WHILE most industry sectors saw substantial declines in applications and approvals for foreign investment in Australia during the 2019-20 year due to COVID issues, offshore investment interest in agriculture, forestry and fisheries rose considerably in value.
The recently released Foreign Investment Review Board annual report for 2019-20 shows total approvals in agriculture and related industries for the year totalled 174, down from 197 a year earlier. Value of ag investment approvals increased by around $1 billion, however, to $8.3 billion for the year.
Agriculture pales into insignificance when compared with other industry sectors, however, with offshore investment in services industries attracting approvals worth $73.6 billion, commercial real estate almost $39 billion, and manufacturing, electricity and gas, $33 billion.
For the first time in four years, the agriculture, forestry and fishing sector was the smallest sector by value for FIRB proposed investment approvals in 2019-20, falling behind finance and insurance ($13.6b) and minerals ($11.2b) (see table).
Approvals by industry sector
The total value of investment approvals across all industries in 2019–20 was $195.5 billion, a decrease from the 2018–19 year, when FIRB investment approvals totalled $231 billion.
Within the agriculture, forestry and fishing sector, the largest source countries of investment by value in 2019-20 were Canada ($2.6 billion), Singapore ($1.4 billion), the United States ($716m), the Netherlands ($496m), New Zealand ($331m) and China ($300m). Other countries (mostly tax havens) accounted for applications in agriculture worth another $827m.
Policy changes due to COVID
In 2019–20, there were significant policy developments in Australia’s foreign investment framework, including measures to address the unique and unparalleled circumstances that unfolded during the global COVID pandemic. This resulted in reforms to respond to particular risks and enhance Australia’s administration of the framework.
In the fourth quarter of the year, the Board’s operations responded to the zero dollar threshold announced by the Federal Government in March last year. These changes were necessitated by the need to manage the potential disruption posed by the COVID pandemic to protect Australia’s national interests during a challenging time for the economy, business and broader community.
At the time the zero dollar threshold was introduced (click here to view earlier report), there were concerns about the pressures facing Australian businesses and the potential for them to be sold to foreign interests without any government oversight, presenting risks to the national interest.
Australia was not alone in implementing such measures at the time. Steps were taken by governments around the world, including Canada, China, the European Union, India, Japan, New Zealand, the United Kingdom and the United States, to enhance foreign investment screening frameworks in response to the COVID pandemic.
The Government also announced reforms to the foreign investment framework, which were subsequently introduced into and passed by the Federal Parliament in 2020–21.
In contrast with agriculture, the overall volume and value of applications across all industry sectors to FIRB in 2019-20 was lower than the year before.
Of the 8221 applications approved in the 2019-20 year, just 174 related to agriculture, forestry or fisheries.
Looking to the future, FIRB expects a recovery in 2020–21, with Australia continuing to remain an attractive destination for foreign investment, supported by its stable democracy, strong rule of law, highly skilled and educated workforce, proximity to dynamic and fast-growing markets, abundant natural resources and world-class industry capabilities, and strong and well managed economy.
- FIRB notes that the data does not necessarily reflect a change from domestic to foreign ownership, as in some proposals both the seller and the purchaser were foreign persons or entities.