Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

I continue my remarks in respect of the Foreign Acquisitions and Takeovers Amendment Bill 2009. At the time the debate was interrupted earlier, I was referring to the fact that the amendments are designed to capture foreign investments that have the potential to provide substantial influence or control over an Australian company either now or into the future. The bill clarifies the operation of the act by explicitly requiring foreign investors to notify the Treasurer where there is a possibility that the type of investment arrangement being used will deliver influence or control over an Australian company.

The Foreign Acquisitions and Takeovers Act 1975 provides the basis for the Treasurer to examine proposed foreign investments in Australian businesses and assets to ensure they are not contrary to the national interest. This bill amends the act to reflect the growing use of more complex investment structures, particularly instruments such as convertible notes, which will now be treated as equity for the purposes of the act. The bill will clarify the operation of the foreign investment screening regime and will ensure the act applies equally to all foreign investments, irrespective of how they are structured. The changes to the act under this bill will apply retrospectively from the date of the Treasurer’s announcement on 12 February 2009. Although this bill clarifies the operation of the act, it does not pre-empt any final decision by the Treasurer on any current or future investment proposals. Applications to the Foreign Investment Review Board will continue to be examined on a case-by-case basis against the national interest.

Foreign ownership of resources, industry and commercial operations in Australia continues to be a polarising subject amongst the Australian people. On one hand, foreign investment has over the years enabled Australia to expand its economic base and in turn create jobs and boost productivity and export income. The counter view is that foreign ownership of Australian assets places Australia at the mercy of overseas countries and overseas boardrooms, who have little empathy for the local community or Australia’s national interest but are instead driven solely by their profit and loss statements.

This becomes even more of a concern when the foreign investment results in a monopoly or unfair market power over the sector, leaving Australian consumers vulnerable. It therefore becomes a balance between ensuring foreign investment that benefits the nation is encouraged, ensuring that Australia’s national interest is preserved and ensuring that Australia’s international investment and trade obligations are met. The recent global economic recession has highlighted the risks Australia can be exposed to when we are too reliant on the global economy and on foreign investment.

In South Australia these risks were clearly exposed with the global downturn in the auto industry and the impacts that downturn had on GMH operations at Elizabeth and the Bridgestone tyre manufacturing plant at Salisbury. Whilst the GMH operations at Elizabeth have survived the rationalisation of GM’s global operations, the Salisbury Bridgestone plant did not survive. The plant is set to close sometime in April of 2010 with the loss of around 600 jobs. Further job losses are likely to occur at other local businesses that have been highly dependent on the Bridgestone plant for the past 45 years. I understand that another 275 jobs will be lost in Christchurch in New Zealand with the closure of that plant by the end of this year.

Salisbury is one of Bridgestone’s many plants around the world. Bridgestone was founded in 1931 and today operates 190 manufacturing plants worldwide in some 26 countries. Of those plants, 76 are tyre related. Production at the Salisbury plant commenced in 1964 under the Uniroyal brand. In 1980 Uniroyal was bought out by Bridgestone and the Salisbury plant became the Bridgestone plant. Bridgestone’s retail operations will continue in Australia, with all tyres sold in future being manufactured in one of their overseas plants and imported into Australia. There has been no evidence that the Australian Salisbury plant was not independently viable or that it could not have survived the global recession. The reality is that decisions about its future were made by a boardroom in Tokyo with the decision most likely based on Bridgestone’s corporate international best interests and not because of Australia’s best interests. I note that the Bridgestone Corporation recently announced the building of a new retread material plant in Thailand and an increase in production of a tyre production plant in China. On the one hand we have the Salisbury plant being closed and on the other hand we have an expansion of operations in Thailand and China.

The closure of the Bridgestone plant also raises another concern. I understand that with the closure of South Pacific Tyres, who were the manufacturers of Dunlop and Goodyear tyres in Australia, we no longer in this country have a major tyre manufacturing operation of any kind.

About three weeks ago the member for Wakefield, who I notice is in the chamber here today and whose electorate the Bridgestone plant is within, the member for Port Adelaide and I had meetings at the Bridgestone tyre factory at Salisbury. Along with the Minister for Employment Participation, Senator the Hon. Mark Arbib, we had discussions with the management of Bridgestone to secure the ongoing rights and entitlements of the workers. I am pleased to see that the management is working with the South Australian government, with the federal government and with union representatives to ensure that the rightful termination payments and the necessary support are given to the 600 employees of that plant as they transition to new employment.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

They are not working nearly hard enough.

Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

I note the member for Wakefield saying that they are not working hard enough. In this respect I particularly acknowledge the work of David Di Troia, the state secretary of the Liquor, Hospitality and Miscellaneous Workers Union, and the role he has played in supporting Bridgestone employees, most of whom are LHMU members. I am sure that the member for Wakefield and I will be watching this very closely because the last thing we want to see is those workers being given a raw deal of any type, given that many of them have been working at that plant for so long. I know that from speaking to a number of the employees, on the day that we were there, there were people who had been working at that plant for 25 to 30 years, in fact most of their lifetime. For them, I am well aware that it would be difficult to transition to any other form of employment after having spent all of their lives effectively doing one particular job.

