Australia is to implement a new screening regime on foreign investors seeking to buy sensitive assets in a bid to bolster national security.
Telecommunications, energy, technology and defense-manufacturing companies will be included in the zero-dollar threshold for screening. The changes, intended to be legislated this year and enforced from Jan. 1 next year, would give the treasurer last-resort powers to force asset sales.
The intended changes could have implications on Australia’s relationship with its largest trading partner, China, which have soured this year after Australian Prime Minister Scott Morrison led calls for an independent probe on the origins of the COVID-19 outbreak in Wuhan.
Beijing responded with verbal attacks on the Australian government, saying it was doing the bidding of the US, while new tariffs on Australian barley and a ban on beef from four meatworks have raised fear in Canberra that the Chinese government is using “economic coercion” in retaliation.
“The reforms will ensure that our foreign investment regime is able to respond to emerging risks and global developments,” Australian Treasurer Josh Frydenberg said.
The government would spend an additional A$54 million (US$38 million) to bolster compliance and monitoring, Frydenberg said.
Australia is not alone in ramping up its foreign investment screening. In recent years, economies including the US, Japan and the EU have toughened their own laws to protect national security. The Australian announcement came a day after Morrison signed a defense agreement with Indian Prime Minister Narendra Modi and upgraded ties to a Comprehensive Strategic Partnership.
Under Australia’s current rules, state-owned enterprises already have a zero-dollar screening threshold, while most private investments under A$275 million, often for large land holdings, are waved through. The monetary thresholds have meant some investments that have raised national-security concerns have escaped screening.
Chinese purchases of agricultural land, including iconic properties such as the Cubbie Station in Queensland and the Van Diemen’s Land dairy in Tasmania, have proved particularly contentious in Australia.
After the changes, the treasurer will have power to to “call in” an investment before, during or after an acquisition for review should it raise national security risks and has not captured by the “sensitive national security businesses” definition.
While the treasurer will have the power of order disposal over approved foreign investments where national security risks emerge post-approval, the last-resort power will not be retrospective.
As treasurer in 2016, Morrison ordered the Foreign Investment Review Board to step up scrutiny of foreign investment in state-owned infrastructure after a strategic port in Darwin used by the US military was leased to a Chinese company.
The US remains Australia’s largest source of approved investment from overseas, comprising A$58.2 billion — or 25 percent of the total — in the year ending June last year. China comprised 5.7 percent of the total, valued at A$13.1 billion.
Before Australia’s calls for a probe into the origins of the novel coronavirus, its diplomatic ties with Beijing were already under stress. The government cited Beijing’s “meddling” into national affairs as a catalyst for its anti-foreign interference laws passed in 2018, the same year it banned Huawei Technologies Co (華為) from helping build its 5G network.
Foreign Investment Review Board chairman David Irvine welcomed the new screening package, saying it “appropriately addresses increasing risks to the national interest whilst ensuring Australia remains welcoming and open to foreign investment.”
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