Cynthia Dearin is Managing Director of Dearin & Associates, a consulting firm focused on investment and cultural ties with the Middle East and North Africa.
I closed my previous post by saying that recent objections to acquisition of Australian agricultural businesses by Middle East and North African (MENA) companies have little basis in fact.
One of the more commonly cited concerns around foreign ownership of Australian farmland is that produce will be shipped directly to the owner's country of origin and will not be available to the Australian domestic market. Presumably the fear is that in the event of future food shortages, Australians might go hungry while others enjoyed Australian-produced food. This concern might have some resonance in a less food-secure nation than Australia, but as we already export between half and two-thirds of our food production, are rated one of the most food-secure nations on earth, and enjoy the status of being the world's fourth largest net exporter of agricultural products, it seems far-fetched.
Moreover, it is hard to see how a foreign investor could secure sufficient farm land in Australia to pose such a risk. As mentioned in the previous post, Australian Agricultural Company, which controls just 1.1% of Australia's land area, is probably responsible for less than 1% of total agricultural output. It would take fifty operations of the same scale all diverting 100% of their output to foreign markets before there would be any risk to national food security.
Another concern related to foreign acquisition of agricultural land is that foreign owners will trash the land and destroy the environment. There seems to be little evidence for this, as corporate and foreign owners have often been better at adopting sustainable practices than domestic owners, presumably because they are answerable to investors who are keen to ensure their reputation is not tarnished by poor environmental stewardship. Foreign land owners also generally have better access to the finance necessary to implement environmental enhancements, and often see such expenditure as a way to enhance the capital value of the land.
Critics also fear that foreign owners might import labour and farm inputs, taking jobs from Australian workers. Once again, experience does not bear this out, as foreign owners have been obliged by the Foreign Investment Review Board to retain the existing Australian workforce and have tended to promote the fact that they employ experienced Australian farm managers and workers. Hassad Foods, for example, vaunts the strength and experience of its Australian property managers and operators.
As industry bodies recognise, foreign ownership of farm land has the potential to significantly benefit the agribusiness sector. Increased transparency around land acquisition and the use of agricultural land should be implemented as a means of allaying public concern. A Senate committee report into foreign investment and the national interest released on 26 June outlines a number of transparency-related measures including the establishment of a national land register that makes it compulsory for all foreign persons or organisations that acquire or transfer an interest in agricultural land and water to report the sale.
The Government should also consider introducing additional measures to promote transparency, such as making public reports produced by the FIRB following the acquisition of agricultural land by foreign investors. These reports confirm, for instance, whether land is being used for the purpose for which it was purchased and that the owners continue to comply with conditions such as use of Australian expertise and labour to cultivate agricultural land.
Requiring foreign investors to certify annually that they are generating increases in productivity and adhering to environmental standards would also demonstrate the bona fides of foreign investors and the benefits of foreign investment in Australian agricultural land to the public.
These measures are unlikely to entirely dispel public concern around land acquisition by foreign investors from the MENA region. Nonetheless, they would go some way towards creating greater acceptance of the idea that acquisition of Australian land could be a positive for MENA countries looking to secure a stable food supply and promote political stability at home, and a plus for Australian agribusiness.