Chapter 3


Chapter 3

Issues raised regarding the bill

3.1        This chapter discusses submitters' and witnesses' various criticisms of the proposed legislation. It details concerns with the bill under the following headings:

  • the bill as a potential deterrent to foreign investors;
  • inadequate data for policy decisions;
  • criticism of the bill's national interest test;
  • commercial in-confidence and publication of investment proposals;
  • setting the appropriate threshold;
  • strategic accumulation of agricultural land;
  • Australia's food security; and
  • Australia international obligations.    

The bill as a potential deterrent for investors

3.2        Some submitters to this inquiry discussed the benefits of Foreign Direct Investment (FDI) and its importance to the agricultural sector and the economy more generally. These submitters raised concern that greater legislative restrictions on FDI could send out the wrong signal and potentially deter investors.[1]

3.3        Treasury outlined some of the mutual benefits of FDI in the agricultural sector for farmers and investors, and the impact the bill could have in this regard:

In addition to supplementing capital for development and expansion, foreign investment has helped to stimulate jobs on farms and support services such as harvesting, transport, and processing. Regional towns and communities have received flow-on benefits through local purchases of inputs, machinery, and the general necessities of life. New investment can help Australian agriculture to be more efficient, competitive and profitable in world markets.

From the perspective of foreign investors, Australia's agricultural sector has been an attractive place to invest. This attractiveness stems from Australia's reputation as a high quality producer; its proximity to key Asian markets; the counter seasonal production benefits it offers markets in the northern hemisphere; its low sovereign risk; and its enviable productivity record. It is not surprising that Australia continues to attract foreign investment as a top surplus food and fibre producer.[2]

...

There is a real risk that the changes could discourage foreign investment in this sector of the economy, which has made an important contribution to the growth and development of Australia's agricultural sector.[3]

3.4        Foreign investment is critical to the development of Australia's industries and infrastructure and has significant benefits for the Australian economy and community. In a joint media release, the Minister for Agriculture, Fisheries and Forestry, Senator the Hon. Joe Ludwig stated, 'Foreign investment is vital for Australian farmers and regional communities because it supports local jobs and economic growth'.[4] Due to its shallow domestic capital market Australia has, and continues to, rely upon FDI in particular for investment in capital intensive sectors such as mining and agricultural production.

Land prices

3.5        It was also argued that a decrease in foreign investment in agriculture could have a negative effect on rural land prices. The National Farmers Federation (NFF) agrees that foreign investment has played a significant role in maintaining rural land values:

Foreign investment in Australia has been a pretty important part of the agricultural industry for a long period of time and it has certainly maintained land values and equity levels within agriculture.[5]

3.6        Mr Greg Mahony, an economist, commented on the potential for FDI restrictions to have an adverse impact on land prices:

Other subsidiary concerns, possibly unintended consequences—and I would imagine that they have been discussed already—are issues that as an economist seem to me to be fairly obvious: if you restrict the number of buyers, all other things being equal the price of agricultural land may either stagnate or fall, depending on what else happens of course.

...

That would have an adverse impact on farmers who are wanting to exit the industry.[6]

Committee comment

3.7        The committee considers it essential that Australia remain a country that welcomes foreign investment and continues to be an attractive place to invest. Any changes to foreign investment policy or legislation should be considered in this light.

Inadequate data for policy decisions

3.8        Some submitters to the inquiry argued that further data gathering and research is required on FDI in the agricultural sector before any legislative or policy changes are made.[7] The NFF welcomes the government's project with the Australian Bureau of Statistics (ABS), the Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) and the Rural Industries Research and Development Corporation (RIRDC) (see paragraph 1.31) 'to strengthen transparency of foreign ownership of rural land and agricultural food production' and has provided input towards the review:[8]

...I think it is very important that we have an understanding of exactly what amount of foreign investment comes back into agriculture as far as land ownership goes and an understanding of the agricultural production and how that agricultural production is managed with foreign investment. I think it is very important that we understand some of those things before we take the next step forward.[9]

3.9        Mr Alan Hill, Director of Policy for the Western Australian Farmers Federation, commented on the lack of information available to monitor foreign investment in agriculture:

Anecdotally, we could say to you, yes, we hear this or that about investment, but the reality is that a lot of it is unknown simply because there is not a register or a publicly accessible database. We can only really speak about Western Australia...But we certainly champion the need to have that data available so we can, as industry and as government, track that analysis and find out what the impacting factors are.[10]

3.10      ABARES also noted that there is currently no database of ownership of Australian agricultural land. It informed the committee that Queensland is the only State that collects this type of information:

Senator HEFFERNAN—Firstly, would it be fair to say for your organisation that we really do not know who owns the agricultural land in Australia?

Mr Morris—Yes.

Senator HEFFERNAN—And so if we went to the land titles office, we probably would not be any further ahead in lots of instances...

Mr Bowen—We have had a brief look at this and we will look at it in a bit more detail. My understanding is that there is a bit more information in Queensland, they do have some registers about foreign ownership, but in other states there is not much information collected at the land offices to determine whether it is foreign owned or not. They often do not differentiate between urban land and rural land as well, which makes it quite complicated to try to use that method to find out information.

Senator HEFFERNAN—So to discover who owns the agricultural resources in Australia, we would have to build a new model?

Mr Morris—Other than for the various categories that FIRB—the Foreign Investment Review Board—looks at, and Queensland seems to have a bit more information than other states, if you really wanted to get detailed information on the ownership arrangements, the current collections do not seem to cover that.[11]

3.11      Treasury elaborated on the need to undertake further investigatory work before any legislative changes, such as those that the bill proposes, are made to the rules governing the foreign acquisition of agricultural land:

In relation to the first concern, problem identification and measurement, the committee will be aware that the government has made announcements in this area and that parliament has also called for broadly consistent data-gathering and analysis efforts...

I think it is fair to say that such initiatives do lend weight to the argument that it would have been difficult for the bill’s drafters to accurately define and measure the need for legislative change in this area until further investigatory work was undertaken.[12]

Data currently available

3.12      The FIRB Annual Report details statistics on proposed foreign investments under the Foreign Acquisitions and Takeovers Act 1975 (FATA) and Australia's Foreign Investment Policy. These proposals are not always implemented and FIRB urges that these statistics be used with caution as they do not capture actual investment flows. Further, FIRB data does not cover FDI below the monetary threshold.[13]

3.13      In answer to a Question on Notice, Treasury provided the following table and explanation as an indication of the number of applications that have been submitted to FIRB.

