Guarding food security in the national interest

It would seem preposterous to contract our nation’s defence to a foreign country – but this is what we could be potentially doing with our most precious resource – food. The decisions we make now will affect our food security into the future, which is why we need to determine our national interest in terms of foreign investment and ownership.

The issue is one of control. It is not in our national interest to lose control of food production – for domestic consumption or export opportunities.

To date, policy regarding foreign investment in agricultural land and business has been based on short term gains. Absent is long term planning in the national interest. What is required is serious opportunity cost analysis into any major foreign ownership of agricultural land. This analysis should be undertaken against what is in the national interest. A central tenant in understanding national interest is best understood by Han Morgenthau, a leading figure in international relations during the twentieth century, he writes:

above all, remember always that it is not only a political necessity, but also a moral duty for a nation to always follow in its dealings with other nations but one guiding star, one standard for thought, one rule for action: The National Interest.

To date, I do not believe the assessment of foreign ownership applications in the ‘national interest’ has been diligent or thorough enough. Nor do I believe it reflects the advice given by Morgenthau. It is difficult to interpret what criteria the Foreign Investment Review Board use when it examines applications and how it tests those applications against the national interest. Until a clear definition of criteria is made regarding what the national interest means for Australia then it will remain vague, ill-determined and at risk.

Not only have we been complacent about what is in the national interest, we have also tended to be complacent about food. Our fortunate, perhaps ‘lucky’, situation has meant we have not had to think seriously about food security issues. However, the world is changing and we need to pull ourselves from this ‘lucky’ complacency and think carefully about the future.

With a predicted global population of around nine billion by 2050 the global food task is going to increase exponentially. The combination of population growth and expansion in consumer demand points to a global requirement for food about 110 per cent larger than today by that time.

As countries’ populations expand, so will their requirement for food. And with increased urbanisation coupling with reduced arable land contributing to the difficulty of attaining the level of domestic food production necessary, it is no surprise some countries are looking to Australia as a source of food supply into the future.

But there appears resistance from policy makers to address the looming threat. A common argument against developing policies to ensure food security for Australians is that we have an abundance of food production activities and most of our agriculture is exported. It is true that we export most of what we grow in Australia. However it is a very short-term view to consider future domestic food needs in terms of current production. No-one argues that, currently, domestic food production is under threat.

The long-term consideration is, will current foreign investment policy create a threat to that domestic productive capacity in the future? It appears that only those with short-sighted views are not willing to consider possible long-term impacts of current foreign investment policy. We are often told that foreign investment in agricultural land is in the interest of Australia but to date it seems there has not been clear or specific explanation of how it is in our interests, and more importantly how it will remain in our interests into the future.

Certainly in the instance of land purchase there is initial capital injection – but what then? Is the potential loss of control of the productive capacity worth the benefit?

At present there seems virtually no real oversight of foreign investment, in spite of the existence of the Foreign Investment Review Board. With no scrutiny required of foreign investment below for a non state-owned enterprise threshold of $244 million it makes a mockery of any real consideration of the national interest.

Indeed, it is difficult to determine exactly how determinations are made by the Foreign Investment Review Board as to what is in the national interest with regard to agricultural purchases. Given that no application for foreign investment in agricultural land has ever been denied by the Foreign Investment Review Board, it is even more concerning that there is minimal understanding of the process through which decisions are derived.

The Foreign Investment Review Board process does not take into account one of the primary concerns, and that is accumulation of land. Parcels of land may be accumulated by foreign entities totalling well over the current value threshold of $244 million, and yet a company doing so never comes under scrutiny as any individual investment is below the threshold.

As a nation we are yet to determine what is an appropriate level of foreign investment. What is appropriate in the national interest? It would be unlikely to happen, but theoretically all the agricultural land in the nation could potentially be foreign owned under current government policy.

There will be howls that this would never happen, that may be true – and yet there is nothing in current policy to stop it.

I am not advocating protectionism – I am about guarding the national interest. And it is of extreme concern that there are many who refuse to even discuss this issue. In my view ‘she’ll be right Jack’ just does not cut it.

We need a balanced, well-thought out approach to determining what is in fact in the national interest when it comes to foreign ownership and investment.

There is a belief if we do not give China what it wants in terms of access to agricultural land and minerals it will take it by force. Some say this is alarmist, but again, all considerations need to be canvassed in determining a balanced policy approach to foreign investment.

Peter Hartcher commented recently:

As the Australian economics reporter David Uren writes in his new book, The Kingdom and the Quarry: ‘As it emerges as a global superpower, China will seek greater security through the pursuit of self-sufficiency, through diversification, through equity ownership, and, if supplies are directly threatened, through military force. And if this sentiment is not managed wisely and Australia ends up acting on it by imposing new and poorly conceived restrictions on foreign investment, we could risk alarming China and other countries, provoking them into thinking about seizing resources by force

Such comments are sobering. However, we do not need a populist, knee-jerk reaction to the increasing levels of foreign investment and ownership. We do need to be prepared to properly consider all the future ramifications of current foreign investment policy. And we do need to consider whether they are, or aren’t, in the best interests of the Australian people.

With a predicted increase in the global food task by 2050, Australia not only needs to ensure our own domestic food supply into the future, we also have a moral obligation to contribute to global food requirements.