I was also pleased to read an announcement only recently, on 16 November, that the GM operations here in Australia, which did survive the global rationalisation and restructuring, are stepping up production. At the Holden plant at Elizabeth they will be increasing the production of their motor vehicles from 310 to 340 cars per day and the global V6 engine facility in Port Melbourne is increasing its engine production from between 240 and 320 engines produced per day now to something like 440 engines per day. It is great to see that because the GM operations here in Australia have always endeavoured to be self-sustainable regardless of their connection to the global operations of the rest of the GM organisation. GMH in Australia has always made sure that they were sustainable in their own right. That has only been because of the terrific working arrangement that has been established between the workforce of GM, particularly at Elizabeth—where I can speak from experience, having gone out there on many occasions—and the company itself.

There is another brief example I want to give which highlights the volatility of foreign ownership. I refer to the video games industry and the company Ratbag Games. Ratbag was quite rightly celebrated as a South Australian success story. Founded in 1993, it became a world leading developer and producer of video games and had titles published worldwide across a range of platforms. The company employed over 50 South Australians in this emerging industry, an industry for which many young people have a passion and aspire to work within as a career. It made the front page of South Australia’s daily newspaper the Advertiser when Ratbag was taken over by Midway Games in August 2005.

Midway Games is one of the largest and most established video games companies worldwide. This takeover was celebrated, with a local company started by a group of friends now becoming part of one of the largest international companies in the industry. In December 2005, just four months after the takeover, Midway closed some of its international operations to cut costs as a result of its financial difficulties. This included the Adelaide studio that had previously been Ratbag, with the loss of over 50 jobs. I understand that many of the former Ratbag employees found employment with other companies in the industry, but we see the same situation where a successful local business through no fault of their own has been closed down. The parent company’s financial difficulties have meant that the decision to close the operation in Adelaide is again made by a far-off boardroom.

I just want to close with a few other issues that are related to foreign investment in this country. One can only speculate as to how often foreign acquisitions are made with the sole purpose of either closing down a competitor or of ultimately transferring operations to an existing offshore facility. It is something that we need to watch, because ultimately it will be the people of Australia that are affected when that happens.

The last matter I raise with respect to foreign investment is the alleged practice by overseas parent companies of structuring global operations so that profits are declared in low-tax countries. This is a practice that is extremely difficult to prove particularly when overseas operations of the same company are charging the Australian operations inflated prices for raw materials, products or services, the clear intent being for the sole purpose of tax minimisation, with Australia again missing out on this legitimate tax revenue.

These are clearly issues that I am sure that the Treasurer is concerned with and matters that have to be taken into account when we consider foreign investments into this country. I know that this bill goes a step further in ensuring that decisions are made in the national interest, and for that reason I commend the bill to the House.

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

in reply—I want to thank all those members who have contributed to this debate on the bill. This bill is a straightforward but important reform to improve the integrity of Australia’s foreign investment screening regime. The bill implements my announcement in February 2009 that the Foreign Acquisitions and Takeovers Act would be updated to reflect the more frequent use of complex investment instruments such as convertible notes and warrants. These types of arrangements have a solid commercial basis but were not envisaged when the act was originally drafted. The bill clarifies that under the act the government can examine in the national interest any investment proposal that could deliver substantial influence or control now or in the future of an Australian company valued over the threshold. The bill applies from the date of announcement, 12 February 2009, to provide maximum certainty around the act’s application while providing flexible and sensible transition provisions.

The bill is consistent with Australia’s international obligations by keeping to the act’s original policy intention. The Australian foreign investment regime has helped to deliver significant benefits to the Australian economy. Foreign investment has spurred growth, competitiveness and jobs in the Australian economy. Access Economics has estimated that 14 per cent of all Australian jobs are attributable to foreign direct investment. Foreign investment drives innovation, skills development, technology and healthy competition. The government is committed to a regulatory regime that gets the balance right, protecting the national interest while ensuring that Australia is a competitive destination for foreign investment.

I have in recent months announced additional changes that go to this question of balance, which are not dealt in this bill. The foreign investment framework must keep pace with changes and trends if it is to remain effective. This bill clarifies that the government can screen investments that involve complex financing arrangements in the same way as traditional shares or voting power. Supporting this bill will improve and safeguard the integrity of foreign screening. This is one important part of an effective foreign investment approach that is well-established and familiar to international investors. This is good for Australia and so important as we prepare the Australian economy for the growth beyond the global recession. I commend the bill to the House.

Question agreed to.

Bill read a second time.