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Don’t take China for granted

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Originally published in Farm Weekly by Amber Atkinson – 11.13

THE new national president of Australia’s China Business Council, Duncan Calder said the time had come for Australia to have the long awaited national debate on foreign investment.

After countless education campaigns trying to demystify the perception that Chinese investors are buying up large areas of Australian farmland, KPMG and a string of experts have indicated that enough is enough, and Australians must make a choice.

Mr Calder said Australia could find itself in the “too hard basket”, with countries such as Kazakhstan, Russia and the US, more favourable investment destinations.

While the issues for and against foreign investment have always been polarising, Australia’s apprehension has led Chinese companies to feel cautious about engaging with Australian agribusiness, according to Mr Calder.

He explained that Australia was flagged as China’s key destination for its first major wave of investment, but the tides were turning.

“The outcomes have been quite disappointing for the Chinese investors and, equipped with the experience they have gained from their dealings with Australia, they are turning elsewhere,” Mr Calder said.

“The challenge for us is when a CEO of a Chinese company is looking where to invest and they see statistics that shows greater return on investments out of Australia.

“There is no doubt that we have seen increasing outflows of Chinese capital to countries other than Australia, and it is no longer the number one destination market.”

According to Mr Calder, the argument for foreign investment boiled down to capital.

“The fact is that as a country, we’ve never had enough capital to expand our country – we’ve needed it from the English, then the Americans, then the Japanese,” he said.

“And we still need capital from all of these countries but in a difficult global market we increasingly need capital from the country that has the greatest liquidity, cash resources and investment capabilities – and that’s China.”

But unlike decades past, Mr Calder said Australia was now in a race for Chinese capital.

“Other countries are putting more effort into making the investment regime more appealing than what we have done historically,” he said. “I think this is why this new Federal Government has been so clear and succinct in constantly repeating the words ‘open for business’.” Mr Calder sees foreign investment as part of a broader solution to reduce farm debt.

And while this may not be an option for the run-of-the-mill small family, this doesn’t necessarily cut them out of the game.

“We’ve got to package up opportunities for investors overseas – Chinese and otherwise – and then present that in such a way that the model and the opportunity to invest is one that we are happy with as a country and that appeals to the Chinese,” Mr Calder said.

“So if we want to put together models that are more lease-based than sale-based then it’s my experience that that is quite achievable as long as the overall package is attractive.”

One of the key arguments used by those opposing foreign investment is that, with so much produce headed overseas, Australia may reach a position where it cannot feed its own population.

“In WA we already export 80 per cent of the food we produce, so we’re never going to run out of food for ourselves, but we can produce a lot more food for the world,” Mr Calder said.

Ferngrove Wine Group managing director Anthony Wilkes said broadacre farming wasn’t alone when facing the stigma of foreign investment and that similar misconceptions were alive and kicking in the wine industry.

Almost three years ago Ferngrove was seeking investment from both within and outside of Australia when an opportunity arose with a privately-owned Chinese manufacturing and diversified wine and food company. The end result was a significant investment that has seen the wine producer go from strength to strength.

Mr Wilkes emphasised that Ferngrove was not the only wine producer to tread this path and that some of Australia’s most coveted wineries have survived because of foreign investment.

Household names such as Cape Mentelle, Peter Lehmann, Gemtree Wine and Pipers Brook Wines have all been strengthened by opening its doors to international investment.

According to Mr Wilkes, foreign investment gave stability and resources to invest and grow the business with a long-term, generational approach. “In the past three years international investment has allowed us to acquire another two vineyards, which has boosted our ability to control quality and our fruit resource for 350 hectares, which is significant,” he said.

“And just yesterday we placed an order with a local Bunbury wine tank manufacturer, which in an investment of hundreds of thousands of dollars, to put greater capacity into the winery equipment.”

Growth of the business has not only led to more local investment, it has also been the catalyst for more local jobs and greater job security for long-term Ferngrove staff. Mr Calder also emphasised that foreign investment had a long line of economic advantages – most importantly, retaining jobs in Australia.
He sees foreign investment as a means to attract investment into the agricultural industry and keep farming families on their land, as well as providing them with access to the Chinese domestic market which can integrate Australian produce into their value chains. The connections Mr Wilkes made through the investment process have opened up several crucial doors that have put the wine maker in good stead to boost wine exports.

“It’s opened up potentially one of the biggest wine markets in the world – being China, which is very complex to understand without local know-how and contacts,” he said. “Our wine maker is going up there in November to do staff training and tasting with distributors but also, in mid-November, we are bringing down 20 distributors that can really get an appreciation for the fine quality of wines we produce, the way it’s made and the food safety of our production processes and a real feel for the place and people.”

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