Foreign investors eye rural targets

The Australian | April 24, 2009

Lenore Taylor, National correspondent

THE debate over foreign investment is set to expand from the mining industry to agriculture as overseas investors pour billions of dollars into Australian rural properties considered by some to be strategic national assets.

The Dubai-based IFFCO group has now bought 20 per cent of Australia's biggest beef cattle company AAco and has refused to clarify whether it intends to bring the state-owned Malaysian land development agency Felda, with which it has close business links, into the deal.

International private equity firm Terra Firma has bought 90per cent of the Packer family's cattle properties for $425million, and US Hancock Agricultural Investment Group and Westchester Group have been part of a rural property splurge by foreign investors over the past two years.

Nationals senator Barnaby Joyce, who has been a critic of foreign, and particularly state-owned, investments in strategic mining assets and who has insisted on a Senate inquiry into Australia's handling of the issue, says agricultural investments can raise exactly the same concerns.

"Overseas interests are targeting our mining and agricultural industries because they have the long-term strategic value and we should be mindful of that. We are not going to be able to sustain ourselves in the long term through service industries, that is the economic form of trying to make a living by taking in someone else's washing," Senator Joyce said.

The Rudd Government has said it welcomes foreign investment but the issue of customers taking over the supply chain will be critical in its assessment of government-owned entities buying into Australian mining concerns.

According to Senator Joyce, the IFFCO investment raises acute issues of vertical integration, whether Felda is ultimately involved or not.

"If you can effectively buy from yourself across borders, it raises critical issues in terms of taxation and in terms of decision-making," Senator Joyce said. "I don't want to ban foreign ownership or investment but we have to have an honest debate about our long-term strategic interests, we have to look at our national interest in the longer term."

IFFCO director and AAco board nominee Arunas Paliulis told The Australian his company had taken a stake in AAco because it complemented its business in India, south Asia, the Middle East and north Africa.

"The people throughout Asia, west and east and north and south Asia, many of them are concerned about the food security; here you are more concerned about food surplus. The image of Australian agriculture, and particularly beef, in the world is what cosmetics are to France in the world," Mr Paliulis said.

"We are more dealing with food consumers, retailers and processors, and we are concerned about raw-material supplies, whether it is grain, meat or milk or sugar or coffee or cocoa or edible oils. That is to say, Australia is strong at producing it and selling it, we are strong at buying it and consuming it."

IFFCO is involved in a bitter battle with the existing AAco board over a separate proposed acquisition deal, which will be resolved at a shareholders' meeting on Monday.
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