Chapter 3
Foreign investment—information gaps
3.1
Over recent years there has been increasing level of community and
industry concern regarding the level of foreign ownership of agricultural
businesses and the acquisition of agricultural land by foreign companies. The
committee heard evidence that these concerns have been exacerbated because the current
levels of foreign ownership are poorly documented, and the impact of foreign investment
is poorly understood. This chapter begins by outlining some of the evidence
received on the lack of accurate data about foreign investment in Australia.
3.2
In acknowledging the information gaps on foreign investment in
agriculture, there have been several steps taken by the government over the
last two years to address this issue. Therefore, the chapter examines the three
key government initiatives to address the paucity of information: the Australian
Bureau of Statistics (ABS) agriculture survey, the Australian Bureau of
Agricultural and Resource Economics and Sciences (ABARES) report, and the
national register on foreign investment in agricultural land.[1]
3.3
Specifically, the chapter notes the evidence received showing the
significant limitations of the ABS agriculture survey and the ABARES report
which were intended to improve the level of knowledge about foreign investment
in agriculture. Finally, the chapter outlines the information available to date
about the agricultural land register and puts forward the committee's
recommendations about what should be included as the register is developed.
Concerns about lack of information
3.4
The committee heard evidence from many submitters and witnesses that
while they were supportive of foreign investment in Australian agriculture that
could provide significant ongoing benefits to the industry, they were also
strongly concerned about the dearth of information about levels and trends of
foreign investment in Australia. For example, the lack of information on the
level of foreign acquisitions in Australian agriculture was raised by one
submitter as a constraint in responding to this inquiry. The Western Australian
Farmers Federation (WAFF) noted specifically that it had not attempted to
address all the inquiry's terms of reference:
...as we believe that there is a lack of detailed and reliable
information on the level of foreign investment in not only Western Australian,
but in Australian, agricultural businesses, and further, the Foreign Investment
Review Board's assessment criteria has precluded its investigation of much of
the investment that has already occurred. As such, the relative effectiveness
of the national interest test in respect of agriculture investment is difficult
to comment on.[2]
3.5
The South Australian Farmers Federation (SAFF) indicated its belief that
the majority of agricultural land in South Australia is still locally owned.
However, it acknowledged that, at present, there is no data available on the
level and nature of foreign investment in South Australia's agriculture
industry.[3]
3.6
SAFF argued that whilst investment (domestic or foreign) is vital for
the growth and success of industry, foreign investment needs to be scrutinised
'in order to ensure maintenance of the national interest test'.[4] SAFF also argued that the government
should increase its scrutiny of proposed foreign purchases of Australian
agricultural land, and recommended that:
- there is a need to assemble much needed data on foreign
acquisitions (and current governance of them local and globally) and assess any
potential changes;
-
all foreign purchases should be detailed in a register (enabling
Australians to see who owns and is buying prime agricultural land); and
- there be a requirement for information about foreign acquisitions
of agricultural to be published online.[5]
3.7
The NSW Farmers' Association (NSW Farmers) also indicated support for
foreign investment generally, and noted that it would encourage productive
investment within agriculture that will 'benefit the national economy and is in
the best long term interest of the nation'.[6]
In addition, NSW Farmers stressed the importance of being able to monitor
foreign investment and argued strongly in favour of a foreign investment
register:
NSW Farmers welcomes the Government's decision to collect
data on foreign investment in agriculture, which has been partially released.
This information will give a greater understanding as to the scope of
investment across the country. However, a one-off survey is not adequate in
this situation. NSW Farmers believes that a register is required that records
all foreign investment in Australia's agricultural assets in order to guide
future policy decisions. Information is an imperative when composing an informed
policy response to a perceived change in circumstances. This register would be
particularly useful in clearly demonstrating when or if creeping acquisitions
are occurring. NSW Farmers believes that the establishment of a national
register is far more important initially than the alteration of the national
interest test.[7]
3.8
The information gap was also acknowledged by the commonwealth government.
