Three-quarters of Australia's sugar mills are now in foreign hands, like Thailand's Mitr Phol
ABC | 1 March 2013
Clash of concerns over foreign ownership of Australian agriculture
There's increasing attention on Australia's agriculture industry with news that foreign-owned companies are expressing interest in South Australia's wine-growing region and the Eyre Penninsula. There's been considerable disquiet over the presence of foreign buyers in the market place, but the stats on the extent of foreign ownership and the emerging trends are far from clear. Last year the government to announce a national register to track foreign ownership of agricultural land.
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EMILY BOURKE: There's been renewed focus on Australia's agriculture sector, with reports this week of foreign interests in local farming enterprises - this time in South Australia's Barossa wine region and on the Eyre Peninsula.
There's been considerable disquiet over the presence of foreign buyers in the marketplace, but the trouble is, it's hard to get an accurate picture of the extent of foreign ownership and the emerging trends
Last year the Government announced a register to track foreign ownership of Australian farmland, but not everyone is satisfied a register will do enough to shore up the national interest.
To discuss the future for Australian agriculture - with or without foreign investment - I spoke to Mick Keogh from the policy think-tank the Australian Farm Institute, the New South Wales Liberal Senator Bill Heffernan, who leads the Senate Rural and Regional Affairs Committee inquiry into the Foreign Investment Review Board's National Interest Test, and Queensland sugarcane grower Joe Marano.
Joe Marano, if I can begin with you. You're a sugarcane grower, three-quarters of Australia's sugar mills are now in foreign hands. Can you explain your farming operations now, how it's changed?
JOE MARANO: Our mill's been owned by a series of foreign investment companies since about the '90s. Originally Tate & Lyle, then is was Finasucre from Belgium and now more recently Mitr Phol from Thailand.
We never owned the operations; well my family have been farming in the Mourilyan area in North Queensland since the early '20s.
Mitr Phol is probably the best of the lot at the moment. They don't mind spending money. They quickly do an assessment where the others used to procrastinate about an assessment on spending money but that's today. What's going to happen in 10, 15, 20 year's time?
EMILY BOURKE: Senator Bill Heffernan, is it such a bad thing if farmers like Joe Marano are pocketing profits?
BILL HEFFERNAN: Not at all, not at all. What we've got to do and what the tax office now recognises and what G20 now recognises is that we've got to put private capital, corporate, whether it is foreign or home based, on the same playing field level as sovereign investment.
Now if you're a sovereign investment and you are avoiding as you can at the present time, the revenue base in Australia, if you're not looking for return on your money, you can distort the capital market and if you're absolutely going to bypass the commodity market, you'd have sought the commodity market.
Now the governor of the Foreign Investment Review Board, the chairman, has owned up to this in our hearings and said we need to revamp the Foreign Takeovers Act and bring the international tax conventions up to scratch to make all capital play on an equal playing field.
EMILY BOURKE: Mick Keogh from the Australian Farm Institute, do you see concerns with foreign investment when it's coming from a state owned enterprise?
MICK KEOGH: Oh look, certainly I think the issue of transparency needs to be there and I think it's interesting for example if you look at the recent Cubby arrangements agreed by the Government. There's some measures there that you would hope would bring some transparency to those sort of issues, because certainly that transfer pricing issue is one that has been dealt with to some degree in the mineral sector and is potentially live in terms of agriculture as well, where either it's a sovereign investor that perhaps doesn't pay tax or it's product transferred overseas at cost price or loss and the profit realised in a different environment.
So I guess, I certainly think those things need to be looked at but I'm not saying that that's a reason that you would clamp down on foreign investment. I think it's the arrangements around that investment that need to be looked at.
BILL HEFFERNAN: Hear, hear.
MICK KEOGH: Not the investment itself.
EMILY BOURKE: Mick Keogh from the Australian Farm Institute, why do overseas investors appear to value Australian agricultural assets more than locals? Is it ignorance, is it indifference? Why can't Australian farms attract local investors?
MICK KEOGH: Um, I think it's a combination of things. I think a lot of the overseas investment tends to have a longer term time frame, a 15 to 20 year timeframe, be it a pension fund or a teacher's fund or something like that.
Unfortunately I think the investment market in Australia and certainly the OECD (Organisation for Economic Co-operation and Development) has pointed this out, more money from retirement funds in Australia is invested in the share market than any other country in the world so we are almost, our existing investment community is almost obsessed with investing in equities as opposed to anything else and they're very convenient, they're very transparent. You can get in and out of them every day. You don't have to think about them and certainly that's been the case in Australia and I think that's the problem - that agriculture is a long term investment vehicle.
