Foreign investment in Australian agriculture: Are we open for business?

By ADRIENNE HARTNETT:

Foreign investment in agriculture; for some Australians the phrase conjures up images of ‘nasty’ foreigners coming to take over our lands, while, for others,  it offers an unlimited opportunity for growth and prosperity.

Foreign investment in Australian agriculture is a current and contentious debate that has been circulating the political sphere. A sensitive and volatile subject for many Australians, the issue has become increasingly heated amid growing foreign interest in Australian agricultural land as well as calls for tighter restrictions.

Many questions arise over the issue of foreign investment in Australian agriculture. There are concerns that the extent of foreign land ownership is insufficiently documented and understood. This had led to some community perception that there is too much foreign investment and that the country is losing control of Australian-owned agriculture.

Foreign investment in agriculture: are Australian farmers benefiting?

Foreign investment in agriculture: are Australian farmers benefiting?

 

 

 

 

 

 

 

 

 

 

History demonstrates that since 1778 Australia has relied on foreign investment capital to develop the agricultural sector.

In a speech delivered in March this year Andrew Robb, Minister for Trade and Investment, spoke to the Credit Suisse Asian Investment Conference in Hong Kong about Australia’s reliance on foreign investment in agriculture, “As a big and vastly populated continent with a thin domestic capital market, but great investment opportunities in front of us, our reliance continues today.”

However, Michael Croft, President of the Australian Food Sovereignty Alliance, believes that the need for foreign capital is no longer applicable.

“We are told Australia needs foreign investment in agriculture and infrastructure so that we can be more efficient and productive. This need for foreign capital may have been true 100 years ago, but lacks legitimacy now.”

Michael Croft is the President of the Australian Food Sovereignty Alliance. He also is also a Fellow of the Australian Rural Leadership Foundation and a delegate to the United Nations Food and Agriculture Organisation Committee on World Food Security.

The issue of food security is quite often brought to the table in the debate over foreign investment in Australian agriculture. There are those who sit in the camp that food security could soon be at stake and therefore we should take necessary measures to address the issue now. This includes strictly limiting foreign investment in agricultural land.

To expand its food production, Australian agricultural businesses often need capital investment. The reality of the situation is that capital is often not available within the country.

Many Australians have heard the term ‘food security’ thrown around by the media in recent times. But is food security really an issue?

Michael Croft certainly thinks so.

“This global land grab is not about feeding the world; it’s about feeding corporate and financial hunger-the need for capital, accumulation and profit. It’s acquisition by dispossession.”

On the other side of the fence sits Judith Sloan.

Judith Sloan has a Master of Arts with First Class Honours in Economics from University of Melbourne. She speaks passionately about foreign investment in Australian agriculture and strongly believes that food security is merely a myth.

“It [food security] is just a red herring. I mean when we are exporting so much more than we could possibly eat -in fact if we ate it all, we’d get even fatter than we are- there can be no issue of food security.”

According to the Foreign Investment Review Board (FIRB), Australia, on average, exports around two-thirds of its total agricultural output each year. Even in a drought year, Australia still manages to export more than half of its agricultural production. So does this mean that there is no danger of  Australia not being able to feed its people?

Over-production of food: Agriculture relies upon foreign investment to sustain itself

Over-production of food: Agriculture relies upon foreign investment to sustain itself

Reports by the FIRB indicate that Australia produces enough food to feed between 60 million and 80 million people. When looking at these facts, it would seem Australia is completely reliant on exports to sustain agriculture.

Moreover, the 2012-2013 Annual Report by the FIRB notes that the sector, ‘Agriculture, forestry and Fishing’ makes up 2% of the total approved Foreign Investment in Australia.

Mrs Sloan is adamant that Australia needs foreign investment in agriculture. “Of all FDI (foreign direct investment) into Australia, investment in agriculture is of the order of 2 per cent, amounting to around $2 billion per year. In an economy with annual GDP around $1.5 trillion, $2 billion is a needle in haystack. In fact, we want more foreign investment in Australian agriculture and infrastructure, not less; particularly, if we are to take advantage of Asia’s rising demand for quality foodstuffs.”

Even in the event that some time in the future food security does become an issue in Australia, the government reserves the right to review all future land purchases

“Even if there were an issue in the future, say, in relation to a domestic shortage of a particular foodstuff, then the first policy of government would be to implement some sort of reservation scheme or partial export ban. It would not involve restricting foreign investment in agriculture, which would lead to lower, not higher, food production,” Mrs Sloan says.

To put this argument into context, it should be mentioned that in 2010, the Australian Bureau of Statistics (ABS) carried out an audit of farmland ownership and farm business ownership. Solely Australian-owned agricultural land made up 86%, while 11.4% was either partly or in some cases, fully foreign owned.

Australia’s Foreign Investment Policy reads as such, Foreign investment brings many benefits. It supports existing jobs and creates new jobs, it encourages innovation, it introduces new technologies and skills, it brings access to overseas markets and it promotes competition amongst our industries.

If our government supports foreign investment in agriculture and it only makes up 2% of total foreign investment in our country, where do the concerns originate?

The debate over foreign investment in Australian agriculture is a subject that polarises farmers, politicians, investors and the community. This is despite the fact that foreign investment in Australian agriculture has been a reality for centuries.

Most of the concerns are centered on the issue of a complete lack of publicly available data on foreign ownership. However, it can also be seen that there is a certain level of uneasiness held by many Australians when foreign state-owned entities such as wealth funds buy up rural properties.

In the past, the United States and Britain were the main players in foreign investment in Australian agriculture. While the United States is still the largest investor in Australia,  China and other Asian countries are showing increasing interest.

What many people find concerning is that the FIRB has considered many applications for foreign investment in Australian agricultural land and agribusinesses. No one has been rejected. Does this mean that our restrictions put in place are too open or is every application submitted in the interests of our nation?

