Improved Transparency? An Analysis Of The Recent Changes To Australian Foreign Investment Policy

Australia has long hold a welcoming position of foreign investment officially. However, compared to its official image, Australia’s Foreign Investment Policy (AFIP) is not as welcoming. Australian government reviews foreign investment proposals against the national interest case by case under the Foreign Acquisitions and Takeovers Act1975(FATA) and its regulations. However, the national interest is never defined in FATA or its regulations and its interpretation rests with AFIP, the key policy document that guides interpretation of the FATA. The non-transparency of AFIP has been observed for a long time and receives hot discussion when new controversial foreign investment decisions are made. In recent years, the Australian government has made consecutive efforts to promote the policy transparency by improving the national interest test and stressing information transparency. Considering the importance of transparency and the current status of foreign investment in Australia, it is meaningful to conduct an analysis on these policy changes.This paper argues that the recent changes to AFIP which are aimed to promote policy transparency are non-transparent in essence. Firstly, it clarifies the importance of transparency of AFIP, especially the national interest test it defines to the whole foreign investment regime. Currently, foreign investment is reviewed against the national interest test. Recent policy changes are mainly concerned with the national interest test. The paper then analyzes the recent policy changes through text analysis and case study, and finds out the non-transparent nature of these changes:the wording of policy text, particularly of the national interest test, is vague and open to interpretation, leading to controversial foreign investment decisions. It also assesses the reasons behind such policy changes. The paper concludes that the self-contradictory policy changes are a compromise between two contradictory driving forces. On one hand, Australia is motivated to promote its policy transparency to increase the capital attractiveness. On the other hand, political benefits brought by the vague policy make a thorough reform impossible. Finally, two recommendations are made to improve policy transparency:provide precise guidance to the national interest test to limit the free interpretation of the Treasurer; require a more detailed explanation when the Treasurer announces foreign investment decisions.