Referral and conduct of the inquiry
1.1
On 4 December 2019, the Senate referred an inquiry into foreign investment proposals to the Senate Economics References Committee (the committee) for inquiry and report by 7 September 2020.
1.2
Pursuant to the temporary order agreed to on 23 March 2020, the committee agreed that the time for presentation of the report of the inquiry into foreign investment proposals be extended from 7 September 2020 to 16 December 2020.
1.3
On Thursday, 12 November 2020, pursuant to the temporary order agreed on 23 March 2020, the committee agreed that the time for presentation of the report of the inquiry into foreign investment proposals be extended from
16 December 2020 to 30 June 2021.
1.4
On Thursday, 12 November 2020, pursuant to the temporary order agreed on 23 March 2020, the committee agreed that the time for presentation of the report of the inquiry into foreign investment proposals be extended from
16 December 2020 to 30 June 2021. On Thursday 24 June 2021, the Senate granted a further extension to report by 5 August 2021. On Friday, 30 July 2021, the Senate granted a further extension to report by 20 August 2021. On Friday, 20 August 2021, the Senate granted a further extension to report by
27 August 2021.
Inquiry terms of reference
1.5
Under its terms of reference, the committee was tasked to inquire into the review of foreign investment proposals against the national interest test, with particular reference to:
(a)
the protection of Australia’s market-based system from manipulation that would benefit proposed foreign investment;
(b)
the assessment of the impact of proposed foreign investment on market concentration and competition;
(c)
the imposition of conditions on foreign investors;
(d)
the extent to which the risk that foreign investment proposals are being used for money laundering is examined;
(e)
the role of the Foreign Investment Review Board; and
(f)
any other related matters.
Conduct of the inquiry
1.6
The committee advertised the inquiry on its website and wrote to stakeholders and interested parties inviting submissions.
1.7
The committee received 20 submissions. A list of submissions is at Appendix 1.
1.8
Public hearings were held on:
15 May 2020—Canberra and by videoconference; and
7 August 2020—Canberra and by videoconference.
1.9
The names of witnesses who appeared at the hearings are listed at Appendix 2.
1.10
The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions and participated in the public hearings.
Scope of the inquiry
1.11
The evidence received by the committee allowed it to investigate the following issues:
assessment of foreign investment proposals against the national interest;
the imposition of conditions on foreign investors;
regulatory compliance and enforcement; and
the secrecy surrounding the foreign investment regime.
1.12
It is around these four issues that the report is structured, interspersed with case studies that were examined during the course of the inquiry. These four issues, either directly or indirectly, related to several of the terms of reference including the protection of Australia’s market-based system from manipulation; the imposition of conditions on foreign investors; the role of the Foreign Investment Review Board (FIRB/ the Board); and related matters.
Australia’s approach to foreign investment
1.13
Successive Australian governments have maintained an open approach to foreign investment—presuming it is beneficial. On the basis of this presumption, a significant amount of foreign investment is not assessed and can proceed without oversight because it does not trigger the criteria for assessment.
1.14
Investment in any economy is designed to stimulate economic activity and create a return for the investor. Generally, there are two main categories of investment. Portfolio investment is where an investor has bought stocks, bonds, shares or some other financial asset via a third party expecting a return over time. This form of investment is referred to as passive investment. The investment decision making is undertaken by the third party such as a managed investment fund, which makes a range of investments internationally.
1.15
Direct investment at the national level is referred to as Foreign Direct Investment (FDI). This form of investment, at a country level, is where an individual or a firm in one country invests by opening a new business in another country, or acquires an interest in an existing asset or business in another country. The latter form of direct investment involves acquiring a level of control or interest in the asset, more generally a controlling interest, even if it is a minority interest. Nevertheless, the interest gives the buyer effective control of the asset.
1.16
Although there is some variation year to year, the most significant sources of foreign investment are (in current order): the United States of America, the European Union (excluding the United Kingdom), the United Kingdom, Japan, ASEAN countries, Hong Kong (Special Administrative Regions (SARs) of China), and China (excluding SARs and Taiwan). Australia’s net international investment position liability is $947.2 billion:
$3,990.9 billion foreign investment in Australia; and
$3,043.7 billion Australian investment abroad.