Indeed, in a paper supplied to the committee as part of its submission, the
Department of Agriculture, Fisheries and Forestry (DAFF) noted that it was
constrained in its ability to respond appropriately to community and industry
concerns about foreign investment because of the 'limited available data on
the current level of foreign ownership'.[8]
3.9
The paper also noted that in November 2010, the government attempted to
address the lack of information and 'strengthen the transparency of foreign
ownership of rural land and agricultural food production'.[9]
The result was that the government requested the ABS to collect more
information about rural land and water ownership.[10]
ABS agriculture survey
3.10
In November 2010 the government announced that the ABS would undertake a
survey to review foreign ownership of agricultural business, agricultural land
and water entitlements. The ABS worked with the Treasury, ABARES and DAFF to
identify the key data requirements.[11]
3.11
The information gathered in the ABS agriculture survey was collected
under the Census and Statistics Act 1905. The ABS agriculture survey was
undertaken to provide an 'up-to-date view of ownership of business operating in
agriculture in Australia and their land and water entitlements'. It was also
designed to deliver 'Australian level estimates' with data by state/territory
or by industry group provided where available.[12]
3.12
In undertaking the survey, a sample of roughly 11 000 businesses was
selected to represent the approximately 165 000 businesses which currently undertake
agricultural activity across the country. The ABS argued that, with a sample of
11 000 agricultural businesses, the survey was a large one, and one which was
representative of the Australian farming industry.[13]
Summary of the ABS results[14]
3.13
The ABS agriculture survey achieved a response rate of 92 per cent of
the approximately 11 000 agricultural businesses selected. There were
three key findings:
- 98.5 per cent of agricultural businesses in Australia were
entirely Australian owned;
- 88.6 per cent of agricultural land area was entirely Australian
owned; and
- 91 per cent (12 500 gigalitres) of water entitlements for
agricultural purposes were entirely Australian owned.
3.14
There was little variation of Australian ownership in agricultural
businesses across sub-industries, with all sub-industries (including mushroom
and vegetable farming, dairy cattle farming and sheep, beef cattle and grain
farming) having more than 96 per cent of businesses entirely Australian owned.
There was also little variation across the states and territories.
3.15
In terms of agricultural land ownership, 5.5 per cent of agricultural
land had levels of foreign ownership between 10 per cent and 50 per cent. In
addition, 5.8 per cent of agricultural land was majority foreign owned.
3.16
There was some variation in foreign ownership of agricultural land across
industry classifications, with 88.3 per cent of sheep, beef cattle and grain
farming land being entirely Australian owned. The remaining industries had at
least 92 per cent of agricultural land entirely Australian owned. The extent of
Australian ownership in agricultural land varied across states from 76.2 per
cent of land in the Northern Territory to 98.5 per cent in Victoria entirely
Australian owned.
3.17
Foreign ownership of agricultural water entitlements represented, in the
committee's view, perhaps the most troubling results. An amount of 1169
gigalitres of water entitlements had some level of foreign ownership and of
this, 915 gigalitres of water entitlements were owned by businesses with
majority foreign ownership.
3.18
There was significant variation in the levels of full Australian
ownership of water entitlements for agricultural purposes across states.[15]
There was also significant variation of the level of foreign ownership of water
entitlements for agricultural purposes across industry classification. Just
over 50 per cent of the water entitlements for the beef cattle feedlots
(specialised) classification were entirely Australian owned. All other industry
classifications had more than 80 per cent of water entitlements entirely
Australian owned.
Concerns about the ABS methodology
and results
3.19
The committee's questioning of the ABS raised significant concerns about
the usefulness of the ABS agriculture survey data. According to the survey, the
measure of business size 'was based on the ABS' Estimated Value of Agricultural
Operations [estimated value of agribusiness] or a derived value based on
Business Activity Statement (BAS) turnover.'[16]
Businesses were included in the survey if they had an estimated value of $5000
or more.
3.20
The ABS's use of businesses valued as low as $5000 raised questions
about whether the survey results might give a misleading impression of the
levels of foreign ownership in Australia. This is because very small businesses
are likely to be of little or no interest to foreign investors.
