chris shulha
TRANSCRIPT
Current state of
Foreign Investment In Australia
Prepared and presented by Christopher Shulha
DoneyLeahy Private Assets and ESA
Discussion Points
A brief history of foreign investment in the 1980’s
The recent landscape of foreign direct investment
Impact on Australian economy
A quick discussion on China and real estate
The new rules and an attempt to look ahead
Going back in time…
d
A Quick Flash Back
Foreign Investment regulation was a lot tougher back then
Until 1986, inventors had to prove there was an economic benefit to Australia
Until 1986, investors had to partner with an Australian business entity to invest
Some industries foreign ownership was very restricted
Source: Kali Sanyal, “Australia’s foreign investment policy”
Restrictions ! ... things still happened
$-
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
$12,000.00
1975-1976 1979-80
(average)
1980-1981 1981-1982 1982-1983 1983-1984 1984-1985
IDFI in Millions
Mining Manufacturing Electricity, Gas and Water Wholsale/Retail Trade
Transport/Storage Finance, Property and Business Other Total
Source: Firb Annual Report 1984-1985
Industry break down in 1984-1985
Mining
3% Manufacturing
10%
Electricity, Gas and
Water
12%
Wholsale/Retail Trade
21%
Transport/Storage
1%
Finance, Property and
Business
49%
Other
4%
IDFI 1984-1985
Mining Manufacturing Electricity, Gas and Water Wholsale/Retail Trade Transport/Storage Finance, Property and Business Other
Source: Firb Annual Report 1984-1985
Liberalization 90’s and 2000’s
Regulations dropped
Examples
Before 1999, an Australian with a non citizen spouse needed FIRB approval to buy a
house. After 1999, the requirement was lifted.
After 2008, people on student visas or working visas were allowed to buy property. This
created potentially 400,000 potential new buyers into the market.
Source: Kali Sanyal, “Australia’s foreign investment policy”
Total Proposed Foreign Investment by Industry
(FIRB)
62,144
31,097 19,390
11,305 14,685
27,035
6,299 10,182
31,152
58,040 90,110
80,808 54,485
47,638
43,728 21,262
21,046
42,760 8,500
19,571
35,763
47,341
37,457 60,057
27,696
32,524
30,518
13,277
40,769 17,481
24,669
49,373
2006-2007 2007- 2008 2008 - 2009 2009 - 2010 2010 -2011 2011 -2012 2012 - 2013 2013 -2014
Agriculture forestry & fishing
$m
Finance
&
insurance
$m
Manufacturing
$m
Mineral exploration & development
$m
Real estate
$m
Resource processing
$m
Services
$m
Tourism
$m
A Look at 2013-2014 (FIRB)
FIRB Annual report 2013-2014
Who likes Australia?
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2013-2014 2012-2013 2011-2012 2010-2011 2009-2010 2008-2009 2007-2008
Foreign Investment By Country in Billions (FIRB)
Canada Japan China USA UK
The biggest player is …
China has been a big player as of late but does not have the legacy of ownership
that the USA, UK, Japan, and Canada do.
The other countries have not gone away. They may re-engage.
1980 1986 1999 2008 2012 2015
Australian partner is a
requirement
A foreign spouse did
not need an
approval to buy
property
Significant investor
visa
Student visa and
working visa were
allowed to buy
property
Today
Foreign ownership is
liberalized
Modified significant
investor visa
Timeline
Impact on Australian Economy
Foreign savings makes up for the gap in domestic savings
Increase in capital stock
Increase in GDP and National Income (Layton, 1993)
A positive influence to the labour force productivity (Krishna, 2009)
Inflow of new technology (Krishna, 2009)
Creation of new jobs
Consumers get more choice and lower prices (see chart)
Negative impact:
crowding out local investment, and
creating disorientation to the economy
A Study in 2010 by ABS
A study re: an Impact on small businesses
According to the Australian Bureau of Statistics in 2010, only 5.4% of small business has some form of foreign
ownership. However, they seemed to add measurable value. (ABS,2010)
A Study in 2010 by ABS
Impact on Consumer
Hot spot in Media
1203.00 5311.00
26,254
12,186 9,758 10505.00 8,273 5,656
712.00
1491.00
0.00
2,421 4,093 4187.00 5,932
12,406
6,163
0.00
5000.00
10000.00
15000.00
20000.00
25000.00
30000.00
2006-2007 2007- 2008 2008 - 2009 2009 - 2010 2010 -2011 2011 -2012 2012 - 2013 2013 -2014
China’s Foreign Investment Proposals by Industry (FIRB)
Agriculture forestry & fishing
$m
Finance
&
insurance
$m
Manufacturing
$m
Mineral exploration & development
$m
Real estate
$m
Resource processing
$m
What is currently changing ?
The FIRB is cracking down on temporary residents who have left Australia and have not
sold their property
Restrictions have been introduced to stop a property that has been revitalized as being
a qualified investment for a foreign investor
New investor visas have been modified and/or created to focus on non-real estate
industries
What is currently changing ? Significant Investor Visa
2012 rule 2015 rule
• Min fund: $5 mil
If do not run a business, investment options:
• Government bonds
• Managed funds
• Min fund: $5 mil
If do not run a business, investment options:
• Venture capital funds
• Emerging company funds
• Some blue chip managed funds
Source: Immi.gov.au
Any thing Happening?
0
500
1000
1500
2000
2500
Axis Title
S&P/ASX Emerging Companies
Index
Series1
800
850
900
950
1000
1050
1100
1150
S&P/ASX Emerging
Companies Index
1850
1900
1950
2000
2050
2100
2150
2200
2250
2300
ASX Small Ords
Losers and winners?
Winners
Anyone who wants to sell their business
Anyone who wants to sell property
Other opinions?
Losers
A domestic person who wants to buy a business
Other opinions?
Policy Suggestions
FIRB should could conduct a follow up study on proposed approved investment
See what actual investment occurs and how much is eventually valued to
Give foreign investors incentives to buy houses in second tier cities.
Lower the threshold for technology investment companies
The changes to significant investor is a start
Having capital coming into Australia to do more than just mining and real estate can help diversify the economy
Other suggestions?
Question time…
The end …
THANK YOU FOR LISTENING
Christopher Shulha
M: 0415 198 589