Australia is in a unique position to be able to contribute to that global food task.

We have arguably the best, most innovative farmers in the world, and highly productive arable farming land.

Indeed, many countries are now looking at acquiring Australian agricultural land as a means to guarantee their own food security, future-proofing their food supply.

Australia has become very attractive to other nations, as an international paddock with the capacity to enable a direct food pipeline back to their home country.

This is not mere speculation. Some foreign entities are very clear that this is their intent.

An example of this is Hassad Australia, an Australian company that was established in November 2009. It has one shareholder, the Qatar based company Hassad Food, a branch of the Qatari government.

The Qatari Government is actively developing a food security network around the world. Using Australian land principally in eastern Australia, Qatar’s interests in land span from Cunnamulla, in Queensland through to the Macquarie Valley and Canowindra in New South Wales and the Moyston, Kaladbro, and Strathdownie regions of Victoria.

While it is a commercial entity, Hassad Australia has been on the public record saying that it has a plan to ensure future food security for Qatar through foreign investment in agricultural land.

China’s food security plans have also targeted Australian farmland. The foreign government aims to purchase underutilised land in northern Australia. The proposed investment will cost billions and it subject to a joint nation’s feasibility study. The Chinese move is part of its overall global plan to develop food pipelines, including in South America and Africa, in order to meet its predicted domestic demand. As the Chinese Agricultural Minister Mr Han Changfu stated in December 2011 “overseas farming has become an important strategy.”

Singapore’s Olam International has also been buying prime agricultural land in Australia. It now controls almost 45 per cent of Australian almonds after its purchase of Timbercorp and its 8,096 hectare plantation.

While there is much commentary about financial benefit of foreign investment, there is commensurately little about potential lost financial opportunity, for farmers and for the nation’s economy.

There will be significant export opportunity for Australian farmers in the future as a result of the increased global food task – it would seem that enabling maximum domestic production capacity in the hands of Australian farmers would be a worthy goal.

Comparatively, seeing export earnings profit foreign entities rather than our own, and the issue of a foreign entity’s ability to avoid paying tax in Australia, are potential end results from current policy, neither benefiting the nation’s economy.

It is of concern that the current government appears to be moving at a fast pace to provide land for Chinese agricultural land purchases. There certainly appears to be unnecessary speed with which the government is moving to facilitate foreign ownership and investment, when there has been little consideration of the national interest. The government has embarked on this process with little public consultation. It seems that the policy is not reflecting general public concerns.

Government should be required to develop a clear assessment tool for foreign purchase of agricultural land against clear national interest criteria that is not based on short term monetary gain but on long term benefit for Australia and our food security.

Opportunity cost is the loss, or sacrifice, incurred by making a decision to take one action instead of an alternative action. So opportunity cost analysis is the study of possible benefits and risks associated with taking one action instead of the alternative action in an effort to determine if the possible benefits would be worthy of those risks. We need to first establish a set of criteria of what is in the national interest in terms of agricultural land then assess it through an opportunity cost analysis.

A transparent criteria used to measure an opportunity cost would need to include a food security plan for Australia. We should at the very least be projecting how much food is required for domestic consumption to meet the requirements of a predictable population in 2050. According to the Australian Bureau of Statistics our population is likely to double to approximately 42 million by 2056. Any predicted food requirement would also take into account possible natural disasters (drought and flood). We would also need to be strategic about how we can service the rest of the world’s demand for food by ensuring we have enough Australian owned agricultural land to continue or even increase our export capacity.

It is worth considering, before further foreign ownership of agricultural land is allowed to proceed in Australia, the requirement for a clear audit of the land we have available and its capacity to grow food for future domestic consumption and trade.

Should an audit of valuable farmland be accompanied by zoning regulations? Essentially, land could be assessed based on its productivity value – those lands that demonstrate the best combination of physical and chemical characteristics for producing food. In the name of the national interest those lands could be zoned and restricted to Australian agricultural practice only. Only after we have ensured our own food security can we assist other nations.

An opportunity cost analysis could then be placed on the remaining agricultural land outside of that which has been zoned agricultural in the national interest. An opportunity cost analysis would examine the economic and strategic value of the agricultural land in question. This value would be assessed against the long term economic or strategic value of selling the land to foreign entities, mining or environmental demands. Where the value of either selling the land to overseas interests, mining or environmental is assessed to have a better opportunity cost then the land should be sold or used for alternative activities.

Such an analysis could be a cornerstone to assessing agricultural land subject to foreign ownership. The opportunity cost analysis could also be applied to managing competing interests such as the environment or mining industry.

There will be argument against this proposition in that some landholders would be restricted from selling land to foreign entities. Yet these restrictions would not be unique, as the media and telecommunications industries are already subject to foreign ownership laws on the basis of national security. That said, however, all considerations must be canvassed if we are to determine the most robust and sustainable policy framework to ensure our future food security.

The lack of a clear set of national interest criteria is a glaring omission in the policy process. How can we possibly determine if foreign investment and ownership is in the best interests of Australians when we do not have any meaningful criteria against which to assess it?

This needs to be addressed as a matter of urgency. No longer can policy makers place their head in the sand in pursuit of short-term gain. The issue of foreign investment, the national interest test and the long-term food security of Australia can no longer be ignored.

Join the Discussion