Removal Of Scrutiny Of Foreign Company Purchases
The Fight Is On Govt. Introduces New Overseas Investment Bill, Throws The Door Wide Open
Removal Of Scrutiny Of Nearly All Foreign Company Purchases
The Campaign Against Foreign Control of Aotearoa (CAFCA) sees considerably more minuses than pluses in the new Overseas Investment Bill introduced into Parliament on November 10 by Dr Cullen, the Minister of Finance. His press release was headed "Toward a more effective overseas investment regime" and it definitely will be - for the transnational corporations whose ceaseless takeover of New Zealand will be made that much easier by this most obliging of governments.
Don't get us wrong, we congratulate the Government in making it harder for foreigners to buy land of "special heritage or environmenlal value" (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 such 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 "special" 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 "special" land sales. Indeed, the latter is a mere sop.
What is in the 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 higher figure. We must be grateful for small mercies (it is worth noting that Treasury's original recommendation was that there be absolutely no overseas investment oversight regime but concluded that it was not politically possible, in light of public opinion).
* 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 official recommendations preceding the Bill 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 "regularly" 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.
Cullen points out the last time a non-land transaction was refused permission was in 1984, and therefore we might as well virtually give up monitoring company takeovers. On the contrary - that is an indictment of 20 years of rubberstamping neglect by the OIC and Government; and a clarion call for the transnational corporate oversight regime to be significantly toughened up, not weakened.
Raising that threshold 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 threshold 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 the tightening of restrictions on the sale of "special" 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. However, this "tightening" wouldn't have stopped any of those purchases, not Young Nick's Head, nor the recent purchase of two Otago high country stations by Shania Twain. The Bill increases penalties for breaches. Sounds good but the proof of the pudding is in the prosecuting. It would be very interesting to know how many foreign investors have been taken to court. In the words of Scribe: "Not many, if any".
The OIC's brief has been to facilitate, not "hinder" foreign investment and this new Bill facilitates the OIC out of existence, and delivers a very "effective overseas investment regime" - an effective surrender of economic sovereignty. The minor concessions on some land sales are simply a smokescreen to conceal that central fact. The Government is saying to transnationals: "Come on in and help yourselves. Make yourselves at home".
CAFCA has produced a leaflet on the subject, giving considerably more detail.
The leaflet can be read at CAFCA's Website. It is a PDF. You can access it at
Check our site regularly, as the leaflet keeps being updated.
There are background articles on the subject. You can access them at: