Coronavirus: foreign investment scrutiny tightened in FIRB revamp

Josh Frydenberg insists new rules tightening scrutiny of foreign buyouts are not aimed specifically at China.

Treasurer Josh Frydenberg in Parliament House in Canberra last week. Picture Gary Ramage

Australia will now scrutinise all proposed foreign investments and extend a time frame for a decision on approval to up to six months, as it prepares for a deepening economic fallout from the coronavirus pandemic.

Treasurer Josh Frydenberg said the changes were needed to protect the national interest and the measures would remain in place until the current crisis is over.

He also denied the move was directed at China.

Governments around the world are rethinking takeover codes amid concerns that businesses will turn insolvent and lay off workers if they cannot raise additional cash.

However, governments are also alert to attempts by cashed-up foreign investors to acquire assets of strategic importance, as happened during the financial crisis more than a decade ago.

In Australia, airlines have slashed capacity on international and domestic routes in recent weeks while standing down workers to navigate the turbulence created by the pandemic. State and territory governments have also ordered non-essential businesses to close, backed up by hefty fines for those that don’t comply.

Current rules apply varying monetary thresholds for foreign investment, reflecting factors that include the investor’s country of origin and the type of asset that they are seeking to buy. For example, bids of less than $1.192 billion for businesses deemed non-sensitive typically won’t attract scrutiny if originating from a country with a free-trade deal with Australia.

We’re abolishing the threshold for foreign investment proposals to $0.

This gives the Government greater visibility & enables greater scrutiny of foreign investment proposals to safeguard the national interest as we deal with the economic implications of #COVIDー19. pic.twitter.com/hhVrLNMujz

— Josh Frydenberg (@JoshFrydenberg) March 29, 2020

Now, the threshold has been reset temporarily to zero across the board, Mr Frydenberg said.

“The government recognises that foreign investment will play an important part in helping many businesses get to the other side - securing jobs and supporting our economic recovery,” said Mr Frydenberg, who labelled the measures “strict and unprecedented”.

“However, these measures are necessary to safeguard the national interest as the coronavirus outbreak puts intense pressure on the Australian economy and Australian businesses.”

He said the precautionary, temporary measure “reflects the extraordinary times we’re in”.

“It will give the government greater visibility and scrutiny of foreign investment proposals to ensure that they remain in the national interest.”

The Foreign Investment Review Board, the agency responsible for screening offshore takeover bids, has extended time frames for reviewing applications to up to six months from 30 days.

Mr Frydenberg denied the move was directed at China.

“This is not [about] one particular country,” Mr Frydenberg told ABC. “In fact, China last year was the fifth-largest foreign investor in Australia with investments of around $13 billion. This compares to the United States which was the leading foreign investor of $58 billion.

“What is very clear to us, and also to the European Union and other countries around the world, (is that) in these extraordinary times need to more strictly assess the foreign investments that are coming into Australia.”

With Dow Jones Newswires