BILL HEFFERNAN: Patient capital.
MICK KEOGH: Patient capital is what's required and our screen jockeys in Australia aren't used to that and don't understand it and maybe some of the perturbations of the share market in recent years might turn their vision back towards understanding the risk and therefore being prepared to look at other vehicles other than just the share market.
EMILY BOURKE: It seems it's very difficult to get an accurate picture of the extent of foreign ownership in Australia and the trends. What are the problems with the way the Foreign Investment Review Board is looking at purchases and the threshold? Why are purchasers slipping through the net, slipping through the radar and how significant is that, Senator Heffernan?
BILL HEFFERNAN: It's almost laughable that the survey they did of 11,000 didn't include trusts, didn't include non-agricultural entities buying our agricultural land like Shenhua bought 52 farms in the Gunnedah there, wasn't included and that a $5,000 farm was worth, for the purposes of the statistic what a $200 million farm is worth and so we really need to tighten down on that.
But it's not much good tightening down and understanding what we're doing if we don't have a level playing field and so I am very much of the view that we've got a long way to go with this and it is going to take a political courage.
EMILY BOURKE: Mick Keogh, there is a push to introduce a register of foreign owned properties. What are your concerns about that? Is there a need for this sort of register, are there any limitations?
MICK KEOGH: Sometimes you look at these issues and a lot of the heat created around them is based on a lack of information...
BILL HEFFERNAN: Hear, hear.
MICK KEOGH: ...where there is a black hole in terms of what is happening, it is very difficult for people to make a sensible assessment of the situation so I think, I mean I always find it ironic that there was concern going back some time in Queensland that overseas investors were buying up all the residential rental apartments on the Gold Coast so the Queensland Government immediately implemented a register of foreign ownership of residential real estate in Queensland but no-one's ever bothered to do that with the issue of agricultural land.
And it doesn't seem a huge difference between being able to do it for an apartment in the Gold Coast compared to being able to do it for agricultural land so I think it really gets down to having the states agree that it is a useful exercise to do, having them agree on some definitions and having them make that available.
I mean it is just run of the mill for New Zealand, it is run of the mill for the US, it's run of the mill...
BILL HEFFERNAN: Brazil.
MICK KEOGH: ...for everywhere else but we don't seem to have been able to get around to it.
BILL HEFFERNAN: Could I just point out one other thing on the Foreign Takeovers Act, the Foreign Takeovers Act describes agriculture land in a certain way and any land that is not described as for full time purposes of agriculture so that if you want to get permission to buy a farm, sure, if you're a sovereign investment you've got to go to the Foreign Investment Review Board but if you're not, 248 million which would be a good bit of the Riverina, without having to put your head up and the act describes agricultural land, the land in the deserts of Australia because it's not farmed full-time, you have to get approval for even though it's out there in the bush but if it's in the Riverina and growing wheat crops, you've got to get permission.
Five acres in the Simpson Desert, you've got to get a Foreign Investment Board approval but not for 200,000 acres in the Riverina. How stupid is that.
EMILY BOURKE: Mick Keogh, with a register, with tighter rules around these purchases, might that serve as a deterrent for foreign investors?
MICK KEOGH: Look, I guess that's always a concern but I don't think so. I think that's one of the things that perhaps doesn't get talked about much but in fact, Australia has by far the most liberal arrangements around this issue of anyone.
BILL HEFFERNAN: The thing about is at the present time there is no real national interest test. It is a political decision. That's evidence we've taken...
EMILY BOURKE: So how do you define national interest then, Senator?
BILL HEFFERNAN: Well, I'll tell you what we should do. We should actually model after we find out what we're doing now which we don't know, model that out for 20 or 30 years and see where that's going to take us as a nation against the background of the fact that by 2050 50 per cent of the world's population will be poor for water, nine billion people on the planet barring a human catastrophe, 30 per cent of the product of the land of Asia out of production, two-thirds of the world's population living etc, etc, the food task doubling.
Model that out and see where we'll be if we keep doing what we're doing and then say do you think it's in our national interests that we go there?
EMILY BOURKE: Senator Heffernan, is the negative talk about foreign investment damaging? We've had the former prime minister John Howard say that Chinese foreign investment should have no conditionality, you have Tony Abbott who said it would be rarely in Australia's national interest to allow a foreign government to control an Australian business.
