Foreign investment has always been a contentious and often divisive issue, and certainly the recent rejection of bids for both agricultural and infrastructure assets by the Treasurer has only heightened this debate.
However, as industries like agriculture struggle with a gaping hole in the capital required to build on the vast market opportunities presented by a cashed-up and quality-conscious consumer, and federal coffers fall short of what is required to invest in the infrastructure and services required to maintain the Australian lifestyle, it is a debate which must be had.
Of course the community, and the politicians seeking the approval of the voting public, have a right to question the sale of land and infrastructure to overseas interests. It would be foolish to attempt to deny there is something uncomfortable about pieces of our country being sold to foreign interests.
This discomfort is often fuelled by scare-mongering by some in the political sphere who entertain protectionist sentiments and typically also oppose the valuable Free Trade Agreements recently negotiated and signed by Australia.
But let’s pare this back to some facts.
Australia is a capital importing nation and has been for virtually its entire European history. For Australians to maintain the standard of living to which they are accustomed, foreign investment must be attracted to make up the shortfall in domestic savings.Tony Mahar, NFF Chief Executive Officer
In a macroeconomic sense, federal, state and territory governments are not helping. By continually running budget deficits our domestic savings fall further behind our investment needs. That means we need more and more foreign investment to fill the gap. It also puts upward pressure on our dollar, damaging the competitiveness of our exporters – but that’s a topic for another day.
Foreign investment in publicly-owned assets can provide our cash-strapped governments with another means to invest in the infrastructure we need to make Australia a great place to live. We all want more and better services but these are simply not able to be delivered by governments through borrowing or taxation alone. We need to use our public balance sheets more intelligently.
If our level of discomfort with assets being sold to offshore interests is such that it continues to both foil economically sound transactions and be used for political point scoring an earnest discussion about serious savings measures needs to be had and had quickly.
Agriculture has rightly been identified as one of Australia’s next wave of growth sectors, fuelled by burgeoning demand from growing Asian wealth. But it needs capital to fully grasp these opportunities. The shortfall in capital required has been estimated at $9 billion per year in an environment where there is a near-insatiable appetite for high-quality and safe Australian food and fibre. But it’s not just about the money. Foreign investment can also lead to knowledge transfer and the sharing of technology to improve productivity and efficiency.
And let’s be real about this, it’s not only the foreign investors who benefit. The sellers of assets should be able to expect to sell to the highest bidder and extract appropriate value from the commercial merits of their assets and potential transactions.
But the Australian community needs assurance and this can only come from a government confident they have adequate measures in place to ensure national wellbeing. This means any investor, foreign or domestic, is made to abide by the laws of the nation, compete fairly in our markets and not endanger our citizens.Tony Mahar
There is a perception within the community that foreign owners of Australian assets are not playing by the same rules and are paying different levels of tax, importing cheap workers and using their own vertically integrated supply chains in a nefarious manner. Again, government must demonstrate clearly there are adequate measures are in place to prevent this. And, if these are genuine concerns, government must improve our domestic regulation and enforcement, not turn foreign investors away.
Furthermore, a robust and transparent screening process with clarity around the ‘national interest’ test is equally important. As has been demonstrated in recent failed bids including S. Kidman & Co and New South Wales’ energy distribution network, Ausgrid, foreign bidders rightly feel the ground move under their feet throughout the bidding process.
Of course governments must assess national security concerns and we understand these often cannot be publicly canvassed, but we need well defined criteria for national interest and transparency of considerations that are not security related. Without this, foreign investors will simply throw up their hands.
The Government has developed foreign ownership registers and implemented transaction thresholds to trigger the approval process but none of this has lived up to expectation and most certainly has not been adequate to allay community concern. These concerns cannot be ignored but they can be assuaged and this must be a priority.
The NFF urges the Government, and indeed the entire Parliament, to focus attention on ensuring our domestic policy settings are robust enough to manage foreign investment and gain the trust of the Australian public.
They need to provide leadership and invest in greater transparency around the screening process. To fail at this will be to constrain our nation’s growth and place clear limitations on industries, like agriculture, which have potential to thrive to the benefit of all Australians.