled the narrative around Australia being a high cost destination to invest in”.
Further, the Office of Best Practice Regulation has revealed that this new red tape has been imposed without proper assessment of the increased regulatory burden. If the Government won’t listen to Labor about the increased barriers to foreign investment, it should take the advice of its own experts.
It is clear these new layers of red tape on foreign investment in Australia will deter international investors seeking to grow businesses and create jobs in Australia.
Nowhere is that more clear than in agriculture where investors face the prospect of both joining a long queue and higher costs. The Budget indicates the Government expects to raise $735 million from the new charges to investors lodging FIRB applications.
In a world in which competition for global capital is intense, there is every chance potential investors may simply decide Australia looks too hard!
The effect of the new cumulative $15 million threshold for foreign investment in agricultural land (and water) will be that any acquisition, regardless of size will need to be submitted to FIRB for approval once the investor reached the $15 million threshold. Even a simple freehold conversion of a road enclosure will attract a $5,000 application fee prior to FIRB approval which at this stage requires the Treasurers consent. The sheer workload that this will create for FIRB will result in foreign investors’ inability to act at auction or simply feel that their capital would be more welcome elsewhere.
Groups such as the Corporate Agriculture Group, a think tank of some of the largest investors in Australian agriculture have raised major concerns about the proposed changes which they consider will also certainly deter foreign investment in the sector.
If Australia is serious about capturing the opportunities that are ahead in the Asian Century, we need to not only accept foreign capital, we need to encourage it. The changes to FIRB will have the opposite effect.
The Treasurer has claimed that “Australia is open for business”, but not if you are a foreign investor.
This article was first published in FARMONLINE on Monday, 15 June 2015.