1.17
Portfolio investment is the largest proportion of foreign investment—having double the share of FDI.
Table 1.1: Level of foreign investment by type—December 2020
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Direct investment
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1,026.6
|
26%
|
|
Portfolio investment
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2,072.0
|
52%
|
|
equity
|
675.8
|
16%
|
|
debt
|
1,369.2
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34%
|
|
Financial derivatives
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396.4
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10%
|
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Other investment
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523.0
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13%
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Total
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3,991.0
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Source: Australian Bureau of Statistics
1.18
Investment from countries tends to concentrate in particular sectors. For instance, investments subject to approval are focussed in:
United States—services and real estate;
UK—services, real estate, and manufacturing, electricity and gas;
Japan—finance and insurance, real estate, and mineral exploration and development;
China (excluding SARs and Taiwan)—real estate, services, and mineral exploration and development (Hong Kong—real estate);
Singapore—real estate, manufacturing, electricity and gas, and services;
Canada—real estate and services.
1.19
Foreign investment is regulated by the Foreign Acquisitions and Takeovers Act 1975 (the Act). Whether a foreign investor is required to notify the Treasurer about a proposed investment depends on a range of factors, including: whether the investor is a foreign government or non-government investor; the type of acquisition; whether the investment is likely to raise national security concerns; the monetary thresholds relevant to the investment, and any free trade agreement commitments.
Temporary zero-dollar threshold
1.20
As will be discussed below, the value of the investment is a key trigger for the requirement that a proposal is assessed and approved by the Treasurer. In some cases, the value threshold can be more than one billion dollars. During the course of the inquiry, a temporary zero-dollar threshold was introduced on 29 March 2020.
1.21
The zero-dollar threshold meant all proposed foreign investments in Australia, subject to the Act, required approval, regardless of the value or the nature of the foreign investor. The Treasurer stated the temporary change was a response to the global COVID-19 pandemic, which was putting pressure on the economy and businesses.
1.22
The Foreign Investment Review Board later added there were concerns about the pressures facing Australian businesses and the potential for them to be sold to foreign interests without any government oversight. This could present a risk to the national interest. The thresholds were restored in January 2021 when reforms to the Act came into effect (see below).
1.23
Between 29 March 2020 and 30 June 2020 (the most recent statistics available), the Treasury approved 137 applications (totalling $2.7 billion) that related to the zero-dollar threshold. These are applications that would not otherwise have been examined. Of the 137 approved, 116 were approved without conditions, and 21 with conditions. The Treasury states no applications were declined, though 9 were withdrawn and 4 considered exempt.
Foreign Acquisitions and Takeovers Act 1975
Reforms to the Act
1.24
During the course of the inquiry, the Act was substantially amended by the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020, which made a number of significant changes to Australia’s foreign investment regime, including:
introducing a reviewable national security action and a national security test;
providing the Treasurer with call-in powers, and a last resort power to issue a divestment order;
strengthening enforcement powers by increasing penalties, and providing for directions powers, and new monitoring and investigative powers;
closing potential gaps in the foreign investment screening regime;
expanding information sharing arrangements; and
establishing a new register for some foreign owned assets.
1.25
Prior to the reforms, monetary thresholds were the primary mechanism for determining whether a proposed investment would be subject to an assessment and approval process. Monetary thresholds are still in place and are discussed below.
1.26
Under previous arrangements, investments that fell under monetary thresholds were not assessed. For investments that were assessed and approved, the Treasurer had only a limited ability to rescind or alter an approval once it had been given, even if circumstances changed. Furthermore, assessment was largely limited to one point in time—the point at which the application was made.
1.27
The amendments to the Act had the effect of bringing the majority of foreign investments, including investments that were not assessed because they fell below relevant thresholds, under the purview of the Act. This does not mean all investments are now assessed under the Act, rather, investments can be assessed under the Act against the national interest test and/or the national security test.
Requirement for foreign investment approval
1.28
The requirements for assessment and approval vary depending on the type of investor and the investment. To avoid uncertainty, investors may choose to submit an application for approval, despite it not triggering requirements for approval. The following summarises some of the key requirements.
Table 1.2: Requirements for foreign investment approval
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Non-government foreign investors
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Business acquisitions
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Approval required before acquiring a substantial interest (generally at least 20 per cent) in an Australian entity valued above the relevant monetary threshold.
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National Security business
|
Approval required before acquiring a direct interest (generally at least 10 per cent) in a national security business (discussed below), or starting a national security business, regardless of the value of the business or the country of the investor.
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Agribusiness
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Approval required before acquiring a direct interest (generally at least 10 per cent) in an agribusiness where the value of their holdings in that business are more than the relevant monetary threshold.
|
|
Media businesses
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Approval required before acquiring an interest of at least 5 per cent in an Australian media business, regardless of the value of the investment.
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Agricultural land
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Approval required prior to acquiring an interest in agricultural land where the value of the holdings are more than the relevant monetary threshold.
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Commercial land
|
Approval required before acquiring an interest in vacant commercial land, regardless of the value of the land. If an application for investment into vacant land is approved, it will generally be approved subject to development conditions. Approval required before acquiring an interest in developed commercial land, if the value of interest exceeds the relevant monetary threshold.
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Mining tenements
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Approval required before acquiring an interest in a mining or production tenement, regardless of value.
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|
Residential land
|
Approval required before acquiring an interest in residential land, regardless of value. Foreign investors can generally purchase vacant land for residential development or newly constructed dwellings with few restrictions; approvals for established dwellings are limited.
|
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Land entities
|
Approval required before acquiring an interest (generally at least 5 per cent for unlisted land entities and 10 per cent for listed land entities) in land corporations or land trusts that have a majority of their assets in Australian land and where the value of the investment is above the relevant monetary threshold.
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National security land
|
Approval required before acquiring an interest in national security land, regardless of the value of the investment or the country of the investor.
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Foreign government investors
|
|
In addition to the requirements above, foreign government investors must obtain approval prior to:
acquiring a direct interest (generally at least 10 per cent) in an Australian entity or Australian business, regardless of the value;
starting a new business;
acquiring an interest in Australian land, regardless of the value of the investment;
acquiring a legal or equitable interest in a tenement, or an interest of at least 10 per cent in the securities of a mining, production or exploration entity, regardless of the value
|
Source: The Treasury
Monetary thresholds
1.29
As noted above, under the Act, monetary thresholds are the primary (but not only) mechanism for determining whether a proposed investment must be notified and undergo an assessment and approval process.
1.30
For foreign government investors there is a zero dollar threshold. For private investors the threshold is ordinarily $281 million or $1.2 billion for investors from countries with which Australia has a free trade agreement. Specific thresholds apply to national security businesses ($0), sensitive businesses, land and agribusiness.
Screening tests
1.31
There are two screening tests for investments: a national interest test and a national security test. The majority of investments that require assessment are examined under the national interest test. The government avoids overlap between the tests by applying only the national interest test when that particular test applies to an action; national security is already a consideration under the national interest test.
National interest test
1.32
If an investment proposal is subject to review (that is, it meets the various thresholds and requirements), the Treasurer examines the proposal against the national interest. The national interest ‘test’ is framed negatively, meaning there is a presumption foreign investment proposals should proceed, unless found contrary to the national interest. The Treasury states:
…the framework operates not by approving proposed foreign investments based on their expected benefits, and instead by prohibiting investments if they are considered to be contrary to Australia’s national interest.
1.33
As a negative test it is not necessary to prove an investment is in the national interest only that it is not against the national interest. According to the Treasury, factors considered as part of the national interest ‘are not limiting factors’.