Visiting Chinese investors this morning have told the ABC ongoing negative commentary about China is starting to take the shine off Chinese enthusiasm for Australian investment.
BILL HEFFERNAN: I did notice this morning that Professor Jaijong (phonetic) from Peking University said that they weren't really concerned what Australia thought. I mean they are trying under the free trade arrangements to have equal footing for sovereign investment as for corporate knowing the tax advantages of that capital and I'd have to say a lot of corporate capital goes through the Cayman Islands or somewhere has withholding tax advantage as demonstrated by David Farley and the AA Company in the Ord matter.
I mean there is a serious disadvantage to home-base capital in the tax system.
EMILY BOURKE: But can Australian agriculture exist without foreign investment?
BILL HEFFERNAN: Foreign investment is part of everyday business. I mean we've just got to put it all on an equal playing footing.
EMILY BOURKE: Transparency seems to be something everyone agrees on. Why is it so difficult to achieve that, what's the resistance? Is it just, is there just opposition for self-serving purposes?
JOE MARANO: It's called a federation. The Commonwealth might decree but it really turns out that the land titling information and systems are very much the responsibility of the state government and to get them all to agree and to get them all to common definitions and common reporting standards is a task that takes some time.
EMILY BOURKE: Joe Marano, what's been the impact, the effect on your local community by having foreign investors in your sector? Would you have the future you have not without foreign investors?
JOE MARANO: We would have a future if farmers could farm and were left to do what, it is a lot of other regulations that are putting a lot of pressure on cane farmers in our region, that is driving farmers out moreso than the foreign investment. But of course, I'm from a town where, like I said earlier, we've had two cyclones in six years, that doesn't help either but it hasn't, the town has gone backwards I'd say for other purposes not because of foreign investment.
EMILY BOURKE: Can foreign investors though provide the sort of capital that locals can't?
JOE MARANO: They can but there's got to be some commitment or some rules from the government that when they do spend money in Australia that that money has to stay in Australia and the profits they make should stay here.
EMILY BOURKE: Mick Keogh, there are political solutions surely in the offing. As far as policy goes, where to from here?
MICK KEOGH: Well, I think that's the thing. I think there is a degree of urgency around getting that transparency in place. Once that occurs, once we have a regular availability of objective information about who owns what and what the trends are, then I think the whole thing can move to a much more objective basis and I think in fact overseas investors may well find that useful as well because that would give a degree of transparency to the whole process and have people understand what's going on.
EMILY BOURKE: Is there scaremongering though?
BILL HEFFERNAN: That's politics.
MICK KEOGH: Look, I think there probably is on occasions but you know, that's what happens in a vacuum.
EMILY BOURKE: We've seen this week the Coalition's really wrestling with this as well.
BILL HEFFERNAN: Well, that's what getting it through their thick skulls is all about and I mean Mr Bradbury and Mr Swan 12 months ago were in a completely different position to where they are now as probably was Nick Minchin and I'm not going to lose the argument because I just deal with the facts and the politics can go to hell.
EMILY BOURKE: But what about the Coalition's position on this?
BILL HEFFERNAN: Well, they will, we're getting there. The world is losing about 1 per cent of its agricultural capacity by area per 10 years that by 2050 two-thirds of the world's populations will live in Asia. We absolutely have a job to service that.
MICK KEOGH: I don't think Australia is going to run out of food. We export twice as much as we actually consume so that's not the issue. I think the issue is how well we can position ourselves to take advantage...
BILL HEFFERNAN: Hear, hear.
MICK KEOGH: ...of the growth that's going to occur and even Treasury has put out forecasts now that suggests that agriculture will grow to about 5 per cent of the economy by 2050 and surpass manufacturing so there is a broad recognition that that opportunity awaits and I guess the question is how best we position ourselves to take advantage of it and that's what a lot of this discussion is about at the moment.
EMILY BOURKE: Joe?
JOE MARANO: Can I just add to that, as long as the Australian farm is around by 2050.
EMILY BOURKE: Joe Marano, from Queensland cane growers, Mick Keogh from the Australian Farm Institute, and New South Wales Liberal Senator Bill Heffernan, thank you so much for joining us.
MICK KEOGH: Okay.
BILL HEFFERNAN: Thank you.
JOE MARANO: Thank you.