The issue of foreign investment made an impromptu appearance during the federal election campaign, with Tony Abbott and Kevin Rudd both signalling a more cautious approach.
The new Coalition government has a policy of reducing the monetary threshold for Foreign Investment Review Board (FIRB) scrutiny of foreign acquisitions of agricultural land. However, in the absence of a change in the criteria applied to these acquisitions, the policy will serve only to increase the workload of the FIRB, without changing the already very low rejection rate for such acquisitions.
The government's caution on foreign direct investment (FDI) sits uneasily with its desire to develop Australia's potential as an exporter of food to Asia and to secure a free trade agreement with China. Agriculture is increasingly capital intensive, requiring new investment from abroad. Australia's regulation of FDI has been the chief stumbling block to the successful conclusion of a free trade deal with China.
Australia's caution on foreign investment also stands in sharp contrast to international developments. In July, China restarted negotiations on a comprehensive bilateral investment treaty with the United States. In August, the Chinese cabinet moved to create a new free trade zone (FTZ) centred on Shanghai that will serve as a test case for a much more liberal approach to its regulation of FDI. If successful, the new Shanghai FTZ will become a template for a much broader liberalisation of China's capital account. China is already a net importer of FDI and home to the world's largest stock of FDI outside the US.
Australia's regulation of FDI risks being left behind by these developments.
The Coalition should move to raise the monetary threshold for scrutiny of foreign acquisitions of Australian businesses to an inflation-indexed $1.078 billion, the same level that currently applies to US and New Zealand investors. This would eliminate the costly delays and uncertainties that currently affect the many foreign acquisitions that are too small to raise potential 'national interest' concerns.
The new government should also not trivialise the concept of the 'national interest' that is meant to inform the exercise of the Treasurer's discretion to reject foreign investment under the Foreign Acquisitions and Takeovers Act. The 'national interest' test should not become a thinly-disguised proxy for domestic political concerns.
Instead, the new government should demonstrate political leadership on the issue by actively working to allay community concerns about foreign ownership.
Dr Stephen Kirchner is a Research Fellow at The Centre for Independent Studies.
Home > Commentary > Opinion > Foreign investment tests Coalition’s free trade credentials
Foreign investment tests Coalition’s free trade credentials
The new Coalition government has a policy of reducing the monetary threshold for Foreign Investment Review Board (FIRB) scrutiny of foreign acquisitions of agricultural land. However, in the absence of a change in the criteria applied to these acquisitions, the policy will serve only to increase the workload of the FIRB, without changing the already very low rejection rate for such acquisitions.
The government's caution on foreign direct investment (FDI) sits uneasily with its desire to develop Australia's potential as an exporter of food to Asia and to secure a free trade agreement with China. Agriculture is increasingly capital intensive, requiring new investment from abroad. Australia's regulation of FDI has been the chief stumbling block to the successful conclusion of a free trade deal with China.
Australia's caution on foreign investment also stands in sharp contrast to international developments. In July, China restarted negotiations on a comprehensive bilateral investment treaty with the United States. In August, the Chinese cabinet moved to create a new free trade zone (FTZ) centred on Shanghai that will serve as a test case for a much more liberal approach to its regulation of FDI. If successful, the new Shanghai FTZ will become a template for a much broader liberalisation of China's capital account. China is already a net importer of FDI and home to the world's largest stock of FDI outside the US.
Australia's regulation of FDI risks being left behind by these developments.
The Coalition should move to raise the monetary threshold for scrutiny of foreign acquisitions of Australian businesses to an inflation-indexed $1.078 billion, the same level that currently applies to US and New Zealand investors. This would eliminate the costly delays and uncertainties that currently affect the many foreign acquisitions that are too small to raise potential 'national interest' concerns.
The new government should also not trivialise the concept of the 'national interest' that is meant to inform the exercise of the Treasurer's discretion to reject foreign investment under the Foreign Acquisitions and Takeovers Act. The 'national interest' test should not become a thinly-disguised proxy for domestic political concerns.
Instead, the new government should demonstrate political leadership on the issue by actively working to allay community concerns about foreign ownership.
Dr Stephen Kirchner is a Research Fellow at The Centre for Independent Studies.
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