Table 3.1

Financial years

Number of agriculture, forestry and fishing proposals

Value of agriculture, forestry and fishing proposals

Percent of total proposed investment in the financial years

2009-10

17

$2.3 billion

1 per cent

2008-09

12

$2.78 billion

1.5 per cent

2007-08

11

$2.49 billion

1.3 per cent

2006-07

4

$0.1 billion

0.06 per cent

2005-06

2

$0.01 billion

0.01 per cent

The classification used for this data is the Australian and New Zealand Standard Industrial Classification. The Agriculture, Forestry and Fishing classification encapsulates agriculture, services to agriculture, forestry and logging and commercial fishing.

Business proposals are classified on the basis of the dominant business activity. Proposals within the agriculture, forestry and fishing sector may include rural land as a business asset, however, the value of agriculture, forestry and fishing proposals cannot be equated with the value of the rural land involved in these proposals. [14]

3.14      The ABS conducts an agricultural survey every five years which examines agricultural commodities and water. The survey is distributed to 170 000 agricultural businesses. Businesses with turnover of less than $5000 a year are not included in the survey. The committee heard that the survey is the 'foundation of [the ABS] agricultural statistics program nationally'.[15]

3.15      The ABS did acknowledge that there is limited information available on agricultural land and water.[16] When questioned why further data was not gathered on ownership of agricultural land, the ABS informed the committee that the Statistician determines the level of priority assigned to each project. This is done in consultation with other entities such as the Australian Statistics Advisory Council, which has representation from the state and territory governments and from the not-for-profit sector.[17]

3.16      Mr Frank Di Giorgio, Principal Advisor of the Foreign Investment and Trade Policy Division of Treasury, provided an overview of the data currently available, and the differences between the FIRB and ABS statistics:

We do not monitor investment in agricultural properties per se, other than that we collect data on applications that fall under the FATA and under the policy. Our latest annual report does have data, for example, on investments in agriculture, forestry and fishing, so it reports that there are a number of cases and it provides a little bit of detail about that.

...

Apart from the FIRB data, which gives us an insight into the applications for investment, the ABS also collects data in this area, which gives us an idea of the stock, the amount, of investment that is in Australia. It breaks it down into a range of categories including agriculture, forestry and fishing.

...

But the FIRB numbers are generally driven on the initial acquisition, and that is why our statistics are about applications and proposals and the ABS is about the full understanding of the total investment.[18]

New data gathering initiatives

3.17      Treasury confirmed that 'there is a lack of data to gauge the level of foreign ownership of rural land and water entitlements and whether that level is detrimental to the wellbeing of Australians'.[19] It drew the committee's attention to the government's response to bridge the gaps through a data gathering project.[20]

3.18      Treasury highlighted its concern with the bill's proposed method to gather data. It characterised the government's preferred approach to data gathering as follows:

More active screening of rural land proposals would indeed generate a flow of new data to FIRB, but it would take time for this data to be useful. The stream of rural land applications received would be incremental and would relate to new investment intentions. While statistical comparisons could eventually be possible, regulation of the kind proposed would appear to be an awkward way to tackle data gaps.

An alternative approach would be to build greater regulatory insight through improved research, analysis and information about how foreign investment is actually impacting on the agricultural sector; the extent to which foreign investment in rural land is occurring and what national interest issues arise from this investment. A better understanding of what is happening in the sector in relation to foreign investment potentially could better inform the regulatory debate.[21]

3.19      The new ABS survey, the Agricultural Land and Water Ownership Survey (ALWOS) was conducted in March 2011, with results expected to be published on the ABS website in September 2011.[22]

3.20      ABARES, the research arm of the Department of Agriculture, Fisheries and Forestry, is responsible for providing research, analysis and advice for government and private sector decision-makers on significant issues affecting Australia's primary industries.[23] ABARES' work will complement the data gathered by the new ABS survey in its study with RIRDC. The terms of reference for the study will examine:

  • the role and history of foreign investment in the development of agriculture in Australia, including assessing the impact which foreign investment has had;
  • the domestic and international factors driving foreign investment in Australian agriculture;
  • the various ownership structures of agribusiness firms for subsets of the Australian agricultural industry, and changes in those structures over time; and
  • measures used in other countries for monitoring and regulation of foreign investment in agricultural land.[24]

3.21      Mr Paul Morris, Deputy Executive Director of ABARES, expanded on the methodology of the project:

There are four elements to our study. Effectively, there is a review of existing information and information that we can gather on the role and history of foreign investment in Australia. So it is looking at how foreign investment has travelled over at least the last several decades, if not longer. Secondly, we are looking at the factors that drive that, so we will be doing a bit of an analysis on what sorts of factors have been driving that foreign investment. We have been undertaking a review of stated information from those people who have invested in Australia as to the reasons why they have invested. That will help inform that analysis. We are going to do a review of particular areas of agribusiness so, while the ABS is focusing on rural land and water, our focus is up the chain a little bit to the agribusiness side. We will be looking at some case studies of particular areas of agribusiness in Australia. The meat, dairy and sugar industries are perhaps examples of ones that we will focus on, but we are still selecting those case studies at the moment. Then, from an international aspect, we will be looking at what other countries do with respect to foreign ownership of land in their countries.[25]

3.22      As chapter 1 noted, ABARES' work is expected to be completed in October 2011.

Criticism of the bill's national interest test

3.23      Treasury outlined two concerns with the national interest test proposed by the bill. First, a legislated test could be prescriptive and expose the Treasurer to judicial review. Second, the bill's proposal would create two separate national interest tests within the FATA.

