Australian foreign investment process underwent major changes on Monday, with the unveiling of the Critical Intelligence Centre (CIC), designed to allow Australia’s intelligence agencies to assess national assets for “red flags”, triggering national security risks for foreign bids.
In a statement, Federal Treasurer Scott Morrison said the centre was crucial as “Australia’s national critical infrastructure is more exposed than ever to sabotage, espionage, and coercion”.
This follows a long list of recent bids made by foreign interests over the past few years that have been rejected on the grounds of security, with the last minute veto, last year, of the New South Wales electricity distributor Ausgrid, being one of the examples of a sale that would have been pre-vetted by the new agency.
Australia, being a relatively rich country, with a wealth of natural resources, has always been a target of foreign investors seeking to invest. For the past 200 years, Australia relied upon outside investment to develop its agricultural, mining, and other primary industries.
Between 1960’s and the 1980’s, Australia imposed stringent investment policy and trade barriers, coupled with a wave of economic nationalism, and a perceived loss of sovereignty, which experts calculate resulted in a 30 percent decline of capital productivity during that period.
The issue of economic nationalism made its way to the forefront again this week, with the response to a looming takeover of DUET, a major energy and infrastructure company, by Pauline Hanson, leader of the One Nation Party in Australia.
Speaking to The Australian, Hanson was vehement that foreign investment was bad for the country, and that she plans to ramp up her opposition to any outside ownership of Australian assets, particularly from China.
“I’ve said this for the past 20 years – your essential services, your gas, your water, electricity, telecommunications, should not be in the hands of any foreign ownership,” Hanson said.
“It should not be allowed – it is a national security issue. They buy because then they will have control over the people and I think it is totally wrong”.
Hanson also implied that the Ausgrid bid was set to be approved, until she raised concerns she had with the sale, last year.
Hanson is not alone in these sentiments, with a number of other prominent politicians in Australia prescribing to protectionist political ideologies, in relation to foreign investment.
Bob Katter, a popular Federal politician in rural Queensland, also shares these views, telling the Australian Financial Review, in 2016, the Ausgrid sale would give foreign owners the ability to “flick the switch off” and described the potential sale as “imperialism and colonialism at its worst”.
“We are giving away the ownership and sovereignty.” Katter said.
Foreign investment in Australia is reviewed by the Foreign Investment Review Board (FIRB). In the case of Ausgrid, mining, or agriculture sales, FIRB examines the proposals and provides recommendations to the Treasurer as to their compliance with legislation and policy.
Danny Thomas, Regional Director of Agribusiness at CBRE, who has an extensive history of dealing with the agency, said his own experiences have left him exasperated.
“I deal with a lot of foreign investors when they buy direct property, and I was frustrated when I was doing one in Western Australia, and I renamed the FIRB to the ‘CHIRB’ (Chinese Investment Review Board),” he said.
“I don’t really think that it is the ‘CHIRB’, but the government is at risk of looking like they are the ‘CHIRB’ if it’s only investments from China that seem to get this kind of treatment.”
Thomas says the biggest issue is convincing people in rural areas that foreign investment is beneficial.
“In the bush there is an anti-foreign investment sentiment, but we are starting to deal with that now through facts,” he said.
“I think as we get more facts out there, they’ll realise – there’s always been a significant amount of foreign investment, in fact the thing that opened the country up and developed it was foreign money.”
His point is echoed by Dr Jeffrey Wilson, a fellow of the Asia Research Centre at Murdoch University, who said the narrative that is being shaped around foreign investment in agriculture, is inherently flawed.
“In rural communities it’s very sensitive. There is this emotional notion of selling the farm and keeping Australia, Australian. The most romantic images of ‘Clancy of the Overflow’, and drovers, and stockmen.” he said.
Wilson believes that this narrative has to be replaced, with more being done to ensure that Australia is able to succeed in the agricultural sector well into the future, as “investment in Australian agriculture is hugely critical”.
“Australia needs lots of investment to manage water better, to manage the fact (that) there is very little labor, to mechanize agriculture, and to make more use of what limited ecological resources Australia has,” Wilson said.
“That is going to need foreign capital, and because China is a buyer, a lot of that capital is going to come from China.”
Wilson says a broader policy is required in order to educate on what foreign investment actually does, rather than the current romanticism of Australian farming that is being used as a tool by protectionists.
He said a lot more focus has to be on that” to highlight the “xenophobic elements” which have “dominated the conversation for the last couple of years in Australia”.
The stance of Hanson and her One Nation Party are of concern to Wilson in terms of foreign investment, and says when “a government is putting up a piece of legislation and has to cut a deal with One Nation, it is not really clear how the cookie is going to crumble”.
Wilson says that the “hodge-podge of left and right wing populism” that is prevalent within the party, combined with the xenophobic elements, make it difficult to predict how they will use their burgeoning political clout.
“It is very hard to know, because of those contradictions in this political movement, which is nothing but ‘we don’t like foreigners but what else (should) we do’, that creates a lot of uncertainty about which way the wind is actually blowing at the moment.” Wilson said.
Wilson does however, see the value in the introduction of the CIC, says the new agency will be able to deliver greater certainty to the bidding process, making it easier for foreign investors to have confidence.
“By actually systematizing this, by having a body that has specialist capabilities, that only gets brought in for the cases where it matters; but provides a level of regularity, and transparency, and institutionalization – that should fix the problem we previously had where it looked ad-hoc and politically fixed all the time,” Wilson said.
“It makes it transparent, and gives companies a bit more confidence so they know what they have when they are trying to make these applications, and there are some clear guidelines, whereas at the moment they are going in blind.”
Some argue however, that the time has come for the whole process to be overhauled, with Chris Berg, Senior Fellow at the Institute of Public Affairs saying, the time has come to “abolish the FIRB”.
“I don’t think it adds any economic value, it does not prevent any harm to Australians, we are talking about foreign investors bringing money into the country. That is inherently a good thing.” Berg said.
“The idea that Australians need to own everything is, in my view, an outdated 1970’s concept of economic freedom. What we really need is lots of investment, lots of money bringing in jobs, jobs that will be taken almost uniformly by Australian workers, and raising capital investment in Australia.”
Berg says that economic integration, and direct foreign investment from Australia’s Asian partners is crucial, in order to strengthen the economy and ensure Australia’s viability into the future.
“The idea that we would have investment from regions across the world is positive. It is positive, not just from an economic perspective but of course, from a foreign policy perspective,” Berg said.
“We live in a globalized world, we can not reject that, globalization is just the way of things, we need to make sure that our destinies are as intertwined with the rest of the world’s destinies, as much as possible.”
– Will Koulouris