Australia overhauls investment rules for national securityBusiness | 5 Jun 2020 4:52 pm
Changes to Australia's foreign investment rules should not inflame tensions with China, Prime Minister Scott Morrison has said while unveiling a sweeping overhaul aimed at protecting Australia's national security.
Under the new plan, the Foreign Investment Review Board (FIRB) would have to approve all investments in a "sensitive national security business," regardless of the value of the deal, ABC News reports.
That could apply to businesses in communications, technology, energy and major infrastructure such as ports and defence contractors.
FIRB provides advice to the Treasurer and Federal Government on whether to approve foreign investments in Australia.
Asked whether the changes to foreign investment rules would add to tensions with China, Morrison said the new rules were formulated based on Australia's national interest.
"I see no reason why that should be the case," he said. "Countries make decisions on their own interests for their own rules and we respect the rules and interests of other countries."
The government wants the new system in force by January 1, 2021, to address what FIRB described as the "increasing risks to the national interest".
Currently, FIRB approval is required where a foreign investment is worth more than A$275 million (US$190.8 million) or more than A$1.2 billion for Free Trade Agreement partners.
There is a lower threshold for purchase of agricultural land and all investments by foreign governments require approval regardless of value.
The proposed changes would see the threshold changed from monetary value to the nature of the business, reflecting the importance of some smaller firms, particularly in the technology sector.
The Treasurer would also have "call in" powers to assess an investment before, during, or after an acquisition, as well as the power to order a divestment if national security risks emerge after an investment is approved.
For example, a foreign company investing in a small defence equipment manufacturer in Australia does not currently need FIRB approval, but would under the proposed regime.
Likewise, a technology security start-up that gets foreign backing in its early days could be re-assessed by FIRB if it grows in importance, while the current laws have no provision for that.
Treasurer Josh Frydenberg said the changes were necessary to respond to a changing world.
"Of the nearly A$4 trillion of foreign investment in our country, more than 20 percent comes from the United States, more than 10 percent from each of the United Kingdom and Japan, and a little over 5 percent from China," he said.
"Foreign investment regulatory framework has always sought to strike a balance between, on the one hand, welcoming and inviting foreign investment to this country but on the other ensuring that those foreign investment proposals that succeed are in our national interest."
In a statement, FIRB chair David Irvine said the changes would make the system "stronger and more sustainable".
"The package appropriately addresses increasing risks to the national interest whilst ensuring Australia remains welcoming and open to foreign investment," he said.
Home Affairs Minister Peter Dutton said the changes were important, given Australia was "seeing more foreign interference than we've ever seen before".
When asked if the changes were aimed at Chinese investments, Dutton said the new rules would be "country agnostic."
"That is important because the threat can come from a number of actors and we need to make sure that we can deal with that threat," he said.
Shadow Treasurer Jim Chalmers indicated the Federal Opposition may support the Government's efforts to get the legislation through Parliament by the end of the year.
"On the face of it, these appear to be be sensible steps," he said.
"To maintain the integrity of the foreign investment regime, we need to avoid the sorts of errors the government has made when it comes to the Port of Darwin sale and we need to make sure that the government communicates any changes clearly."