The need for a flexible national interest test

3.24      Treasury discussed the difficulties of a legislated national interest test and argued it could create a system that is 'inflexible and prescriptive':

First, it raises concerns around incorporating in the FATA a rigid set of criteria that must be used to assess the national interest. This system can be inflexible and prescriptive. It may give rise to the future need for ongoing revisions or additions to the list of factors that make up the criteria. It has also been suggested that a statutory test could expose the Treasurer to the possibility of judicial review of his decisions as well as provide an additional avenue for opponents of a takeover to challenge it.[26]

3.25      Treasury outlined that the original intent was for the national interest test to be flexible in interpretation and application. In 1975, the Hon. Francis Stewart MP emphasised in the Second Reading Speech of the Foreign Takeovers Bill[27] the importance of not prescribing the national interest test in the legislation:

I come now to the question of criteria for judging whether a foreign takeover proposal would be against the national interest. The criteria have not been incorporated into the Bill; this is because the criteria must be flexible in their interpretation and application and it has been found that it would be impracticable, consistent with the need for such flexibility, to express the criteria with the precision required by legislative form.[28]

3.26      Treasury told the committee that this has been the policy of successive governments for many years and that it was advantageous to have the interest test defined at the discretion of the Minister of the day. It explained:

That is underpinned by the notion that it is very difficult to determine what will happen tomorrow, or what will happen in five years time. Situations do change and the Treasurer, the decision maker, needs to have the flexibility to determine at a particular point in time what might be in the national interest...The point is that it is about flexibility. One could mount an argument that if you codify too specifically a national interest test, it could impede foreign investment in the sense that it may deter some investment if they think they might be in violation of a particular test that might not otherwise occur.[29]

Judicial review

3.27      As well as concerns raised by Treasury, law firm Clayton Utz highlighted the possibility that the proposed national interest test could expose the Treasurer to judicial review.[30]

3.28      New Zealand uses a statutory test for foreign investment proposals. The 'investor test' lists the key criteria for FDI as good character, business acumen, financial commitment and absence of ineligible individuals for exemptions or permits under the Immigration Act. The 'benefit to New Zealand test' states that investments in non-urban land that exceed five hectares must be of substantial and identifiable benefit to New Zealand.[31]

3.29      The New Zealand Treasury told the committee that when an application is rejected, it can be subject to judicial review. Over the past five years there has been a judicial review of three decisions. In each case, the decisions were upheld.[32] The New Zealand Overseas Investment Office sent through summaries of the judicial review cases in an answer to a Question on Notice:

There are three cases that have been the subject of proceedings since 2005 (all related - initially heard in the High Court, appealed to the Court of Appeal, and then appealed to the Supreme Court).  I have also attached summaries of two other proceedings (Talleys Fisheries v Cullen) and (Foodstuffs v Progressive Enterprises), both heard in 2002.  I've included details of the costs proceedings for the latter cases as well as they provide additional insight into the context of the proceedings.

Please note that in all cases third parties (in the 2002 cases, competitors) have brought the proceedings. None of the proceedings relate to a decision that has been declined.[33]

3.30      Treasury elaborated on the potential for the national interest test to expose the Treasurer to judicial review during the committee's hearing:

We could get into some problems with a codified national interest test where the Treasurer may well have been criticised for not having stuck exactly to the letter of that codification. That could be open to either an administrative or decision-based appeal. It would certainly create problems for the way that the process works for decision making.[34]

Two national interest tests

3.31      Treasury argued that the proposed national interest test in the bill would create two tests in the FATA:

...one of the issues with the national interest test in the bill that is also an issue is that there are two national interest tests that apply in this legislation. We have one national interest test that will apply to Australian agricultural land and we have another national interest test that will apply to everything else, and that includes the largest of the business proposals that we see. There can be situations where there might be an overlap for investors such that it is not clear to them exactly which test applies.[35]

...the Bill also imports into the FATA an elevated degree of sensitivity for rural land which would appear to surpass that applying currently to the most significant of business proposals. Within the same piece of legislation, most business proposals and real estate applications would continue to be assessed against the FATA's 'contrary to the national interest' test, without reference to a list of prescribed criteria.[36]

Committee comment

3.32      The proposed national interest test, applying only to agricultural land, will effectively create two separate national interest tests within the FATA. The committee recognises that this could unintentionally create confusion for investors.

3.33      In addition, the committee notes the deliberate intention of the drafters of the FATA (then the Foreign Takeovers Act 1975) was to allow a flexible interpretation and application of the Act, which accommodates for changing circumstances. The committee is concerned that the bill's proposed legislated national interest test will be inflexible and overly prescriptive.

3.34      The committee recommends that the current mechanism, whereby the national interest test is determined on a case-by-case basis at the discretion of the Treasurer, is sufficient and should remain unaltered.

Commercial-in-confidence and publication of investment proposals

3.35      The bill proposes the publication of all applications for foreign investment of agricultural land on the Treasury website. The Explanatory Memorandum states that the proposed mechanism is intended to contribute to the information needed to 'make good policy decisions for the future.'[37]

3.36      The proposed mechanism to require publication of all FIRB applications could also appease community concerns and calls for greater transparency, such as those made by the Western Australian Farmers Federation:

We are being told quite positively that future population will be driving demand to a level we have not seen in the past, and yet, conversely, we are getting told that all that food will need to be produced at less than current prices or people will not be able to afford to buy it. So, yes, absolutely we would agree that there needs to be greater transparency in the application and successful bidding for future ownership of land.[38]

3.37      There has been some concern, however, that publication of proposed investments may affect commercial negotiations. Treasury detailed how the publication of investment applications could jeopardise commercial-in-confidence arrangements and the privacy of personal information:

Changes proposed by the Bill to the way sensitive commercial proposals must be made public, including with updates through the FIRB consideration process, are likely to raise significant privacy concerns for business and may help to undermine foreign investor confidence in the agricultural sector more broadly. FIRB has, for a long time, provided public assurances that commercial-in-confidence and personal information would be protected. There is general recognition that much of the information required to assess a foreign investment proposal would be commercially sensitive or private to the applicant. Internal FIRB procedures are in place to protect private and sensitive information in accordance with the requirements of the relevant legislation. FIRB has defended these procedures in the Administrative Appeals Tribunal.[39]

3.38      Under current policy, applications for approval of foreign investment are submitted confidentially. Whilst the government may share the application with other government departments and agencies for consultation purposes, "commercial-in-confidence" is assured. The policy states:

The Government will not provide your application to third parties outside of the Government unless it has your permission or it is ordered to do so by a court of competent jurisdiction. The Government will defend this policy through the judicial system if needed.[40]

3.39      The policy instructs investors to discuss potential applications with the FIRB prior to lodging, to lodge applications in advance of any transaction or make purchase contracts conditional on FIRB approval. This is to allow for a timely approval process which does not delay the acquisition when it is announced to the market.[41]

3.40      The FIRB Annual Report details the Board's adherence to the Privacy Act in dealing with applications, and offers assurances to investors that FIRB will follow procedures to protect commercially sensitive applications:

The Board recognises that much of the information required to assess a proposal will be commercially sensitive or be private to the applicant. Consequently, appropriate procedures are in place to ensure that confidentiality is protected.

