Publications / Foreign Investment
Recent land acquisitions by foreign-owned companies have shone the spotlight on an issue of growing concern to some in the food and agribusiness sector. While the Federal Government policy encourages foreign ownership, the hard data required to hose down concerns over food security and land-use, including the loss of farming land to mining, seems to be lacking.
On 6 July 2011 the Senate voted to launch an inquiry into the purchase of agricultural land by foreign investors, with public forums to be held in regional areas to give the rural sector an opportunity to voice its opinion in this increasingly vocal debate.
Late last year, independent Senator Nick Xenophon introduced a bill into parliament seeking tougher notification and approval requirements for foreign investment in Australian rural land. A Senate review committee has recently rejected his proposed amendment to the Foreign Acquisitions and Takeovers Act 1975 (Cth) that would have required foreign companies to obtain the approval of the Foreign Investment Review Board (FIRB) to buy farmland of five hectares or more.
This decision comes at a time when concern about the need to protect Australia’s agricultural land for food production is gaining widespread publicity. This debate has also spread to foreign ownership of Australia’s water, which is vital to Australia’s food production capabilities. The government has said that it will wait for the results of two studies on the current level of foreign ownership of Australian rural land before making any changes to the current FIRB approval requirements.
Currently, acquisitions of rural land valued at less than $231 million do not require FIRB approval (unless the investor is connected with a foreign government). Even where FIRB approval is required, the sole test is whether the investment would be contrary to Australia’s national interest. It is the Australian government’s firm policy to encourage foreign investment and very few proposed acquisitions are rejected on national interest grounds. Rather, conditions are often imposed to ensure that the proposed investment meets the national interest criteria.
However, there is some suggestion that the ‘national interest’ test administered by FIRB may need to be updated to reflect community concern about agricultural land and water rights. This may require a distinction between rural land that is being acquired to facilitate mining operations (such as the recent acquisition of large areas of coal-rich farmland in northern New South Wales by Chinese state-owned mining giant Shenhua Watermark) and the buy up of Australian farms by foreign investors for long-term food production (such as the recent significant acquisitions of Victorian farmland by the Qatari government backed Hassad Food).
The terms of reference of the Senate inquiry means that the current tests applied by FIRB may be revisited. Changes in the short term may be seen in the form of extra conditions placed on foreign acquisitions of rural land, for example a requirement that mining companies sell the land back to Australian farmers once mining operations are finished. In the medium term it may be that the government tightens the notification requirements for foreign investment in rural land so that proposed acquisitions will need FIRB approval below the current $231 million threshold.
However, with constant reminders of Australia’s dependence on foreign investment for its economic prosperity, the Australian government has indicated that it intends to maintain its policy of encouraging foreign investment.
Watch this space for further updates.
Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.