Australia has announced that it will be tightening foreign ownership rules. This follows criticism over the long lease of Darwin port to a company in China with “minimal scrutiny.” Announcing this, Treasurer Scott Morrison said in Canberra that the new rules will take effect on March 31. Accordingly, the Foreign Investment Review Board (FIRB) will go for a “formal review” of all asset sales in critical infrastructure.
Australia faced heavy criticism for its minimal assessment before it leased the Darwin port to a Chinese company. Critics allege that the Chinese company has links with the People’s Liberation Army, reports News Corp.
The $500 million-plus Darwin deal was for 99-years. It also invited criticism from the US leaders, including President Barack Obama, who reportedly asked Prime Minister Malcolm Turnbull why his government was not informed of the long-term lease agreement.
However, Morrison did not link the Darwin port to the proposed changes in foreign investment rules. He made it clear that all high values asset sales in future will be subject to a “more robust process.”
The “higher scrutiny” also drew criticism from some quarters. Shane Oliver of AMP Capital Investors Ltd in Sydney said the tightening will affect Australia’s capacity to attract foreign investment for meeting its infrastructure needs. It would also send mixed messages on Australia’s openness to overseas buyers, reports Bloomberg.
“An overseas investor would interpret it as increasing the hurdles needed to buy Australian assets,” Oliver said
Deals already in the pipeline worth more than $20 billion will be affected by these new rules. Most of the assets lined up for sales are in states and territories.
Morrison listed some of the upcoming deals that would face the test. They include Ausgrid valued at more than $10 million, Port of Melbourne ($6 billion), Port of Fremantle ($1.1 billion), Endeavour NSW electricity at $4 billion.
The changes in rules will require all applicants to satisfy a “tax deed” to ensure payment of a fair share of taxes in Australia.
“Under current rules which have not been amended assessment of critical infrastructure was only required when assets were sold to state-owned enterprises,” Morrison said.
He said the new rules will be binding on all critical infrastructure sales, including airports, shipping ports, public transport, electricity, gas, water roads, railways, land transport network, telecommunications and nuclear facilities.