Cabinet boosts ministerial powers over foreign investment decisions
By Jonathan Underhill
Dec. 9 (BusinessDesk) – The Cabinet has approved tweaks to the regulations on foreign investment, increasing ministerial power to consider wider issues of economic benefit when assessing deals.
The changes will come too late for the high-profile Natural Dairy (NZ) proposal to acquire the Crafar dairy farms. Regulatory change is expected to take effect on Jan. 13 and existing cases won’t be affected, said Brad Young, a spokesman for the Overseas Investment Office.
Two months ago, the Cabinet agreed to give ministers broad new grounds to veto foreign sales of sensitive land, specifically large scale overseas ownership of farm land and vertically integrated companies in primary production.
The Crafar farm application has slowed under its own complexity rather than any political or public pressure, the OIO’s Young said, pointing to the office’s reporting on the saga posted on its website. The two principal companies, Natural Dairy and May Wang’s UBNZ, are now under Serious Fraud Office Investigation and Wang was declared bankrupt yesterday.
“The OIO needs to be quite neutral on this,” Young said. “The decisions can be judicially reviewed.”
Under the changes announced today, ministers can consider a new economic interests test that will provide “ministerial flexibility to respond to both current and future economic concerns about foreign investment, such as large-scale ownership of farmland,” Finance Minister Bill English said in a statement.
They can also consider mitigating factors that would provide a benefit to New Zealand, according to Cabinet papers released today. They include listing on the NZX, local incorporation or head office, local investment partners and a local director.
Foreign direct investment in New Zealand amounted to $92.8 billion in the year ended March 2009, with an annual flow of $6.1 billion. That puts it in the same order as Crown expenses and spending appropriations.
The lion’s share is from Australia, New Zealand’s biggest export market and trading partner, as well as the most closely aligned regulatory and trade regimes. It made up about 50% of the total on $46 billion in the March 2009 year though in the same period the flow slowed to a trickle at $677 million from $2.38 billion a year earlier, the papers show. China doesn’t make the top five for total FDI or flow, which includes the U.S., U.K., Netherlands, Japan and Canada.
The OIO will receive a Ministerial Directive Letter instructing the office to give “high relative importance” to the new factors in “any decision of whether overseas investment in large areas of farm land is likely to benefit New Zealand.”