Moreover, the Government is required to respect the privacy and sensitivity of personal and commercial information that is provided by applicants to the Board, in accordance with the requirements of the relevant legislation, including the Privacy Act 1988 (Privacy Act) and the Freedom of Information Act 1982 (FOI Act). However, in accordance with the Privacy Act, to provide whole of government advice to the Treasurer on applications or where the applicant may have breached the FATA or the policy, other government agencies may be consulted and relevant information may be provided to those agencies. Those agencies include the Department of Immigration and Citizenship (DIAC) and the Australian Taxation Office (ATO).

In the event that third parties outside government seek access to confidential information, it would not be made available without the permission of the person(s) who provided it, except upon order by a court of a competent jurisdiction or, in some circumstances, through the operation of the FOI Act.

In 2008-09, the Division received one application under the FOI Act (two in 2007-08) seeking information concerning foreign investment matters. The FOI Act provides criteria to determine whether particular documents or parts of documents are available or exempt from release. These include, for example, that the document contains commercially sensitive information where its release would cause harm to its provider. In line with the provisions of the FOI Act, the Division may consult with the parties to a proposal about documents they provided which are the subject of an FOI request, to seek their views on their possible release to an FOI applicant.[42]

Publication of applications may not address the information gap

3.41      The committee heard evidence that a public register of FDI in the agricultural sector may not necessarily capture accurate statistics. It was noted that any information gathering process would need to be carefully constructed in order to avoid a skewed result.

3.42      The New Zealand Overseas Investment Office informed the committee that every month, decisions—both rejections and acceptances—are published on their website.[43] This data, however, does not allow for the aggregation of statistics:

When we assess an application for consent, all the data that relates to the particular property is gathered by us and we store it. It is very comprehensive. We do have data in relation to particular properties. What we are not able to determine is how much land is held in New Zealand hands and how much is held in foreign hands. There are a number of reasons for that. First, we only started gathering data about overseas investments probably in the early 1990s, so we do not have a base from which to start. Also, overseas ownership can change and it can become very hard for us to track ownership changes for a particular property. For example, an individual, an American investor might come in and pitch a block of land but then gain New Zealand citizenship. That would be very hard for us to track. Whereas we do have data on individual investments, that soon becomes out of date and of course we have no database that tracks foreign ownership of all land in New Zealand.[44]

3.43      The NFF noted the importance of capturing the relevant information when considering the implementation of a register:

Mr McElhone—...we have got to make sure that whatever we do in this space does not lead to more confusing outcomes than where we started. It is all well and good to say, ‘Listen, let’s start an agricultural land register now,’ but, unless we are making that differentiation about the type of land ownership, under what basis it is and the other factors we have talked about today, we can get a bit of a skewed result. We just have to be careful about those things.

Senator COLBECK—There was an interesting revelation this morning from New Zealand that, despite the fact that they have an approvals process, they do not maintain a register because of the movement in the data. So it might be that we come through this process and make a decision to include this information-gathering process at a five-yearly cycle, for example...[45]

Exploring alternative methods of publication

3.44      As part of their research project, ABARES will look at measures used by other countries for monitoring FDI in agricultural land; they intend to examine New Zealand, Canada, the United States, Brazil and Argentina:

The study is going to be looking at several countries and how they monitor or manage or regulate foreign investment in agricultural land. We were, as I said, going to look at New Zealand. You mentioned the US. That was another country we were going to look at. We understand there are some regulations there about reporting of foreign purchasing of land, but we still need to do further digging into that to see exactly what the rules and regulations are. But the US will be one of those markets that we intend to look at.[46]

3.45      Foreign investment in US farmland is regulated under the Agricultural Foreign Investment Disclosure Act (AFIDA), enacted in 1978. AFIDA does not limit or restrict foreign investment in US farmland.[47] The regulations, Disclosure of Foreign Investment in Agricultural Land, provide for a nationwide system for the collection of information pertaining to foreign ownership in US agricultural land.

3.46      The regulations require all foreign persons who acquire, transfer or hold an interest in US agricultural land to report such holdings and transactions to the Secretary of Agriculture within 90 days. In addition, any foreign person who holds land that subsequently becomes or ceases to be agricultural land, or any person who holds agricultural land who subsequently becomes or ceases to be a foreign person, must also report such a change within 90 days. AFIDA specifies in detail the information required to be reported.[48]

3.47      The information provided is used in the preparation of periodic reports to the President and the Congress concerning the effect of holdings upon family farms and rural communities. The latest report is Foreign Holdings of US Agricultural Land through February 28, 2009.[49]

3.48      Other provisions of the legislation include a requirement for:

  • completed report forms submitted under AFIDA to be available for public inspection in Washington DC within ten days of receipt by the Secretary; and
  • every six months, the Secretary of Agriculture to send each State in the US copies of completed report forms relating to foreign held interest in agricultural land in that State.[50]

Committee comment

3.49      The committee acknowledges that FIRB's current administration of foreign investment proposals adheres to the requirements of the Privacy Act and provides assurances to investors that there will be sensitivity in dealing with commercial confidences. The committee is concerned that the publication of all applications, as proposed by the bill, may undermine foreign investor confidence in the agricultural sector. The committee recommends that the joint RIRDC and ABARES study, to be completed in October 2011, be examined before any legislative changes to the publication of investment proposals are made.

Setting the appropriate threshold

3.50      As noted in Chapter 2, a FIRB review is triggered when a foreign investment proposal that exceeds 15 per cent of a firm that is worth $231 million or more is proposed. All foreign governments and their related entities are required to apply to the Treasurer before making a direct investment in Australia, regardless of the value of the acquisition.[51] The committee discussed at length whether the monetary threshold of $231 million was adequate and whether a spatial threshold, as proposed by the bill, would be appropriate.

Monetary threshold

3.51      The committee heard claims that the $231 million threshold needed to be reviewed,[52] that it was 'far too lax',[53] and that the value of most Australian farms would fall well below that figure. The WA Farmers Federation indicated that the average value of WA properties was between $1 million and $10 million.[54] Mr Norton, President of the Federation argued that '[y]ou could sell off the whole of the Western Australian agricultural sector and not trigger the interest of the Foreign Investment Review Board'.[55] The WA Farmers Federation called for a threshold value to be set that captures smaller sized properties, but also high end businesses:

Mr A Hill—I need to say initially we do not have a predetermined figure in mind. Our thinking on that was that the five hectares appeared to be a little arbitrary. The thought was, I guess, that particularly in high-value horticultural type enterprises five hectares may be three or it may be one but it needs to be set at a level which captures some of those small in size but high-value businesses. Certainly in a financial sense it is likely to be significantly less than $231 million, as it is currently. We were raising the issue just to highlight that some thought needs to be given and that in not recognising the value and size of farms, particularly in Western Australia, the five hectares may not transpose from the New Zealand model, which I think it was based on.

