Australia’s Attorney General Department Seeks to Reform National Security Review of Critical Infrastructure, Prompted by Expanding Chinese Investment
On October 10, Australia’s Attorney General Department (AGD) released a preliminary draft of the “Security of Critical Infrastructure Bill 2017,” which aims to expand the federal government’s ability to mitigate national security risks arising from excessive overseas investment in Australia’s critical infrastructure. A primary concern is Chinese investment which has triggered a series of reforms this year to Australia’s investment screening mechanisms, particularly for critical infrastructure sectors such as energy, telecommunications, ports, and power. Specifically, a 2015 lease of Australia’s Darwin Port to China’s Landbridge Group Company ignited controversy about the national security risks of such transactions. It culminated in the establishment of the Critical Infrastructure Centre, which opened in January.
The newest piece of legislation contains a ‘last resort’ provision enabling ministers to mandate risk mitigation actions directly from companies with critical assets in high-risk sectors. The AGD asserted that “Australia’s national critical infrastructure is more exposed than ever to sabotage, espionage, and coercion.” New reforms will implement a register that will track ownership and operations of infrastructure assets deemed critical to the integrity of Australia’s economic and financial security.
The passage of the legislation could jeopardize ongoing Chinese investment objectives in Australia, including China Resources Co. Ltd.‘s recent bid for the Loy Yang B coal-fired powered station in Traralgon, Australia. By September 2016, China Resources had achieved “preferred bidder status” over other competitors and was directly negotiating with the owners of the power station and its asset managers, Rothschild Australia. Analysts speculate that the bid could be in jeopardy if AGD’s agenda were to pass in time and expand the definition of “critical infrastructure” under a national security mandate. In the past, the Australian government has blocked other attempts by Chinese firms to acquire the country’s critical energy assets. In August 2016, the Federal Treasury blocked the sale of power transmission operator, Ausgrid, to China’s State Grid Corporation and Cheung Kong Infrastructure Holdings.
Despite periodic pushback, Chinese entities have been aggressive in their pursuit of these national assets. An April 2017 report from Sydney University and accounting firm KPMG indicates that Chinese investment in Australia was the highest since the 2008 Global Financial Crisis, reaching a total of $15.4 billion and 103 signed deals in 2016. Below is a visual demonstrating the growth of Chinese investment in Australia.