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Gov To Transnationals: Come In And Help Yourselves




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, whcih 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



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. Non-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.

e.. 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 September, so it is critical to act now.

CAFCA has produced a leaflet on the subject, giving considerably more detail.

The updated leaflet can be read at CAFCA's Website. It is a PDF. You can access it at


You can download the leaflet yourself from there or you can order hard copies from us. If you order several hundred, we'd appreciate a koha for the cost of copying and postage.

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 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.

CAFCA will be mounting a campaign on this Bill, and we need all the help that we can get.

Let's all get stuck in!

Murray Horton


CAFCA Campaign Against Foreign Control of Aotearoa

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