Fears of foreign ownership ‘overstated’, China still small source of FDI, English says
By Jonathan Underhill
Aug. 13 (BusinessDesk) - Fears of foreign ownership of New Zealand assets are frequently overstated and foreign direct investment is an important source of funding for growth for a nation that doesn’t save enough to meet those needs internally, says Finance Minister Bill English.
“As a small country, we naturally rely on FDI to help us achieve economies of scale, and for access to ideas and consumer markets,” English said in a speech to a conference on contemporary China in Wellington. “We do not have the large stock of capital which older and wealthier countries have.”
Investment from overseas has played a central role in the development of New Zealand dating back to the 1800s, including sealing, flax and timber and later, frozen meat, wine, banking and finance, English said.
The gap between New Zealanders’ savings and the nation’s investment needs amounted to about $9 billion a year between 2002 and 2011, he said. While the outflow of profits from foreign-owned firms contributed to New Zealand’s current account deficit, “it’s also important to consider the bigger picture,” English said.
The purchase of the Crafar farms by Shanghai Pengxin Group met with some opposition and sparked widespread debate about New Zealand’s foreign investment rules. But China ranked only 11th among nations that invest here, with a total of $1.8 billion. Foreign direct investment was less than half that amount.
By contrast, FDI from Australia was $52 billion and from the US amounted to $11 billion. New Zealand’s investments in China are also relatively small, amounting to $789 million in 2011, making it the 13th-biggest destination for kiwi funds. New Zealand sits at about the OECD average as a recipient of foreign investment though the nation’s overseas investments are below the average of the OECD.
China is New Zealand’s second-largest export market after Australia.