Covid-19: Australia to review all foreign investments regardless of value

Australia’s Foreign Investment Review Board will now review all proposed foreign investments into the country, regardless of their value or investor type.

The federal government moved to tighten foreign investment rules this week for an indefinite period, following multiple reports in the Australian media that officials were growing concerned about foreign companies, particularly from China, launching takeovers of distressed Australian firms.

The new rules mean that all proposed foreign investments into Australia will require approval from FIRB.

Previously, different value thresholds applied depending on the sector and the nature of the investor, while a $0 threshold already applied to any entity classed as a foreign government investor, which included public pension funds or sovereign wealth funds.

Treasurer Josh Frydenberg said in a statement that, effective immediately, the monetary screening thresholds for all sectors and investor types has been reduced to $0.

For non-government investors, the previous thresholds for agribusinesses stood at A$1.192 billion ($731 million; €660 million) for investors from countries with which Australia has a free-trade agreement (including the US, New Zealand, Japan, China, Canada, Singapore, Mexico, Chile and Vietnam) and A$60 million for investors from all other countries.

For agricultural land, the same A$1.192 billion threshold applied for non-government investors from FTA countries, while a A$15 million threshold applied for all other investors.

In addition to the new thresholds, Frydenberg advised that the FIRB assessment process will be extended from 30 days to six months.

Speaking to Agri Investor, Laguna Bay Pastoral Company CEO Tim McGavin said that it was still “business as usual” for the fund manager.

“We have a longstanding productive relationship with FIRB and we work within a zero-threshold environment already as our largest investor is a US state pension fund. The time frames may be slightly longer to process applications but we are a known entity, so we don’t expect too much disruption to our deployment processes,” he said.

“We continue to do due diligence on good value assets with top tier operators and are keen to add more opportunities into our pipeline. We completely understand and respect FIRB’s reasoning in reducing thresholds and protecting the national interest in this time of national emergency.”

Frydenberg moved to reassure businesses by saying the changes were “not an investment freeze.”

“Australia is open for business and recognizes investment at this time can be beneficial if in the national interest,” he said, adding that the government would prioritize “urgent applications for investments that protect and support Australian business and Australian jobs.”

FIRB chairman David Irvine was supportive of the changes and said: “These temporary measures have been necessitated by extraordinary economic circumstances. Foreign investment is and will continue to be critical to Australia’s prosperity.

“These temporary measures are necessary to protect the national interest during an historically challenging time for the economy, businesses and the broader community.”