Farm sector split over level of foreign ownership scrutiny
Reducing the threshold for scrutiny of foreign acquisitions of Australian agricultural land to a cumulative $15 million, down from $244 million, could be a major disincentive to overseas investors and disastrous for WA's farm sector in the long term, according to leading WA farm investment and management consultant Gordon Verrall.
But WAFarmers argues this reduced threshold could still be too high for WA, where it estimates the average price of farms is between $1 million and $10 million.
And the Pastoralists and Graziers Association (PGA) says the current system is working well and current thresholds could remain, or possibly be halved to just over $100 million.
Under a coalition government, foreign buyers seeking ownership of Australian farm land would be subjected to a review by the Foreign Investment Review Board (FIRB) for purchases of $15 million or above, well down from the current $244 million threshold.
In its Discussion Paper on Foreign Investment in Australia, released last week, the coalition also proposed compulsory review for all overseas investments in the agribusiness sector above $53 million - or more than a 15 per cent stake of agribusinesses valued above $244 million.
And it reiterated the need for a national register of foreign owned land and foreign owned agribusinesses, which a Labor Party working group is already working on.
Mr Verrall said a register of foreign investment in the agricultural, commercial and resources sectors in this country would be valuable to inform debate and provide a good database of overseas ownership.
But he said lowering the current FIRB acquisition review level to $15 million for farm land was too low and pandered to xenophobic interests and political opportunism.
"Certainly the current threshold of $244 million is ridiculously high and I don't have an issue with lowering it," he said.
"But it would be more realistic to set it around $100 million, or at least the $53 million level proposed for agribusiness acquisitions."
Mr Verrall said investments in agricultural land should be treated the same as other sectors and there were too many double standards concerning farm land ownership in this country versus allowable investment in all other asset classes.
"FIRB already assesses all purchases associated with foreign governments, so a reduction in the threshold is likely to impact less on this component of investment than on other investors, who do not currently have to endure the effort of compiling a FIRB proposal," he said.
"Ironically, this is the exact opposite of what is being sought by the more conservative farmer groups.
"Foreign ownership in mining is significantly higher and has greater sovereign risk, and yet occurs without the scrutiny that is being proposed here.
"There is danger in the government becoming unduly restrictive on a particular asset class - such as agriculture - because foreign and other investors may stay away from the sector as a whole."
Mr Verrall said Farmanco Management Consultants' latest benchmarking data for WA showed the average client had agricultural land worth $6 million, which meant there were many WA farms that would be worth greater than $15 million and attract FIRB review under the coalition's plan if sold as entire holdings.
"Other growers generally could not afford to purchase larger scale operations above $15 million in their entirety and these may be broken up when an exit is required," he said.
"This would be a retrograde step for the progression of the industry."
Mr Verrall said the longer term implications for an agricultural sector with limited access to capital were an inability to expand, loss of operational scale, a slow slide to unprofitability, higher stress levels, greater difficulties with succession planning, depression and possibly higher suicides.
He said Australian investors should be ashamed of their lack of support for the sector and this was unlikely to change rapidly.
Wellard Agri chief executive officer Tim Macnamara told the Farm Machinery and Industry Association of WA (FMIA) annual conference last week that Australia's agricultural sector had the lowest portion of total foreign investment in any sector in this country at 0.2 per cent and only 1 per cent of Australian agribusinesses were part or wholly owned by overseas interests.
"We have to think about what value foreign investment brings to our sector," he said.
"That's what's important, not where the money is coming from or being used for."
Foreign investment in agriculture was understood to amount to only 0.8 per cent of total FIRB approvals in 2010-11.
A KPMG report released last week highlighted that China's investment in Australia has been heavily concentrated on mining (79 per cent of total investment) and energies (12 per cent).
Between September 2006 and June 2012, WA registered firms attracted the highest level of Chinese investment at 30 per cent of China's total investment in Australia. This included US$16 million spent by the Chinese in the agriculture sector, compared to US$39 in mining and gas and US$52 million in construction.
WAFarmers president Dale Park said it was hard to determine how important foreign investment was to WA's agriculture sector without a database of land ownership.
"One of the positives about setting up a register of foreign interests in this State is that it will enable us to answer of a lot of unanswered questions about the source and level of foreign investment," he said
Mr Park said the coalition's plan to lower the FIRB threshold for foreign investment review was a step in the right direction, but $15 million was too high for WA.
"We question whether reducing the threshold from $244 million to $15 million will actually assist in investigating more investment, considering the average price of WA farms is somewhere between $1million and $10 million.
PGA president Rob Gillam disagreed, saying many WA farms were worth $30 to 40 million and setting the threshold of review at $15 million would create unnecessary bureaucracy.
"Resources and mining sectors attract significant overseas investment and are not subjected to this proposed level of scrutiny," he said.
"I think the coalition is playing popular politics on this issue."
Mr Gillam said a register of foreign ownership would achieve little and the PGA had no major problem with the way the FIRB currently operated.
He said foreign capital was important to WA, especially in light of this State's reliance on exports and a need to build positive overseas relationships.
National Farmers' Federation president Jock Laurie said the coalition's foreign investment review plan was flawed in proposing to lower the FIRB review threshold before a register of overseas land ownership was set up.
He said a register would create greater transparency around this much-debated issue and then help to determine appropriate investment thresholds.
Agricultural industry stakeholders can have input to the coalition's policy discussion paper on foreign investment until October 31. Written submissions can be sent to email@example.com .
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