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Foreign investments in domestic water entitlements

Our most precious resource. Photo: ABC

Australia is the driest inhabited continent on earth, and has decades of experience in managing water scarcity, which has allowed countries in our region to gain access to investment expertise and technology in resource management for a number of years.

As an era of uncertainty regarding water supplies approaches, predicted to effect two-thirds of the world’s population, first public reports on foreign investments reveal that over 10 per cent of entitlements in Australia are currently owned by foreigners, with China and the US at the top.

BACKGROUND

Fresh, clean water is a limited resource. While most of the planet is covered in water, it is saline water and can only be consumed by humans and other species after undergoing desalination.

In Australia, occurrences such as droughts and contamination can further limit access to clean and fresh water, leading communities to take steps to reduce water use and save as much as possible.

The World Bank has estimated that by 2025, 1.8 billion people will be living in countries with absolute water scarcity and two-thirds of the world’s population will be under water stress.

The effects of growing populations, rising incomes, and expanding cities will see demand for water rise exponentially, while supply becomes more erratic and uncertain, according to the report.

This was reinforced in a 2015 report by Natasha Fox, who found drought, pollution and population growth would cause a water shortage by 2030, creating the potential for instability in the Indo-Pacific region.

Authorities have argued that water scarcity, exacerbated by ‘climate change’, could hinder economic growth, spur migration, and spark conflict in the future, and countries “must neutralize the impacts of the future world by taking action to allocate and use water resources more efficiently”.

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In 2015, foreign investment in water and agricultural assets became heavily incorporated into the Australian agenda, amid public backlash after a Chinese company purchased a 99 year lease over the Port of Darwin for $506 million.

As a result, the Register of Foreign Ownership of Water or Agricultural Land Act 2015 was introduced shortly after, and from 1 July 2017, foreigners are now required to register their interests in water entitlements and contractual water rights with the Australian Taxation Office.

This was an effort to improve transparency and the security of Australia’s critical water assets.

These new requirements, essential to ensure the longevity and security of Australia’s most precious resource, have finally revealed the extent to which foreign investors have entered the Australian water market, leaving some concerned that an increasing buying trend may be developing.

FOREIGN OWNERSHIP STATS

Last month, the government has released the first report of the Register of Foreign Ownership of Water Entitlements, after committing to increasing transparency surrounding water holdings.

It has been revealed that Australia has spawned the most advanced water market in the world, with more than $3 billion worth of rights changing in 2009 alone.

The report shows the proportion of total water entitlements with a level of foreign ownership is 10.4 per cent, making up a total volume of 4,035 gigalitres across Australia as of last year.

This includes a spike to over 25% of all water entitlements in Western Australia alone:

The United States of America and China are Australia’s largest sources of foreign investment in water entitlements, holding approximately 1.9 per cent of total water entitlements each.

Tom Rooney, president and group CEO of Australia’s water trading organisation Waterfind, said it was alarming to find out one of every 10 water entitlements was now held by foreign entities.

“I think part of the concern is … the unfair advantage, which some of these foreign entities are getting, in terms of the cost of finance and or access to cheap money.”

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Only a tiny handful of water bureaucrats in each state has full knowledge of who owns the country’s permanent water rights, as water registries cannot be openly searched.

Some foreign companies responsible for acquisitions of water that have emerged historically include: Summit Global Management, Singapore company Olam International, Ecofin, Guinness Peat Group, and Japanese consortiums led by the Mitsubishi Corporation.

Overseas stakes in our $30 billion market already include: $20 million worth of entitlements bought by Summit Global Management, $130 million worth of water bought by Olam International, and previously over $30 million worth of rights in western NSW held by Tandou.

Causeway Asset Management, of Melbourne, wants to attract $100 million from foreign investors to a ”diversified portfolio of permanent water entitlements” in Australia.

In some financial circles, water is dubbed ”blue gold”. Online investment journal, Investment U recently had the headline: ”The oil of the 21st century … how ‘blue gold’ can make you rich”.

Indeed, this is only the beginning stages of multi-division plans and regulations that will be established to dictate the use and supply of Australian water supplies, and we only have to look to the Murray-Darling Basin Plan in NSW for an example of future ownership structures.

MURRAY-BASIN PLAN

The Murray-Darling Basin is a catchment for the Murray and Darling Rivers and all their tributaries, covering most of inland NSW and extending from Queensland to South Australia.

It is the twentieth largest river catchment in the world, covering more than a million square kilometres, and contains 22 major catchments.

It is a significant area for food production and aquatic ecosystems, both nationally and for the more than two million people who live there, draining one-seventh of the Australian continent and representing one-third of agricultural production.

Outline of the Murray-Darlin Basin for perspective. Photo: Wiki

Historically, the Basin was managed by state governments, however, the Murray-Darling Basin Plan was developed as a requirement to determine the amount of water that can be extracted annually for consumptive uses, including urban, industrial, and agricultural.

After a change to the government’s tender system in 2010, prices to access the Basin dropped as much as 40 per cent, hurting irrigators who need to sell their water rights, but making buying into the market more attractive to investors.

The Register of Foreign Ownership of Water Entitlements describes that of the 4,035 gigalitres held by foreign investors, more than 1,800 gigalitres of foreign-held water entitlements are inside of the Murray-Darling Basin:

In comparison, this is 9.4 per cent of the total Murray-Darling Basin water entitlement available, with the findings showing the majority of foreign-held water entitlements in the Northern Basin (21.9 per cent), followed by the Southern Basin (5.5 per cent).

The Australian government has experienced much controversy since the introduction of the plan, attempting to redress the over-allocation of water licenses and return water to the environment.

This has come at great expense of farmers and farming supplies, who are required to hand over any additional water saved the to the Commonwealth for restoration purposes, in exchange for more ‘water efficient’ technology and resources.

Despite this, farmers continue to struggle at unprecedented rates, while a precious resource that is predicted to become scarce in the next decade continues to be sold off to foreign interests. A winning combination.

This also includes continued drying catchments, declines in fish numbers and general pollution across the area in recent years.

The report is based on a comparison of data held on the Register of Foreign Ownership Water Entitlements and BOM’s assessment of total Australian water entitlements on issue.

The report collates data from the Water Register as at 30 June 2018 and is available on theForeign Investment Review Board website.


RELATED LINKS

Register of Foreign Ownership of Water Entitlements as at 30 June 2018 | Australian Taxation Office

Spotlight to shine on foreign water ownership | WA Today

Thirsty foreigners soak up scarce water rights | SMH

What is the Murray-Darling Basin Plan and why are we still talking about it? | ABC

Murray-Darling Basin Plan to be reviewed if Labor elected | ABC


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2 Comments on “Foreign investments in domestic water entitlements”

  1. Steven
    April 6, 2019 at 17:06 #

    There is one way nature desalinates water, increased temperatures. Climate change may be just what is needed

    • April 10, 2019 at 09:54 #

      Interesting. Thank you for your thoughts, Steven!

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