FOREIGN Investment Review Board (FIRB) chairman Brian Wilson has raised concerns about the unbalanced focus on Chinese investment in Australia and xenophobic community attitudes in comparison to other countries with similar or greater commercial interests.
Mr Wilson said the nationalistic and xenophobic elements of the current foreign investment debate were “of concern”.
He said it seemed, through media reports and his personal conversations, that suddenly it was okay for the Americans, British and now the Japanese to make investments in Australia - but it was “dreadful” for the Chinese to do so.
Mr Wilson faced a grilling - in particular over the recent sale of Cubbie Station - when he appeared before the Senate Rural and Regional Affairs and Transport References Committee’s inquiry into the FIRB’s national interest test recently in Canberra.
Committee chair, NSW Liberal Senator Bill Heffernan, said there’d recently been quite a lot of media commentary about Australia's position on foreign investment.
Mr Wilson said the nationalistic and xenophobic elements of the current foreign investment debate were “of concern”.
He said it seemed, through media reports and his personal conversations, that suddenly it was okay for the Americans, British and now the Japanese to make investments in Australia - but it was “dreadful” for the Chinese to do so.
“When I talk about xenophobia it is probably in the sense of China getting such a huge focus,” he said.
“If we look at the UK, they are a 4 per cent trading partner and 11pc of our stock of foreign investment. The US are a 9pc trading partner and 25pc of our stock of foreign investment. Japan is a 12pc trading partner and 10pc of our foreign investment.
“China is a 19pc two-way trading partner, 25pc export partner and 2.6pc of our stock of foreign investment, which is about equivalent to Germany, Canada and Singapore.
“But I would suggest that at least 90pc of the discussion around foreign investment… is about China.”
Mr Wilson said a lot of fuss was also made about foreign acquisitions by the British 100 years ago and by Americans in the post-war years.
He said it was no coincidence that the Foreign Acquisitions and Takeovers Act was put in place in 1975. It was at a time of huge political and community concern about Americans acquiring our manufacturing base, he said.
Mr Wilson said it was also no accident that the real estate provisions were implemented (in the Act) in 1989 when huge community concern existed about the Japanese acquiring our tourism assets and commercial real estate.
Senator Heffernan ruled out xenophobia as being the governing factor underpinning questions around foreign investment.
He said the nation had to “figure out” where we are now and where we are going to be in 50 years time, along with the rest of the world.
“Every day you read more about the challenge that people are presented with globally in the future food task,” he said.
“Obviously if a country needs to feed half its people… we need to make sure that we participate in that useful exercise in a way that does not destroy our revenue base, which could happen.
“It is no good looking back and saying, 'Oh my god’.”
Mr Wilson said the underpinning questions were to what extent does foreign investment in Australia cause Australian food security to be reduced, and to what extent is it contrary to Australia's national interest?
The FIRB chair also faced tough questioning at the senate hearing about the controversial approval of the sale of Australia’s largest irrigation farm, Cubbie Station, to a conglomerate with 80pc Chinese-Japanese interests.
Mr Wilson said there’d been incorrect speculation that bidder Shandong Ruyi was a Chinese state-owned enterprise - he stressed it was not.
He said Shandong Ruyi – which had undertaken to sell down to 51pc in three years - was a private company, owned 70pc by Chinese interests and 30pc by Itochu, one of Japan’s largest trading companies.
Mr Wilson said another core issue surrounding the FIRB’s approval of the Cubbie Station sale was the potential for transfer pricing.
He stressed there was a commercial imperative from all the parties involved in the sale to maximise production and product price.
He said the sale’s undertakings sought to ensure that 100pc of the marketing of any product – not just cotton – would be under Asutralian agribusiness Lempriere’s control.
“Lempriere, the 20pc Australian partner with a direct economic interest in the project, will be responsible for 100pc of the marketing,” he said.
Senator Heffernan said he’d spoken to Will Lempriere from Hong Kong in the days leading up to the hearing, who reassured him the family owned company was “completely determined” to make the Cubbie sale, “a fully commercial, maximum profit for all the players' operations”.
Mr Wilson also told Senator Heffernan Shandong Ruyi had one other acquisition in Australia in the past - a wool property - which “has acted perfectly well”.
“Ruyi has actually been a purchaser of Australian product from third parties as well for many years - cotton, wool and the like - for their quite significant operations,” he said.
Mr Wilson said the potential issues with transfer pricing and potential market corruption, repeatedly expressed by Senator Heffernan and others, remained outside the FIRB’s remit and were better off dealt with by Treasury or the ATO.
He did acknowledge that transfer pricing, both in Australia and all countries in the world, was a matter of concern.
“The mere fact that there are significant parts of the Income Tax Assessment Act and modifications to that would suggest that it is a continuing issue,” he said.
Mr Wilson said Cubbie had been subject to dozens of applications and analysis over years and consultation on the sale was thorough.
“While it might appear on the surface that the purchaser has popped up and 30 days later they have an approval, this is something that went over years,” he said.
“Every interested water party in terms of the Commonwealth and the states; the downstream states and water bodies in the Murray-Darling area - including Victoria, New South Wales and South Australia - were consulted over the water issues and all raised no objections.
“That occurred over a very long period of more than 12 months.”
Mr Wilson said if no buyers appeared in the sell-down of Shandong Ruyi’s interest to 51pc, the FIRB can allow an extension of the three year time-frame.
He said if there was short-term market difficulty, such as a market crash, the FIRB may allow a 12 or 18-month grace period.
“It would not be a case of: 'We can't get the right price; we don't want to sell.' It is not an undertaking to sell at a particular price or at the price they have bought or for a gain; it is an undertaking to sell.”
Source: farmonline.com.au
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