1.34
While central to Australia’s foreign policy framework, there is no definition of the ‘national interest’ in the Act. Rather, the Treasurer is empowered to decide in each case what constitutes the national interest and whether an investment would be contrary to the national interest. Guidance provided by the Treasury states the national interest consists of a range of factors; the weight given to each varies depending on the nature of the enterprise and investor.
national security—the extent to which an investment could affect Australia’s ability to protect its strategic and security assets;
competition—whether an investment could result in an investor gaining control over market pricing and production of a good or service in Australia, or whether an investment could affect the make-up of a global industry and/or distort competitive market outcomes;
other Australian government policies—the impact on, amongst other things, taxation revenues or the environment;
economy and community—whether a restructure is proposed, how the investment will be funded, the level of Australian participation after acquisition, and how the investor will develop the project to ensure a fair return for the Australian people; and
character of the investor—the extent to which the investor operates on a transparent commercial basis and is subject to adequate regulation and supervision, its corporate governance practices, and whether it complies with the spirit and letter of Australian laws and acts in good faith in complying with conditions.
1.36
Aside from these factors, there are additional considerations for investments in the agricultural sector, investments in residential land, and investments by foreign government investors.
National security test
1.37
A range of investment proposals are examined under the national security test, including proposed investments in national security land, interests in exploration tenements over national security land, a proposed direct investment in a national security business or starting a new national security business
1.38
It is in relation to potential national security risks that the Treasurer can exercise the ‘call in’ and ‘last resort’ powers (discussed below).
1.39
As with the national interest, the Act does not define ‘national security’, nor what is contrary to it. The Treasurer is instead empowered to decide in each case whether an investment would be contrary to national security. Treasury guidance indicates the government would consider the extent to which the investment would affect Australia’s ability to protect its strategic and security interests.
Actions
1.40
The Act defines four types of actions (or foreign investments): significant actions, notifiable actions, notifiable national security actions, and reviewable national security actions. There is overlap between these categories. The Treasurer has a range of powers to assess foreign investment proposals, including to approve an investment with or without conditions (called a no objection notification, with or without conditions), and to prohibit an investment.
Significant actions and notifiable actions
1.41
Most significant actions are subject to voluntary notifications—that is, an investor can voluntarily advise the government. Notifiable actions are subject to mandatory notifications—that is, the Treasurer must be notified and approve the action before it can be taken.
1.42
The Act contains a number of conditions to determine whether a proposed foreign investment is a significant action or notifiable action, including a threshold test and change in control test. The Act’s regulations also specify certain significant actions are also notifiable actions. If a foreign person voluntarily chooses to notify the Treasurer of a proposed significant action, it becomes a notifiable action.
1.43
Regardless of whether a significant action is notified, the Act gives the Treasurer powers to:
prohibit a proposed significant action;
require a significant action to be undone; and
if a significant action has been taken about which the Treasurer was not notified, and the Treasurer subsequently determines the action is contrary to the national interest, the Treasurer may make a disposal order to unwind the action, or impose legally enforceable conditions.
1.44
The Treasurer has the power to:
for an action that is notified, provide a no objection notification not imposing conditions;
for any action (significant or notifiable), provide a no objection notification imposing conditions; or
decide the action would be contrary to the national interest and make an order prohibiting the proposed action.
1.45
In a limited number of circumstances, the Treasurer can order the disposal of an asset whose acquisition the Treasurer has previously approved. These circumstances broadly include the person not complying with conditions attached to the no objection notification and subsequently being convicted of an offense or being the subject of a civil penalty order; and having an order under section 19B of the Crimes Act 1914 made against the person.
1.46
Although the Treasurer has the power to vary or revoke conditions made in a no objection notification imposing conditions, this may only be done if the person consents to the new condition or variation, or if the new condition or variation does not disadvantage the person.
Notifiable national security action
1.47
A notifiable national security action operates according to the type of investment, not the value of the investment. A person must notify the Treasurer before taking a notifiable national security action, and must not take the action unless given a no objection notification (with or without conditions). The Treasurer has the power to prohibit a notifiable national security action.
