Australian Foreign Investment Board Needs Overhaul, Report Finds

  • State and local government assets exempt from FIRB scrutiny
  • FIRB process appears to be ad hoc, run on case-by-case basis

Australian lawmakers said the nation’s foreign investment regulations need to be bolstered after the U.S., its main ally, queried a decision to sell a port in the northern city of Darwin to a Chinese company.

An interim report by senators released Thursday said the Foreign Investment Review Board needs to be strengthened as state- and local-government-owned assets, regardless of their strategic importance, remained exempt from its scrutiny. The Northern Territory government approved the sale of the port -- home to U.S. marines -- without needing further permission from the national regulator.

“The capacity of FIRB to provide informed and effective national security-related advice to the Treasurer is a matter of concern,” the report said.

Australia is seeking to toughen restrictions on the sale of state-owned infrastructure to foreigners after President Barack Obama’s administration raised concerns about the deal in Darwin -- a city that hosts U.S.-Australian war exercises and where as many as 2,500 Marines are based on a rotational basis. Australia’s defense department has dismissed claims the sale to privately-held Chinese company Landbridge Group could undermine national security.

Landbridge, which operates a 30-million metric ton per annum port in North Haizhou Bay in Shandong province, is paying A$506 million ($363 million) for the 99-year-lease to operate the port, with the Northern Territory government planning to use the proceeds to invest in new infrastructure.

“The Foreign Investment Review arrangements need to be strengthened in their capacity to support assessments while also ensuring that they can continue to be responsive to new and emerging challenges,” the report found. “The FIRB process appears to be ad hoc, run on a case by case basis,” with the committee to further investigate whether the watchdog needs to be a made a statutory body.

Before it's here, it's on the Bloomberg Terminal.