Foreign investment is very welcome in Australia, but national security considerations have shot up the agenda, participants in Infrastructure Investor’s Melbourne Summit heard at a panel discussion today.
“Australia welcomes foreign investment and has been heavily reliant on it,” said Patrick Secker, a member of watchdog Foreign Investment Review Board, pointing out that FIRB approvals for 2015/16 totalled nearly A$250 billion ($190 billion; €170 billion), a 30 percent increase from the previous year. China was the biggest source of approved FDI, at almost A$48 billion, followed by the US, with A$31 billion of investments.
But he recognised “the FIRB has been the canary in the coal mine when it comes to national security in Australia”, flagging up cases that were not being taken up by governments because the requisite processes were not in place.
When asked about the national security issues that scuppered the initial Chinese-backed bids for the privatisation of Ausgrid, the New South Wales poles and wires business, Secker said they had obtained information from an important ally that there was a national security problem. However, that information was received one day before the 2016 election was called, preventing an electorally constrained federal government from making a speedy decision.
“At the end, the NSW government felt a bit hard done by, but there is a pretty important reason why those particular applicants were rejected,” Secker said, highlighting there have only been five FIRB rejections over the last 15 years. Although he did not disclose the reason, he did offer a hint: “It was about who operates Ausgrid, not who owns it.”
Warren Mundy, managing director of Bluestone Consulting and a director of the Sydney Desalination Plant and Transgrid, agreed that “the question is not so much about foreign ownership, but rather concerns over national security. However, governments are seeing ownership regulation as a way to deliver national security outcomes. That is not the most efficient way to manage the risks of national security.”
The stage is set for that to change, though, with the establishment of the Critical Infrastructure Centre, in January, a one-stop-shop to address national security issues regarding Australian Infrastructure.
But Gary Sofarelli, a director at the UK’s Foresight Group, suggested “the introduction of a pre-screening process, where the FIRB could raise red flags would help” keep bidding costs down. “What is critical here is to get more consistent with the approval results and how national interests are assessed.”