3.21
The ABS defended its selection of businesses based on the estimated minimum
value of agribusiness of $5000. The ABS stated that the sampling focused on
gaining significant coverage of large businesses. As one official explained:
...based on our proportional methodology, that the final sample
selection resulted in 54 per cent of all large businesses with an estimated
value of agricultural operations greater than $5 million, on the survey frame
being selected. Only six per cent of the microbusinesses, which are those that
have less than $125,000, were selected, and seven per cent of small businesses,
which are those between $125,000 and less than $500,000. So the majority of the
actual sample that we selected were large businesses.[17]
3.22
However, this evidence can paint an inaccurate picture. While the survey
sample selected a much higher percentage of large businesses from the total
large business pool than small and micro businesses from the total small and
micro business pool, the proportion of large versus small/micro businesses in
the ABS agriculture survey sample is significantly different.
3.23
The following table illustrates an approximate percentage of number of
businesses by size (micro, small, medium and large) making up the survey sample
of approximately 11 000 businesses.
Table 3.1—Percentage of businesses by size selected in
the ABS agriculture survey[18]
Business size
|
Range of Business
Estimated Value
|
Number of
businesses in sample
|
Percentage of total
survey sample
|
Large Businesses
|
Greater than
$5 000 000
|
330
|
3
|
Medium-sized
Businesses
|
$500 001 to
$5 000 000
|
1870
|
17
|
Small Businesses
|
$125 001 to $500 000
|
3080
|
28
|
Micro Businesses
|
$5000 to $125 000
|
5720
|
52
|
Total
|
|
11 000
|
100
|
3.24
With micro or small businesses (i.e. businesses with an estimated value
of agribusiness of between $5 000 and $500 000) comprising 80 per cent for
the ABS agriculture survey, the committee considers that the survey does not
appropriately target the businesses of foreign investment interest which are
likely to be large or even medium sized businesses.
3.25
The ABS also acknowledged that the value of agricultural land was not
covered in the survey:
Senator XENOPHON: Okay, but in terms of the overall
value of agricultural production owned by partially or wholly foreign owned
businesses, do we go to the 11 per cent figure [of agricultural land with some
level of foreign ownership]... In terms of the actual value of—
Dr Charker: Value is a different concept.
Senator XENOPHON: Yes. Was that covered in this
survey?
Dr Charker: No. What we have reported on here is
number of businesses; proportion of land owned and proportion of water
entitlements, not value of production.[19]
3.26
The absence of information in the survey about the value of
agricultural land under foreign ownership further undermines the usefulness of
the survey for determining the level of foreign investment in Australian
agriculture. As the following exchange with the ABS indicates:
Senator NASH: Can I just follow up on the value
issue, because this is spot on the money. As you say, you did not do it on
value. The 99 per cent of businesses being Australian owned could,
hypothetically, be only 30 per cent of the total value of the 100 per cent of
businesses.
Dr Charker: It could be. We do not know what their
contribution is in a financial production sense.
Senator NASH: That is the point. Just so I am clear,
a very small per cent of businesses that are not Australian owned could own a
significant portion of the overall percentage value of the 100 per cent?
Dr Charker: They may or they may not. We have no
information to inform that.[20]
Self-reporting and company
structures
3.27
Another criticism regarding the ABS agriculture survey was that it was a
self‑reporting survey that had potential weaknesses in terms of
compliance and in uncovering complex company ownership structures, or
alternative uses of agricultural land, such as mining. For example, the
committee heard evidence that there were limitations to the extent to which
responses were independently verified as the following exchange suggests:
Senator JOYCE: In following any of this [the survey] up,
did you ever go out and say, 'Righto, I'm going to take a sample of this
section of country in northern New South Wales'? Why? I can think right now of
10 farmers who have been approached in extremely good farms in northern New
South Wales—right now. Did you ever go and take a sample and say, 'Right, let's
go for a wander around Moree. Drive up and down the road and actually go in and
knock on the door and say g'day to people and do some on-the-ground
assessment'? Did you ever do that?
