The Report shows that in the last year:
This is the third consecutive year that China has been ranked in the top three sources of proposed investment in Australia. Interestingly, for the first time India (and consistent with our experience) has been ranked in the top five; support (if it was required) that Australia and Asia are inextricably linked.
The Report indentifies that 2010/2011 has been characterised by continued media scrutiny and community interest in foreign investment, particularly in the area of agriculture. The Report notes the release of a Policy Statement on Foreign Investment in Agriculture which provides guidance on the factors FIRB will typically consider in assessing foreign applications involving the agricultural sector. Based on the 2010/2011 approvals, investment in the agriculture, forestry and fishery sector accounted for 0.79% of total approvals by value. The proposed investment in this sector decreased from $2.3 billion in 2009/2010 to $1.4 billion in 2010/2011. The number of applications stayed constant at 17 (as compared with 33 applications for finance and insurance and 50 proposals for manufacturing).
The Report also highlights the consideration by FIRB of one of the most significant cases to come before it – the proposed takeover of the Australian Securities Exchange by the Singapore Stock Exchange. This is the only occasion since 2001 that a business proposal has been found by the Treasurer to be contrary to the national interest. Interestingly, on this occasion the Treasurer published his reasons for objecting to the proposal – a welcomed insight into the process of decision making see: The "national interest test" and Australian foreign investment laws.
A number of submissions to the “Australia in the Asian Century” White Paper articulate the importance of foreign investment to Australia as a driver for economic development (including Rio Tinto and the National Farmers’ Federation). Those submissions go on to highlight the need for greater transparency in Australia’s foreign investment framework. As noted in the OECD Policy Framework for Investment, the quality of a country’s investment policies directly influences the decisions of investors. Predictability and transparency are paramount to encouraging foreign investment both here and in other jurisdictions (see Andrew Lumsden’s previous article on transparency in Australia's foreign investment regime considering proposed changes to China’s foreign investment rules). Clearly the message is Australia needs to remain vigilant to ensure that we are seen as having no official bias against or for any particular country.
The release of the Report is important, not only in encouraging transparency in Australia’s foreign investment framework, but also in shaping media and community debate and interest about the form and nature of foreign investment. What the Report shows is that we have an enlightened foreign investment policy which has served us well in the development of globally competitive businesses. Foreign investment has delivered significant economic and social benefits to all Australians in the form of strong regional and global connections, strong economic activity, more jobs and increased real wages.
If our foreign investment policy needs changes they are at the margin and the changes should focus on the enhancement of the effectiveness of our policies. As the Treasury Secretary Dr Parkinson said “Foreign investment is in Australia's national interest because there simply is not enough capital domestically to invest in developing assets”. We hope that more attention is paid to the facts (such as those published in the Report) rather than the hype. There still remains much to be done to ensure better communication of Australia’s foreign investment policy, guidelines and decisions. In our view, there is however a middle path that will allow Australia to profit from access to foreign capital while still protecting our “national interest”.
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