Andrew Wallace (Fisher, Liberal Party) Share this | Hansard source

Before the COVID-19 crisis, foreign investment into this country totalled $3.8 trillion. Our attractiveness as a destination for overseas capital has only ever been increasing. Foreign direct investment inflows to Australia in the three years to 2019 averaged 3.3 per cent of GDP, compared with an average of 1.7 per cent for other OECD countries. In particular, foreign investment in critical businesses with important implications for protecting our national security is growing. In the energy sector, for example, EnergyAustralia—one of our trio of companies which together supply nearly 70 per cent of retail customers—is owned by China Light and Power. In the ACT, 50 per cent of the power distribution company ActewAGL is owned by a joint venture of the Chinese company State Grid Corporation and Singapore Power International. State Grid Corporation also partly owns most of the distributors in Victoria as well as the largest stake in South Australia's energy transmitter, ElectraNet. Likewise, the Hong Kong listed Cheung Kong Infrastructure own a 51 per cent share in two of Victoria's distributors and in the South Australian Power Networks' electricity distribution network.

However, it is not simply very large companies making very large investments. Innogy, Neoen, Goldwind, ESCO, thyssenkrupp, Canadian Solar, Acciona and Engie are all foreign owned and are all engaged in building hundreds of megawatts worth of smaller renewable energy generation projects in Australia. Most of this investment derives from our close strategic and military allies like the United States, the United Kingdom and the European Union. However, our fastest-growing source of overseas investment is China and Hong Kong. By the end of 2019, this investment had reached a total of $218.9 billion.

In general, foreign investment is welcome. However, as I've previously described to the House, there is evidence that some foreign investment may have geopolitical intentions beyond simple commercial benefits. Analysts at the Lowy Institute, among many others, have highlighted how, for example, China's Belt and Road Initiative is designed to achieve important but unstated national security and foreign policy aims for the Chinese Communist Party. These include geopolitical priorities like providing reserve entry points for China's fuel supplies, delivering access to potential future military ports and increasing China's economic influence over other nations in our region. This is only one example among many of the foreign policy objectives that are fulfilled all over the world by foreign investments made by many national governments.

The Morrison government has already acted to protect our most significant infrastructure through the Security of Critical Infrastructure Act of 2018, which I was pleased to support. However, foreign investment can be complex, and unravelling the national security implications is not straightforward at all. Certainly many investments, even those of considerable size, have limited implications for national security. Investment in non-essential services or companies like retail chains are unlikely to be a significant risk. However, some seemingly innocuous and modest investments could have an indirect impact on our critical national security assets or organisations and that is what this bill will address.

Through my work as chair of the parliament's defence subcommittee, I've had the privilege of visiting many ADF installations. However, the sensitive asset that particularly comes to mind is Open Pool Australian Lightwater, or OPAL, in Lucas Heights. OPAL is one of the world's most effective multipurpose research facilities and is vital for Australia's medical supplies, as the deputy chair well knows. However, it's also a potentially dangerous nuclear reactor—and I say 'potentially'. The site is patrolled 24 hours a day by armed Australian Federal Police, who were a very visible presence during the time I was there. OPAL maintains a risk and audit committee and its security processes have been subject to approval by relevant Commonwealth bodies. In short, the Commonwealth has considerable control over the OPAL reactor and, of course, its security, as is right and appropriate. We would not allow foreign investment in it or in any other national security asset.

However, not far away, OPAL is surrounded with private land. It is supplied with much of the equipment and supplies it requires by private companies. Private contractors provide services, specialist technology and some personnel to the site itself. The impact that these private enterprises could have on the efficient and effective operation of this critical national security asset is potentially significant.

The same is true of those businesses which supply the ADF or our intelligence services. The commercial ecosystems that surround large and technologically complex organisations are huge. The impact they can have on the direct defence of this country should not be underestimated. The situation is perhaps even more clear in the case of critical infrastructure like energy and transport facilities. Though the government has protected these directly with the Security of Critical Infrastructure Act, the possible impact on them and on our community of any inappropriate activity among the many private suppliers and contractors could be significant.