Dr Charker: For this collection, no. There was
certainly not the time nor the funding available to support that. But, as I said,
we do maintain field visits for our broader agricultural collections, and to
the extent that we had any information at all from that or other statistics we
have got which indicated to us that a particular area or a particular company
may have had a degree of foreign ownership, then automatically we made sure
that that area or that company was included and received a survey form.[21]
3.28
The committee also heard evidence that complex ownership structures,
that may have had significant foreign investment component, were not covered in
the survey. The ABS told the committee that for the survey it was 'unable to
track all the way back through complex chains of ownership'.[22]
This was further explained by the ABS in for following exchange:
CHAIR: Not included in your survey were the title
details, not included in your survey were trusts, and not including your survey
were mining companies.
Dr Charker: It is not as black and white as that. The
situation is that we—
CHAIR: That is your own advice to us.
Dr Charker: were unable to track back to really
complex chains of ownership. What we were able to do was go back a certain way,
so that, where a respondent indicated that they themselves were not the owner,
we asked them who the owner was and we went back to the owner. But if that
owner in turn were owned by another sovereign fund, or there was some sort of
situation beyond that, we were not necessarily able to track back as far as
that.[23]
3.29
A related issue was that the ABS agriculture survey only covered those
companies that continued to use the purchased agricultural land for
agricultural production. As the following exchange shows, it is likely that,
for example, companies that transferred the use of the land from agriculture to
mining were not included:
CHAIR: They [surveys] were sent to the minimum
turnover you had of an ABN that was agriculture related?
Mr Hockman: Yes, or you had to have indicated in
registering for your ABN that you had either primary or secondary agricultural
activity.
CHAIR: So the 42 farms that were bought around the
Shenhua mine [in the Liverpool plains region] were not in the register, were
they?
Mr Hockman: We cannot talk about specifics, but if
those businesses had an ABN—
CHAIR: If the business is a mining business, it would
not have been included—put it that way.
Mr Hockman: If they were under the $5,000—
CHAIR: No. Shenhua is 68 per cent owned by a
provincial government. It is a mining company that bought 42 farms. That
company would not have been included in your survey, because it is a miner—it
does not have an ABN that relates to agriculture.
Mr Hockman: No. However, if they were—
CHAIR: No, that is the answer—that is all I want:
'No, it wasn't included'.[24]
3.30
The ABS clarified the scope and coverage of the ABS agriculture survey
in an answer to question on notice:
The frame or list of businesses which were potentially in
scope for this survey was drawn from the ABS Business Register. Examples of
types of business included in the list of businesses surveyed in the ABS
agriculture survey are listed below:
-
A mining company which purchased land or an agricultural
business, and conducts some agricultural activity was in scope for the ABS
agriculture survey;
-
A blind trust that has an Australian shelf company which owns
agricultural land or operates an agricultural business was in scope for the ABS
agriculture survey. There were a number of examples of these identified and
their level of foreign ownership confirmed;
-
A company that owns agricultural land but does not operate was in
scope of the ABS agriculture survey. There were a number of these identified by
farming businesses which provided details of the owners of the agricultural
land they were leasing in their survey form. Subsequent action was taken to
despatch survey forms to those land owners.