...

Senator XENOPHON—...what do you think is a reasonable monetary threshold? You were saying that $231 million is too high a threshold. Is that the case?

Mr Norton—Yes, it certainly is. The average sale of properties in Western Australia can vary anywhere from about $1 million to perhaps $10 million. In the current wheat belt, when those blocks were split up they were on average between 3,000 and 5,000 acres, and then you can put them together in multiples of the 3,000 and 5,000 acres. Obviously there are some properties of around 30,000 to 40,000 acres. If you can pick up blocks like that as a foreign investor you can put them together. A block like that in the outer wheat belt is selling for about $320 a hectare at the moment. You do not amass a lot of value like you do on some of the high-value east coast.[56]

3.52      The NFF confirmed that Australian agricultural property values are likely to fall well below the current threshold of $231 million:

Mr Laurie—I do not think you would be able to go back through the records and find one property that has ticked over $230 million—actually, there have been a couple of agricultural businesses. One a few years ago ticked over well over the $230 million, but that was bought locally, so it did not matter. Obviously the $230 million does not really come into play when it comes to agricultural properties.

...

Mr McElhone—...At the same time, we realise that, regarding changing existing thresholds or policies, you do not want to get a perverse outcome of setting up a new level of bureaucracy that overhangs, adds costs and deters investment. So we have to look at all these things, and that is why we are taking a very cautious approach to this.[57]

Spatial threshold

3.53      The NFF outlined that a spatial threshold may not be appropriate given the vast diversity of Australian agricultural lands:

I think five hectares on the east coast is a lot different to five hectares west of Broken Hill, so you need to understand that areas probably do not matter too much here. It is about the investment going into that enterprise. A five-hectare one on the eastern seaboard, for instance, could have a substantial investment going into it and it could be completely different. Once again, it is a matter of understanding what it all actually means. Once we have that I think it will make it a fair bit clearer about where you want to set your parameters, whether it is a financial investment that you want to have a look at or whether it is a land based thing. I think the sheer diversity of agriculture would make it that the five-hectare or any area limit would probably be questionable.[58]

3.54      Ms McClure, Manager of the New Zealand Overseas Investment Office, outlined the categories that the five hectare threshold tends to capture in New Zealand:

It tends to capture what we would call lifestyle blocks like hobby farms. The other thing is that the definition in our legislation of non-urban land can also capture, for example, mining operations or dairy factories that are on smaller blocks of land but are in an agricultural setting. So our definition of nonurban land over five hectares in fact encompasses more than just farmland. As I said, it can also encompass dairy factories, mining operations and so forth that are carried out in a farmland setting.[59]

3.55      The New Zealand Overseas Investment Act 2005 provides three categories of foreign investment that require approval: investments in substantial business assets; investments in the fishing quota; and investments in sensitive land. Investment in agricultural land greater than five hectares falls within the sensitive land category. In addition, there are various other types of sensitive land, such as coastal land, land with particular significance to the Maori and other categories.[60]

3.56      Ms McClure informed the committee that the office usually receives between 150 and 200 applications per year, and approximately half of those are farmland applications.[61]

Claims that the New Zealand threshold is inappropriate

3.57      Treasury asserted that New Zealand's spatial threshold may not be appropriate in Australia given differences in the composition and use of agricultural land and, in consequence, the high regulatory burden that a low threshold may impose in Australia:

The Bill makes some reliance on the foreign investment model used in New Zealand to regulate rural land. In doing so, the accompanying materials have not established whether the 5 hectare threshold used in New Zealand would be appropriate in the Australian context, whose agricultural sector differs significantly in terms of scale, composition and contribution to economic output to that of New Zealand's. Judging by the scale of agricultural activities in the two countries, it seems that the proposed threshold is too low, thus adding a relatively greater burden of regulation on foreign investment into Australia.[62]

3.58      Mr Mahony asserted that caution should be exercised when comparing Australia to New Zealand due to numerous differences between the two countries:

Any comparison with Australia and New Zealand in regard to the treatment of foreign investment in land should be treated with caution. There are a range of specific cultural, political, social and environment concerns associated with the New Zealand requirement that acquisitions of 5 hectares land by foreign interests is subject to approval. I am currently involved in a research project that investigates these factors along with other aspects of the CER. Suffice it to say that 5 hectares (about 5 full sized rugby fields) is very little land in the Australian context. Even for quite productive land in the areas such as Riverland SA this limit is, in my view, inefficient regulation.[63]

Committee comment

3.59      The committee questions whether the spatial threshold used in New Zealand would be appropriate in Australia, which has a significantly different agricultural sector. The committee notes that New Zealand has a category for 'sensitive land' relating to its unique cultural, political, social and environmental concerns. The committee does not consider the five hectare threshold proposed by the bill as appropriate in the Australian context.

3.60      The committee acknowledges the evidence which suggests that the $231 million threshold for foreign investment in the agricultural sector would rarely trigger a FIRB review. However, the committee asserts that the current data gathering and research project should be completed before any adjustment to the threshold is made. Following the reporting of better data, the FIRB figure should then be reviewed to allow for an appropriate threshold.

Strategic accumulation of agricultural land

3.61      In a competition law context, 'creeping acquisitions' refer to strategic aggregated investments by an investor seeking to acquire a series of companies within the same sector in order to gain a controlling stake in certain sectors of the economy. On its own, each acquisition might appear insignificant, but combined over a period of time, they could create significant changes in a market. Section 50 of the Competition and Consumer Act 2010 (CCA) prohibits mergers and acquisitions that would be likely to have the effect of substantially lessening competition of a market within Australia.[64]

3.62      There is an obvious parallel between 'creeping acquisitions' and a foreign investor making a single purchase of agricultural land that does not trigger a FIRB review, but whose multiple purchases exceed the FIRB threshold.

