26 February 2016
Media Release - #2016018, 2016

Opinion piece, Australian Financial Review

In recent times we have seen the devastating impacts of the former Labor Government's knee jerk assault on the live cattle trade and the Victorian government ripping up the East West link contract that also cost taxpayers more than $1 billon.

It's called sovereign risk - something I never thought I would see associated with Australia. It cost jobs and growth, because it undermines confidence to invest in Australia's future.

In these times of global economic uncertainty, being a safe and secure place to invest has never been more important to Australia.

We are not an emerging economy with low wages and unregulated markets that delivers the big returns that go with the high levels of risk. This is not our competitive position.

We are a high wage, developed and stable economy, with an educated and highly skilled workforce whose future depends on our reliability, diversification, innovation and connectedness to the rest of the world.

This week I decided not to object on national interest grounds to  the sale of the NZ owned dairy company VDL to Moonlake Investments, a privately owned Chinese Company – the owner of which has a good track record of operations in Australia. VDL has been foreign owned since it was founded in the 1800s.

The New Zealand owners went through a formal sale process that had been going for several years. Australian companies bid in that process and were unsuccessful, including TasFoods with whom Jan Cameron was associated. Having concluded the sales process and having entered into a contract with VDL, Moon Lake submitted the purchase for approval, as required by the Foreign Acquisitions and Takeovers Act 1975 (FATA), for my consideration of whether the transaction was contrary to the national interest.

The FIRB process is not a relitigation of the tender process. It is not, under our law, an opportunity to reopen the bidding and consider alternative purchasers. It is a decision about whether the proposed acquisition is contrary to the national interest.

VDL produces less than 1% of Australia's milk. The new owner has agreed to honour all existing supply contracts - which are currently to a NZ company. The new owner has guaranteed all 140 jobs and committed to an additional $100 million investment in the business which will create a further 95 jobs. This means jobs and economic growth in Tasmania. In addition there are no national security issues. The former head of ASIS and ASIO David Irvine sits on the FIRB Board that recommended approving the sale.

In addition, for the first time, I imposed new conditions that protect against the new owner engaging in transfer pricing to shift profits overseas, to avoid paying tax here. Failure to comply means I can order a divestment – so they pay tax here or sell up, it's not a subtle message or an idle threat.

So the proposal delivers jobs, new investment, maintenance of supply and protection for taxpayers.

Those who have opposed this decision argued that the FIRB process should have been used to overturn an entirely legitimate private tender process because an unsuccessful commercial bidder had failed to win the contract.

If the Government acceded to this demand, no investment tender process could be taken seriously again in this country. That would be against our national Interest. This would have smashed investor confidence at the worst possible time and counteracted the significant gains we have been making that is helping Australia be so successful as we transition our economy.

The alternative decision would have put the jobs of 235 Tasmanians at risk and robbed the Tasmanian economy of $100 million in new investment. It would also have added a sovereign risk premium to every other transaction in the country that would follow because no investor would be able to have any confidence that their successful bid wouldn't be gazumped by unsuccessful bidders pressuring the Treasurer to reopen the process. This would corrupt and undermine the integrity of all future sales processes.

It's our job to reduce the risk of investing in Australia, not increase it. It's not our job to run the tender process for the sale of privately owned assets or act as a court of appeal for failed commercial bidders.

Our government is serious about driving jobs and growth. This decision supports that objective and proves that we are serious even when faced with difficult decisions.