-
A company which was only leasing agricultural land but did not
own it was in scope of the ABS agriculture survey for the purposes of business
counts. The owner of the leased land was also in scope of the ABS agriculture
survey, as per the point above.[25]
Information on the regions,
farmland type and industry type
3.31
The ABS summarised the survey's information as 'providing quality
estimates of foreign ownership at the Australian and state levels.'[26]
However, the limitations of the survey were clearly outlined by the 'agreed
output specifications' that ABS received for the survey from Treasury, DAFF and
ABARES:
-
Foreign ownership of agricultural businesses:
- Count and percentage of businesses by
level of foreign ownership by State;
- Count and percentage of businesses by level
of foreign ownership by agricultural industry at the Australian level only;
- Foreign ownership of Australian agricultural land:
- Area of holding (Ha) and percentage of
agricultural land by level of foreign ownership by State;
- Area of holding (Ha) and percentage of
agricultural land by level of foreign ownership by agricultural industry at the
Australian level only;
- Foreign ownership of water entitlements (used for agricultural
purposes:
- Water entitlement (megalitres) by level
of foreign ownership by State;
- Water entitlement (megalitres) by level
of foreign ownership by agricultural industry at the Australian level
only;[27]
3.32
In addition, the ABS representatives told the committee at a private
briefing that levels of foreign investment in 'prime agricultural land', as
opposed to marginal land, could not be determined from the survey.[28]
Comparison with previous
information
3.33
The committee also heard evidence that compared the results of the ABS
agriculture survey with the ABS's agricultural census in 1983-84 which also
examined levels of foreign ownership. At the committee's hearing held on 16
November 2011, Dr Jill Charker, Acting First Assistant Statistician, ABS, told
the committee that:
The businesses reporting that they were not fully Australian
owned may have been either partially or entirely foreign-owned and, as such,
the survey provides information about business land and water entitlements by
the extent of their foreign ownership. The survey results are broadly
comparable with levels of foreign ownership of agricultural businesses and land
collected in the ABS's agricultural census of 1983-84, and I note that the ABS
has not previously collected data on foreign ownership of agricultural water
entitlements.[29]
3.34
The committee is therefore concerned by seemingly contradictory evidence
provided by the ABS at a hearing held on 10 August 2012. At the hearing Ms
Helen Baird, Director, Rural Environment and Agriculture Statistics, ABS,
stated that the methodology used for the 1983-84 Agricultural Census was significantly
different:
Senator Gallacher: Your final statement on the
summaries of key Australian reports, says that, according to the ABS, these
levels of foreign ownership for agriculture businesses and land are broadly
comparable to that found in the 1983-84 agricultural census and water
entitlements were not measured.[30]
What is the difference between what you have done now and what you did in
1983-84?... You are saying that the conclusions are about the same, and I am
interested in whether the methodology of calculation was the same. How was the
agricultural census working out compared to what you have done now?...
Ms Baird: ...I would make the comment that the
frameworks under which each of the surveys – a census being a very large
survey, I guess – were undertaken was different. So the list of businesses of
interest was constituted differently [in the 1983-84 census] than the one with
respect to 2010. The methodology also for understanding the area of land, for
example, was more on an equity basis than as a single [asset] then attributable
to a level of ownership within ranges.[31]
3.35
This response was elaborated on in an answer to question on notice:
Data has been collected by the ABS on foreign ownership in
agriculture in respect of 1983-1984 and 2010. The two sets of data are not
directly comparable for two main reasons.
- The entity from which information was collected, and to which the
ownership status pertained, were different in the two collections. In
1983-1984, data were collected in respect of farms – that is the entity which
was operating the agricultural land. The survey did not seek to understand the
ownership status of the owner of the agricultural land if that owner was not
also the operator of the land. In the 2010 ABS agriculture survey, the survey addressed
the question through the business operating the agricultural land and also
sought to understand the ownership status of the owner of the land if they were
not operating the land.
-
The methodology used to report the area of agricultural land with
a level of foreign ownership was fundamentally different. In 1983-1984, an
equity methodology was used whereby the percentage of foreign ownership of the
operating entity was applied to the area of operated land to provide an area of
foreign operated agricultural land. In the 2010 ABS agriculture survey, the
land was treated as a single asset and the level of foreign ownership (in
ranges) was identified for that asset.[32]
3.36
In January 2012, the government announced that it would fund future ABS
agriculture surveys in 2013 and 2018. This would be complemented by an
expansion of the agricultural census in 2016 and 2021 to provide more
information on foreign ownership of agricultural land and water entitlements.[33]
The ABS also made a submission to the consultation paper on the foreign
ownership register (discussed below) and noted that the working group should
consider ways that the register information could link with other sources,
including the ABS agriculture survey. However, the ABS also stated in this
submission that 'the [ABS agriculture survey] information could not
provide a substitute for [an initial] stocktake [of foreign ownership], as it
produces only aggregate, point-in-time statistics which would not allow for
tracking of flows in acquisitions and disposals of land between surveys.'[34]
Committee view
3.37
The committee is highly concerned by the significant limitations of the
results from the ABS agriculture survey. Three key problem areas make the
committee very weary of the characterisation of the results as a reliable
indicator of the level of foreign investment in agricultural land and
businesses in Australia.
