January 31, 2018 / 11:23 PM / 4 months ago

UPDATE 2-Australia curbs foreign ownership of farmland, electricity grids

* Australian government to restrict foreign energy purchases

* Treasurer already has discretion to regulate foreign purchases

* Treasurer blocked Chinese, Hong King energy grid bids in 2016 (Recasts, adds Morrison source)

By Byron Kaye and Colin Packham

SYDNEY, Feb 1 (Reuters) - The Australian government plans to impose new restrictions on foreign purchases of electricity grids and agricultural land, saying the move will safeguard national security and help local companies better compete for farm sales.

The changes are the latest steps by Australia to keep a tighter rein on foreign investment, a politically sensitive topic which has helped bolster populist parties in recent state elections at the expense of the state counterparts of the centre-right federal government.

“The government is committed to an open foreign investment regime that strikes the right balance in managing national security risks, while promoting job opportunities and enabling economic growth,” the government said in a statement, referring to the new electricity rules.

The federal government has already ratcheted up its control over the vetting of high profile foreign sales since 2015 when the government of the remote Northern Territory sparked a public outcry by selling a port to Chinese interests without seeking federal approval.

The shift has frustrated foreign buyers who are no longer guaranteed of securing Australian assets even when they bid the most.

BUYING BACK THE FARM

The new agricultural policy forces sellers to advertise locally for at least 30 days, ensuring that Australians have the opportunity to purchase agricultural land ahead of foreign buyers.

Foreign entities seeking to buy any major Australian asset must already apply to the Foreign Investment Review Board, which is overseen by the country’s treasurer.

A government source said the new measure was designed to stop rural land sales being privately negotiated without the land ever going to market.

“We want to see a fair and transparent process. There had been some cases were when some foreign companies have purchased properties that hadn’t even been on the market,” said a source familiar with the thinking of Treasurer Scott Morrison.

Australia introduced a register of foreign ownership of agricultural land in 2015. Its latest report showed agricultural land held by Chinese interests grew tenfold in 2017, making China the second-biggest foreign owner of farmland behind the United Kingdom. Total foreign-owned farmland shrunk to 13.6 percent of total farmland, from 14.1 percent a year earlier.

The government also cut the threshold at which foreign buyers of farmland must seek regulatory approval to A$15 million from A$252 million.

Matt Dalgleish, analyst at agricultural research company Mecardo, said locals still owned the vast amount of agricultural land in Australia.

“This announcement will appeal to voters that have moved their support to parties such as Pauline Hanson’s One Nation,” said Dalgleish.

ENERGY GRID CHANGES

The government said on Thursday that all future applications to sell electricity transmission and distribution assets will attract ownership restrictions or conditions for foreign buyers.

“Electricity distribution and transmission infrastructure are critical national assets and a key national security safeguard is the diversity of ownership of these assets,” Morrison and Home Affairs Minister Peter Dutton said in a joint statement.

No major Australian electricity grids are currently for sale. The grids of the country’s two biggest states are already privatised, and planned sales of the next two biggest states’ grids were cancelled amid vocal public opposition.

$1 = 1.2415 Australian dollars Reporting by Byron Kaye and Colin Packham; Editing by Richard Chang and Richard Pullin

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