Mixed messages mar investment moves

Inconsistent government policy regarding foreign investment is hurting a range of industries.

IT’S hard to know when foreign investment is welcome and when it is not.

Over the years we had been courting those offshore investors when we wanted to develop our minerals wealth. At first it was British money, then American, then Japanese and, more recently, Chinese.

Such investment has involved rules about control and often, for bigger projects, involved some form of diplomatic negotiations to ensure that sovereign risk for both sides is avoided.

At some point that investment started paying dividends much greater than many Australians could envisage at the time these projects were financed by offshore investors – because we didn’t want to fund them or did not have the expertise to do so.

Due to that, two years ago, when launching the Resource Super Profits Tax, Treasurer Wayne Swan railed against the high foreign ownership of Australia’s miners and how profits were flowing out of the country.

Mr Swan was very specific in his attacks, focusing on companies that had operated here for decades and become dominant forces in Australian mining because they had bought-up rival players at prices their owners were willing to sell them for.

Those ‘foreign’ companies – BHP Billition, which is based in Melbourne and Rio Tinto, which is dual-listed in Australia and the UK – were now the bad guys for taking the long view on commodities and accepting the risk that investing in them brought. 

Of course, the foreign investors need not have worried. In the case of the RSPT they struck a deal with new Labor leader Julia Gillard for a more friendly mining tax, leaving smaller Australian-owned miners out of the negotiations.

Many of the local miners – the smaller ones for which the RSPT was meant to make life easier by saving them from the nasty royalties – objected to the government’s new deal with the  big miners.

As a result the federal government shifted its anti-industry rhetoric to local Australians who had done well from mining – entrepreneurs whose profits were remaining inside Australia. 

Now, Andrew Forrest and Gina Rinehart were the greedy mining billionaires, a new target to replace the faceless foreign companies that were harder to vilify because they didn’t wear pearls or a flouro shirt.

With this in mind I was somewhat bemused when I read about federal Trade Minister Craig Emerson talking up Chinese investment in agriculture to develop our north as a food bowl.

There is no doubt that the world’s growing population needs food and Australia, with vast tracts of undeveloped land, a small population and historic farming expertise, is in a good position to benefit from that. This is not new.

Farmers and rural entrepreneurs have been talking about this for decades. In fact, many of them have been trying for just as long to develop untapped parts of Australia; but governments, including this one, have stood in the way.

In his book To Dam or be Damned, author and businessman Jack Fletcher writes of his efforts backed by US investors to develop large-scale cropping in the Kimberley, only to be thwarted by state and federal governments that were not interested, or even opposed to the idea.

Some of the Kimberley’s most productive areas are due to infrastructure that his progressive enterprise abandoned after it became clear that the large-scale development required to make the agriculture there truly cost effective would not be allowed.

More recently, successive state governments have failed to allow pastoralists more freedom to develop other uses for their land beyond cattle. Many pastoral stations have ample bore water and good soil, which could be converted into various forms of horticulture if they were allowed to. Red tape stops them, forcing them to be marginal operators.

This is to our detriment. Our regions would be far healthier if pastoralists were able to make a better living from their land. More people would be employed, the economies of these areas would be diversified, our export industries would grow, and we could feed more people.

And then, even when pastoralists manage against such odds to eke a reasonable living from cattle, Mr Emerson’s federal government tries to destroy them by shutting them down for weeks over a TV documentary showing cruel treatment of Australian cattle in Indonesian abattoirs. There is plenty of evidence the industry has gone backwards as a result of that policy failure.

It really does intrigue me as to why this federal government is even considering Chinese investment in northern Australian agriculture when it has done all it could to restrict that kind of development in the Kimberley.

It turned a study into the development of North Australian started by prime minister John Howard into a recommendation to the opposite – suggesting the Kimberley wasn’t suitable for development.

Then it sought to put a large amount of the region under a blanket of red tape linked to heritage powers.

With all this damage done, it is a wonder anyone is interested in developing it at all, let alone foreign interests.

Going back to my mining example above, there would have to be similar risks. It is also worth remembering that, like the Kimberley, much of today’s mining resources were out of bounds for development at all before foreigners starting investing.

Iron ore, for instance, was considered a strategic mineral that could not be exported. Without exports, no-one wanted to develop it. Lang Hancock, Mrs Rinehart’s father, argued against the prevailing view in the bureaucracy that there was not enough ore for everyone. He was, of course, quite right.

That opened up investment to foreigners, often at the expense of locals like Mr Hancock, who were treated shoddily by the same governments that were benefitting from his discoveries.

Ultimately, the federal government started to dislike the foreign investors as well – hence the rhetoric around the mining taxes.

Imagine if this kind of history repeated itself in agriculture.

We unlock land that local investors have wanted to access for years and invite foreign interests to develop it.

As food prices rise we benefit but eventually we, as a nation, get greedy and demand a bigger slice of the action because food is our resource and all the profits are going to foreigners.

The Wayne Swan of the future will be able to tell our children how we should not allow foreign interests to take all the benefits of our agriculture while introducing a Food Super Profits Tax.

Then, when we realise that foreigners are needed to keep investment, that future Mr Swan can pick on Australian farmers instead, claiming they are being greedy by not sharing their wealth. The poor miners, by then, will be wanting a handout, along with the car industry, which will have never stopped taking the government’s money.

• mark.pownall@wabn.com.au