3.38
First, foreign investment is likely to be directed towards medium and large
farming enterprises. The committee is therefore concerned that the ABS has
included a very large number of very small farming enterprises in the sample
selection. In the committee's view this significantly undermines the
credibility of the survey. The use of an estimated value of agribusiness of
between $5000 and $125 000 is far too low as it captures over half of the
businesses surveyed. These are micro businesses that are likely to be highly
irrelevant to the interests of foreign investment, as the committee believes
that it is highly unlikely that a foreigner buyer would consider a business
valued as low as $5000.
3.39
It appears to the committee that either 52 per cent or potentially 80
per cent of the businesses included in the ABS survey were irrelevant to the
question the ABS was seeking to report on. The inclusion of these businesses is
likely to have significantly skewed the findings of the ABS study.
3.40
Second, the committee considers that the self-reporting aspect of
foreign ownership in the questionnaire undermines the veracity of the survey
results as it clearly relies on the goodwill of companies to report foreign
ownership. The committee is conscious that it would be tempting for some
companies to not fully report the levels of either direct or indirect foreign
ownership. In the case of large companies, this would only need to happen on a
few occasions to distort the results in the survey.
3.41
Third, the committee is concerned by the lack of ability of the survey
results to drill down to regional levels, quality of farmland, and Australian
and New Zealand Standard Industrial Classification (ANZSIC) groups. The
committee is aware that farmlands differ greatly in their productive and
agricultural value. The ABS agriculture survey provides virtually no ability to
analyse its data in a way that could shed light on the levels of foreign
ownership of prime farmland, for particular rural communities, or the beyond
the most cursory examination of different agricultural industries.
3.42
Due to these problems the committee is disturbed by public references to
the ABS agriculture survey to dismiss the concerns about the levels of foreign
investment in Australian agriculture. In addition, given the significantly
differing methodologies that were used for the ABS agriculture survey and the
survey published in 1983-84 regarding foreign ownership, the ABS's claim that
the two surveys show 'broadly comparable' results significantly misleads the
public debate on foreign investment in Australian agriculture.
3.43
Finally, the committee considers that the major concerns noted above
seriously undermine the value of the ABS agricultural survey in informing
public debate about the levels of foreign investment in Australian agriculture.
The committee also notes that the government has committed to implementing a
national register of foreign ownership of agricultural land (discussed below).
In light of this, the committee considers that there is little value in the ABS
conducting future agricultural surveys. However, in regard to the agricultural
census, the committee considers that it has and will continue to provide
important information about the agricultural industry. Therefore, the committee
agrees with the government's proposal to collect additional data about foreign
investment in future agricultural censuses.
Recommendation 5
3.44
The committee recommends that the ABS does not conduct future ABS
agricultural surveys on foreign investment. The committee considers that the
national register for foreign ownership of agricultural land should be the
primary mechanism for collecting and publishing information about foreign
investment in Australian agriculture (as per the recommendations below).
ABARES' study
3.45
As noted above, on 23 November 2010, the government announced an 'information-gathering
process to address some emerging community concerns about foreign ownership of
agricultural land and agricultural food production'.[35]
As part of this process, the Rural Industries Research and Development
Corporation (RIRDC) commissioned ABARES to undertake an evaluation of the
economic impact of foreign investment in Australian agricultural industries and
agribusiness. ABARES was also asked to review of the extent to which some other
countries monitor and regulate foreign investment in agricultural land.
3.46
It was the government's intention that this work would complement the
data being collected by the ABS in relation to foreign ownership of rural land
and water.[36]
The result was the ABARES report, entitled Foreign investment and Australian
agriculture, which was released in January 2012.
3.47
Some of the key findings of the report that are relevant to the
committee's inquiry are:
- 1.6 per cent (worth $2.33 billion) of foreign direct investment
approvals in 2009/10 were in agriculture, forestry and fishing.
