The Senate

Rural and Regional Affairs and Transport References Committee

Foreign Investment and the National Interest

June 2013

© Commonwealth of Australia 2013

ISBN 978-1-74229-822-1

This document was prepared by the Senate Standing Committee on Rural and Regional Affairs and Transport and printed by the Senate Printing Unit, Department of the Senate, Parliament House, Canberra.

Membership of the committee

Members Senator the Hon. Bill Heffernan, Chair New South Wales, LP Senator , Deputy Chair Western Australia, ALP Senator Sean Edwards South Australia, LP Senator Christine Milne (until 11 September 2012) , AG Senator Fiona Nash New South Wales, NATS Senator Anne Urquhart (until 27 June 2012) Tasmania, ALP Senator the Hon. Lin Thorp (from 27 June 2012) Tasmania, ALP Senator Peter Whish-Wilson (from 11 September 2012) Tasmania, AG

Substitute members for this inquiry Senator John Williams New South Wales, NATS to replace Senator Fiona Nash on 9 February 2012 Senator Bridget McKenzie Victoria, NATS to replace Senator Fiona Nash on 17 February 2012 (9am to 2pm) Senator Gary Humphries Australian Capital Territory, LP to replace Senator Fiona Nash on 17 February 2012 (2pm to 5:45pm) Senator South Australia, LP to replace Senator Fiona Nash from 8 to 12 April 2013

Participating members participating in this inquiry Senator Judith Adams Western Australia, LP Senator Chris Back Western Australia, LP Senator the Hon. Tasmania, LP Senator Alan Eggleston Western Australia, LP Senator South Australia, LP Senator Mary Jo Fisher South Australia, LP Senator South Australia, ALP Senator Barnaby Joyce Queensland, NATS Senator Bridget McKenzie Victoria, NATS Senator Anne Ruston South Australia, LP Senator Western Australia, AG Senator Matt Thistlethwaite New South Wales, ALP Senator John Williams New South Wales, NATS Senator Nick Xenophon South Australia, IND

iii Secretariat Mr Stephen Palethorpe, Secretary (from 5 March 2012) Ms Jeanette Radcliffe, Secretary (until 2 March 2012) Ms Jackie Morris, Acting Secretary (from 8 to 28 June 2012) Dr Chris Curran, Principal Research Officer Mr Terry Brown, Principal Research Officer (from 14 January 2013) Ms Trish Carling, Senior Research Officer Mr Nick Craft, Senior Research Officer (from 26 November 2012 to 31 May 2013) Ms Kirsty Cattanach, Research Officer (from 7 January 2013) Ms Cassimah Mackay, Research Officer (until 12 December 2012) Ms Lauren Carnevale, Administrative Officer (from 24 September 2012) Ms Carol Stewart, Administrative Officer (from 13 March 2012) Ms Lauren McDougall, Administrative Officer (until 9 March 2012)

PO Box 6100 Parliament House Canberra ACT 2600 Ph: 02 6277 3511 Fax: 02 6277 5811 E-mail: [email protected] Internet: www.aph.gov.au/senate_rrat

iv Table of Contents

Membership of the committee ...... iii

Abbreviations ...... ix

List of Recommendations ...... xi

Recommendations of the Committee's Interim report: Tax arrangements for foreign investment in agriculture and the limitations of the Foreign Acquisitions and Takeovers Act 1975 ...... xix

Executive Summary ...... xxi

Key Findings ...... xxii

Chapter 1...... 1

Introduction ...... 1

Conduct of inquiry ...... 2

Acknowledgements ...... 4

Note on references ...... 4

Previous Senate inquiries ...... 4

Structure of the report ...... 5

Chapter 2...... 7

Background—the global food task, comparative regulatory contexts and Australia's regulatory framework ...... 7

The benefits of foreign investment ...... 7

The global food task ...... 9

Comparative regulatory contexts ...... 13 Implications of free trade agreements for Australia's foreign investment regulations ...... 20

Australia’s foreign investment framework ...... 21

Chapter 3...... 27

Foreign investment—information gaps ...... 27

Concerns about lack of information ...... 27

ABS agriculture survey ...... 29

ABARES' study ...... 39

The national register of foreign ownership of agricultural land ...... 41

Chapter 4...... 47

Transparency and scrutiny of foreign investment ...... 47

The FIRB review process ...... 47

Overview of FIRB national interest test ...... 47

General views of the FIRB review process ...... 49

Compliance ...... 52

Case studies ...... 55

Hassad Australia case study ...... 55

Cubbie Station case study ...... 59

Chapter 5...... 67

Investment threshold and related issues ...... 67

FIRB foreign investment review threshold ...... 67

Cumulative purchases ...... 70

Local economy impacts ...... 71

Definition of "rural land" ...... 76

Definition of "direct investment" ...... 80

Chapter 6...... 85

Foreign investment and agricultural development: the Ord irrigation area case study ...... 85

The Ord irrigation area ...... 86

Key issues ...... 87

Capital investment ...... 87

vi

Water entitlements and access to domestic capital ...... 91

Land tenure ...... 94

Community sentiment towards foreign investment ...... 96

Dissenting report by Government Senators ...... 99

Minority report from the ...... 107

Additional Comments by Senator Nick Xenophon ...... 111

Appendix 1 ...... 121

Terms of Reference ...... 121

Appendix 2 ...... 123

Submissions Received ...... 123

Appendix 3 ...... 127

Public Hearings and Witnesses ...... 127

Appendix 4 ...... 135

Information about the Significant Investor Visa ...... 135

Appendix 5 ...... 139

AACo's Proposed Terms of Reference for an Independent Commission of Audit into Agribusiness ...... 139

Appendix 6 ...... 149

Map of the Ord Irrigation Expansion Project, including current and future developments ...... 149

vii