Australian Update – Foreign Investment in Agriculture
- The Australian government is planning to introduce a foreign ownership register for agricultural land to provide the community with better information about foreign agricultural landholdings.
- The government has also published guidance as to factors that it will consider when assessing foreign investment applications involving Australian agriculture.
Foreign investment in the Australian agricultural sector is increasing. Recent mergers and acquisitions activity in the agricultural sector includes the acquisition of a large Australian cotton farm, Cubbie Station, by a consortium led by Shandong Ruyi, and Archer Daniels Midland’s proposal to acquire Graincorp, both in October 2012.
Foreign investment in agricultural land and agribusinesses has attracted controversy in Australia, partly fuelled by a lack of adequate information as to the extent of foreign ownership in the Australian agricultural sector.
Australia’s government has reiterated that it strongly supports foreign investment in the agricultural sector in its National Food Plan Green Paper 2012 and in the Australia in the Asian Century White Paper 2012.
Under Australia’s current system, certain types of proposed acquisitions by foreign persons are subject to review by the Foreign Investment Review Board (FIRB) and may be rejected if they are considered not to be in the national interest.
For these purposes, land is classified as either ‘rural land’ which is land that is used wholly and exclusively for carrying on a business of primary production or ‘urban land’ which covers all land that is not rural land. Although acquisitions of urban land are subject to a separate notification and approval regime, acquisitions of rural land are assessed under the rules for general business acquisitions.
This means that for most agriculture sector acquisitions, FIRB approval is only required where the value of the business or agricultural land exceeds AUD248 million (or AUD1,078 million for acquisitions by United States residents), or where the acquirer is a foreign government or related entity.
In January 2012, the Australian government released a Policy Statement on Foreign Investment in Agriculture. This policy statement provides guidance to foreign investors as to specific factors that FIRB will consider when assessing whether an acquisition in the agricultural sector is in Australia’s national interest. These factors include the effect of a proposal on:
- the quality and availability of Australia’s agricultural resources, including water;
- land access and use;
- agricultural production and productivity;
- Australia’s capacity to remain a reliable supplier of agricultural production, both to the Australian community and its trading partners;
- biodiversity; and
- employment and prosperity in Australia’s local and regional communities.
When notifying FIRB of a proposed acquisition, foreign investors now need to address these specific factors as well as addressing the impact of the proposal on the following national interest considerations which apply to foreign acquisitions generally:
- national security;
- the economy and community;
- other government policies including tax revenue and environmental impact; and
- the character of the investor.
Proposed foreign ownership register
Reliable information about foreign ownership of Australian agricultural land is currently limited as most Australian states do not maintain a register of foreign owned land.
In October 2012, the Australian government announced that it will introduce a foreign ownership register for agricultural land following consultation with stakeholders.
The purpose of the register will be to improve the transparency of foreign ownership by providing the community with a comprehensive picture of the location and size of foreign agricultural landholdings.
The design of the register is still to be determined with the consultation process ongoing, but the consultation paper makes it clear that the register will be a record system only and will not form part of the foreign investment approval process.
Although increased foreign investment activity in the agricultural sector has attracted controversy, policy responses have been measured, with the Australian government:
- seeking to provide additional transparency to foreign investors as to the policy considerations that it takes into account when assessing agriculture sector acquisitions; and
- proposing measures designed to provide additional information about the levels of foreign ownership of agricultural land, so as to better inform public debate.
Nevertheless, with food security and access to agricultural resources becoming increasingly important global issues, foreign investment in the Australian agricultural sector will likely be the subject of ongoing policy and regulatory developments.