Protect data in foreign takeovers: FIRB chief

Our personal data must be protected in foreign takeovers just like critical infrastructure, FIRB chief warns.

David Irvine has warned of foreign takeovers of Australian companies.

Australians’ personal data must be protected in foreign takeovers just like critical infrastructure such as ports, water and power, Foreign Investment Review Board chairman David Irvine has warned.

The former ASIO chief said the board was taking a tougher stand on buyout proposals that involved offshore bids for Australian-based companies holding sensitive ­personal data and businesses holding data centres. “The protection of sensitive data is becoming the issue du jour — and not just ­sensitive national security data,” Mr Irvine said in a speech to the Australia China Business Council in Sydney.

“In recent years, FIRB has seen an increased number of foreign ­investment proposals seeking access­ to data centres and other ­facilities which house or have access­ to sensitive private data about Australians.”

Mr Irvine — also a former head of the Australian Secret Intellig­ence Service and a former ­ambas­sador to China — said he saw the board’s role as imposing conditions on foreign bidders designed to make data more secure and insisting­ on third-party monitoring that the foreign bidder was complying with the conditions after the deal was done.

Mr Irvine said the board was evolving its policy in “applying conditions which give Australian citizens a much better chance of having their information protected in a world where it is difficult to protect anyone’s information”.

He said he did not want to see foreign takeovers of Australian companies resulting in situations where someone took the personal data of Australians “willy nilly and (dumped) it in some foreign storage unit in Hyderabad or Qatar”.

Mr Irvine said he saw data ­security as ranking alongside ­critical infrastructure as an increasin­gly sensitive area for the board to review when it came to bids by foreign companies.

“The development of data-­security conditions — conditions on the foreign investor to protect data — continues to be a key area of focus for us,” he said. “Our polic­ies are evolving in that sense.”

The FIRB provides advice to the Treasurer, who makes the fin­al decision on foreign takeovers.

Mr Irvine said the federal governme­nt had set up the Critical ­Infrastructure Centre last year to look for ways to identify and ­protect critical assets including ports, water, energy and telecommunications.

“I am having a long-running battle with the Critical Infrastructure Centre, which says critical infrastructure is ports, water, power, energy and telecommunications,” he said. “I am saying there is anothe­r one: it is called data. Because­ technology is evolving so quickly, our policies are going to have to evolve quickly too.”

Mr Irvine’s comments follow the federal government’s move last year to ban Chinese telecommunications companies from ­supplying equipment for Australia’s 5G network.

The health industry is also becomi­ng an increasingly attractive area in Australia for foreign investors­, particularly Chinese buyers, with big deals for companies such as Sirtex Medical, Life-Space Group, Nature’s Care.

An indicative bid by Chinese company Jangho, for ASX-listed medical services company Heal­ius, in January, raised questions about the security of Australian Defence Force records, as the company­ provided imaging for the ADF.

The bid, by Healius’s largest shareholder, was rejected by the board and did not go ahead.

A survey released in April by KPMG and the University of ­Sydney showed that healthcare was the most popular area for Chin­ese investors in 2018, attracting 42 per cent of total new investment from China during the year.

Tom Uren, a senior analyst at the Australian Strategic Policy Institute­, said that FIRB’s tougher stance on data protection from foreign ­investors was a “step in the right direction” but required more consideration.

Mr Uren said the major factor that led to Huawei’s ban from the 5G network was the fact that Australi­a would be putting critical infrastructure in the hands of foreig­n investors “whose intentions (with our data) may change”.

Mr Irvine said FIRB’s tougher approach to data security had had “very little pushback from foreign investors”.

He said he urged sellers of ­critical infrastructure, including state governments, to talk to FIRB early in the process to understand its policies on foreign ownership.

Mr Irvine said that Australia welcomed Chinese investment.

“In recent years, foreign investment, including from China, has enabled Australia to take advant­age of a once-in-a-generation ­resources boom, which has helped drive exports from Australia and new business opportunities in China,” he said.

He said there could be several reasons for last year’s drop-off in new Chinese investment, particularly by state-owned enterprises.

FIRB’s latest report shows the US has passed China as the country with the largest amount of new investment approvals. The report shows approvals of proposals from the US went up from $26.5 billion in 2016-17 to $36.5bn in 2017-18, while approvals for bidders from China went down from $38.8bn to $23.7bn over the same period.

Mr Irvine said China was now the fifth-largest foreign investor in Australia.

He said he would be making a visit to China next month to explain­ Australia’s evolving foreign investment review policies.