Monday, January 23, 2017

Security test puts heat on foreign bids

Security test puts heat on foreign bids

Federal Attorney-General Geor­ge Brandis will today unveil the Critical Infrastructure Centre, which will begin assessments of assets in the power, ports and water sectors, including their cyber operations.
  • The Australian

Malcolm Turnbull has ordered a sweeping security probe of major infrastructure across the nation to create a list of “red-flagged’’ assets­ that will trigger national securit­y scrutiny of foreign bids for critical assets.
Federal Attorney-General Geor­ge Brandis will today unveil the Critical Infrastructure Centre, which will begin assessments of assets in the power, ports and water sectors, including their cyber operations. It will be staffed by officials from ASIO, the Australia­n Signals Directorate, Treasury and other agencies.
The move comes after the federal government issued an 11th-hour veto of the sale of NSW power network company Ausgrid last year on national interest grounds, blocking its purchase by Chinese interests. The veto sparked anger in Chinese business circles after the rejected bidders had spent months of staff time and millions of dollars building up their offers.
The security assessments apply not only to federal and state-owned assets but, signifi­cant­ly, will also capture sales of private-sector assets considered “critical infrastructure’’.
The federal government has confirmed it is now in talks with state and territory governments and industry on the management of assessments and the register that will raise red flags for national security scrutiny of foreign bids for critical infrastructure.
Senior government sources said the CIC’s function would ultimately become much broader, with a centralised ability to manage and mitigate national security risks for critical assets and vulnerabilities to terrorism, cyber-attack and natural disasters.
The centre will be tasked with providing greater certainty and clarity for investors around critic­al infrastructure, while also managing a classified list of individual critical assets assessed as having a national security profile.
“This is about not getting blindsided like we did with Ausgrid,” a senior government source said. “It isn’t a desktop study; it will be actual physical assessments of infrastructure.”
The Australian understands that the creation of a critical infrastructure list was approved by cabinet and the National Security Committee in December after a submission from Senator Brandis and Scott Morrison.
The government is adamant that it will not be a blacklist for foreign­ investment and will instea­d provide the first comprehensive picture of critical infrastructure ownership in high-risk sectors across the country.
It is expected that the list would inform the Foreign Investment Review Board of the national security profiles of critical infrastructure assets that might be referred to it and what mitigation measures may be required on a case-by-case basis.
The move reflects recognition of the “evolving” risks with increasing foreign involvement and outsourcing of operations in Australia’s national critical infrastructure. But it has also attracted greater urgency following the controversial Port of Darwin sale and the bungled Ausgrid deal.
The intelligence community has long argued for a critical infrastructure list, citing the US Depart­ment of Homeland Security lists, which cover 16 sectors including energy, water, commun­ic­ations, the chemical industry, food, some manufacturing and the commercial and finance sectors.
It is assessed on the basis that incapacitation, disruption or destruction could impact national or economic security of public health and safety.
The Turnbull government has already moved to protect critical communications assets under the proposed telecommunications sector security reforms bill, which is still being assessed by the parliamentary joint committee on intelligence and security.
“This is about securing Australia’s critical assets and assuring the public that national interest is at the forefront of decisions affecting our essential infrastructure,” Senator Brandis said. “These new measures will enable us to adopt a more co-ordinated and proactive approach to managing the evolving risks to our national critical infrastruct­ure into the future.
“The Critical Infrastructure Centre will provide us with a consolidated picture of the ownership of nationally important assets across the country, their associated risks, and how these can be best managed.
“This invaluable information will help Australia to maintain strong foreign investment while ensuring national security risks are appropriately mitigated.”
The Australian understands that FIRB had twice sought Department of Defence advice on the NSW government’s $9 billion Ausgrid sale last year, with ­Defence raising no objection until FIRB identified a potential nation­al security concern linked to the prospect of the Chinese bidder gaining control of the assets.
The $500 million lease of the Port of Darwin, also given the green light by the Department of Defence in 2015, sparked controv­ersy when the US raised objections when not told of the sale to a Chin­ese company with links to the ­People’s Liberation Army. Its concern was based on the proximity of an Australian Defence Force base serving 1200 US Marines.
The sale by the Northern Territory government eventually triggered changes last year by the federal government to mandate FIRB assessments for all state government-owned assets to private investors.
“The Critical Infrastructure Centre’s ongoing focus on national security risks and foreign involvement in critical infrastruc­ture assets will support the foreign investment review framework which, on an individual case basis, strikes a balance between ensuring that Australia remains an attractive investment destination while maintaining community confid­ence in foreign investment and protecting Australia’s interests,” the Treasurer said.
Mr Morrison, who strongly backed the initiative, added: “The establishment of the Critical Infrastructure Centre will add to the confidence that Australians have in the foreign investment framework through the ongoing assessment of national security risks that can arise with critical ­infrastructure.”
Changes to foreign investment rules last year mean state and territory-owned critical infrastructure is now subject to automatic FIRB review if sold. The infrastructure classes include airports or airport sites, ports, public transport, electricity, gas, water and sewerage systems, roads, railways, telecommunications infrastructure and nuclear facilities.
The security assessments will be contained within the CIC.

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