Posted on 12-8-2004
Foreign
Not Foreign
GOVERNMENT TO CHANGE OVERSEAS INVESTMENT LAWS, THROW THE DOOR
WIDE OPEN
REMOVAL OF SCRUTINY OF NEARLY ALL FOREIGN COMPANY PURCHASES
The Campaign Against Foreign Control of Aotearoa (CAFCA) sees
more minuses
than pluses in the proposed overseas investment law changes
announced in
July by Dr Cullen, the Minister of Finance. Predictably his
press release
was headed "Tougher protection for sensitive sites"
and the media, by and
large, unquestioningly brought that line. Don't get us wrong,
we
congratulate the Government in making it harder for foreigners
to buy
"iconic" land (note: not actually stop them buying,
just to make it
harder). That arises directly from sustained public campaigning
about
issues such as the sale of Young Nick's Head, other coastal
property and
South Island high country stations.
But "iconic" land is a small part of the overall picture
of rural land
sales to foreigners (the vast bulk of which is forestry and
farm land) and
a very, very small part of the economy. The fact is that company
takeovers
by transnational corporations, in all the sectors that constitute
the guts
of the New Zealand economy, total billions of dollars per year
(not the
tens of millions of "iconic" land sales) and the Government
plans to make
it even easier for those transnational corporate takeovers to
proceed.
That more than wipes out any gains made in the area of tightening
up
"iconic" land sales. Indeed, the latter is a mere
sop.
And even that alleged "tightening up" on some land
sales is definitely
more illusory than real. Read the very interesting analysis
of that
aspect, by CAFCA commiitte member, Joe Hendren, that follows
below.
Cullen's July 20 announcement means that we are no longer dealing
with a
review (which had been conducted since November 2003, behind
closed doors)
but with a proposed whole new Overseas Investment Bill. The
Government has
announced that it plans to introduce this Bill around September,
with the
intention of it coming into law on July 1, 2005. There will
be the
opportunity for public submissions during the Select Committee
phase.
What does the Government intend to have in this Bill?
* It will abolish the Overseas Investment Commission, which
is the current
rubber stamp body administering the overeas investment regime
and will
transfer its functions to a specialist unit within Land Information
New
Zealand (LINZ)
* The threshold for official approval for transnational corporations
to
buy NZ companies will be increased from the current $50 million
up to
$100m. Interestingly, Treasury had recommended that the threshold
be
increased to $250m and that is the figure cited all through
the Cabinet
papers, Cullen's recommendations, etc. Apprehension about public
outcry
caused Cabinet to back away from the highrer figure. We must
be grateful
for small mercies.
* To remove the current need for approval of foreign land purchases
of
less than five hectares in area and/or more than $10m in value.
* The recommendations cite NZ's obligations under the General
Agreements
on Trade in Services (GATS) and the free trade agreement with
Singapore as
inhibiting NZ's ability to set restrictions on foreign investment.
Indeed
the official papers say that the proposed new threshold for
company
takeovers by transnationals will become the benchmark for all
future free
trade agreements and the officials were anticipating that threshold
would
be $250m.
* To add insult to injury, the Government plans - "to keep
costs to the
taxpayer down" - to let the foreign investors be responsible
for
post-consent compliance and monitoring. New Zealanders have
had 20 years
of experience of "self-regulation" to not need to
be told how just how
lousy a system that is. They will only to have a file a report
"every one
or two years" on how they are complying witrh the terms
of their consent
and outline any reasons for non-compliance. Guess how many will
say "No,
we're not complying".
The removal of the Overseas Investment Commission is no great
tragedy in
itself. CAFCA has always said that its job could be done by
a monkey with
a rubber stamp. But its replacement agency will see a significant
weakening of any oversight. By definition, Land Information
NZ is
experienced with land. But land sales are very much the smaller
part of
the much bigger picture, maybe totalling in the tens or hundreds
of
millions of dollars per year. Company takeovers are where the
foreign
investment action is, totalling in the billions per year. There
is no
proposal for any new agency with any expertise in that field
to be
involved.
Raising that threshhold for company takeovers will remove all
but the
biggest of them from any scrutiny. Huge chunks of the NZ economy
will be
bought and sold without any official oversight at all. And remember
-
until just days before the 1999 election, the threshhold for
company
takeovers was just $10m. We urged the incoming Labour-led government
to
roll it back to that level. They have refused to do so and are
now going
to raise it to $100m (an increase of 1000% in less than five
years).
The removal of the need for approval for foreign land purchases
of less
than five hectares in area and/or more than $10m in value removes
the need
for any scrutiny of central business district projects that
involve land.
What we've been saying all along about the dangers of NZ getting
entangled
in free trade agreements (whether multilateral, like GATS or
bilateral,
such as with Singpore) is made glaringly obvious. We lose the
right to
control foreign investment.
We welcome any tightening of restrictions on the sale of "iconic"
land.
This concession has been brought about by public opposition
to the sale of
the likes of Young Nick's Head and the sale of coastal land
(primarily in
the North Island) and South Island high country stations. But
it is a mere
sop and more than cancelled out by the other recommendations.
Murray Horton
Secretary/Organiser
**********************************
The following analysis is by CAFCA committee member, Joe Hendren.
A stated public policy objective behind the changes to the OIA
is to
"ensure the value of sensitive New Zealand property is
recognised and
enhanced by any overseas owners. This recognises that for some
land in New
Zealand there is an ‘ownership value’. That is,
New Zealanders derive a
welfare benefit from knowing that particular pieces of land
are owned by
New Zealanders. Thus, where the land is owned by an overseas
investor,
this lack of ownership value is compensated by the imposition
of controls"
(Cabinet Policy Paper (POL), 20/7/04)
It needs to be asked, as it is not clear in the review, why
this very same
argument is not applied to businesses, forests and anything
else for that
matter. Thus it could be just as easily said that New Zealanders
derive a
welfare benefit from knowing that a particular business or service
is
owned by New Zealanders, with the tangible benefit of an increased
chance
of the profits being spent in New Zealand.