1.48
A notifiable national security action encompasses an action to:
start a national security business;
acquire a direct interest in a national security business;
acquire a direct interest in an entity that carries on a national security business;
acquire an interest in Australian land that, at the time of acquisition, is national security land; and
acquire a legal or equitable interest in an exploration tenement in respect of Australian land that, at the time of acquisition, is national security land.
1.49
A national security business includes, but is not limited to:
the responsible entity or direct interest holder of critical infrastructure assets, or carriage service providers;
a business that develops, manufactures or supplies critical goods, technologies or services that will be used by defence and intelligence personnel, including from another countries, in activities that may affect Australia’s national security; or
a business that owns, stores, collects or maintains classified data, or personal data relating to Australia’s defence and intelligence personnel.
1.50
A notifiable national security action can also be a significant action or a notifiable action. For notifiable national security actions that are not also significant actions, the Treasurer can assess the action according to whether it would be contrary to national security. If a notifiable national security action is also a significant action, it is reviewed on national interest grounds.
Reviewable national security actions
1.51
Reviewable national security actions are actions in any sector or of any value that may raise national security concerns and are reviewable against Australia’s national security. These actions can be ‘called in’ by the Treasurer (see below).
1.52
There are nine scenarios where a reviewable national security action may arise. Generally, these actions include:
acquiring a direct interest in an entity or business (of any percentage), land, or shares;
entering into an agreement relating to the affairs of an entity;
altering a constituent document of an entity;
acquiring an interest in assets of an Australian business;
entering or terminating a significant agreement with an Australian business; and
proposing to start an Australian business.
1.53
As a consequence of the action:
the foreign person may be in a position, or more of a position, to influence or participate in central management and control;
the foreign person may be in a position, or more of a position, to influence or participate in, or determine policy;
one or more senior officers of the entity will be under an obligation to act in accordance with the directions, instructions or wishes of a foreign person who holds a direct interest.
Treasurer’s national security powers
Call-in power
1.54
The Treasurer’s call-in power (national security review of actions) relates to actions the Treasurer has not previously considered and approved. Using the call in power, the Treasurer may examine reviewable national security actions and significant actions that are not notifiable actions or notifiable national security actions. Significant actions that have been notified to the Treasurer, notifiable actions, and notifiable national security actions cannot be called in by the Treasurer for review.
1.55
The Treasurer may start a review of an action within ten years from when the action is taken. The Treasurer may not use this call-in power if:
the action has been notified to the Treasurer;
the Treasurer gave a no objection notification in relation to the action (with or without conditions); or
the action is specified in an exemption certificate.
1.56
Because the Treasurer cannot call in an action that has been notified to the Treasurer or for which a no objection notification or exemption certificate exists, foreign investors can voluntarily notify an action to extinguish any uncertainty that is caused by the possibility the action may be called in at a later date. This does not, however, extinguish the ability of the Treasurer to examine the investment under the last resort power (discussed below).
1.57
Under the call-in power, the Treasurer can issue a no objection notification (with or without conditions). The Treasurer has the power to prohibit an action or order an action be undone. The Treasurer can also vary or revoke an order if satisfied it is not contrary to national security.
Last resort power
1.58
In some instances, the Treasurer has the power to review an action for which a no objection notification, an exemption certificate, deemed approval, or notice imposing conditions has been given. The use of this ‘last resort power’ is contingent on:
the Treasurer being notified of the action after 1 January 2021, an application for an exemption certificate was made or the action was reviewed under the call-in power;
since that time, the business, structure or organisation has materially changed, the investor’s activities have materially changed, the circumstances or market have materially change, or the Treasurer becomes aware of a relevant and material false or misleading statement or omission by the investor when notifying the action;
the Treasurer conducts a review, receives and considers advice in relation to the action from an agency in the national intelligence community, takes reasonable steps to negotiate in good faith with the foreign person, is satisfied that exercising the powers is reasonably necessary for purposes relating to eliminating or reducing the national security risk, and the use of other options under existing regulatory systems would not adequately reduce the national security risk;
the Treasurer is reasonably satisfied:
the false or misleading statement or omission directly relates to the national security risk;
the national security risk could not have been reasonably foreseen or could have been foreseen but was only a remote possibility at the time of the original approval;
the relevant material change alters the nature of the national security risk posed at the time of the original approval.
