In issue 2 of Cultivate, we discussed proposed changes to the approval process for Foreign Direct Investment (FDI) in Australia’s agricultural sector, such as a lower threshold for compulsory notification and approval, and the introduction of a national register to identify foreign ownership of agricultural land. There is still a lot of debate regarding such reforms – but are we any closer to their implementation?
Currently, state-owned enterprises such as sovereign wealth funds must notify and gain approval from the Foreign Investment Review Board (FIRB) for the acquisition of all types of agricultural land in Australia, regardless of how the land is being used. They must also notify and gain approval from the FIRB for all agribusiness proposals. Other foreign investors must only notify the FIRB if they intend to buy land actively used for farming – and they only need approval if the value of the ‘business’ (the land and the farming operation) exceeds A$248 million.
On October 21, 2014, the Australian Government released a Green Paper on agricultural competitiveness, with a number of proposals affecting agribusiness in Australia. The paper proposes lowering the threshold for notification and approval of foreign acquisitions to A$15 million for agricultural land and A$53 million for agricultural businesses. This is not a new proposal, but the Green Paper suggests the government is serious.
The deadline for comments on the Green Paper is December 2014, after which the Government proposes to issue a White Paper. For this reason, and because the changes will require formal legislation, the new thresholds are unlikely to come into force before the middle of 2015. Even so, recently signed free-trade agreements with Japan and Korea take into account the new thresholds, signalling that the Government remains committed to pushing these changes to FDI in Australia through.
National land register
In October 2013, the Australian Minister for Agriculture, Barnaby Joyce, announced plans for the Foreign Ownership Register for Agricultural Land, which will increase transparency and provide accurate information on ownership of agricultural land to policy makers and the wider community. However, Joyce’s recent emphasis on the importance of ‘doing this properly’ and ‘developing detailed planning’ suggests that it may be some time before the register is implemented.
Similarly, plans for a property owners’ register to record foreign ownership of residential real estate (reflecting community concerns about the high level of foreign acquisitions of domestic residential property) are likely to be some time before being brought into operation.
Implications for foreign investors
Neither the changes to the notification and approval thresholds nor the introduction of a new national land register are likely to affect agribusiness FDI proposals in Australia substantially.
They do not affect current policy settings which are intended to welcome and facilitate FDI in the sector (as long as FDIs do not spark national interest considerations similar to those in the 2013 Graincorp case, which raised significant concerns about foreign control of the Australian grains industry).
Once the new FDI threshold comes into force, there will of course be additional regulatory clearance processes facing foreign investors, but these processes are unlikely to be particularly costly or time-consuming, and clearance will probably be achievable within 30 days of filing.