Is Foreign Investment a Good Thing?

Australian Agricultural Land Foreign Land Grab?

We’re seeing a lot of reports predicting a problematic future for Australian agricultural land ownership owing to an increasing amount of land being bought up by foreigners, particularly from China. This comes amidst concerns that Australia is slipping in its competitive position for agricultural exports. Yet foreign investors are seeing potential. Are we getting complacent?

Do we need to lobby for legislation?

There are plenty of countries in the world where foreigners can’t buy land. Instead, they can get long term leases ranging from 20 to 99 years, or “lifelong leases”. When the lessee dies, the land becomes open to a new lease, or resale to citizens. But as we’ll see, this seemingly elegant solution has its own problems.

More than 3 million hectares already foreign territory

Historically, countries that wanted to undertake an expansion of resources would go to war, but nowadays, a new type of “invasion” is happening. The good news is that it’s peaceful. Nobody dies or is actually displaced, but the bad news is that one could theoretically end up in a situation when a country’s land and resources are foreign-owned.

Chinese land ownership is believed to be in the order of 2 million hectares. That’s a lot of land. People worry about an increasingly complex political future and a loss of opportunities for local farmers. A lot of the sales are to big consortiums, the kind that individual farmers simply can’t compete with on the market.

Australia isn’t alone in this concern. Headlines such as “China Buys Canada” are common, and many African states that can’t afford decent infrastructure are making deals with China for much needed seaport, road and rail linkages that will, in practice, put China in control of these countries’ economies.

Are we entering an era of economic imperialism in which entire countries are effectively “owned” by foreign investors?

Even leasing can be problematic

Leasing may look like a solution, but even leasing can be problematic. For example, Singapore locals are complaining that foreign demand for rental properties is driving market prices up, often beyond the reach of average Singaporeans. And when you have a situation in which foreign investors lease large tracts of land in decades-long agreements, you still have a degree of power imbalance.

Should we just accept the power of market forces and internationalization?

There’s a major backlash against internationalization worldwide, and it’s creating a very uncertain environment. The Brexit vote and the election of Donald Trump are just symptoms of the way ordinary people feel about globalization. Simply put, they fear they’re being “left behind”.

Should we allow ourselves to be out-competed by foreign nationals and consortiums in our own countries? Basic economic theory says that whoever has the wherewithal and the ability to be competitive should get the benefits, but where does that leave the rest of us?

Can we be more competitive ourselves? Should we subsidize?

Protectionist economic and agricultural policies have proved costly and controversial. For example, the average European cow receives more in government subsidies than a third world child receives in food and education funding in a year. Is the situation sustainable? Clearly, it isn’t.

And when we are up against powerful consortiums with lots of capital at their disposal, it becomes difficult or even impossible to compete. There are no easy answers. We certainly live in interesting times!

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