RURAL AFFAIRS: by Patrick J. ByrneNews Weekly
Should we restrict foreign ownership of farmland?
, September 28, 2013
Restrictions on the foreign buy-up of farmland are needed, at least until an accurate register of foreign ownerships is established.
However, the issue is complicated by the fact that many farmers would be happy to sell to anyone wanting to buy their farms, because of the parlous state of many rural industries.
One indicator of farm stress is farm debt, which has risen from 100 per cent of farm income in 1981 to about 650 per cent in 2011 (see News Weekly, August 17, 2013).
The issue of foreign ownership was highlighted recently when an Indonesian government agency proposed buying 1 million hectares of farmland in Australia’s Top End to breed cattle for export to Indonesian feed lots.
Australia’s northern beef industry has been in crisis ever since the temporary live export ban in 2011, which followed allegations of Indonesian maltreatment of cattle.
Subsequently, when Australia tried to reopen the trade, Indonesia imposed import quotas of 80,000 tonnes annually. The market used to be worth 500,000 to 600,000 head a year.
These quotas have created shortages in a market that has a huge appetite for meat. Australia is the nearest and cheapest supplier.
The proposal to have Indonesia buy Australian cattle properties may be politically aimed at placating economic nationalist forces inside Indonesia that have resisted imports after Australia’s live export ban.
It’s a sad irony that some graziers in northern Australia have had to resort to selling their properties because they have been left in dire straits after the export ban.
Their plight highlights two issues: a need to resolve the issue of the buy-up of Australian farmland and the need for a new approach to failed agricultural policies.
Currently, the threshold at which the Foreign Investment Review Board (FIRB) considers blocking a foreign buy-up of an Australian company when the purchase is 15 per cent or more of a business valued $244 million or more.
In the case of commercial property or real estate, the threshold is $53 million.
These restrictions apply only to a single purchase and not the cumulative buy-up of businesses or land. The rules don’t apply to creeping acquisitions.
Further, a report by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) in 2010 concluded that “there is no systematic source of data on foreign ownership of agribusiness companies. Nor is there regular information on the nationality of foreign inventors or about the type of entity involved. The extent of investment by foreign government entities is also not known.”
In the same year, the Australian Bureau of Statistics estimated that the area of land owned by foreign interests was 11.3 per cent, about the same as in the early 1980s. However, the usefulness of the survey has been much criticised.
Investment rules vary internationally.
New Zealand has much tighter restrictions on foreign investment in farmland than Australia has. The NZ Overseas Investment Office has to approve investment in “sensitive land”, which is described as:
• farmland that exceeds five hectares;
• land that exceeds 0.4 hectares and adjoins certain types of reserve or conservation areas (that also exceed 0.4 hectares); and
• land that exceeds 0.2 hectares and adjoins foreshore.
Australia’s former Trade Minister Craig Emerson argued that restricting foreign ownership would hamper Australia being able to sign free trade agreements (FTAs), particular with China.
However, NZ has both tight restrictions on foreign ownership and an FTA with China.
China does not allow foreign ownership of land, but allows foreigners to lease land.
Argentina has a 1,000-hectare limit on foreign investment.
In Canada, the provinces regulate land ownership. Foreign ownership in Alberta is limited to 20 acres, and in Saskatchewan it’s 10 acres.
In the United States, some states have regulatory requirements, while Washington requires foreign buyers to report all acquisitions of agricultural land within 90 days. The figures are reported annually.
The incoming Agriculture Minister, Barnaby Joyce, has opposed both the land sale to Indonesia and the $3 billion bid by US food giant, Archer Daniels Midland (ADM), for Australia’s grain-handling company, GrainCorp. He maintains that the sales would not be in the national interest.
Following a 2012 discussion paper on foreign investment in agricultural land, the Coalition has promised to reduce the threshold for buying farmland down from $248 million to $15 million.
However, it will remain subject to the FIRB’s “national interest” test. To date, the Nationals have failed in their bid to have this test more tightly defined.
Clearly, restrictions are needed, at least until an accurate assessment of the level of foreign investment is made. Such measures should include:
• Maintaining majority Australian ownership in farmland;
• Allowing agricultural land to be leased for 20 years.
However, the willingness of farmers to sell their land to any buyer won’t abate until new agricultural policies make farming profitable again.
(Victorian DLP Senator John Madigan has launched a petition opposing increased foreign ownership of farmland at www.WeWontSellOut.com.au).
Patrick J. Byrne is national vice-president of the National Civic Council.