Indonesia has been experiencing an influx of beef prices over the past year; this is because its local beef producers have become incapable of meeting domestic demand. The increase in the demand for beef in Indonesia was caused by the country’s self-sufficiency policy. This policy was implemented to restrict imports from other countries such as Australia. The government has found a solution for the beef supply crisis. The government of Indonesia is considering buying land in Australia in which it will raise beef cattle and export them into their country. This issue has raised controversy especially among Australian top government officials. Some leaders are opposed to the sale of land while others view it as a form of foreign direct investment to the country. It is, therefore, necessary to evaluate both arguments, to establish whether the Australian Foreign Investment Review Board should approve the proposal or not.
The arguments for the sale of Australian land to Indonesia cite trade promotion and the economic benefits generated from the transaction. Those advocating for this foreign investment argue that it will promote global trade, especially between Indonesia and Australia. According to these advocates, both countries are in a global supply chain, and the sale of Australian land to Indonesia seeks to enhance it (Roberts, 2013, para 4). They further state that the modern era aims at shunning protectionism measures because the global markets are created through production and supply chains. They view the sale of Australian land to Indonesia as part of a global chain that creates trade opportunities between the two nations.
The supporters of this foreign direct investment into Australia argue that the land would be subject to taxation, and its sale would be profitable to Australia. Australia has mining investments in Indonesia; proponents of the FDI state that Indonesian authorities have no problem with this. The only thing the Australian authorities should do is impose strict rules on the Indonesian government regarding the manipulation of their markets. The lobbyists argue that this would protect the Australian markets and enhance relations with Indonesia.
The proponents for the sale of Australian land to Indonesia view this transaction as an opportunity for Australia to negotiate trade deals with Indonesia. They argue that the Australian government can use this land to their advantage. This can be achieved through negotiating trade agreements with Indonesia. The Australian government, for example, could ask the Indonesians to let them export goods to their country. They also argue that Australia provides a favorable environment to the breeding and rearing of beef cattle; when the Indonesians realize this, the Australian government should hold them for trade deals in exchange of rearing their cattle.
The people against this FDI base their arguments on the loss of control and sovereignty. The sale of Australian agricultural land to Indonesia will be a disadvantage to the host nation. The country will lose control over its land to the Indonesians (Cowie, 2011, para 6). According to the Indonesian government, the land will be under the full control of Indonesian governments based in Australia (Cawood, 2013, para 5). Australia, therefore, cannot force Indonesia, for example, to sell some of their beef cattle to them. Australia, thus, would be in a demand crisis, for example, in the event of a shortage in beef supply. According to the opponents of this foreign investment, the Australian markets risk manipulation by Indonesia. This is because Indonesia will gain control over the beef market in both countries.
The opponents of the sale of Australian land to Indonesia view it as a raid of the country’s resources. They view this proposal as destruction of Australia’s beef exports and a devaluation of land prices. They argue that Australia should lease the land to the domestic farmlands in the country instead of selling it to foreign nations. This is because the sale affects the future of Australian farmers. The opponents state that the country should consider how it is going to feed the future generations. Some foreign direct investments choke the domestic industries (Bora, 2002, p.46), and some Australian’s view this as one. Indonesia’s attempt to buy Australian land is a calculated approach to sustain its beef demand in both the short and long term. They argue that Australia, should also consider its future before selling the land.
The sale of Australian land to Indonesia has no contribution to the host’s Gross Domestic Product. This is because there is no tax payable for this transaction, and so is a loss to the Australian government. Opponents to this investment also view it as a loss of Australia’s sovereignty. Australia gives Indonesia an annual financial aid of $500 million; the Australians rejecting the sale of their land say that Indonesia is using the funds they give them as foreign aid to purchase their land. They view this as a loss of national sovereignty. The sale of the land is also a loss for Australian farmers to whom the land would have been leased (Cowie, 2011, para 6).
The Australian Foreign Investment Review Board should not approve the sale of their land to Indonesia. This is because, in doing so, the Australian government could have detrimental market implications in the future. The demand and supply for beef cattle, for example, would be affected. The government also risks a manipulation of their markets by Indonesia; Indonesia may result into buying beef cattle from Australian farmers, which would affect the domestic beef industries. The sale should not be approved because Australia will lose control over the land, and cannot force Indonesia to sell some of it back to them. The sale of the land would lead to a loss of the intellectual property of Australian farmers, hence loss of sovereignty.
Bora, B. 2002. Foreign direct investment: research issues. London: Routledge.
Cawood, M. 2013. Indonesia’s ag land plans. The Land. Retrieved from http://www.theland.com.au/news/agriculture/livestock/cattle-beef/indonesias-ag-land-plans/2671193.aspx?page=1
Cowie, T. 2011. Foreign ownership of Aussie land: the peril of selling the farm. Crikey. Retrieved from http://www.crikey.com.au/2011/06/16/foreign-ownership-of-aussie-land-the-peril-of-selling-the-farm/
Roberts, G. 2013. Indonesia approves plan to buy 1 million hectares of Australian grazing land. ABC. Retrieved from http://www.abc.net.au/news/2013-09-12/indonesia-plans-to-buy-1m-hectares-of-grazing-land/4952578