The possibilities are not difficult to imagine. Organisations so closely linked to critical infrastructure, defence and intelligence assets could potentially put this country and its citizens at risk through the inappropriate use of sensitive data, unauthorised technology transfer and even direct interference through the disruption of supply chains or services. Such ideas are not fantasies. Overseas aggressive foreign powers have shown a strong interest in, for example, disrupting electricity supplies. Cyberattacks against the electricity grid of Ukraine in 2015 and 2016, for example, left more than 200,000 citizens without power. Media reports regarding the activities of private company Cambridge Analytica in the US and UK, and reports of Russian interference in elections in the US and elsewhere, suggest the compromising impact that a large-scale data breach by a hostile power could have on our economic and political life.

This bill will help to prevent that outcome by ensuring that the government has the ability to stop investments that are a threat to national security. Before the government's recent and temporary COVID-19 measures came into effect, private foreign investors in most sectors needed only to seek government approval for investments of more than $275 million. This means that investments in some of our most sensitive sectors like software, low-volume high-tech manufacturing and digital technology were not ordinarily screened, even where an investment could raise national security concerns. These sectors are especially important to our defence and intelligence interests, yet they are made up of many smaller, specialised companies which would not attract investments over the threshold.

The bill before the House will provide that the Treasurer must be notified of all foreign investments of any amount which involve national security businesses or land. It will also provide the Treasurer with the ability to call in any other foreign investment if he or she considers that that investment may pose a national security concern. This second power ensures that all ownership can be considered without the unnecessarily onerous requirement that absolutely every foreign investment be referred to the government. If the Treasurer identifies that a proposed investment could cause a national security concern, he can approve it with conditions which would allay that concern, require that assets be divested before the investment can go ahead or prohibit the investment entirely.

Importantly, this power is flexible. Our nation's national security situation is fluid and responsive to the actions of billions of people, businesses and state actors. The actions of foreign investors themselves will sometimes have the ability to change that. In circumstances where a significant change has taken place, the Treasurer must have the ability to review and alter previously acceptable investments if they now pose a risk to national security. Though the criteria to be met are appropriately robust, with the last-resort power this bill provides for such a rare, but important, situation.

Finally, this bill ensures that the Treasurer's new powers will be enforceable with a series of substantial new penalties for noncompliance. It also ensures that there will be comprehensive information available to the government regarding foreign ownership of assets with a potential national security implication. By creating a single public register of land, water and national security assets held in foreign ownership, the Treasurer will have the information he needs to respond to emerging threats.

From the many hundreds of millions of dollars of foreign investment into Australia each year, this measure is expected to affect only a very small number of investments. The regulatory burden and disincentive to investment will be negligible. It is estimated that the reforms will result in around 100 additional applications and 1,800 additional registrations being made by investors each year. The total compliance cost will be, in aggregate, just $1.5 million a year, and the bill further mitigates this by reducing the complexity of the fees system and removing as many of the low-risk investments from the need to make an application as possible. The Morrison government is far from alone in recognising the necessity of making this change. Between 2017 and last year, nine out of the world's 10 largest economies have introduced greater government oversight of foreign investment with national security implications.

Foreign investment across Australia is welcome. On the Sunshine Coast alone we need billions of dollars worth of new infrastructure and jobs for the future for our young people. The Morrison government is already spending more than $3.5 billion on infrastructure in my community, and more funds will always be needed. Foreign investment offers one important option for finding those funds and delivering projects quickly and efficiently. Foreign investment also helps to increase our ties with other economies in our region and encourages greater prosperity for all of us. However, as I've sought to outline today, this overseas investment is not without some risk. We cannot ignore the fact that there are growing threats to Australia's national security from some of the very nations with which we trade. The world's strategic situation is rapidly changing, and competition between nations for exports and investment is ever increasing. We cannot guarantee that a state which is our friend today will not have powerful incentives to act against our national interest tomorrow. We need a foreign investment screening process which is robust, comprehensive and flexible to meet those changing threats. Alongside the government's legislation on critical infrastructure and arrangements with states and territories, this bill is another important step towards securing our nation from foreign interference. I commend the bill to the House.

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