1.59
If the required conditions are satisfied, the Treasurer may:
vary or revoke any conditions that have been imposed;
make orders prohibiting an action;
require the undoing of a part or the whole of an action (including divestment).
Foreign investment regime in comparison
1.60
Few foreign investments proposals are blocked outright—though the Productivity Commission suggests the low rejection rate could be partly explained by the screening regime that discourages some investors from applying at the outset.
1.61
The following table outlines foreign direct investment applications considered by the Treasurer between 2015–2016 and 2019–2020. It shows over time, the number of foreign investment applications (aside from real estate, explained in footnote 48) has remained relatively constant.
Table 1.3: Foreign investment applications considered
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Approved (nc)#
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26,954
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8,607
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6,301
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4,575
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4,508
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Approved (wc)#
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14,491
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5,750
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4,844
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4,149
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3,713
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Residential real estate
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(40,149)
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(13,198)
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(10, 036)
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(7,513)
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(7,056)
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Commercial real estate
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(606)
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(465)
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(391)
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(487)
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(440)
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Total approved
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41,445
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14,357
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11,145
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8,724
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8,211
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|
minus real estate
|
700
|
694
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718
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724
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715
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Rejected
|
5
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3
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2
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1
|
3
|
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Declined
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-
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-
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3
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-
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-
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Total decided
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41,450
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14,360
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11,150
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8,725
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8,224
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Withdrawn
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1,319
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770
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644
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670
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715
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Exempt
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244
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60
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61
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71
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65
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Total considered
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43,013
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15,190
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11,855
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9,466
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9,004
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Source: Foreign Investment Review Board
1.62
Australia’s foreign investment regime is considered to be above-average on the Organisation for Economic Cooperation and Development index of FDI restrictiveness, though lower than Canada and New Zealand.
1.63
However, Australia’s regime is not considered overly restrictive in absolute terms. The cost of added restrictions is material, though according to the Productivity Commission, not large in the context of the economy. It estimates increasing Australia’s restrictions on foreign investment to a level similar to that in New Zealand would reduce gross national income by between $0.8 and $7.1 billion per year, or between $82 and $731 per household per year.
The Treasurer and foreign investment agencies
The Treasurer
1.64
Under the Act, the Treasurer is the decision-maker with regard to foreign investment, though in practice, there is delegation to the Treasury and the Australian Taxation Office (ATO).
Foreign Investment Review Board
1.65
The Foreign Investment Review Board is a non-statutory body established in 1976 to advise the Treasurer on foreign investment matters. It provides advice only and cannot make binding decisions on foreign investment.
1.66
The Board examines against the national interest some proposed investments subject to the Act and supporting legislation and makes recommendations to the Treasurer and other Treasury portfolio ministers. It is supported by a secretariat in the Treasury.
1.67
It also provides advice on the operation of the foreign investment framework; conducts awareness raising activities in Australia and abroad of Australia’s investment policy; provides guidance to entities on the operation of the framework; and monitors compliance with the framework.
1.68
The Board considers only the applications provided to the Treasurer for decision (that is, not decisions delegated to the Treasury or ATO—see below). Ordinarily, it meets face-to-face monthly, weekly by telephone, and out-of-session by email. It currently consists of seven part-time members and a full-time executive member (the Head of Treasury’s Foreign Investment Division).
FIRB agencies
1.69
The Treasury and the ATO are often referred to as FIRB agencies, though they do not report to, or come under the control of, the FIRB. The Foreign Investment Division of the Treasury:
advises the government on all aspect of foreign investment policy; and
is responsible for the day-to-day administration of the foreign investment framework in relation to business, agriculture and sensitive or complex commercial real estate cases.