3.63      However, Treasury highlighted that the definition of 'creeping acquisitions' as a competition policy matter is distinct from some of the foreign ownership accumulation concerns expressed during this inquiry. Treasury provided the following definition of 'creeping acquisitions' in the competition policy context:

...creeping acquisitions are generally defined to be series of small scale acquisitions that individually do not substantially lessen competition in a market in breach of section 50 of the Competition and Consumer Act 2010, but collectively may have that effect over time.[65]

3.64      Mr Mahony from the Australian Catholic University commented on the emerging trend of agglomeration of farms:

In spite of it not always being a happy situation for some, the market will push the agglomeration of farms as we have seen in the US and across Europe. One does not have to say that is a good thing socially or personally and you might seek reasons to inhibit it, but that is what we observe.[66]

3.65      As noted earlier, the WA Farmers Federation told the committee that no Western Australian farm is worth $231 million unless amalgamated with others. The current threshold may therefore not trigger a review of strategic aggregated investments.[67]

3.66      The New Zealand Treasury provided some historical context to New Zealand's overseas investment regime which addressed aggregation of land:

New Zealand has a long history of regulating investment in farmland, which reflects the traditional view in New Zealand that land ownership should not be concentrated in the hands of a few but should be able to be widely dispersed amongst the population. In fact, up until 1995 all purchases of farmland in New Zealand, including by New Zealanders themselves, required regulatory approval in order to avoid undue aggregation of the land. In addition to that, since 1968 there has been a regime for scrutinising investment by foreign investors in farmland in New Zealand. Since 1995 that has all been encompassed as part of our Overseas Investment Act.

Turning to our current regime, the guiding philosophy behind that regime is that foreign investment is welcome in New Zealand but is also a privilege.[68]

3.67      FIRB presented evidence to the Economics References Committee in its inquiry into Foreign investments by state-owned entities to suggest that the FATA may need tightening to address aggregated acquisitions:

The way that the legislation is written says that a 15 per cent interest in either the issued shares or the voting power of the company is the trigger. That is the way that the law is written. That is the way it has been since 1975. Yes, it is possible to construct a proposal that may not trigger that. It is one of the reasons why the government announced that we would be looking at a legislative fix on that.[69]

Past Senate inquiries into creeping acquisitions

3.68      The Senate Economics Legislation Committee has examined the issue of creeping acquisitions in the context of section 50 of the CCA on three occasions over the past three years:

  • in August 2008, the committee inquired into the provisions of Senator Steve Fielding's private member's bill titled the Trade Practices (Creeping Acquisitions) Amendment Bill 2007;[70]
  • in May 2010, the committee reported on the provisions Senator Nick Xenophon's private members' bill, the Trade Practices Amendment (Material Lessening of Competition—Richmond Amendment) Bill 2009;[71] and
  • in June 2010, the committee inquired into the provisions of a government bill titled the Competition and Consumer Legislation Amendment Bill 2010.

3.69      Senator Fielding's bill advocated a timeframe within which the courts and the Australian Competition and Consumer Commission (ACCC) would be directed to determine whether an acquisition had the effect of substantially lessening competition. It proposed that an acquisition could be prohibited if it and any one or more other acquisitions by the company in the previous six years together have the effect, or are likely to have the effect, of substantially lessening competition.

3.70      The committee report on Senator Fielding's bill recommended that the Senate defer its consideration until the Government's legislation on creeping acquisitions is presented.[72]

3.71      Senator Xenophon's bill proposed that a corporation that already has a substantial share of a market would be prohibited from acquiring shares or an asset which would have the effect of lessening competition in a market. The bill also proposed a lower threshold for the section 50(1) prohibition, replacing a 'substantial' lessening of competition with a 'material' lessening of competition.

3.72      The committee report rejected the 'Richmond Amendment', arguing that setting a percentage market share threshold would be both arbitrary and contentious. If the threshold is set too low, it may prevent relatively small firms with a sizeable share of a local market from merging to increase efficiency and competitiveness.[73]

3.73      The government's bill proposed two changes to section 50:

  • first, it proposed amending the reference to 'a market' in section 50(1) to 'any market'. This amendment was intended to clarify the ability of the ACCC or a court to consider multiple markets in assessing mergers. In other words, a business cannot challenge a decision to block a proposed acquisition on the grounds that the substantial lessening of competition would be in a market other than the primary market in which the acquisition would occur. The ACCC will be able to examine the effects of a proposed merger in both upstream and downstream markets; and
  • second, it proposed deleting the word 'substantial' from section 50(6), which clarifies the meaning of 'a market'. The Minister for Competition Policy and Consumer Affairs, the Hon. Dr Craig Emerson MP, explained that this would remove the risk that a court could adopt the view that acquisitions in geographically confined markets may not be considered substantial and therefore not fall within the scope of section 50.[74] It is important to note, however, that this amendment does not oblige the ACCC to examine the competitive impact of an acquisition on small markets. It is simply a clarification that it can, and that it is a relevant factor where there are issues.

3.74      The Economics Legislation Committee concluded in its report on the government's bill that while the proposed amendments to section 50 'may seem fairly minor points of clarification, it is important that the regulator, the courts and the public at large understand that the ACCC can consider a local market in their assessment of section 50'.[75] However, the bill lapsed immediately before the commencement of the 43rd Parliament and has not been reintroduced.

Sovereign Owned Entities and Sovereign Guaranteed Entities

3.75      State-owned entities (SOE) and sovereign wealth funds (SWF) have emerged as significant players in international capital markets. In recent years there has been heightened interest in the activities of SWF and SOEs in Australia due to substantial foreign investment by these entities in the mining sector[76] (see paragraphs 1.19 to 1.21).

3.76      An SOE is a legal entity created by a government to undertake commercial or business activities on behalf of the owner government. SOEs can be fully owned or partially owned by government. A SWF is a state-owned investment fund, or government investment fund. Sovereign guaranteed entities (SGE) hold a government's guarantee that an obligation will be satisfied if the primary guarantor defaults from the terms of an agreement, many Australian banks, for example, are SGEs.