Concerns arise at a time when China faces continuing population growth and limited land and water resources, as a result of their rapid acceleration in urbanisation and industrialisation. According to the ‘Australia China Quarterly’, China has 21% of the world’s population but only 8.5% of the world’s arable land and just 6.5% of the world’s water reserve.

Naturally China, in order to combat the issue of food security, would look to a country like Australia which has the greatest per capita of resources in the world.

The point is that China is, in fact, a small investor, and on the agricultural side, China ranks i as the ninth largest foreign investors in Australia.

But when Chinese companies are looking at hundreds of millions of dollars of rural investments and the Federal Government is undertaking a joint study with Beijing on ways of turning the undeveloped north into an Asian food bowl, it tends to set many Australians’ teeth on edge.

This impending foreign presence has quickly become reality for the Australian sugar milling industry with a change in ownership from around about 15 per cent foreign owned to over 70 per cent in the last 18 months.

If our biggest concern with foreign investment in agriculture isn’t about food security, then could it be an issue of xenophobia?

Judith Sloan certainly thinks so, particularly when the issue of food security is brought up.

“The issue of food security is an illegitimate diversion and is really code for xenophobia and hostility towards investment from certain countries,” she said.

“To be blunt, there is a fair amount of xenophobic hysteria attached to local hostility towards foreign investment in agriculture. Take the case of Tasmanian-based dairy company Tamar Valley. When it was recently bought by New Zealand Company Fonterra, no one batted an eyelid. But when the Van Dieman’s Land company – a foreign-owned dairy company also based in Tasmania – sought an investment partner there was loud vocal concern about the prospect of a Chinese company taking a role.”

However, Michael Croft adamantly denies those who oppose foreign investment are xenophobic.

“Demanding due diligence in a commercial transaction is not xenophobic. To analyse the motivation of corporate takeover and conducting cost benefit analysis is good business practice,” he said.

Mr Croft does not entirely oppose foreign investment. He instead believes that foreign investment in agricultural land should be strictly limited. Part of his argument forms the basis that Australian land has certain bio-physical limits, and that Australia is a target to a global land grab.

“We farmers, and I am one, are well aware of biophysical limits. We work with them in the real world every day. Only in a mental construct such as economics, are no limits possible. There are very strict limits in the real world, and we violate them at our peril,” he said.

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Fears over sustainability: Australian land bought by foreign investors

Mr Croft’s argument extends from the idea that if used sustainably, Australian land will have a virtually infinite life. However, when foreign investors buy land in Australia, essentially, foreign investors can use that land however they need to, regardless of whether it is sustainable or not.

“This is about our values and the economic price does not measure our values. Right now, one nation’s corporation are looking for farm land, enough to produce 130 000 head of cattle a year into the live trade. Transnational corporations from this particular country are in the process of acquiring 30 000 square kilometres of northern Australia. To put this into perspective that is roughly the size of Taiwan or Belgium,” Mr Croft said.

Judith Sloan disagrees with the idea that foreigners are out to take over Australian land suggesting that it’s not as scary as some people make it out to be.

“Sadly, the figures don’t point to that. In 2012-13, foreign investment in agriculture actually fell. It fell by 24%. So the idea that we are somehow being taken over by the foreign hoards, particularly those nasty sovereign wealth funds, and those nasty state-owned Chinese enterprises is not true.”

As calls for stricter limitations on foreign investment in agriculture are put forward, many are concerned that China may get upset by the tighter scrutiny and as a result, it could potentially hinder farmland investment in Australia.

A study by ‘Essential Research’ in 2012 showed the different attitudes held by Australians regarding foreign investment in Australian agriculture. When asked about specific sources of foreign investment, voters turned negative and seemed xenophobic. European corporations fared best — 38% of voters approved of their investment, while 42% disapproved; 38% also approved of investment by US corporations, with 43% disapproving.

But investment by south-east Asian government-backed corporations was approved by only 27% of voters, with 52% disapproval, and Chinese state-owned enterprises approved by only 23%, with 60% disapproving.

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The idea of strictly limiting foreign investment in Australian agriculture may not have any economic value, but it may have some political value by reducing community concerns about the extent of foreign ownership. And as we have established, transparency is always a good thing.

However, it should be noted that farmers already face significant challenges in raising capital to fund growth with debt levels already high. So, does Australia need more scrutiny?

Currently, foreign investment applications automatically go to the Australian government for approval, regardless of the amount of the investment. This means that all farmland purchased by China and government-owned businesses in other countries are already reviewed.

The view of those who support foreign investment in Australian agriculture is that stricter controls on foreign investment are not needed, but greater transparency is.

Judith Sloan believes that the measures in place for foreign investment in agriculture are sufficient.

“Foreign investment is good. Foreign investment in agriculture is good. We don’t have a free for all. We don’t have a system where it’s anyone comes along. We have current restrictions and that system works very well.”

Foreign investment has long been an important feature of Australian agriculture. It has provided a key source of capital for Australian farmers and has promoted the growth of the Australian agricultural sector.

It seems that foreign investment in Australian agriculture, despite being a touchy subject, is something Australians will have to get used to as Australia seeks badly needed capital to fuel our economic growth.

As the political row continues, it cannot be denied that foreign investment in Australian farmlands may help the industry despite how valid claims against foreign agricultural investment are.

Australians are regularly reminded that foreign investment is vital to national development. Our Foreign Investment Policy states; The Government welcomes foreign investment. It has helped build Australia’s economy and will continue to enhance the well-being of Australians by supporting economic growth and prosperity. And it seems unlikely this statement will change any time soon. Australia, for now, is definitely open for business.

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Australia’s agricultural industry looking to the future

 

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