1.70
The Public Groups and International area in the Australian Tax Office:
administers all aspects of foreign investment in residential real estate (transferred from Treasury in December 2015), non-sensitive commercial real estate and corporate reorganisations (transferred from Treasury in April 2017);
collects foreign investment application and vacancy fees; and
develops and administers the registers of foreign ownership of agricultural land, water entitlements and residential land.
Decision-making powers of FIRB agencies
1.71
Under the Act, the Treasurer has delegated to senior officers in FIRB agencies, decision-making powers on applications that are consistent with the foreign investment framework. Certain applications are also decided by other Treasury portfolio ministers.
1.72
In practice, officers of the Treasury make decisions on some non-sensitive low-value applications for land; senior officers of the ATO generally make decisions relating to investments in residential real estate. The Treasurer remains the actual decision maker for the most sensitive cases.
Previous inquiry reports
1.73
In April 2016, the committee tabled a report into the foreign investment review framework. Key issues of interest during the inquiry were the Port of Darwin and Transgrid leases in the context of foreign ownership of critical infrastructure. The inquiry also examined foreign ownership of agricultural land and agribusiness, including the blocked sale of S. Kidman and Co. Ltd.
1.74
The inquiry made three substantive recommendations concerning:
providing more detailed information on the foreign investment review process, including the steps of the process;
publishing the rationale behind positive and negative decisions on foreign investment proposals; and
establishing a publicly-available agricultural land register.
1.75
The Government responded to the recommendations in February 2017, undertaking to:
review the Foreign Investment Review Board website and publish additional information about the assessment and screening process for foreign investment proposals;
maintain the principle of confidentiality in the foreign investment framework and to continue the practice of selectively issuing a press release when making a decision on a significant foreign investment proposal; and
in the case of the register of foreign ownership of agricultural land, to continue the practice of strictly limiting the disclosure of any information that might identify any investor.
Structure of the report
1.76
Chapter two examines the constitution of the national interest, against which foreign investment proposals are examined. A foundational principle of Australia’s foreign investment regime is the presumption of benefit, which underpins the negatively framed national interest test—applications proceed unless found contrary to the national interest. This results in a predisposition to approving foreign investment.
1.77
The chapter discusses the benefits and disadvantages which potentially flow from foreign investment and whether the national interest test is sufficiently ambitious to ensure Australia benefits to the maximum extent from foreign investments. In this context, the positive approach taken by the New Zealand Government is examined. The chapter closes by examining the influence of ‘voluntary undertakings’ in assessments of the national interest and discusses the importance of investors being held to account for the undertakings they make in foreign investment proposals.
1.78
Chapter three looks at the assessment of foreign investment applications by the Treasury and the application of conditions to foreign investment approvals. In so doing, it examines Treasury’s role as regulator, in particular whether it has the capacity to accurately assess foreign investment applications in the national interest. The chapter discusses two case studies: one related to identifying the source of funds (Musselroe Bay), and the second on the application of conditions on foreign investments (Alinta). Views on the nature of conditions imposed by the Treasury are also explored.
1.79
Chapter four examines Treasury monitoring, compliance and enforcement. It begins with a discussion on the responsibilities of regulators before examining the Treasury’s regulatory load and the substance of its compliance and enforcement activity. It continues the Alinta case study, examining the long time frame allowed for compliance with conditions imposed to ensure the investment was not contrary to the national interest. Whether Treasury’s information management system is fit for purpose is discussed, followed by the newly legislated regulatory and enforcement powers. The chapter closes by discussing views on whether the Treasury is the most appropriate regulator.
1.80
Chapter five deals with the issue of transparency, discussing the protected information provisions in the Act, prior to examining how they are interpreted by the Treasury. Several cases are then highlighted where conditions have been made public. The secrecy surrounding the foreign investment regime is compared to other Australian regulators, and also to international foreign investment authorities.
1.81
The final chapter discusses the committee’s views and makes three recommendations to improve Australia’s foreign investment regime, acknowledging the public must have confidence that foreign investments are approved in the national interest.