3.77      The committee explored the difficulties in defining whether a SGE could be classed as a SOE and the complexities surrounding the level of influence or control that SGEs have over their own enterprises.[77] In the case of SGEs, it could be argued that the government guarantor could hold de facto control of the investment. It was also suggested that a SGE backed by a SWF may not trigger a review by FIRB as the controlling stake may be somewhat concealed. The current policy requires all foreign governments and their related entities to notify FIRB to get approval prior to making a direct investment in Australia regardless of the price.[78]

3.78      ABARES informed the committee that foreign investment policy provides for the FIRB review process to examine sovereign investment in Australia:

There is already a review process for any sovereign investment in Australia, so that is already covered under the Foreign Investment Review Board procedures. To the extent that if a government in another country wished to purchase agricultural assets in Australia, then that would have to be reviewed from a national interest perspective to make sure that some of the concerns you are raising, which could well be legitimate, are addressed.[79]

Committee comment

3.79      The committee continues to hold the view that the current regulatory framework for assessing foreign investment proposals is adequate. The combined powers of the Foreign Acquisitions and Takeovers Act 1975, the Foreign Acquisitions and Takeovers Regulations 1989, the Competition and Consumer Act 2010 and the system of case-by-case assessment based on the national interest, has served Australia well.[80] In addition, the ACCC can rule against successive acquisitions on the basis that they are anticompetitive.

3.80      The committee notes the government's work to address competition aspects of creeping acquisitions through the now lapsed Competition and Consumer Legislation Amendment Bill 2010. It believes the intent of this legislation—to clarify the intent of section 50 of the CCA—is sound.

3.81      The committee's 2009 report on SOEs recommends that the government tighten the FATA to deal with creeping acquisitions, and 'give adequate consideration to the interaction between the various components of an acquisition'.[81] In light of this, the committee recommends that the strategic accumulation of agricultural land be re-examined following the release of the joint RIRDC and ABARES study to be published in October 2011.

Australia's international obligations

3.82      A number of submitters raised concerns that the bill may be inconsistent with some of Australia's international trade agreements.[82] Mr Mahony was concerned that the bill would not reflect the spirit of certain international trade agreements:

One thing is that, whilst I am not an international trade lawyer, it seems to me that there are questions about whether or not this kind of legislation is at least in the spirit of our international obligations and relationships, particularly our evolving investment protocol with New Zealand. But that is, kind of, a technical matter and the import of that is not just a technical-legal concern of mine, which I am not that concerned about, obviously; it is the effect on innovation in the region and the effect on agriculture and the Australian economy generally—its capacity to innovate.[83]

3.83      The New Zealand Treasury's submission outlined that their main interest in the bill was that amendments to the FATA be consistent with the new Closer Economic Relations (CER) Investment Protocol signed by both countries' Prime Ministers in February 2011. A key feature of the CER investment protocol is to reduce existing barriers to trans-Tasman investment.[84] The New Zealand Treasury stated they did not have any concerns to date.[85]

3.84      The Australian Treasury outlined how the bill may relate to some of Australia's international obligations:

Australia is permitted to maintain its foreign investment screening regime, without being in breach of the national treatment obligations, due to certain reservations in its various free trade agreements (FTAs). However, these reservations do not specifically cover investments in [Australian Agricultural Land] AAL, nor do they permit new measures or amendments to measures that would decrease the conformity of Australia's existing foreign investment screening regime with Australia's national treatment commitments. A change to Australia's foreign investment policy resulting in less favourable treatment for foreign investors in rural land may be inconsistent with Australia's commitments under its FTAs and other instruments. These FTAs include the Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) to which an Investment Protocol has been recently added. The Investment Protocol specifically provides for higher screening thresholds for New Zealand private investors, and complements broader initiatives between Australia and New Zealand towards the creation of a single economic market.[86]

Free Trade Agreements

3.85      In answers to Questions on Notice, Treasury expanded on some requirements under Australia's Free Trade Agreements (FTAs):

Australia has free trade agreements with ASEAN and New Zealand, Singapore, Thailand, the United States and Chile. Australia has made commitments relating to national treatment[87] and its screening thresholds in relation to the business acquisitions in its free trade agreements with Singapore, Thailand, the United States, Chile and, when in force, the recently signed Investment Protocol with New Zealand.

If Australia were to adopt a measure that is inconsistent with commitments provided in its free trade agreements this could lead to recourse via the dispute mechanism under these agreements. Chile, Singapore, Thailand and the United States could enforce such commitments.

While each free trade agreement provides for a slightly different dispute mechanism, the process would generally begin with bilateral consultations.  If the issue is not resolved to the satisfaction of both parties through consultations, this would trigger the next stage in dispute settlement which is generally binding arbitration. If the arbitration panel or tribunal makes findings against Australia that a measure is inconsistent with its commitments, Australia would be obliged under the free trade agreements to address those findings. How these matters are addressed are determined in consultation with the other treaty partner and could include the offer of compensation or an undertaking to remove or change the measure that is inconsistent with our commitments. If Australia fails to appropriately address the findings of the arbitration panel or to otherwise rectify the breach, a treaty partner could retaliate by denying benefits available to Australian businesses under the agreement.

In addition to providing for state-to-state dispute settlement, Australia's free trade agreements with Singapore, Thailand and Chile include investor-state dispute settlement provisions. However, in all of these agreements other than the agreement with Singapore, the investor-state dispute settlement provisions will not cover the application of Australia’s foreign investment screening regime as they are limited to post-establishment[88] matters and/or a requirement that the investor establish that the measure has caused them loss or damage.[89]

OECD obligations

3.86      Treasury expanded on how the changes proposed by the bill could impact on Australia's obligations with the Organisation for Economic Co-operation and Development (OECD):

As a member of the OECD, Australia is bound by the OECD Code of Liberalisation of Capital Movements (the OECD Code).  The Code seeks to promote open markets by providing a balanced framework for gradual liberalisation of investment. The Code includes obligations to provide national treatment to foreign investors from OECD countries (i.e. the same level of treatment as that afforded to domestic investors) and non-discrimination between OECD countries (i.e. the same level of treatment to investors from all OECD member countries).  The imposition of a five hectare screening threshold may be inconsistent with Article 1 of the OECD Code, which obliges OECD countries to progressively liberalise capital movements. It also imposes a new requirement on foreign investors that is not required of domestic investors (i.e. that is national treatment-inconsistent).

Under the Code, OECD countries are required to notify the OECD of any additional restrictions imposed on investment. These are subject to scrutiny by the OECD Investment Committee.  The Code does not have a binding dispute mechanism.[90]

Committee comment

3.87      The committee is concerned that the bill may be in breach of 'national treatment' obligations as part of Australia's Free Trade Agreements, which accords foreigners and residents equal treatment. Further, the committee acknowledges that the proposed screening threshold of five hectares may be inconsistent with Article 1 of the OECD Code to progressively liberalise capital movements.

