Inquiry weighs new rules to block foreign raids on industries

A parliamentary inquiry will consider whether foreign investment rules should be permanently tightened.

Senate economics references committee chair Kimberley Kitching says coronavirus has exposed the fragility of Australia’s medical-equipment supply chain. Picture Kym Smith

A parliamentary inquiry will consider whether foreign investment rules should be permanently tightened to protect Australia’s industrial capabilities, as the pandemic exposes supply chain vulnerabilities in key sectors.

The government has introduced temporary changes requiring offshore buyers to secure Foreign Investment Review Board approval for all takeover bids to head off predatory raids on struggling companies.

The Senate economics references committee, which was already examining the national interest test for foreign investment proposals, will examine whether Australia’s capabilities in key sectors should be specifically considered in the FIRB’s national interest test.

Committee chair Kimberley Kitching said the coronavirus pandemic had exposed the fragility of Australia’s medical equipment supply chain, and warned that longer-term changes might be needed to protect companies in key sectors from foreign takeover. “This inquiry has the ability to explore ways to ensure sovereignty is upheld and the needs of Australians are protected,” the Labor senator said. “The current global crisis has highlighted the need to secure certain assets and capability.”

Under any normal circumstances, the global trading system would ensure sufficient supplies of medical equipment and other essential goods, she said. “However, what we are seeing is an unprecedented demand on a global scale. Compounding this, we have also seen the mass stockpiling and export of equipment that could have served Australians.”

The new foreign investment rules scrap the $1.2bn threshold for FIRB consideration of foreign investments, requiring the board’s approval for all foreign takeovers. The timeframe for FIRB screening of takeover bids will increase from 30 days to six months.

Liberal MP Andrew Hastie, the chair of the parliamentary joint standing committee on intelligence and security, said the dramatically increased scrutiny of investment proposals was “prudent statecraft” to protect Australian sovereignty.

“Many of the assumptions underpinning the Australian economy have changed in the last two weeks,” he said. “We all need to be realists now.” He warned that auth­oritarian governments would look to “advance their geostrategic position” during this crisis through “their business fronts”.

ANU economist Shiro Armstrong, the director of the ­Australia-Japan Research Centre, said the new rules were “a kneejerk protectionist response”.

“I can understand instinctively why the community doesn’t want to see Australian assets sold cheaply in a sort of fire sale,” Dr Armstrong said. “But we are capital starved right now and the alternative for many businesses is to just close up and go broke.”