- Since 2008 (with deregulation of wheat export arrangements) there
has been an increased foreign investment interest in grain bulk handlers and
exporters, e.g. Viterra (Canadian) acquiring ABB Grain and Cargill (US) now
owning AWB Ltd. Half of the 23 licensed wheat exporters in Australia are foreign
owned.
- Since 2000 (with deregulation of the diary industry) about half
of Australian milk production is processed by foreign owned firms (e.g.
Fonterra (NZ), Lion (Japan), and Parmalat (France)).
- Three foreign owned milling groups make up almost 60 per cent of
Australia's raw sugar production (the foreign companies involved in sugar
refining are Finasure (Belgium), Wilmar (Malaysia, Singapore) and COFCO (China,
state owned).
- About 40 per cent of Australian red meat production is processed
by foreign owned firms (based on throughput).[37]
3.48
These examples highlight some important recent changes in foreign
investment in Australian agriculture. However, it should be noted that the
report does not undertake major new data collection but relies on other data
sets and publicly available information. These information sources included:
the ABS agriculture survey and other ABS data sets regarding foreign
investment; the Queensland State Government's register of foreign ownership of
land and water entitlements; other reports and case studies of various
companies and sub‑industries in agriculture.[38]
3.49
Indeed the report conceded that while some sources were accessible to
develop the conclusions of the report:
...there is no systematic source of data on the foreign
ownership of agribusiness companies. Nor is there regular information on the
nationality of foreign investors or about the type of entity involved. The
extent of investment by foreign government entities is also not known.[39]
Committee view
3.50
Given that the ABARES study was one of the key announcements of the government
to improve the information regarding foreign investment in agriculture, the
committee is disappointed that ABARES were not directed to collate significant
new empirical information.
3.51
The report certainly brought together some useful existing information
about foreign investment in Australian agriculture, and the case studies
discussed above help confirm some of the anecdotal evidence that the committee
has received elsewhere about significant levels of foreign investment.
3.52
However, the committee is concerned about the reliance on the ABS data
for parts of the report, given the concerns outlined with it above. The ABARES
report, therefore, was not able to provide the in depth information of foreign
investment that stakeholders and rural communities are desperately seeking.
The national register of foreign ownership of agricultural land
3.53
The most promising development from the government to address the
information gaps in foreign investment in agricultural assets was the
commitment to, following consultation with stakeholders, establish a national
register of foreign ownership of agricultural land. The committee strongly
supports its establishment, based on the overwhelming evidence received through
submissions and witnesses, as outlined above.
3.54
The committee discussed the development of the consultation for the
register at a public hearing on 16 August 2012. The process at that staged was
outlined by one Treasury official as:
The government issued a press release on 15 June [2012] to
say that they wanted a working group to consult on the development of a
Commonwealth foreign ownership register for agricultural land. Realistically,
the purpose of all of this is to give greater transparency on the ownership of
agricultural land in Australia and what is described as a more comprehensive
picture of the specific size and locations of foreign agricultural land
holdings, over and above what we know at the moment.[40]
3.55
In November 2012, a discussion paper for public consultation was
released by the Treasury. The paper sought submissions on the following issues:
- The scope of the register in terms of information collected and
the definition of relevant terms such as agricultural land;
- The use of a threshold to exclude small transactions;
- The need for an initial stocktake of foreign investment;
- The monitoring of divestments as well as investments;
- Australia's international obligations;
- Compliance issues, including the timeframe for registration; and
- Public access to the information.[41]
3.56
Submissions under the Treasury consultation process have closed.
Treasury received 33 submissions and all but 6 (which remain confidential) are
available on the Treasury website.[42]
The committee notes that these submitters indicated broad support for a
register and that more information about levels of foreign investment would be
beneficial. However, some submitters were also concerned about cost,
administrative burden, privacy issues and potential disincentives to foreign
investment. There were also varying views on the extent to which the information
should be collected and made public.[43]
Committee view
3.57
The committee strongly supports the development of the register for
foreign ownership of agricultural land. The committee also believes that the
register should be as streamlined as possible to avoid unnecessary costs and
administrative burdens. Where appropriate, it should protect personal privacy
and commercial confidentiality.
