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Posted on 12-7-2004
NZ
Gov. Threatens To Open Foreign Investment Floodgates
From cafca.org.nz Photo shows Michael Cullen
In November 2003 the Minister of Finance Michael Cullen announced
a "first
principles" review of the Overseas Investment Act. The purpose
of this
review is twofold.
a.. "First, to ensure that the overseas investment regime
focuses on those
assets of critical interest, such as certain sensitive land
areas, natural
resources (eg fish) and assets with historical or cultural
significance
(eg heritage buildings).
b.. Second, to maintain a liberal foreign investment regime
and to reduce
compliance costs where this is feasible, while ensuring the
government’s
objectives are achieved."
Treasury led the review, with input from officials from other
Ministries.
It was conducted behind closed doors. The recommendations
have gone to Dr
Cullen and been approved by Cabinet. They go to the Labour
caucus on July
20 (next Tuesday) and Cullen hopes to introduce a Bill to
Parliament in
August.
The recommendations have, thus far, not been announced. But
courtesy of a
leak, we know what some of them are:
* The Overseas Investment Commission (which administers the
foreign
investment regime) will be abolished and its functions taken
over by Land
Information New Zealand.
* The threshold for official approval for transnational corporations
to
buy NZ companies will be increased from the current $50 million
up to
$250m.
* 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.
* There will be some tightening on the ability
of foreigners to buy
"iconic" land.
What do these mean? 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 all matters to do 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 very
biggest of them from any scrutiny. The officials' themselves
estimate that
the number of approvals needing scrutiny will drop from 20
per year to
five. The likes of Toll's $130 million takeover of Tranz
Rail will require
no 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 $250m
(an increase of 2500% 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.
What You Can Do
a.. Call for a proper public inquiry, rather than a secret
one led by
agencies such as Treasury which will favour the dismantling
of controls.
b.. Contact your MP urgently and register your opposition
to the weakening
of the current overseas investment law and regulations. If
you have a
Labour MP, urge that s/he express opposition to the recommendations
at the
July 20 caucus meeting.
c.. Write to your local paper. Call talkback.
d.. Argue for strengthening the controls over foreign investment,
the
conditions that are placed on it, and the monitoring that
should follow.
e.. Advocate strongly for tighter control on overseas ownership
of land
and fisheries.
f.. Become informed. Join CAFCA and gain access to a wealth
of information
and analysis that you will not find in your local newspaper.
Membership is
$20 per year (or $15 unwaged). Payments to CAFCA, Box 2258,
Christchurch.
a.. The Government plans to introduce legislation by August,
so it is
critical to act now.
CAFCA LEAFLET AVAILABLE
CAFCA has produced a leaflet on the subject, giving considerably
more
detail. It is entitled "Foreign Investment In New Zealand:
We Are In
Danger Of Losing The Right To Pick And Choose" (it has been
updated from
the original version, to include what we now know about the
review and the
officials' recommendation).
We want it spread far and wide, by our members and supporters.
If you
would like hard copies of it, please reply to this e-mail,
giving your
name and postal address and saying how many copies you would
like.
Photocopying and postage costs money, so a koha towards costs
wouldn't go
amiss either. Make cheques to CAFCA, at the below postal
address.
The leaflet can also be downloaded from CAFCA's Website.
It is a PDF. You
can access it at
There are background articles on the subject. You can access
them at:
and click on the Foreign Investment In New Zealand page.
For the second
Number 105, April 2004.
Read the leaflet, read the articles, and you'll see the threat.
We need
your help to arouse public awareness and action on this.
CAFCA is
campaigning on this review and the legislation that will
shortly emerge
from it. We need as much help as possible.
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