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Program 1.1: Promotion of Australia's export and other international economic interests

Attracting productive foreign direct investment to Australia

Australia has clear advantages as an investment destination, such as economic stability, continuous economic growth, high-quality assets, a skilled workforce, first-class education institutions, high incomes, and interconnectedness with key Asian markets. However, investment attraction is a competitive and crowded global market, with most major economies actively courting investment.

Austrade works in collaboration with states and territories to attract productive foreign direct investment (FDI), with particular attention to projects that will create and retain Australian jobs, develop new industries and infrastructure, introduce new technologies and skills, encourage innovation and competition, raise productivity, and strengthen Australia’s overall trade and economic links with global markets.

Austrade’s respected government position contributes to this objective by assisting with introductions to major influencers and investment decision-makers in both the private and public sectors.

Australia's investment environment

Australia’s inward FDI stock reached $849 billion in 2017, an increase of 7 per cent on the previous year and more than 50 per cent above 2011, according to the latest data released by the Australian Bureau of Statistics.11

Australia’s economic resilience, together with its strategic location, increased global trade and investment ties, and business-friendly environment, continues to position Australia as an attractive investment destination within the Asia–Pacific region.

Australia moved up one spot to eighth place in the 2018 A.T. Kearney Foreign Direct Investment Confidence Index, continuing its impressive ranking in the top 10 for the eighth year in a row. The economy expanded by 2.3 per cent in 2017, marking almost 27 years without a recession—a global record. The International Monetary Fund (IMF) recently upgraded its forecasts for Australia’s growth to 3 per cent this year, up from the 2.9 per cent rate predicted early this year. The IMF is now projecting that Australia’s real GDP will grow by an average of 2.8 per cent a year between 2019 and 2023—the highest among major advanced economies, and up from an average growth rate of 2.6 per cent between 2014 and 2018.12

As a percentage of GDP, Australia’s inward FDI stock was 47 per cent in 2017, up from 37 per cent six years ago. Traditional sources of FDI continue to perform well: the United States and the European Union remain dominant sources with total stock values of $190 billion and $189 billion respectively. The value of FDI from the United States declined slightly by 2 per cent, while the European Union continued to rise, up 9 per cent in 2017.

Japan remains Australia’s second-largest direct country investor with total FDI stock levels of $93 billion in 2017, rising by 2 per cent and accounting for 11 per cent of total FDI stock in Australia. Canada has also been an important investor in Australia in recent years. After a strong rise of 14 per cent in 2016, inward FDI from Canada surged again by 25 per cent to $35 billion in 2017.

In recent years, there has been a solid increase in capital inflows from Asia, a trend reflecting Australia’s close ties to those economies in a fast-growing region. China remains Australia’s fifth-largest direct investor with a total stock value of $41 billion. Chinese FDI grew 5.1 per cent in 2017 and experienced an average growth rate of 19 per cent each year since 2011. Other Asian economies are also emerging as fast-growing sources of FDI (in compound annual growth rate measures), with ASEAN rising by 7 per cent to $42 billion, and Singapore by 5 per cent and Hong Kong by 23 per cent to $26 billion each.

By industry, the mining sector received the highest value of FDI with $315 billion, accounting for 37 per cent of the total FDI stock value in Australia. This was followed by the manufacturing sector at $98 billion, real estate at $91 billion and financial services at $75 billion. Together, these three sectors accounted for just under a third of total FDI stock value (11.5 per cent, 10.7 per cent and 8.8 per cent respectively). Other industries with strong direct investor activities in 2017 were utilities (up 39 per cent to $22 billion) and construction (up 23 per cent to $25 billion). Human health and social work activities rose sharply over the past two years, up by an average of over 60 per cent a year to $4.6 billion, albeit from a low base.

Delivering investment outcomes

Austrade, along with its key partners in state and territory governments, contributed to 113 investment outcomes during 2017–18, with recorded investment value of almost $4.8 billion and the creation or retention of an estimated 27,588 jobs.

