OPINION: THERE'S been foreign investment in Australian agriculture since 1788. Had there not been we would all still be stuck around Botany Bay or Sydney Cove in lap-laps.
There is always much debate on the question of the register of foreign ownership of agricultural land and agribusiness assets. The Senate debated Foreign Acquisitions and Takeovers Legislation Bills last week. I endorse this legislation and gave my perspective regarding the history and impacts of such investment.
In 2013 foreign investment in Australia totalled around $170 billion of which 2.2 per cent or $3.6 billion was associated with agriculture. The vast majority was mining at $50 billion, manufacturing at over $30 billion and services around $20 billion.
The level of foreign investment in agricultural land is pitifully small and in my opinion, it can be greater.
The countries investing in Australian agricultural land include Canada, 25 per cent; the United Kingdom, 22 per cent; America, 12 per cent; the United Arab Emirates, five per cent; New Zealand, 4.3 per cent; and Chinese investment is about 0.5 of ONE per cent of foreign investment in agricultural land.
These figures may be updated as we get better data through a land ownership registration process, but about 99 per cent of all Australian properties are Australian owned and Australians own 89 per cent of Australian agricultural land.
The Bills propose a requirement for the purchase of agricultural land registration, that the dollar limit be reduced from $252 million to $15 million for the purchase of property, and $55 million for agribusiness enterprises.
Three uncertainties in data collection have now been clarified.
The first relates to trapping information and data on foreign acquisitions of leased land, given that about 90 per cent of northern pastoral land is leasehold.
Leased land will be included in the register of foreign agricultural acquisitions.
Foreign investment into purchasing agricultural land for purposes other than agriculture, for example coal mining, will also have to be registered. Any land that could be reasonably used for agriculture will need to be registered with the Australian Tax Office, even if it is to be used for another purpose.
The third issue that needed clarification is that of a foreign State owned entity (SOE), trading through an international bank engaging an Australian company or partnership to ‘own’ an enterprise, making it appear as an Australian based operation. An enterprise purchased in that manner where its beneficial owner is an overseas entity must be captured in the registration net. Very strict anti-avoidance rules will apply.
I further suggest a shadow price, like royalties in the mining sector, be applied to agricultural produce if a SOE produced, for example grain, that was sent to their home country, milled and turned into bread and then given to that country’s poorest citizens. In such an event, no price is created and no tax is paid in Australia on that transaction.
That state owned entity has used Australian land and soil, Australian water, Australian expertise and Australian transport and port infrastructure. It should, like minerals, have to pay a royalty on the value of that product. This would need to be consistent with its value in the Australian market, on the wharf, on the day it transfers from Australia. In other words if that foreign State owned enterprise was producing something in Australia for which there was no commercial value and hence no tax applied, we could apply a royalty, based on the value of the product as it transfers out of the country.
Foreign investment in Australian agriculture provides access to new technologies and grows local skills in agriculture and agribusiness skills. As well as providing greater links to global food chains, foreign investment provides new capital for agricultural expansion and, through recently negotiated free trade agreements, open doors for Australian agricultural and related investors to actually invest into countries with whom Australia trades.
Esperance in south eastern WA is an example of successful foreign investment.
In the 1960s and '70s the Americans invested heavily in the Esperance region, principally using Australian expertise. The Esperance Land Development Company (ELD) financed largely by the Chase Manhattan Bank contracted with the WA Government to develop 100,000 acres each year. ELD retained and farmed 50,000 acres with the other half split into 2000 acre conditional purchase blocks. This allowed young Australian farmers the chance to farm in the Esperance area. It was light land with trace element mineral deficiencies but with the advent of NPK fertilisers the Esperance plains were soon producing bountiful pastures and crops. There were crop, pasture and animal production challenges but through joint Australian-American knowledge and research, problems were quickly arrested.
Today the Esperance area is one of the most productive farming areas in Australia.
The Americans have left now, they eventually sold out. Did they take the soil? Did they take the land? Did they take fences and water points? They did not!
More accurate knowledge of who owns what is essential. However, we must continue to encourage foreign investment in Australian agriculture.