Barriers to foreign investment are hurting Australia’s agriculture sector and costing agribusiness more than $5.5 billion every year, a draft report from the government’s Productivity Commission has found.
Increased scrutiny on foreign investment in agricultural land and agribusinesses, along with larger application fees, are barriers to agri investment because they cause costly delays and complexity, it says.
Regulation costs incurred from withdrawn investments and delays caused by mandatory screenings exceed $5.5 billion annually.
The report recommends the government restore the threshold for examination of foreign investments in agricultural land and agribusiness to its previous $252 million and works to ensure that application fees are no higher than necessary to finance the Foreign Investment Review Board’s activities.
The findings come in the wake of the FIRB’s rejection of a Chinese consortium bid to acquire S Kidman, Australia’s largest ranch and cattle-land holder, for A$371 million in May.
The government passed laws imposing special scrutiny on foreign investment in the agricultural sector last year. Provisions mean building a register of foreign-owned agricultural land and required government approval for foreign agribusiness investments over A$55 million and agricultural land purchases greater than A$15 million. The previous threshold had been $252 million for both.
Australia relies on foreign investment to improve incomes, bridge financing gaps for private enterprise and boost GDP, the report says. It adds that in the agriculture, foreign investment is important for introducing new technology and driving competition in the sector.
Advocates for the stricter regulations imposed in 2015 have argued that foreign acquisition of agriculture assets poses a risk to national security. But thresholds for screening of foreign investment in other potentially sensitive sectors, including telecommunications, transport, defence and military-related industries remain at $252 million.
In addition to locking out potential investment capital, the report finds the scrutiny injects unnecessary complexity into the investment climate, while sending the message that investment from some specific countries is unwanted. This is because investments from Chile, the US and New Zealand valued below A$1094 million are not subject to the same approval process.