Factors driving the push for critical infrastructure security reform in Australia
2018’s Security of Critical Infrastructure Act didn’t come out of a policy bubble. The fact is we live in a globalized world; cross-border trade is the norm. The benefits of high levels of integration to comparatively open economies like Australia have been obvious for some time now, specifically in the realm of foreign direct investment (FDI).
Why FDI? Well, the inflow of FDI correlates positively with technology spill overs, human capital formation, increased business competition, and improved business development. Source enterprises, in particular, receive valuable transfers of capital, technologies, techniques, and intellectual property.
Fortunately, then, for Australian enterprises, the country has long ranked high in received foreign direct investment, usually defined as foreign ownership of ten percent or more of a company. Those FDI inflows show no end in sight. In fact, they’ve only skyrocketed in recent years: according to the Bureau of Statistics, Australia received A$850 billion in inward FDI in 2017. That figure represented a seven percent increase from the prior year and an over 50 percent jump from 2011.
Meanwhile, the mix of countries providing the bulk of Australia’s FDI has shifted. Inflows from advanced economies like the U.S., EU, and Japan remain strong; Canada has even upped its FDI transfers recently. Australia is, however, also experiencing noticeable increases in capital inflows from state-backed enterprises in China and members of ASEAN (the Association of Southeast Asian Nations).
The entry of foreign, state-backed investment into sectors deemed vital to the national security usually creates a domestic policy (and often political) blowback, though. And we find this predictably to be the case in contemporary Australia, where critical infrastructure (see the statutory definition below) – whether electricity, gas, or water assets, or ports – has been deemed vital to the national interest. In consequence, policy actors consider muscular interventions like the Security of Critical Infrastructure Act 2018 perfectly appropriate.
What’s more, like in most industries, the critical infrastructure sector has been buffeted by technological change. Nowadays, technological platforms that power most critical infrastructure assets-industrial control systems, data holdings, security systems, and other corporate systems-are largely digital and cloud-based.
No doubt, the digitization of these management systems has been enormously beneficial to the industry. But those same platforms now also create a cyber threat vector for hackers. And therefore, in crafting the Security of Critical Infrastructure Act 2018, policy makers had the same incentive to prescribe rules for the handling of management systems. To learn about those specific measures, download our overview guide to the Security of Critical Infrastructure Act 2018.
How the Security of Critical Infrastructure Act defined critical infrastructure assets
- Critical electricity asset, a network, system, or interconnector for the transmission or distribution of electricity to ultimately service at least 100,000 customers; or an electricity generation station critical to ensuring the security and reliability of electricity networks or systems in a state or territory.
- Critical port, land that forms a part of any number of security-regulated ports, including the Ports of Adelaide, Brisbane, Melbourne, Sydney Harbour, etc.
- Critical gas asset, a gas processing facility that has the capacity of at least 300 terajoules per day, a gas storage facility that has a maximum daily quantity of at least 75 terajoules per day, or a network or system for the distribution of gas to ultimately service at least 100,000 customers.
- Critical water asset, one or more water or sewerage systems or networks that are managed by a single water utility and ultimately deliver services to at least 100,000 water connections or 100,000 sewerage connections.
European Journal of Interdisciplinary Studies: The Effects of Foreign Direct Investments of Host Country’s Economy
The United States Studies Centre at the University of Sydney: Deal-Breakers? Regulating Foreign Direct Investment for National Security in Australia and the United States
The Australian Trade and Investment Commission: Australia’s inward FDI stock surged to almost A$850 billion in 2017
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