Western Europe (including the United Kingdom and Israel) was the largest source of investment outcomes with 43 per cent of the total. This was followed by North America (United States and Canada) with 28 per cent. Greater China (including Hong Kong and Taiwan) comprised 12 per cent. Figure 20 shows the source market distribution of investment outcomes assisted by Austrade in 2017–18.

Among the agreed investment priority sectors:

  • 56 advanced manufacturing, services and technology outcomes accounted for 49 per cent of total outcomes
  • 18 agribusiness and food outcomes accounted for 16 per cent
  • 17 resources and energy outcomes accounted for 17 per cent
  • 15 major infrastructure outcomes accounted for 13 per cent
  • 3 tourism infrastructure outcomes accounted for 3 per cent.

A further 2 per cent of Austrade-assisted investment outcomes were in non-priority sectors.

Figure 21 shows the industry sector distribution of investment outcomes assisted by Austrade.

Activities to support investors are undertaken with state and territory partners and are demonstrated through investor requests. During 2017–18, Austrade serviced 490 investor requests, including facilitating 134 site visits by investors. Austrade also had 100 significant engagements with agreed investor targets, including in the areas of reinvestment and aftercare.

Figure 20: Austrade-assisted investment outcomes by source market, 2017–18

Figure 20: Austrade-assisted investment outcomes by source market, 2017–18

(a) Includes Hong Kong and Taiwan.
(b) Includes Israel and the United Kingdom.

Figure 21: Austrade-assisted investment outcomes by priority sector, 2017–18

Figure 24: Austrade-assisted investment outcomes by priority sector, 2017–18

The traditional FDI markets of North America and Western Europe continued to dominate the investment pipeline, although investor interest from Japan and China was also strong. From an industry perspective, 95 per cent of qualified investor leads were within the investment priority industries:

  • 37 per cent in advanced manufacturing, services and technology
  • 21 per cent in agribusiness and food
  • 18 per cent in resources and energy
  • 13 per cent in major infrastructure
  • 7 per cent in tourism infrastructure.

Achieving priority milestones

Recognising the long-term nature of investment decision-making, Austrade also tracks investment priority milestones. During 2017–18, Austrade recorded 31 priority milestones. These tangible demonstrations of commitment to the Australian market are an important indicator of Austrade’s long-term success in promoting Australia as an investment destination.

Promoting investment in Australia

A key mechanism for Austrade to showcase opportunities to potential investors and raise Australia’s profile as an investment destination is through targeted investor outreach, site visits, forums and events.

Regional tourism infrastructure investor familiarisation

In May 2018, Austrade, in collaboration with Tourism Australia and the South Australian Tourism Commission, co-hosted an investor familiarisation visit program with four investors from Taiwan and Hong Kong, to identify regional investment opportunities in the tourism infrastructure sector in South Australia.

The investors met with the South Australian Minister for Trade, Tourism and Investment, and were shown a range of potential investment projects located in Kangaroo Island, McLaren Vale and Adelaide focused on tourism accommodation assets and ecotourism projects.

The familiarisation visit provided valuable feedback to Austrade, local government councils and owners about investor appetite and the risk profile of regional tourism projects, and raised Austrade’s profile in facilitating productive FDI in the tourism sector.

Blockchain mission to New York

Austrade, in collaboration with Data61 and the New South Wales Government, led a delegation of 50 Australian blockchain companies and experts to Consensus 2018 in New York, an event that attracts over 8,000 attendees from leading industry startups, investors, financial institutions and enterprise tech leaders.

The mission showcased partnership and investment opportunities in Australia’s world-class research, development capability, digital currencies and payments, and its blockchain innovation, with participants proposing new and unique ways for businesses to operate and trade.

Austrade connected export-ready Australian businesses with leading innovative banks, including HSBC and the World Bank Group, raising collaboration opportunities to develop technology solutions to address global challenges.

Investment Award

In 2016, the Minister for Trade, Tourism and Investment introduced the Investment Award, acknowledging significant and enduring contributions to the Australian economy by an international company or joint venture.

