There is more work to be done if we are to drive greater investment in agribusiness, a priority sector under the Federal Government's Innovation Agenda, write partners Hazel Brasington and Shane Bilardi in The Australian Financial Review.
The following article has been reproduced with permission from The Australian Financial Review
Agribusiness investors need more certainty
The federal government's recently released innovation and competitiveness agenda sends a positive message to foreign investors interested in agribusiness and food in Australia by making these sectors a focus of development efforts, while committing to making it easier for significant investment to proceed.
It is an important message if Australia is to attract the billions of dollars of capital needed to upgrade ageing silos, repair fragile rail networks and relieve port bottlenecks that reduce returns on agricultural production and stand in the way of meeting projected future Asian food demand.
No wonder then that the Abbott government has selected food and
agribusiness as among five priority industry sectors. But if the
government is serious about attracting more foreign capital into
these sectors, there is still more to be done.
Uncertainty about how the requirements may be applied, along with
suspicion about potential changes in the future, are contributing
to a widespread impression that investing in Australian
agricultural assets is a risky business.
Guidance on national interest test
Clearer guidance on how the national interest test will be applied would not only help reduce the perceived risk for investors entering the Australian market, but would also be in line with the government's agenda to improve the communication and consistency of regulatory approvals. This would not involve changing the national interest test, or adopting a mindset against evolution of the national interest.
Our local and international clients in the Australian agribusiness and food sectors have also told us very clearly that the best thing the government can do for the industry will be to fix infrastructure impediments and to facilitate access to local and international markets.
There are signs that private capital is finding a variety of new funding vehicles to address small farm undercapitalisation and inter-generational succession. This will keep land in agricultural production – probably even more efficiently than is currently the case. However, reversing the effect of long-term underinvestment in rail and port infrastructure is firmly in the government's court, as is the new water-storage investment referred to in the agricultural competitiveness green paper.
Window of opportunity
It might be that the sale of state assets, together with the kind of strong investment interest that has fuelled recent acquisitions in Australia's agricultural sector, have aligned to yield a unique window of opportunity to address these challenges.
The Quattro port terminal joint venture at Port Kembla, which leverages private investment together with government-led rail network improvements to deliver choice, competition and better utilisation of port land and facilities that will benefit exporters, is an example.
In isolation, neither government nor the private sector would unlock the same value. If the prospective privatisation of state-owned ports presents similar opportunities, the best could be yet to come.
