Cyber concerns behind block on Chinese Probuild bid

Australia’s decision to block the Chinese takeover of construction firm Probuild followed extensive discussions between security agencies and the FIRB.

Treasurer Josh Frydenberg. Picture: Gary Ramage

Australia’s decision to block the Chinese takeover of construction firm Probuild followed extensive discussions between security agencies and the Foreign Investment Review Board and comes against a backdrop of growing government concerns about cyber warfare.

Josh Frydenberg called FIRB chairman David Irvine before deciding to block the bid by China State Construction Engineering Corporation on national interest grounds, a senior government source has confirmed.

The Chinese state-owned company was told in December that its application to buy the Australian-based company had been rejected, at which time the state-owned enterprise withdrew its $300m bid.

National interest has become an area of greater focus over the past five years, coinciding with the Australian government’s growing concern about the escalating threat of cyber warfare, and more broadly for the capacity for data to be compromised or stolen by hackers.

There is the belief in the government all nationally sensitive areas have become dependent to some degree on the cyber world.

Issues around who controls the quality of and access to Australians’ data has become an area of increasing focus for the FIRB, and the government has been imposing more conditions on foreign companies regardless of their provenance to control these risks.

In the case of building contractors, FIRB guidelines note that foreign intelligence services could gain access to sensitive blueprints or install surveillance equipment in sensitive buildings. Probuild was involved in the building of the Victorian headquarters, as well as in the construction of CSL’s Melbourne head office.

FIRB made its formal recommendation to the Treasurer following intense consultation with security agencies, including ASIO and defence, as well as with the Australian Taxation Office and ASIC. The Treasurer has the power to make the decision based on the evidence presented by the FIRB, and in this instance had the support of Mr Irvine, the source said.

The senior government source also denied the charge from China that FIRB’s national interest test unfairly targets Chinese firms, saying all state-owned enterprises would automatically require FIRB approval, regardless of provenance.

The insights come as Josh Frydenberg on Thursday pushed back against accusations from China’s foreign ministry that Australia’s investment regime and the new emphasis on national interest was politically motivated and discriminated against our biggest trading partner.

“When it comes to our approach to foreign investment, we welcome it,” Mr Frydenberg said. “It is important to Australia, from whichever country it comes. But we do have a strict national interest test.”

Mr Frydenberg said over the past six months 250 bids involving Chinese companies had been approved by the FIRB. That meant around one in five foreign investment applications involved at least one Chinese party in the bid, he said.

The rejection of the bid sparked a furious response from the Chinese embassy, which accused the government of “weaponising the concept of ­national security’’.