Chinese Investment in the Kimberley
- Wednesday, 11 July 2012
Background
In late April 2012, a Chinese investment group trading as Kimberley Agricultural Investments (KAI), launched a bid to buy 15,000 hectares of land in the Kimberley region of North-Western Australia. With a population of 1.3 billion, China’s investment in foreign agricultural land is motivated by increasing food requirements and a need to secure food resources for its future population. This sale of land to a foreign investor, however, has led to much debate over legislation changes, questions of sovereignty, monitoring of land acquisition by foreign companies and questions about Australia’s own plans for long-term food security.
Comment
The Chinese investment group KAI intends to develop the land for sugar production and a beef industry capable of processing 500,000 head of cattle per year.
The WA Government is already spending $311 million on expanding the Ord irrigation scheme, to facilitate the extension of agriculture in the Kimberley. There are many who believe that foreign investment is necessary to assist in this development of the agricultural sector. Frank Tutor, National President of the Australia China Business Council, quoted by ABC Rural on 7 June 2012, spoke in favour of foreign investment and its foreseeable benefits. He said: “we need to go overseas to attract investment to be able to develop the projects which give rise to employment opportunities, which give rise to royalties going into government, taxation going into government and we all enjoy the proceeds of that.”
At the Australia Summit on 3-4 May 2012, Prime Minister Julia Gillard spoke about Australia’s potential to become an important supplier for the increasing regional demands for food in the future, saying: "Just as we have become a minerals and energy giant, Australia can be a great provider of reliable, high-quality food to meet Asia's growing needs".
However, China’s bid to purchase the 15,000 hectares – the entire area of the Ord-East Kimberley Expansion Project – immediately became a contentious issue within government and amongst farming organisations. The Australian reported that 13 other companies and individual farmers have also made submissions to the WA government seeking to purchase the land, including Australia’s largest beef company, the Australian Agricultural Company. Its CEO, David Farley, argued against the need for foreign investment. He stated that: "there's no need for a Chinese investor to win this at all, Australia is more than capable of developing this asset itself… We've got the skills base, we've got the intellect and more importantly we've got the capital base within the country to take this project on and deliver it to market." (ABC News, 1 June 2012)
An important issue that has been raised is that of legislation, particularly the possible changes that may be made to the Foreign Acquisitions and Takeovers Actas part of this deal with China. The Regulations under the Act control the reporting and approval of foreign acquisitions of Australian assets and establish the monetary thresholds that dictate when reporting and approval are required.
China is seeking a free trade agreement with Australia, which may result in such acquisitions of Australian farmland being subjected to less scrutiny than at present. Liberal Senator Bill Heffernan has taken a critical stance on this issue, calling for more scrutiny on proposed farmland acquisitions, cautioning that such deals could threaten Australian sovereignty, and seeking amendments to the Act to include stricter requirements for mandatory reporting of land acquisitions. Senator Heffernan has also spoken out on tax evasion issues, saying that the current tax system is not equipped to deal with such foreign investments and that there is the potential for the tax system to be significantly bypassed.
On the issue of mandatory reporting of foreign land acquisitions, the Western Australian Farmers Federation has suggested that to make informed decisions about how foreign investment is affecting Australian agriculture, it is necessary to have a registry of foreign investors (ABC News, 1 May 2012). Currently, it is only necessary for sales of properties worth over $231 million to be registered and considered by the Foreign Investment Review Board (FIRB), so it is impossible to estimate the exact impact of these foreign investments, since the records do not include smaller acquisitions.
Future Directions International, reported, in Foreign Ownership of Agricultural Land Remains Unchanged After 30 Years, that that just 11 per cent of Australian agricultural land is foreign owned, and that this proportion is on par with the percentage of foreign ownership in the mid-1980’s. The report was based on a survey of 11,000 agricultural businesses, conducted by the Australian Bureau of Statistics in September 2011.
Nevertheless, since only larger purchases have to be reported to the FIRB, it is difficult to know the total extent of foreign ownership of agricultural land and businesses. Although the ABS survey provides a useful estimate, a more accurate assessment could be made if all purchases were required to be registered with the FIRB.
Finally, China’s bid for land in the Kimberley has raised the issue of food security for Australia and questions about Australia’s plans for the future. Nationals Senator Barnaby Joyce commented to The Sydney Morning Herald on 1 June 2012, that “...it exposed the lack of planning for our own food security”.
Foreign acquisition and leasing of agricultural land is a global phenomenon, which can be expected to increase as the need to secure food sources intensifies. How Australia chooses to negotiate land acquisitions, to balance the need for foreign investment with the need to maintain a secure food-production basis for itself, is likely to continue to present a difficult problem. Ultimately, Australia needs to ensure that appropriate steps are taken to monitor foreign land acquisitions, protect business opportunities for Australian farmers, keep quality food affordable for the Australian public and strategically plan for Australia’s own long-term food security.
Sarah Metcalfe
Research Assistant
FDI Global Food and Water Security Programme