On 17 July 2012, the Australian Government released the National Food Plan green paper (Green Paper). The Government's message is clear: Australia needs to seize opportunities in the global food sector and foreign investment is integral to this.
This message is consistent with the Policy Statement on Foreign Investment in Agriculture and the Foreign Investment and Australian Agriculture Report, both released in January of this year.
- The Australian Government is committed to foreign investment in the food sector
- A foreign ownership register of agricultural land is being considered
- Further changes to foreign investment regulation seem unlikely under the current Government
- Finding the right balance between food production and extraction of natural resources will continue to be a challenge in some places
- Comments on the Green Paper are due by 30 September 2012
NATIONAL FOOD PLAN AND THE GREEN PAPER
The Australian Government is developing Australia's first ever National Food Plan. The intention of the National Food Plan is to establish an integrated approach to food-related policies and programs for the benefit of business (including foreign investors) and consumers and to underpin the vision of Australia being a reliable, sustainable, productive and resilient supplier of food.
The Green Paper has been developed to explain current food-related policies, having regard to certain objectives, including global competitiveness and productivity growth, and to help identify potential policy gaps and possible actions Government may take. It takes account of feedback received from stakeholders in response to the June 2011 Issues Paper to inform development of the National Food Plan.
It is intended that the Green Paper and submissions on it will inform the National Food Plan.
Stakeholders are invited to make submissions on the Green Paper until 30 September 2012. The Government expects to finalise the National Food Plan next year.
FOREIGN INVESTMENT A NECESSITY
The Green Paper states unambiguously that foreign investment is vital to support growth and jobs for Australian farmers and regional communities and notes that foreign investment "is critical to the ongoing success of our agriculture and food sectors". The Government has reiterated that Australia welcomes foreign investment in Australian agriculture in a manner that is consistent with the existing foreign investment framework and accordingly not contrary to the national interest.
Australia's existing approval requirements for foreign investments in agriculture and agribusiness are described in the table below. It is important to appreciate that under Australia's existing foreign investment framework, acquiring an interest in Australian rural land (which is land that is used wholly and exclusively for carrying on a business of primary production) does not require notification to FIRB unless the acquisition would otherwise meet the thresholds described below.
|Investments that require Foreign Investment Review Board (FIRB) approval|
|Category of investment/investor||Monetary threshold (updated each year)|
|Foreign government or related entity|
|Any direct investment||Nil – any direct investment by a foreign government or related entity in agribusiness or agricultural land requires approval|
|Investors who are not foreign governments or related entities|
|15% or more in an Australian business or corporation or interest in land used exclusively for primary production (agriculture, livestock etc)||$244 million - value of total business or corporation
For US investors, threshold is $1062 million except for prescribed sensitive sectors
|15% or more in offshore company with Australian subsidiaries/assets||$244 million – value of Australian subsidiaries/assets|
|Land not used exclusively for primary production||Nil – all investments require approval|
|Developed commercial real estate (eg an operating mine)||$53 million ($1062 million for US investors)|
Note – a related entity includes any entity in which a foreign government has a direct or indirect 15% or greater interest.
The Policy Statement on Foreign Investment in Agriculture provides that in assessing investment applications in agriculture, the Government (ie FIRB and the Treasurer) will typically consider the effect of the proposal on:
- the quality and availability of Australia's agricultural resources, including water;
- land access and use;
- agricultural production and productivity;
- Australia's capacity to remain a reliable supplier of agricultural production, both to the Australian community and our trading partners;
- biodiversity; and
- employment and prosperity of Australia's local and regional communities.
This is in addition to the matters considered for all foreign investments for which FIRB approval is required, which are set out in the Government's Foreign Investment Policy.
FURTHER GOVERNMENT RESPONSE
The Green Paper supports a cautious response to recent community concern about foreign ownership of agricultural land, which is limited to improvement of the quality of data about land sales and ownership.
In June of this year the Government announced that a working group would seek stakeholder views on the establishment of a register of foreign landholdings, including:
- what ownership interests should be captured under a register;
- how the register would interact with existing state and territory land title registers, including the Foreign Ownership of Land Register in Queensland;
- ways to monitor and enforce compliance; and
- how information would be reported on and disclosed.
Clearly, the design of any register would need to have regard for commercial confidence requirements of investors, including the timing for placement on the register, and would need to limit duplication for requirements to lodge information under State legislation (eg The Foreign Ownership of Land Register Act 1988 (Queensland)).
DRIVING INVESTMENT AND TRADE
The Green Paper acknowledges that a growing world population and changing consumption patterns in Asia will provide new opportunities for Australia's export food industry. The Green Paper provides that a key to taking advantage of increased global food demand is for farmers and processes to be more productive and for the strengthening of ties between Australia and other countries. As noted above, foreign investment is expected to be critical to gains in productivity.
The Green Paper notes that the Australian Government is committed to a policy approach that supports trade in food and, accordingly, the Government proposes to continue to:
- promote liberalisation of trade in food;
- pursue regional and bilateral free trade agreements;
- address market access issues; and
- encourage trade and economic integration by supporting regional economic forums such as APEC.
Consistent with the Government's existing foreign investment policy, the Green Paper makes clear Government support for foreign investment in agriculture. In June of this year, the Trade Minister noted that:
Throughout Australia's period of European settlement, our national development required the savings of foreigners. A small population on a vast continent could never muster the domestic savings needed to fund Australia's agricultural expansion...
In view of the Green Paper and other public statements by the Government, further changes to regulation of foreign investment in agriculture seem unlikely under the current Government. The federal opposition parties have, however, stated that their intention, should they win government in the election which is due by late 2013, is to reduce the threshold for investment in agricultural land by private (ie non-government) foreign investors from $244 million to $10-$15 million.
A copy of the Green Paper is available here.
Corrs has significant experience in advising foreign investors including foreign government controlled entities in all aspects related to FIRB approval and other foreign investment regulations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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