QUICK FACTS. SELLING THE FARM?
Few subjects – other than the one about how we’re about to be overrun by refugees – produce quite as much heat, rhetoric and plain old xenophobia.
The latest outbreak of “foreign land ownership” fever comes after the federal government approved the sale of Australia’s largest cotton farm, Cubbie Station in southern Queensland to a Chinese and Japanese consortium. The 93,000-hectare station was placed in administration three years ago with debts of some $300m, holding licences to store vast amounts of water.
Cubbie Station. Picture via Australian Financial Review.
The general argument goes that the benefits of foreign investment – saving jobs and creating new ones, more innovation, new technology, access to new markets, have to be balanced against the negatives – the sale of Australian assets, the risk to jobs for Australians and the alleged chance that if we keep “selling the farm” we will imperil our secure food chain and the ability to feed ourselves.
But as the debate rages over foreign investment, both sides of politics say “look at the facts”.
So what are the facts and how are foreign investment decisions made?
- The Coalition wants the threshold for Foreign Investment Review Board (FIRB) reviews of private foreign investment in agricultural land to be lowered – from from $244m to $15m.
- There are a couple of exceptions to the foreign investment rules: media and some classes of real estate – like developed commercial real estate ($53m threshold) or heritage listed real estate ($5m) where the government must be notified.
- The only nations that appear to escape some of these regulations are the USA and New Zealand that can invest in agricultural land or companies and real estate up to $1062m, no questions asked.
- The FIRB’s review uses a framework outlined in the Foreign Acquisitions and Takeovers Act (1975) that gives the Treasurer the ability to knock back investment proposals which are contrary to the national interest.
- But what’s contrary to the national interest? They include whether the investment impacts strategic and security interests , or gives the buyer control over market pricing and production in the sector, impact on tax revenues and the environment, Australian participation after the investment and last but not least, the character of the investor.
- Some of those arguing foreign investment is on the increase question the intention of the investors, especially when they are foreign government backed.
- Amongst the investments that have sparked concern, is the Qatar based Hassad Foods, backed by the Qatar Investment Authority (an arm of the Qatar Government). It’s invested $200m in 250,000 hectares of sheep grazing and grain producing land across Queensland, New South Wales, Victoria and Western Australia.
- And the Chinese State owned Shenhau Watermark Coal that’s invested $200m in farms near Gunnedah in NSW and $300m for a thermal coal exploration licence covering 195 square kilometres of the Gunnedah Basin.
- And the Chinese state owned Bright Foods (China’s largest dairy producer) which, having taken a 60% share in the UK icon, Weetabix and attempted to buy France’s Yoplait, has snapped up a majority stake in food manufacturer Manussen and is targeting wine, dairy and sugar assets here.
- Brazil and Japan are active in abattoir and beef investments whilst Singapore based company, Olam now owns 45% of Australia’s almond producing industry.
- Dick Smith says he has no doubt that foreign nations are buying food producing companies and agricultural land in Australia to protect their own food security. He calls the investments the “great disappearing act”.
- But is he correct? The government cites a 2011 Australian Bureau of Agricultural and Resource Economics and Sciences report which says only 1% of Australian agricultural businesses are part or fully owned by foreign interests and 44 million hectares of agricultural land are now wholly or partly owned by foreign entities: whilst that’s a 60 per cent increase from the early 1980s, around half had majority Australian ownership. The government says this is no cause for alarm.
- But Nationals Leader, Warren Truss says the stats are flawed (they are gathered from FIRB approvals where proposals must be valued over $244m to need review) and that between 2007 and 2010 there has been a ten-fold increase in foreign investment in agri-businesses. And Liberal Senator Bill Heffernan says the stats are “absolute horseshit” because “The big miners who bought farms didn’t get asked because they are miners and the trigger point was $5,000 turnover at a farm, which was completely flawed.”
- The government says it’s considering a national land register but there’ll be no change to the FIRB’s thresholds. Any change would likely cause a fair degree of concern amongst those nations at which it would be primarily directed - China, Korea and Japan – because of the favourable rules applying to the US and New Zealand. Remember? They need to tip $1062m before anyone blinks an eyelid.
- The government also says that Australian farmers wouldn’t be impressed if they were locked out of the lucrative Asian market by prohibitive reviews, especially as China has other options for placing its excess investment dollars. The National Farmers Federation seems to agree; it doesn’t support the Coalition’s call for higher review thresholds but wants the register.
Politicians and critics of the FIRB alike say they’re concerned about food security as the world’s population continues to grow.
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