New federal government foreign investment rules may tighten loose provisions, which allow overseas purchasers to buy land, on the promise of spending and future improvements.
University of Tasmania Politics and International Relations senior lecturer Mark Harrison said the proposed legislation would strengthen Australia’s foreign investment laws.
The federal government has released exposure draft legislation, amending the Foreign Acquisitions and Takeovers Act 1975 to implement the reforms to Australia’s foreign investment framework,announced in June.
Dr Harrison said the changes were important, after promises made by the Chinese purchaser of Tasmania’s biggest dairy, Van Dieman’s Land, in the north-west of the state, in 2016.
Chinese businessman Xianfeng Lu acquired VDL Farms in Tasmania’s north-west, from a New Zealand company, for $280 million.
“I suppose the most relevant aspect for Tasmania is the idea of a compliance regime for foreign investments, in which promises made are subject to review and potential penalties,’ Dr Harrison said.
“The other theme is removing the investment threshold so that even relatively small investments can be subject to assessment.”
The VDL deal was approved by the Foreign Investment Review Board, subject to promises made by Mr Lu to invest heavily and increase local employment.
He pledged to employ another 95 staff and invest $100m into VDL.
In April, 2018, all five non-executive directors of Moon Lake Investments – the owners of VDL – resigned.
At the time, VDL deputy chair, David Crean, said the board had failed to convince Mr Lu to spend $2 million on irrigating the company’s 24 properties.
The board also estimated $20 million needed to be spent on infrastructure upgrades, in the next four years.
Dr Harrison said the federal governments proposed legislation addressed some of the concerns that emerged from the VDL investment.
“Promises of very significant investments were made that have not been fulfilled but there is no scope in the current regulations for review of that,” he said.
“I think the proposed changes are indeed aimed at strengthening the law – that’s how they sound, to me.”
Treasurer Josh Frydenberg said the draft legislation reaffirmed Australia’s commitment to an open, transparent and non-discriminatory foreign investment review framework that also protected Australia’s national interest.
The draft has been released for public consultation.
Mr Frydenberg said the consultation was the next step in modernising Australia’s foreign investment regime to keep pace with emerging risks and global developments while allowing it to remain welcoming to foreign investments.
The new provisions strengthen Australia’s foreign investment regime and ensure the country continued to realise the benefits of foreign investment by requiring foreign investors to:
- Seek approval for all investments in sensitive national security land or businesses (including starting such a business) – regardless of value.
- Comply with the terms of their approval or be subject to enhanced monitoring and investigation powers and stronger and more flexible enforcement options and penalties.
- Continue to bear the costs of administering the foreign investment regime, under a reformed framework which will be fairer and simpler for foreign investors.
Michael Warren, Roberts Limited, said he did not believe the proposed legislation would deter foreign investors.
“People just accept that’s the way things are,” Mr Warren said.
“They know that’s what needs to happen, it may make the process a bit longer, because more details are needed.”
Mr Warren said many of the large land purchases, in Tasmania, recently had been by established overseas operators, looking to expand, or primary producers from Victoria or NSW.
“Across the board, in the last 12 months, there have been people looking for dairies which are experiencing a better season,” he said.
“Beef operators from Victoria and NSW have purchased here, looking for that grazing type country, but they are already established, corporate operations.
“Agriculture still looks okay.
“We have had good seasons, and things have gone well, generally, across the board.
“The biggest issue will be the lack of properties that are available for sale, as agricultural operators are doing well.”
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