Foreign Control of NZ - Key Facts
Foreign Control of NZ - Key Facts
† indicates source. Last updated: 4 February 2018
Note that there are often revisions to official data, leading to some changes to reported data for past years.
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Foreign direct investment (ownership of companies) in New Zealand increased from $15.7 billion in March 1989 to $113.0 billion at March 2017 ï¿½ over seven times. As a proportion of the total output of the economy, Gross Domestic Product, it has risen from 22% to 42%. Ownership of overseas companies by New Zealand residents has not grown as fast over that period (over five times) so net foreign direct investment has grown almost nine times from a net liability of $8.8 billion to $77.1 billion, and as a percentage of GDP more than doubled from 13% of GDP to 28%.
Foreign Direct Investment from International Investment Position, National Accounts, Statistics New Zealand, InfoShare series IIP088AA. GDP from National Accounts, Statistics New Zealand, InfoShare series SNE038AA.
Foreign owners controlled 38% of the share market in 2017. In 1989, the figure was 19% and it was estimated to be below 5% in 1986.
At March 2016, they owned an estimated 20% of the value of all equity (shareholdings) and 24% of privately owned equity of enterprises in New Zealand, including shares not listed on the stock exchange.
Foreign investors owned 24% (or $399 billion) of net wealth in New Zealand whose commercial net value totalled $1.7 trillion at March 2016. They owned 27% of private net wealth. This comprised housing, land, other property, plant, equipment and financial assets owned directly or indirectly by households, government, non-profit organisations and foreign investors. New Zealand residents owned a further $240 billion of investments abroad. (These totals exclude shared natural wealth such as rivers, and human and social capital.)
1986, 1987: "Brian Gaynor: New Zealanders buy back their sharemarket", New Zealand Herald, 19 October 2013; and "Brian Gaynor: Potential problems in NZX's high level of foreign investment", New Zealand Herald, 31 January 2015;1989-1997: "Corporate Governance Research on New Zealand Listed Companies", by Mark Fox, Gordon Walker and Alma Pekmezovic, Arizona Journal of International & Comparative Law Vol. 29, No. 1, 2012, Table 4, p.16. 1997-2004: "Savings and the Equity Market" - JBWere submission to the Savings Working Group, November 2010, p.2. 2005-2017: Equity Ownership Survey - New Zealand 2017, JBWere, 15 December 2017, p.2, "Ownership structure of NZX primary listed stocks since 2005". Wealth is calculated from Statistics New Zealandï¿½s Annual Balance Sheets, and the equity estimates (which do not include households' equity in unincorporated enterprises) are calculated from data provided by Statistics New Zealand from the same source*.
In 2017, the Overseas Investment Office (OIO) approved foreign investment totalling $5.3 billion. The average for the decade 2008-2017 was $7.0 billion. Of the $5.3 billion in 2017, $4.2 billion was sales from one overseas company to another (all but $1.8 billion was sales from one to another on average over the decade). Only company takeovers involving $100 million or more need OIO approval, except those involving land or fishing quotas. For private Australian investors the threshold was $501 million in 2017, and is adjusted upwards each year for inflation. Until 1999, the threshold was $10 million, it then became $50 million, and from August 2005 the government increased it to $100 million.
Overseas Investment Commission and Overseas Investment Office.
Note that the OIO suppresses some values. In 2017 it suppressed a dollar value in July 2017 for one approval which caused totals for the rest of the year also to be suppressed. The total dollar values given here are estimated by replacing that one approval by the minimum $100 million threshold. It is therefore an underestimate.
In 2017, the OIO approved the sale of 25,696 hectares of freehold rural land and 47,679 hectares of leases and other interests in land to foreigners. This is the lowest area of freehold land since 2003 when 17,259 hectares were approved for sale and well below the average for the decade 2008-2017 of 124,631 hectares. However the level of sale of leases and other interests in land is close to the average for the decade of 46,516 hectares. About 8,000 hectares of the freehold land and 25,000 hectares of the leases and other interests in land were from one foreign investor to another. Statistics on sales of land to overseas interests are poorly recorded and incomplete. Our best estimate is that in 2011 at least 8.7 percent of New Zealand farmland including forestry, or 1.3 million hectares, was foreign-owned or controlled and it could have reached 10 percent.
