a detailed examination into foreign investments in six companies, including Van Dairy Limited (VDL), based in Smithton, Tasmania.
In 2016, China’s Moon Lake Investments received the approval of then-treasurer and current Prime Minister Scott Morrison to acquire VDL for $280 million from New Plymouth District Council in New Zealand. However, four years later, Chinese owners of Australia’s biggest and oldest dairy farming business are yet to meet several significant undertakings they committed to when receiving approval for the investment.
In April this year, confidential documents and photographs obtained by The Sydney Morning Herald revealed how the conditions at the iconic Van Dairy farm have been deteriorating since its 2016 takeover. These photographs, which were taken in December 2020, show skinny cows, dead cows and farms in disrepair with drainage systems overflowing as they were unable to cope with the number of cows on the properties. The dairy farming business has already been issued with nine Environmental Protection Notices, while an audit conducted by Tasmanian Dairy Industry Authority also discovered that 19 of the company’s 23 farms had significant compliance issues.
“So-called ‘voluntary undertakings’ made at the time an investor is seeking approval for an investment, but which later fail to materialise, make a mockery of Australia’s assessment process against the national interest and undermine community confidence in the foreign investment framework,” the report published on Friday said.
According to the committee, there are “serious flaws” in the approval process of Australia’s foreign investment, particularly in relation to anti-money-laundering and corporate transparency. The committee drew this conclusion especially following the seizure the Musselroe Bay land and six properties in Melbourne by the Australian Federal Police (AFP). Back in 2013, the 3,000-acre property was put on the market, valued at $4 million, and a planning permit for the Musselroe Bay Resort was approved by the Dorset Council, with funding coming in from China. According to the AFP, of the funds that were invested in the development, $23 million was obtained fraudulently.
“There remains doubt as to whether the Treasury has the knowledge, experience, and information management systems to appropriately regulate foreign investment in Australia,” the committee noted.
Nevertheless, in the case of the conditional acquisition of organic infant formula producer Bellamy’s by dairy giant China Mengniu in 2019, the report made an example where foreign investment conditions were exempted from protected information provisions.
Following the thorough examination of these, and three other companies, the report made three recommendations in order to ensure investments were in the national interest. They include, the amendment of regulations so as to ensure undertakings are enforced as conditions on an investment approval. The committee also suggested that an audit be conducted by the government regarding the expertise required by foreign investment regulators to ensure applications did not infringe the national interest. The third and final recommendation stated attention should be given to set up the most fitting institutional design to support decision-making on foreign investment.
