Hold Up, Mate: Australia Gets Tough on Foreign Investment

01/31/18 08:25 PM EST
By Rob Taylor 

CANBERRA, Australia--Australia's government will harden rules on foreign investment in critical energy infrastructure and prime farmland, handing new security powers to the country's deals watchdog as concerns mount about Chinese interference in the country.

Treasurer Scott Morrison will give Australia's Foreign Investment Review Board new powers to examine sales involving energy assets to ensure no overseas company accumulates too much control of the national grid. The move follows controversies over Chinese investment in farms and energy grids, as well as mounting alarm over meddling in politics and Australian society by Beijing and other nations.

"All future applications for the sale of electricity transmission and distribution assets, and some generation assets, will attract ownership restrictions or conditions for foreign buyers," he said Thursday.

Australian farmers will now be given first option on buying prime agricultural land parcels worth more than 15 million Australian dollars ($12 million) to ensure they aren't locked out of sales, he added.

In 2016, Mr. Morrison blocked both the sale of the sprawling S. Kidman & Co Ltd. cattle empire and a controlling stake in AusGrid, Australia's biggest electricity distribution network, to Chinese and Hong Kong companies.

Australia has since 2015 increased its scrutiny of takeover deals from abroad, after the U.S. raised questions about a long-term lease to a Chinese group of the Port of Darwin-- used each year for training by thousands of U.S. Marines.

Nationalist politicians in the coalition of Prime Minister Malcolm Turnbull vigorously oppose deals perceived to be security threats, notably those with people linked to China's ruling Communist Party.

Many lawmakers have grown increasingly wary of potential national-security risks flowing from Australia's increasingly intimate relationship with China, echoing a worldwide wave of protectionist rhetoric and policy--including in the U.S.--that's been partly driven by soaring Chinese investment overseas.

"The Government is committed to an open foreign investment regime that strikes the right balance in managing national security risks, while promoting job opportunities and enabling economic growth," Mr. Morrison said.

The government is committed to "boost the transparency and integrity of the foreign investment regime and provide prospective investors with greater certainty about the rules," he added.

China is Australia's largest trade partner, with two-way flows last year valued at $157 billion--more than a quarter of Australia's total merchandise trade volume and almost four times the value of its trade with the U.S. Chinese investment in Australia quadrupled between 2010 and 2016 to $87 billion ($70 billion), according to KPMG.

Australia's domestic intelligence agency on Wednesday warned the Parliamentarians considering tough new counter-intelligence and espionage laws that foreign interference and meddling--blamed mostly on Beijing--had exceeded levels seen at the height of the Cold War. Australian government officials have accused China of covertly attempting to steer political processes and foreign policy, while also influencing universities and media.

In farm deals, the government said foreign investors will in the future need to demonstrate that agricultural land worth more than $15 million Australian dollars had been part of a public sales process and marketed widely to potential Australian bidders for a minimum of 30 days.

The FIRB will also now be assisted by Australia's new Department of Home Affairs in carrying out national security risk assessments on critical infrastructure investment transactions, Mr. Morrison said. Where required, ownership restrictions will be flagged to the market as early as possible in the sale process, he said.

The Kidman empire was eventually sold to a Chinese-Australian consortium involving Australia's richest woman, mining billionaire Gina Rinehart. It elevated China to become the second-largest owner of Australian farmland in 2017, behind the U.K. and ahead of the U.S.

Write to Rob Taylor at rob.taylor@wsj.com

 

(END) Dow Jones Newswires

January 31, 2018 20:25 ET (01:25 GMT)

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