The most recent award was presented to NEC Australia, recognising its role in cultivating innovation, and developing new industry capability and broader benefits, such as job creation resulting from investing in Australia. The award was presented at the 55th Australian Export Awards (see pages 62–63).

Backing Australian mining and manufacturing

In September 2017, GFG Alliance (GFG) completed the acquisition of ex-Arrium assets, following one of the largest and longest administrations in Australian history. GFG could see the potential of building a new business, resistant to business cycles and with attractive growth prospects. In Australia, the company also saw fundamental competitive advantages: the resilience of the Australian economy, now in its 27th consecutive year of growth, the country’s resource reserves, renewable energy advantages, strong domestic steel demand and an educated workforce.

The acquisition breathed new life into South Australia’s iconic Whyalla Steelworks, as well as Arrium’s other mining, manufacturing, recycling and distribution businesses. With GFG’s policy of ‘no hard redundancies’, the deal secured the future of more than 6,000 workers and their communities.

Austrade’s London office has been in contact with Liberty House Group—a GFG Alliance member—since September 2016, and provided introductions to representatives of the South Australian Government. Austrade also facilitated meetings with the then Minister for Trade, Tourism and Investment, the Hon Steven Ciobo MP, and more recently, the then Prime Minister, the Hon Malcolm Turnbull MP, on a visit to the United Kingdom.

Within 100 days of completing the acquisition, GFG undertook a far-reaching plan to restructure the existing organisation and operations, realign strategy to bring it into line with wider GFG goals, and agree on a structured program of investment to complete the turnaround and support growth.

‘As we now focus on our plans for investment and growth, we have every reason to be confident that this business will increase its already significant role in supporting the construction of Australia’s future,’ said GFG executive chairman Sanjeev Gupta.

‘We also expect the Australian businesses to benefit greatly from their integration with the group’s global reach. We were very pleased with the level of interest and support from the Australian federal and state governments, including Austrade, during the process,’ said Mr Gupta.

Canadian pension fund representatives attend the Montreal investment roundtable, held in September 2016, with Tony Negus, Australian High Commissioner, Canada and Portia Maier, Consul-General and Senior
Trade Commissioner, Toronto.

The Whyalla Steelworks in South Australia.

Whole-of-government communications and policy input

Austrade leverages the deep commercial knowledge and relationships of our international and domestic networks to provide a unique perspective to government policy discussions. This includes advocacy to inform and influence policy that affects our clients, such as resolving investment impediments, and achieving positive trade and investment outcomes for Australia.

Austrade is a consultation partner to the Foreign Investment Review Board in its consultations on proposed foreign investment transactions. During 2017–18, Austrade provided input on 307 consultation requests.

Austrade worked closely with the Department of Foreign Affairs and Trade, the Treasury, the Attorney-General’s Department, the Department of Home Affairs, and other federal, state and territory government agencies on matters affecting investment attraction. This included important policy development on streamlining Foreign Investment Review Board processes, handling sensitive investment cases, critical infrastructure, stamp duties on commercial real estate, the research and development tax incentive, stapled securities, changes to the skilled migration program, and communicating the importance and benefits of FDI.

Significant Investor Visa and Premium Investor Visa programs

Since 1 July 2015, Austrade has had three areas of responsibility under the Significant Investor Visa (SIV) and Premium Investor Visa (PIV) programs:

  • to nominate potential SIV applicants (along with state and territory governments)
  • to be the sole nominator for the PIV
  • to oversee policy aspects of the complying investment framework.

The Department of Home Affairs is responsible for the administration of the SIV and PIV programs, including visa processing and grants, compliance and promotion.

To support dynamic and innovative areas of the Australian economy, the SIV requires a mandatory investment of at least $500,000 in venture capital and growth private equity; $1.5 million into small and emerging companies; and a balancing investment of up to $3 million in complying investment. The PIV requires a $15 million complying investment. The programs are designed to deliver on the Government’s objective of attracting new foreign investment that promotes innovation and commercialisation.

