Chinese Investors undeterred by Foreign Investment Review Board farmland crackdown
Geoff Raby, Australia’s former ambassador to Beijing, says Chinese interest in Australian farms and processing assets is surging, despite the Abbott government’s crackdown on foreign purchases of agricultural land and real estate.
Since March 1, foreign investors require approval from the Foreign Investment Review Board to buy agricultural land worth $15 million, down from the previous threshold of $252 million.
New rules flagged last week by Prime Minister Tony Abbott and Treasurer Joe Hockey could result in foreign buyers of Australian residential property and farmland being slugged with a $5000 application fee for properties worth less than $1 million.
The fee is $10,000 for properties worth more than $1 million and it increases by $10,000 for each additional $1 million in value.
Dr Raby, who was the Chinese ambassador from 2007-2011 and has since founded Beijing-based advisory Geoff Raby & Associates, said these changes were noticed in China.
“The Chinese certainly wonder what our intention is and ask: Is this directed against China? Is this a Chinese concern we have? Any change in the [regulatory] regime will create uncertainty,” he said.
“But we run a very open system here … I think the FIRB is much better understood in China now.”
Spike in interest
The success of Australia’s recent free-trade talks with China had “turned heads” towards the trading relationship between the two countries, and his firm was dealing with a spike in Chinese interest in Australian agribusiness, he said.
“Lately there has been been a lot of inquiries, particularly along the agricultural supply chain, not just in farmland but in processing. The main interest is in meat, wheat, and dairy.”
Dr Raby spoke to The Australian Financial Review following his presentation to the ABARES Outlook 2015 conference in Canberra.
ABARES, the federal government’s agricultural forecaster, on Tuesday hosted the first of two days of presentations by public servants and business and industry leaders outlining opportunities and challenges for Australian agriculture.
Fortescue Metals founder and chairman Andrew Forrest said Australia needed to capture more value in the supply chain and invest in brands.
“We have a great brand in Australia, so let’s sell it,” he said.
Mr Forrest owns extensive pastoral land in Western Australia and grew up on a cattle station in the Pilbara.
The mining billionaire has been the driving force behind the ASA 100, the Australian Sino Hundred Year Agricultural and Food Safety Partnership, composed of 100 significant Chinese and Australian producers and distributors.
He said he had a vision to “drought-proof” vulnerable parts of Australia and said he had been working hard to develop large-scale rail and water projects that would increase the capacity of the Australian economy.
“I mentioned … the pain of watching Australia’s beautiful wildlife perish and my own family shutting the gates on dying stock covered by dust storms in drought conditions.
“I believe that we can greatly improve the utilisation of Australia’s water resources.”
Mr Forrest said he planned to harness “the huge potential” of northern Australia and underground water resources.
“I have set my team the aspirational challenge to develop plans to harness at least 5000 gigalitres of water from these existing basins to irrigate new areas for agricultural production and to drought-proof others,” he said.
CBH Group chief executive Andrew Crane said any discussion of Australia being “open for business” should by clarified by asking what benefit investment brought to the Australian economy and society.
CBH is a Western Australian grower-owned co-operative and is Australia’s biggest grain exporter.
Last year a bumper 13.5 million tonnes of grain went through its network, and almost 95 per cent of the crop was exported.
Dr Crane said that as well as its Australian ports and storage assets, CBH growers owned seven flour mills in Asia.
“When we are thinking about investing in agribusiness our first thought is foreign investment. Why are we not encouraging and challenging Australian businesses to trade the other way? And not just trade commodities but invest in those markets,” he said.
“CBH itself has been investing in flour milling in Malaysia, Indonesia and Vietnam … We are actively participating in value-adding in the marketplace.”
ABARES said it expected export earnings from farm commodities to be about $40.5 billion in 2015-16, compared with a forecast $40.3 billion in 2014-15.