Removal Of Foreign Company Scrutiny Imminent
Urgent Action Needed Government Review Of Overseas Investment Laws
Imminent Removal Of All Scrutiny Of Foreign Company Purchases
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.
"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).
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
Call for a proper public inquiry, rather than a secret one led by agencies such as Treasury which will favour the dismantling of controls.
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.
Write to your local paper. Call talkback.
Argue for strengthening the controls over foreign investment, the conditions that are placed on it, and the monitoring that should follow.
Advocate strongly for tighter control on overseas ownership of land and fisheries.
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.
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 http://canterbury.cyberplace.co.nz/community/CAFCA/OIAReview1.pdf There are background articles on the subject. You can access them at: http://www.converge.org.nz/watchdog/04/01.htm and http://www.converge.org.nz/watchdog/05/01.htm If these Links don't work, for any reason, then go to http://www.cafca.org.nz , and click on the Foreign Investment In New Zealand page.
For the second Foreign Control Watchdog article, go to www.converge.org.nz/watchdog , 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. Let's all get stuck in! Murray Horton
Campaign Against Foreign Control of Aotearoa
Box 2258, Christchurch, New Zealand