The total number of SIV applications made under the enhanced complying investment framework remained strong in 2017–18. In total, there were 461 expressions of interest lodged, 402 nominations (of which five were issued by Austrade), 341 applications lodged, and 174 primary visas granted. This resulted in $870 million made in complying investments during the year, including $87 million committed to venture capital and $261 million invested in small and emerging Australian companies.

Austrade continues to see examples of how SIV investment, particularly the venture capital and growth private equity component, is supporting the growth of innovative, emerging Australian companies. These include investments in:

  • fintech company Avoka, which has developed a secure cloud-based software platform that manages the digital interface between organisations and clients
  • Clinical Genomics, a healthcare diagnostics company that has developed a DNAbased test for screening and monitoring colorectal cancer
  • IR Exchange, which has developed a grocery distribution platform that efficiently matches retailers directly to manufacturers, enabling cheaper and faster delivery of goods.

In 2017–18, Austrade also conducted a review of the SIV complying investment framework as part of the Department of Home Affairs’ broader review of business, investment and talent visas.

Developing capability

Continuous development of Austrade’s and its partners’ investment capability continues to be a key element of Austrade’s strategic approach. In 2017–18, Austrade delivered two ‘Winning Investment for Australia’ training courses as a key platform for delivering a nationally coordinated approach to investment promotion, attraction and facilitation.

Internal capability building is also an important element of Austrade’s strategic direction as a centralised networking hub for all involved in international trade and investment, helping deliver seamless services and making the most of collective knowledge and resources. To support these goals, Austrade delivered a series of internal ‘Investment Labs’ across the globe to ensure staff maintain best practice skills in investment, both onshore and offshore, to meet the needs of Austrade’s clients.

Annika Barton Services and Technology Advisor, Sydney

Annika Barton, Services and Technology Advisor, Sydney.

With a focus on cybersecurity and artificial intelligence— and a role that also includes a number of smaller, emerging technology sectors— Annika Barton is working across the Austrade global network on new and flexible ways to provide opportunities for Australian companies and foreign investors.

Over the past year, Annika was involved in the negotiation of the UK–Australia Fintech Bridge, the delivery of the largest ever cybersecurity trade mission to the United States, and the development of the Australia – Hong Kong Tech Bridge pilot program.

Since joining Austrade in 2016, Annika has transitioned from the Investor Visa Unit to a role as digital technology lead under the former Advanced Manufacturing, Services and Technology Investment team, and is now in a role focused on progressing both trade and investment efforts in services and technology.

Annika has extensive public sector experience, with a particular focus on the intersection between government and industry, having come to Austrade from a position within the NSW Department of Industry. She holds a Bachelor of International Relations and a Bachelor of Languages, and speaks Spanish, French and Italian.

Foreign investment challenges

Austrade’s work to attract FDI includes promoting Australia as a promising place to invest, targeting and attracting investors to specific projects, coordinating investment facilitation activities for all levels of government, and maintaining relationships to encourage reinvestment by investors with existing Australian portfolios.

Investor feedback to Austrade’s onshore and overseas networks has identified two areas for improvement:

  • greater regulatory efficiencies and harmonisation
  • minimising activity that may increase the perception of sovereign risk.

While regulatory requirements reflect important policy objectives, regulatory efficiency such as reducing duplication, and speeding up processing and decision-making, provides investors with greater certainty. This is an important consideration to maintain Australia’s investment attractiveness while ensuring investment is in the national interest.

Although not unique to Australia, investors also cite a perception of political or policy uncertainty across the three levels of government as an impediment to investment in major infrastructure. Investors advise that their perception of risk increases with unexpected changes to, for example, taxation policy impacting foreign investors, or uncertainty surrounding construction timetables and the commencement of major infrastructure projects.

11 Australian Bureau of Statistics, International Investment Position, Australia: Supplementary Statistics, 2017, cat. no. 5352.0.

12 International Monetary Fund, World Economic Outlook Database, April 2018, at https://www.imf.org/external/pubs/ft/weo/2018/01/weodata/index.aspx..

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