As was identified by the Federal Government in the “Australia in the Asian Century” White Paper and the National Food Plan Green Paper, one of the key beneficiaries of the emergence of Asia is expected to be Australia’s agriculture and food sector (see our response to the White Paper here).
There is a clear opportunity for Australia to be a food bowl for China and significantly increase exports of all agricultural commodities.
The mere existence of this opportunity does not ensure that it will be grasped. Tangible benefits will require targeted specific strategies and concrete steps by government and industry. In this context, the release of a joint Australian-Chinese governmental study entitled “Feeding the Future: A Joint Australia-China Report on Strengthening Investment and Technological Cooperation in Agriculture to Enhance Food Security” (Joint Report) is welcome.
The Joint Report is an important symbolic sign of mutual intent between Australia and China. It identifies key opportunities for both countries in enhancing their agricultural links. In Australia, the particular areas identified as having high potential are developing water and soil resources in Northern Australia, commercialising new technology and new plant and animal varieties and improvements in food processing and logistics.
The Joint Report seeks to establish a “best-practice approach to Australia-China cooperation” in agriculture, and sets out a range of recommendations towards this goal, including:
- steps to improve bilateral understanding of investment conditions;
- the establishment of joint pilot projects;
- support of visits by delegations of investors to develop new investment opportunities;
- reduction of green tape in Australia, particularly where requirements are duplicated at State/Territory and Federal levels;
- investigating the feasibility of establishing a joint research centre with robust commercialisation capabilities; and
- prioritising Chinese investment into Northern Australia, including a recommendation that the Federal, Queensland, Northern Territory and West Australian governments hold a joint forum with Chinese provincial leaders to promote agricultural links.
The Joint Report is certainly a positive step forward, as it broadens the debate beyond the simple “Australian agribusiness needs more Chinese capital” story. The Joint Report emphasises the critical role of technology and innovation, and the opportunities for Australian agribusiness and service providers to invest more in China.
The Joint Report encourages both governments to focus on breaking down the barriers to further cooperation in agribusiness, for mutual benefit. In relation to Australia, it particularly focuses on policy areas that have been neglected, including reduction of green tape and investment into Northern Australia, and promotes a strong positive discourse around foreign investment. However, in line with our view on the Asian Century White Paper, it is important to recognise that the Joint Report should be regarded as a first step in expanding bilateral co-operation. We would like to see real actions emerge from the recommendations outlined, as well as further engagement to deepen bilateral links.
The Joint Report recognises the need for and potential benefit from foreign investment in each country. It recognises that foreign investment that improves agricultural productivity can contribute to meeting both countries’ domestic demand and help address food security challenges. It is particularly welcome that, in a joint governmental report, Australia has made a clear statement that it welcomes and is actively seeking foreign investment into agriculture.
The key concerns of Chinese investors are identified in the Joint Report, including risks of not obtaining governmental approval, excessive green tape, limited availability of labour in key agricultural areas and a perceived lack of effective ways to obtain information about investment in Australia. The caution of Australian investors regarding investments into China is also noted, together with their concerns about the perceived risks of the regulatory environment, land ownership and food safety (with ensuing reputational risks).
The Joint Report outlines some steps to address the concerns that stem from misinformation on each side, such as improvement of website information and more trade delegations. However, we would urge each government to focus on the underlying regulatory reform needed to address the substantive concerns of investors. In the case of Australia, we consider that a reduction of green tape and taking action to address the skills gap and availability of labour in the agricultural sector would benefit the industry as a whole, as well as encourage foreign investment.
The Joint Report identifies that the initial focus of cooperative investment activities should be large-scale agricultural water and soil resources development in northern Australia; promotion and application of proprietary technologies and new varieties in agricultural product processing (including beef and sheep meat); aquaculture (including tropical rock lobster farming); and building modern agricultural logistics systems.
The strengths of each country’s agricultural technology and the ability to leverage them across an enormous population base in China, and a substantial agricultural sector in Australia are clearly and prominently noted in the Joint Report. The Joint Report identifies that the initial focus of technological cooperation should be sustainable agriculture; plant genetic resources; plant biosecurity; animal disease control and health; plant biotechnology; agricultural processing technologies; animal genetic resources; environmental remediation; remote sensing technologies for agriculture; and supply-chain development and improvement.
The Joint Report makes specific recommendations to explore the feasibility of a joint research centre, and encourage the use of demonstration projects in each country to promote the uptake of technology. We also note, in particular, the explicit call for Australian banks to expand their rural banking in China, where this would strengthen investment and technological services in China.
These recommendations and the technological cooperation they imply are positive steps, and are consistent with the approach outlined in the Asian Century White Paper (see further on the White Paper’s innovation approach here). King & Wood Mallesons is already working with key organisations like CSIRO and The University of Sydney in their engagement with China and the specific actions in the Joint Report should enhance such initiatives. However, at this stage the Joint Report’s initiatives appear to be at a preliminary phase and there needs to be a specific action plan. We encourage both governments to pursue the various recommendations and work with private and public sector bodies to deliver clear, costed and actionable initiatives.
The Joint Report confirms the focus on the part of both governments on the opportunity for Chinese investment to help develop agriculture in Northern Australia. In light of the water and land resources of this vast region, and its gross economic underdevelopment, this is particularly welcome. As the proposed investment by Shanghai Zhongfu into the Ord River area indicates, Chinese investors have both the desire and capital to make the agricultural potential of the Northern regions into a reality.
The Joint Report’s recommendations for pilot projects (e.g. in broadacre cropping) and highlighting of the possibilities for tropical agricultural production in fruit, mariculture and energy crops are valuable first steps. As well as continuing with these and other initiatives to improve knowledge of the region, we believe that the Australian government should take concrete action to address the logistical and infrastructure issues in the regions and the chronic lack of skilled workers. Investment from China can play a valuable role in developing the North, but given the scope of the project, government has a significant role to play.
Valuable cooperation mechanisms, as identified in the Joint Report, can improve cooperation and food security. However, in our view, bilateral trade and cooperation would benefit most from a comprehensive Australia-China free trade agreement. As it stands, Australian agribusiness is at a distinct disadvantage in the Chinese market vis a vis competitor countries such as New Zealand, which have successfully negotiated such an agreement with China. As the Joint Report makes clear, both countries have a keen interest in, and recognise the importance of, cooperation and trade in agriculture. We believe both Australia and China could benefit if they were to leverage this understanding towards a reduction and removal of tariff barriers, and strongly urge this course of action.
What it means for Australian agribusiness and service providers
The Joint Report sets the stage for growth of Australian-Chinese trade and technological co-operation in agribusiness. However, while it builds on the broad vision of the Asian Century White Paper with some specific recommendations, we consider that much work remains to be done to ensure that the focus on agriculture results in significant growth in the agricultural sector in Australia and food security for China.
The two governments have opened the door to Australia becoming China’s farm as well as its quarry. Seizing this historic opportunity requires continued attention and energy, and ongoing support from all levels of government and other stakeholders in both countries. We hope that business and industry embrace the cooperative steps proposed in the Joint Report and continue to work together and with the Australian and Chinese governments to strive for reforms and policy measures that ensure that a mutually beneficial relationship can be taken to new heights.
Participants in the Australian agribusiness sector should focus on the initiatives proposed by the Joint Report, and get involved. In addition, technology organisations, banks and service providers should update their China plans and investigate how initiatives arising from the Joint Report could lead to more opportunities in areas such as distribution, logistics and supply-chain management, land remediation and rural banking.