Foreign Ownership of Primary Production Land in NSW Q1 2012

Introduction

One concern further hindering foreign ownership legislation, is that available information regarding foreign investment in the sector is inadequate to support policy decisions. The aim of this report is to identify the largest foreign land owners in NSW and suggest measures to ensure that the use of land is consistent with the representations made by the owners to the Foreign Investment Review Board (FIRB).
Land is considered as the ultimate investment due to its scarcity and stability, as well as its ability to generate an income. It is for this reason that the issue of foreign ownership of Australian land has been fiercely debated over the past 30 years. Recent surveys by government agencies have failed to reassure the public, despite the results showing that 89 per cent of agricultural land, 99 per cent of agricultural businesses, and 91 per cent of water entitlements were entirely Australian owned. The government considered the findings as a vindication to their foreign investment policy, concluding that further scrutiny of overseas investors will lead to reduced investment in Australia.
More recently the debate has focused on the $13 million increase of the FIRBs threshold to $244 million. The threshold is the value of a transaction that mandates an application to the FIRB. The threshold was indexed at the start of 2012 despite calls to reduce the value to $5 million so it can capture more foreign investment transactions. However, this indexation makes little change to the oversight of land transactions, as normally sales fall below this amount.
Discussion
The Ho Myoung Farm company was identified as one of the largest investors in NSW, with land ownership of over 500,000 hectares (ha) as at February 2012. The company, which is owned by the Korean Young An Group owns land in Wanaaring in the states Orana Region. It is important to note that the carrying capacity of the land (a standardised method to measure the viability of a farm) in this region is low compared with other areas of NSW. In many regions large farms are a requirement to ensure a sustainable business.
The United Kingdom is represented in the top ten investor list by Clyde Agricultural and Michael Hintzes MHPF, with all of Clydes properties currently on the market and MHPFs NSW portfolio nearing $100 million. UK investors represent a case in point about foreign ownership, highlighting the cycle of investment in and divestment of farm assets.
Cargill is the most diversified company currently transacting in the market, with a recent purchase in the Riverina District. With its parent company in the United States, Cargill Australia owns both the commodities management (abattoirs, feedlots) as well as the ownership of AWB Grainflow, with grain receival sites throughout the state. Through its Black River Asset Management subsidiary the company also owns a large share in BFB Pty Ltd, a large land owner in the Riverina and Central Western Districts.
Analysis An analysis of prices per hectare of land revealed a range between $2,229 per ha (MHPF) to $2,647 per ha (Westchester) for portfolios that are weighted towards the centre of the state. Further west the rate per hectare declined together with the carrying capacity of the land. Examples include Clyde Agriculture ($310 per ha) and Swiss Australian ($88 per ha). Top prices were paid by Shenhua Watermark for land in the Breeza area, averaging $10,917 per ha. The high rate is reflective of the change in land use from farming to mining. This highly productive land in the Liverpool Plains was bought over 2009/10, with the company currently in the process of obtaining mining licenses.
Clyde Agricultural demonstrates the cyclical nature of foreign investment. The parent company John Swire and Sons has been selling the northern NSW holdings of Clyde over the past two years.
Localities where countries have established their operations are shown on the map (refer to PDF below) providing a snapshot of the dispersion of each countrys investment across the state. UK and US investors target properties in the Murray and Riverina Districts, while Ho Myoung Farm (Korea), Glencore (Switzerland), and Swiss Australian Farm own large properties in the states Far Western Region.

Conclusion

The table (refer to PDF) summarises the identifiable land owned by some of the largest foreign investors in NSW. While the aggregate of the area shown is miniscule compared to an approximately 56 million hectares of agricultural land in NSW, there are many gaps in information due to delayed settlements and the secrecy that often surrounds foreign investment transactions. Given the limited information that is readily available, it is likely that the true extent is larger. Furthermore, the structure of ownership is often complex, with foreign parent companies owning shares in several Australian subsidiaries.
Recommendations
The Senate Rural Affairs and Transport References Committee is currently examining the impact of foreign ownership, Focusing on the National Interest Test, with a report due in March. While the recommendations of the committee are still unknown, it is suggested that the following recommendations have the potential to increase the transparency of foreign investment in Australia and NSW:
1.The establishment of a state registry to track the foreign ownership of land.
2.The examination of the different methods of ownership with a special attention given to trust structures and the major shareholders of large agricultural land owners.
3.Ensuring foreign investors representations and undertakings, as to the use of the land, are enforced upon settlement.
4.More attention has to be paid to the ownership and control of facilities such as abattoirs, ports and dairies, as they often bare greater risk to the national interest than the farmland itself.