3.58
However, the committee also believes that if established properly, the
register will not cause a disincentive to legitimate and commercially
orientated foreign investment. Consistent with the issues outlined above
regarding the agricultural survey and in later chapters regarding the
definition of 'rural land' in the FATA, and the importance of transparent
management of water entitlements, the committee recommends that the register incorporate
the following recommendations.
3.59
Finally, the committee is mindful of the significant lack of information
regarding foreign investment in agriculture (discussed in this chapter). The
committee also considers that in addition to improving the knowledge of current
circumstances, modelling of future circumstances is needed to inform the public
debate. To this end, the committee considers that it is essential that the
public is provided with modelling that shows the possible costs to the
agricultural industry should current arrangements (including current regulation
and barriers to domestic investment) regarding foreign investment in Australian
agriculture remain unchanged.
Recommendation 6
3.60
The committee recommends that when establishing the agricultural land register,
the government conduct an initial stocktake of foreign ownership of
agricultural land, agribusiness and water entitlements. In addition to numbers
of businesses, land size and volume of water entitlements, the value of foreign
investment acquisitions should be captured. The initial stocktake should be
comprehensive, as far as possible consistent across states, and take into
account complex company structures including foreign trusts, "shell
companies", ownership of agricultural assets by foreign mining companies,
and debt structuring and ultimate liability.
3.61
Furthermore, on the basis of this initial stocktake, the government
should commission independent modelling of the level of foreign investment in
Australian agriculture in 20 years' time if current trends and regulatory
arrangements are assumed to remain. The modelling should also include estimated
costs to the industry over the same period based on current constraints to
domestic capital investment in Australian agriculture. Finally, the modelling
should have regard to the future opportunities provided by the growing global
food task over this period.
Recommendation 7
3.62
The committee recommends that the ongoing information collected in the
register include the information that the committee recommended be included as
part of the stocktake of foreign ownership (as per recommendation 6).
Recommendation 8
3.63
The committee recommends that the register include divestments as well
as investments. This will ensure that the information from the register remains
current and can reflect changes over time.
Recommendation 9
3.64
The committee recommends that participation in the register be a legal
requirement for foreign investors and that appropriate mechanisms for compliance
apply in cases where such participation is avoided.
Recommendation 10
3.65
The committee recommends that the register not use the current
definition of 'rural land' in the FATA. Instead the definition adopted should
be that which results from the update of 'rural land' as per recommendation 25.
This would maintain consistency with the regulatory framework for foreign
investment in Australian agriculture.
Recommendation 11
3.66
The committee recommends that there be no minimum threshold for
reporting and that all foreign investment should be captured in the
agricultural land register. However, this data should be collected in a manner
that can clearly delineate foreign investments in terms of value and business
size.
3.67
Although the committee is mindful of privacy and the need for business
transactions to be protected by certain levels of commercial confidentiality,
it also considers that the information collected be as accessible to public and
parliamentary scrutiny as possible. In general, the committee considers that
the public debate on this issue will benefit greatly with the availability of
significantly more information about the levels and nature of foreign
investment in agriculture.
Recommendation 12
3.68
The committee recommends that the register's data be held in a manner
that is centralised and can provide comprehensive information about all foreign
ownership that is recorded.
Recommendation 13
3.69
The committee recommends that levels and trends of foreign ownership of
land, agribusiness and water entitlements should be published annually by the national
register for foreign ownership of agricultural land. Aggregate level data about
the respective value and level of interest of foreign government investors and
private foreign companies should be included. The data should also be made
available in categories such as state, sub‑industry (ANZSIC levels),
water catchment areas, and local shires.
Recommendation 14
3.70
The committee recommends that country of origin of all foreign
government investors and specific foreign government investments should be
published annually by the national register for foreign ownership of
agricultural land.
Recommendation 15
3.71
The committee recommends that, in order to prevent possible
disincentives for foreign investment, the country of origin details for private
foreign companies should be published by the national register for foreign
ownership of agricultural land at aggregate levels only. However, country of
origin details for specific private foreign investments should be made
available to parliamentarians, parliamentary committees, and any relevant
government agency upon request.
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