If it wasn't clear that "the national interest" was a pretty hazy criterion on which to deny foreign investment approvals, then Scott Morrison confirmed it last Friday.
The first time the Government rejected a Chinese bid for the S Kidman & Co. estate — Australia's largest private landholding — it was because part of the property, Anna Creek, was next to a sensitive defence site.
In fact, some of Anna Creek is in the least important green zone of the Woomera Prohibited Area, which is infrequently used by the Woomera Rocket Testing Range. Nevertheless, the Foreign Investment Review Board was skittish about a Chinese company owning property nearby, so the deal was scuttled in November 2015.
The Kidman deal was then restructured to exclude Anna Creek. Last week, Morrison announced that this wasn't enough — the property is just too large to be sold to a Chinese firm. Kidman and Dakang Australia Holdings have until Tuesday to come to another arrangement, otherwise Morrison's "preliminary decision" to prevent the sale will become a permanent decision.
It's easy to present the Kidman sale as a big deal. It is, indeed, an enormous collection of properties, spread across Western Australia, South Australia, the Northern Territory and Queensland. It was put together in the 1890s by Sidney Kidman, to whom the words "baron" and "legendary" are usually affixed.
But the land is in fact some of Australia's least productive. We're talking about desert. The Kidman holdings are enormous because they have to be — to run cattle across such stark landscape you need space.
As David Uren pointed out in The Australian over the weekend, S. Kidman & Co wouldn't even rank in a list of Australia's largest 2000 companies. It has nowhere near the largest number of head of cattle of Australian companies. Geographic size isn't everything.
Still, you might object, size does matter. But how? Why? Morrison's press release announcing his preliminary decision is completely empty on this point. It states simply that the sale of a property of Kidman's size is not in the national interest.
How so? Is it because, as Morrison points out, there are some Australian companies that are interested in the property? This assumes what needs to be shown — that large scale foreign investment is against the national interest, but domestic investment would not be.
Usually governments feel the need to offer arguments in defence of their position. Morrison's press release offers no justification — just "the national interest", an empty signifier with no qualification or clarification.
If Kidman is sold, the land would remain in Australia, obviously. The property's new foreign owners would be able to do no more or less with it than any Australian owners would.
Some have claimed that the sale might result in the loss of Australian jobs, if the new owners brought in Chinese workers. But any Australian purchaser could do the same. The thing that is stopping them is our strict immigration system, and the heavy regulatory constraints around the 457 skilled worker visa program.
Simply put, land owned by foreign investors continues to be governed by Australian law. It is private land so it can be used for private purposes, within those legal constraints. To be afraid of foreign ownership of land is to be afraid of private ownership of land. And to punish it.
Two things are going to happen if Morrison fails to approve the sale of Kidman. First, Kidman's owners are going to get less money for their property than otherwise. Less money is less investment in Australia — with its superior bid, we can assume that Dakang believes it can run a more efficient and profitable enterprise than any other bidder. Australia is still desperate for capital investment, particularly in the vast interior. Investment brings jobs. Investment brings growth. Blocking investment harms both.
Second, any failure to approve seriously damages Australia's reputation for stable and reliable investment, and the marketability of other properties that might be sold in the future. Hence the concern from farming groups — WAFarmers and the Northern Territory Cattlemen's Association, for instance. All this populist handwringing about foreign investment in agriculture actually harms the real farmers who want to maximise investment and sale prices.
We have a clear national interest in attracting investment; a clear national interest in promoting investment certainty; a clear national interest in developing the interior; a clear national interest forging tighter economic links with China; and a clear national interest in allowing Australian property holders to get the best deal for their property.
All of these things encourage economic development and growth, with flow-on effects that enhance our living standards. The Coalition understood this, when, after the 2013 election, they declared that Australia was open for business. How are potential investors in Australia supposed to see that promise now?
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