In a decision that has surprised many in both Australia and the United States, Australian Treasurer Joe Hockey has rejected a record $3 billion bid from US conglomerate Archer Daniels Midlands to acquire Australian grain handler GrainCorp. Despite the increased offer by ADM of an additional $200 million investment in GrainCorp’s infrastructure, Mr. Hockey blocked the bid on the basis that “it would not be in our national interest.” Explaining that his decision was informed by concerns that accepting ADM’s offer “could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally”, Mr. Hockey acknowledged the need and support for foreign investment in Australia, but on the proviso that such investment “is not contrary to our national interest.”
The rejection has re-ignited the debate surrounding foreign investment in Australia ever since ADM first announced its proposal last month. Whilst those in the National Party and the agricultural industry who strongly opposed the bid applauded Mr. Hockey’s decision, the Opposition has criticized the Treasurer for allowing internal coalition politics to override Mr. Hockey’s claims of Australia’s readiness to welcome foreign investment. Indeed, despite Mr. Hockey’s statement that his blocking of the bid represents the sole rejection of a foreign investment proposal out of 131 applications, Shadow Treasurer Chris Bowen has nevertheless stated that the message communicated to potential investors by Mr. Hockey’s decision is that "the greatest obstacle to foreign investment in Australia is the cabinet", raising concerns about Australia’s attractiveness as a destination for ongoing foreign investment.
Those who contested the bid have played down this notion of an emerging bias against foreign investors, instead highlighting the manner in which the rejection offers GrainCorp the unique chance to develop from being a national company to an international player in a major global industry. Arguing that capital equal to the offer made by ADM could be raised by GrainCorp management themselves in order to improve the company’s infrastructure and competitive abilities, supporters of Mr. Hockey’s decision have cited the importance of retaining “a national champion” as a critical part of a sector that has been identified as one of Australia’s most significant national growth industries.
In contrast, critics of the rejection have emphasized the lost opportunity to procure an unprecedented amount of foreign investment offered by ADM, which would have enabled GrainCorp to considerably increase its grain production by 50% in the next 30 years and provided access to an international customer and trading base. With the middle classes in Asia predicted to increase significantly in subsequent years, supporters of the ADM offer have raised concerns that its rejection will deprive the Australian agricultural industry of the “massive quantities” of capital needed to capitalize on this profitable market.
As the debate persists between those who fear this decision sets a potentially damaging precedent for those opposed to foreign investment to intensify their protests and those who see it as a win for Australian farmers and the national interest, the statement that Australia is “open for business” looks poised to remain a pivotal issue for domestic and international observers alike.