Cullen also needs to be asked, perhaps as a Parliamentary question,
to
spell out the ‘non-optimal foreign investment outcomes’
referred to the
POL policy paper, for both land and the sale of NZ business
to overseas
persons.
Despite the hype, economic factors remain the primary consideration
in
land sales.
Under the subheading coverage a Cabinet Paper of 20th October
2003
(Preliminary Thinking On a Potential Review of the Overseas
Investment
Regime) stated that "Ministers have expressed concern that
the current
regime does not adequately protect some critical assets. The
current
national interest’ criteria only take account of economic
factors.
Economic factors such as environmental and cultural importance
are also
important, and should be given consideration. "
But the Cabinet minutes of the 5th of July released with the
proposals
make no real provision for coverage of environmental concerns.
Criteria
for land approvals are to be expanded to take into account natural
heritage; historic heritage; walking access; economic development;
and
residency of the applicant. Natural heritage is envisaged to
include
protecting existing areas of indigenous vegetation and fauna
though pest
control and agreements reached over covenants over the land.
Historic
heritage is envisaged to be about improved conservation of historic
heritage sites, areas or buildings, legal mechanisms such as
the Historic
Places Act, covenants over the land and agreeing access to heritage
sites
with relevant community groups as appropriate (such as Maori)
While Cullen in his press release of the 20th of July 2004 heralded
that
"Overseas buyers wanting to buy sites of special heritage
or environmental
value will be subjected to a tougher screening and compliance
regime" it
is clear that the new environmental and cultural protections
are far more
limited than they appear. Probably due to Treasury influence,
it appears
that environmental grounds have been stripped back to the bone
on the
grounds that other regulatory mechanisms such as the RMA will
apply
equally to foreign and domestic land users.
As it will be up to the relevant ministers to decide which are
appropriate
to a particular proposed sale, it could easily be decided that
the
Conservation department only need to be consulted when the sale
affects or
adjourns conservation estate.
The fact that Cullen will still treat sale of forestry cutting
rights as
just another business sale, and does not come under land provisions
means
that there are no additional environmental protections for an
industry
that can have negative environmental outcomes.
Maori Land
"42. The sale of Maori freehold land is currently exempt
from the
provisions of the Overseas Investment Act if it has been confirmed
by the
Maori Land Court under section 152 of the Te Ture Whenua Maori
Act 1993.
In confirming a sale to an overseas person, the Maori Land Court
is
required, as far as possible, to act in conformity with the
relevant
provisions of the Overseas Investment Act and regulations; and
must have
regard to the matters required to be taken into account by that
Act or
those regulations. Thus both processes are currently required
to be
undertaken, but with the Overseas Investment Act process carried
out by
the Maori Land Court."
It is very interesting there is so much material related to
the seabed
foreshore issue in the documents, it was not signalled at the
start of the
review - was Cullen waiting until submissions had closed on
the S+B bill
perhaps?
Crown purchase of foreshore and seabed (From Cabinet Minutes
(04) 22/6)
n.. agreed that the Act provide for a right of first refusal
in favour
of the Crown in respect of any foreshore or seabed land subject
to the
Act; (ie that could be sold to a foreign person) o.. directed
officials
to report to the Minister of Finance by the end of July 2004
on
proposals for a right of first refusal in respect of foreshore
and
seabed land, and the possibility of compulsory acquisition of
foreshore
strips;
It is to be assumed that compulsory acquisition of S+F land
from a foreign
investor would involve paying compensation, something that is
denied to
Maori. There is also an obvious lack of consideration to Maori
interests
in the recommendations, and what is there only seems to relate
to the sale
of Maori land to foreign investors and vague examples such as
'access' to
tapu sites under heritage provisions. But there are options
included in
the review to remove jurisdiction of Maori Land Court from sales
of Maori
land to overseas persons!
Under Treaty Implications in the POL document
"105: The underlying principles that allow foreign investment
in private
property have not been altered under these proposals, thereby
not creating
new Treaty risks. This is expected to be the case even if responsibility
for applying Overseas Investment Act criteria to Maori freehold
land is
transferred to the overseas investment regulator. Further work
on the
proposed right of first refusal will include treaty implications."
There is more evidence that Maori interests are regarded as
threats and
barriers to FDI in discussion of the disadvantages of the current
system
governing the sale of Maori land.
"Disadvantages: The regulator’s role is likely to
become more difficult,
with a wider range of factors (environmental, heritage and walking
access
being explicitly added to the criteria) being taken into account
in
deciding applications. "(I.e. the regulator is not there
to oversee
investment but to promote it)
It is concerning that the recommendations do not include requirements
to
consult with Maori over relevant approvals, especially if Maori
land sales
were removed from the jurisdiction of the Maori Land Court.
One would hope
there would be a Supplementary Order Paper to the bill to this
effect if
there are any changes in this area (such as a requirement to
consult with
Te Puni Kokiri).
********************************************
What You Can Do
a.. Contact your MP urgently and register your opposition to
the
weakening of the current overseas investment law and regulations.
b.. Write to your local paper. Call talkback.
c.. Argue for strengthening the controls over foreign investment,
the
conditions that are placed on it, and the monitoring that should
follow.
d.. Advocate strongly for tighter control on overseas ownership
of land
and fisheries.
|