The annual report of the Foreign Investment Review Board may have shown a material jump in the number of approved foreign investments, but the battle for global capital is alive and well. Indeed, it is rumoured that the imminent budget will include more than $50 million towards promotional activities designed to push Australia as a foreign investment destination.

Clearly there is a strong need to attract investment in agribusiness and food, resources and energy, infrastructure, tourism, services, manufacturing and technology.

The world is resplendent with investment opportunities – building a silk road, new ports in South Asia, energy infrastructure in Central Asia, transport in Vietnam, high speed rail in China – and there is an inexhaustible appetite for funding in our region and indeed globally.

In a global market for capital, the more roadblocks we put in the way of foreign direct investment – the more we aggravate the effect of the gap between our necessarily small domestic savings base and global investment flows. Post GFC there is no doubt that the economics of how investment flows is changing and we need to be nimble to retain our fair share.

Australia’s new penalty and fee regime has hopefully got the balance right:

Click here to view table.

We have previously argued for a user pays model that was clearly not a “tax” on the flow of foreign funds. Some of the proposed fees were extreme, particularly in the agricultural space, where the fee proposed was $10,000 per $1 million.

The current regime seems much more sensible. Under the current proposal a $50 million farm will attract an application fee of $100,000.

However, there are still some aspects that seem questionable, for instance, the annual programme fees seem quite a high cost of being foreign and only serve to exacerbate the problem for “accidental foreigners”.

Tighter controls will also be introduced to foreign investment in agribusiness. The definition of agribusiness encompasses primary production businesses and certain first stage downstream manufacturing businesses (such as dairy, meat and poultry, fruit and vegetables). We need to see more detail of this to make sure it does not inadvertently widen the class of businesses caught.

The agribusiness sector will now be subject to a lower $55 million threshold. This means that foreigners who purchase an agribusiness will face a fee of $25,000. If the transaction is more than $1 billion, the fee rises to $100,000.

While these fees seem modest, when combined with a rural land purchase they could have the potential to discourage investment. For example, an overseas investor who buys a $60 million abattoir will incur a fee of $25,000. If they plan to expand their agribusiness by purchasing cattle farms worth $15 million, the fees rise to $125,000.

Could investors see this level of fees as a reason to look elsewhere? Will Argentina or South Africa be a viable alternative? Again, we need to be careful that we do not accidentally tilt the playing field away from Australia.

This circles back to discussions about conveying the message that Australia welcomes foreign investment, and protects the interests of long-term investors. Foreign investor application fees need to be presented in a way that will not push investors away. Very few countries that we compete with charge similar amounts.

Also, unlike many other countries, Australia has a zero threshold for investment by foreign governments. We hope that the detailed plan for the administration of these fees is sensible and cognisant of the competitive landscape in which we operate.

Australia has less than 1% of irrigated agricultural land, but it generates more than a quarter of the total gross value of agricultural production. ANZ Bank has estimated that $600 billion of investment is needed in the Australian agricultural industry from now to 2050 to maintain its growth and profitability.

As we have argued, infrastructure will be important for Australia and our agriculture sector. Investment is needed in water and irrigation facilities, roads, railways and ports.

Fortunately, there is a great deal of interest in Australian infrastructure. Investing in Australia is seen as a positive because it is relatively safe, the political risks are manageable and many investors with a wider Asian agenda see this market as a way to learn about the asset class and further develop their technological knowledge. It is important that we take advantage of this attitude.

Foreign direct investment has long been a key part of investment in the Australian agricultural industry. Growing the investment in our agricultural industry represents a once-in-a-lifetime opportunity for Australia.