Australia's food security

3.88      A range of submitters raised concern about Australia's food security in light of global developments.[91] In his second reading speech, Senator Xenophon said:

According to media reports, the buy-up of Australian agricultural assets has become even more aggressive since the global food shortage of 2008. A recent report named China, South Korea, Japan, India, Saudi Arabia and the Gulf States as the buyers who have become most aggressive in their purchases. These are countries that are looking to protect their own food security, and we cannot fault them for that. But we have to acknowledge that our poor foreign investment standards put our own agricultural industry at risk.[92]

3.89      The Senate Select Committee on Agricultural and Related Industries discussed the growing concern over Australia's food security and the decline in agricultural land around the globe. The report discussed the need for Australian governments to consider mechanisms to protect agricultural land from alternative uses in the interests of long term productive capacity and food security. The report explored the need to monitor FDI in agriculture, particularly that of sovereign-owned entities in order that:

...Australia's productive capacity is not undermined by foreign interests producing food on Australian land that is not intended for trade, but for direct supply to countries that have not managed their own food security needs.[93]

3.90      The NFF informed the committee that 2007-08 held "the other GFC" – the Global Food Crisis. Australians remained largely oblivious with the exception of consternations about food prices and the 'shallow public policy response' of Grocery Watch.[94] The response overseas was more incessant. The United Nations warned that rising food prices had security implications, and many governments responded with a range of emergency policy measures, '[f]ood security was etched in the mindset of these countries and has not been as easily forgotten'.[95] The NFF assert:

In this light, a new wave of foreign investment in Australian agriculture is starting to emerge. Rather than being underpinned by genuine commercial forces where profits are the driver, food security has emerged as a new factor for investment. With state owned enterprises entering the market, it is becoming blurred as to whether all of this investment is still interested in the profitability of the venture, or rather in ensuring that a consistent stream of food can be delivered to its people.[96]

3.91      The NFF argued that while the 'relationship between foreign investment and farming has been an overwhelming win-win',[97] there is a need for a policy response to Australia's food security and the shift in investment trends due to food supply:

...Australia needs to establish a clear food policy of our own and what role our own agricultural assets need to play in this. Other nations are well ahead of Australia in this regard and are taking proactive steps to ensure that the needs of their domestic populations are secured in the long term. Australia, as a net food exporter, has rested on its fortunate position for too long. Now is a good time to get on the front foot and get clarity on where we want to head towards as a successful food producing nation and ensure that we don't simply rest on our laurels.

The NFF is not afraid of foreign investment and rather believes it can continue to play an extremely important and positive role within Australian agriculture into the future. The NFF remains committed to open markets and this includes the capital impetus that foreign investment has brought and will continue to bring to Australian farmers. We want to see more, not less, investment in Australian agriculture.

Yet as a nation we should be aware that the motives for some of this investment have shifted as food security concerns have escalated.[98]

Responding to food security concerns

3.92      Mr Mahony argued that increased investment and innovation is required to meet growing food demand and that foreign investment policy and regulation is the government's enabling framework to encourage innovation inherent to FDI:[99]

It is apparent that efficiency and rapid technological change leading to lower cost production, quality improvements and market access are associated with a pattern of production linked to international networks, complex supply and distribution chains; in fact what some call `the global factory’. If rapid growth of food demand is the trend this century, driven by higher income for more of the world’s people it can only be met by increased agricultural productivity. Well recognized and serious challenges related to ecology (e.g. water allocation and soil degradation) and sustainability of farming practices need to be addressed in most parts of the world. However a retreat to a protectionism that limits competition and cuts Australia off from international patterns of production seems ill advised and detrimental to holders of agricultural land and the nation.[100]

3.93      Treasury outlined that the government is considering food security issues and is planning ahead, as evidenced by the three intergenerational reports.[101] ABARES also informed the committee that they are undertaking work specifically to examine Australia's long term food security:

Certainly in our organisation work is going on at the moment looking at the longer term. We are looking at the food security issue from both a national and a global sense, so there is some work going on in that regard. It is looking at things like the impact of climate change and other things that might influence the ability to maintain productivity growth rates in the future.[102]

Current data on Australia's food security

3.94      ABARES recently provided data on Australia's food exports and imports stating that while 'imports are playing a larger role in Australia’s food supply, Australia’s agricultural production is, overall, well in excess of consumption requirements, and a considerable surplus is available for export'.[103] ABARES states that:

  • over the past decade wheat production has averaged around 3.5 times the volume needed for domestic consumption and beef and veal production has been around 2.8 times the quantity consumed;
  • total food exports averaged over the three years 2006–07 to 2008–09 amounted to 54 per cent of food production; and
  • expenditure on imports in 2009–10 amounted to more than 40 per cent of the receipts for food exports. However, the majority of Australia’s imported food is highly valued, with a high level of processing, and the quantity of food supplied is far less than suggested by its cost.[104]

3.95      In discussing Australia's food security ABARES argues:

While food imports by Australia have been increasing in the past decade, Australia remains in a strong surplus position. Australia’s integration in the global food economy with an increasingly sophisticated pattern of exports, imports, processing and distribution provides the Australian consumer with choice among a greater diversity of products, with more price competition. Economic prosperity, derived in part from participation in the global economy, guarantees Australia’s food security.[105]

Committee comment

3.96      The committee notes the strength of Australia's agricultural sector. In 2009, Australia had a food trade surplus of $14 billion and exported 60 per cent of agricultural production. Further, 98 per cent of Australia's fresh produce is grown and supplied by Australian farmers.[106] Despite this strength, the committee acknowledges that there is genuine concern in the Australian community about Australia's food security and whether future projections have been made regarding Australia's food supply. In this context, the committee is interested in the outcome of the joint RIRDC and ABARES study to be published in October 2011.

Concluding comments

3.97      The committee reiterates that FDI is critical to the development of Australia's industries and has significant benefits for the Australian community at large. Further, the committee believes that the current FIRB arrangements are adequate to protect the national interest and ensure Australia's food security. Australia remains a significant net exporter of food and is clearly self-sufficient in agricultural production. The FIRB process has worked well on a case by case basis and should not be subject to a prescriptive national interest test. The committee believes that the bill's national interest test and spatial threshold would be inconsistent with the existing FIRB framework and, potentially, Australia's FTAs and OECD obligations.

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