Australia's powerful mining industry argues new government proposals to tighten foreign investment laws may deter future investment to the detriment of the country's resources sector.
The proposed reforms include enhanced national security reviews of sensitive acquisitions, extra powers to ensure foreign investors comply with the terms of their approvals and amendments to streamline investment in non-sensitive areas. The federal government also plans to set up a new register of foreign ownership that will merge and expand the existing agricultural land, water and residential registers, so to increase the government's visibility of foreign investments made in Australia.
"Risks to Australia's national interest, particularly national security, have increased as a result of a confluence of developments, including rapid technological change and changes in the international security environment," the government said in a discussion paper. Canberra did not mention China by name, but the proposed measures come at a time when Australia has become more concerned about China's influence in Asia-Pacific, which has raised trade tensions between the two countries.
The Australian government's economic research body the Productivity Commission estimated that the US was the largest foreign investor in Australia as at the end of 2018, which was the latest year that data were available. It was followed by Japan, the UK and the Netherlands, while China was the fifth largest with around $40bn investments in Australia. China buys around 30pc of Australia's total exports by value.
Mining lobby group the Minerals Council of Australia (MCA) said the government should reduce the sovereign risk for mining-related investment to as low as practical.
"Continued restrictions to investment in Australia will result in faster development of alternative supplies globally at the expense of the Australian taxpayer, worker and mining sector," the MCA said in a submission to the government's proposed reforms to the foreign investment review framework.
The introduction of the new zero-threshold national security test creates significant potential uncertainty as to the types of businesses that may be covered, the MCA said. The inclusion of businesses that develop, manufacture, or supply critical goods or technology intended for military use by another country could be interpreted to include any potential input into a defence supply chain.
"Given that minerals companies produce raw materials that are ubiquitous and used in all types of consumer and military goods, it is likely to be unclear to investors making even very small investments where this definition begins and ends," the MCA said.
The industry body representing Australia's mineral exploration firms had its own reservations. The Association of Mining and Exploration Companies (AMEC) welcomed the identification of a list of commodities that Australia's Foreign Investment Review Board is not interested in to provide certainty for investment, it said in its submission.
"As mining and mineral exploration in Australia occur on crown land, will the new laws to seek foreign investment approval for acquisitions of interests from the federal, state, territory and local government bodies that may raise national security risks, apply to mineral activities?" the AMEC said.