Overseas Investment Commission and Overseas Investment Office.
"Overseas Ownership Of Land: Far Greater Than The 1% The PM Claims", by Bill Rosenberg (www.converge.org.nz)
Statistics NZ figures, as of March 2017, list the biggest foreign owners of New Zealand companies as being from, in decreasing order: Australia, US, Hong Kong, UK, Japan, Singapore, Netherlands, British Virgin Islands, Canada, China, Cayman Islands, Switzerland, Belgium, Luxembourg and France (though the investments from some countries have been suppressed). All had over $100m in foreign direct investment in New Zealand. These accounted for 95% of foreign direct investment in New Zealand and Australia alone accounts for 51%. Luxembourg, British Virgin Islands and Cayman Islands are tax havens, and the Netherlands has been used to avoid tax. A Statistics New Zealand study showed that in 2010, large proportions of the foreign direct investment from the Netherlands, Singapore, Hong Kong and tax havens was in fact from other countries, led by the UK, US, Germany and Canada. In 2017, other tax havens with investments in New Zealand companies include Vanuatu, Channel Islands, Isle of Man, Bermuda and the Bahamas, but the value of their holdings has been suppressed as "confidential". Bermuda showed a negative investment in New Zealand companies between 2009 and 2011 and data released in 2015 showed it was negative up to 2015 (negative $1.8 billion in 2015), but all values since 2005 have now been suppressed. Germany has also showed negative investment since 2013 and Fiji (where the data has not been suppressed) since 2002. Ireland's ownership went negative in 2017 following steadily falling direct investment. Negative investment suggests that the companies may have been loaded with debt to their parents or are technically insolvent.
International Investment Position, Statistics New Zealand: Directional basis stock of direct investment by country (Annual-Mar), InfoShare series IIP081AA. Note that these statistics are compiled on a different basis from those also from Statistics New Zealand above, so the total does not match. These are compiled on a "directional" basis, based on ultimate nationality of ownership; the above are on a "balance sheet" basis, based on residency of the company. Industry statistics below are also compiled on a directional basis.
Mallika Kelkar. (2011). "The ultimate sources of foreign direct investment (p. 19). Presented at the New Zealand Association of Economists (NZAE) Conference, Wellington, New Zealand. Retrieved from http://stats.govt.nz/methods/research-papers/nzae/nzae-2011/ultimate-sources-foreign-direct-investment.aspx
The Financial and insurance services sector, which includes the four big Australian owned banks, accounted for by far the biggest part of foreign ownership of New Zealand companies by industry in March 2017, with $36.0 billion. Next was Manufacturing at $16.0 billion. Other industries having more than $1 billion of foreign investment were in decreasing size, Agriculture, forestry, and fishing; Retail trade; Wholesale trade; Rental, hiring and real estate services; Electricity, gas, water and waste services; Information media and telecommunications; Professional, scientific and technical services; and Health care and social assistance. Mining fell from $1.4 billion in 2016 to $291 million in 2017. $16.6 billion was unable to be allocated to an industry because of the way foreign direct investment is estimated, or was suppressed as being confidential.
Source: International Investment Position, Directional basis stock of direct investment by industry (Annual-Mar), InfoShare series IIP080AA - Statistics New Zealand. See note regarding country statistics.
Transnational corporations (TNCs) make massive profits out of New Zealand. These can truly be called New Zealand's biggest invisible export. In the year to March 2017, they were $8.6 billion. Over the last decade they have averaged more than the combined exports of seafood and milk powder. In the decade 2008-2017, TNCs made $79.8 billion in profits from New Zealand. They made an average rate of profit on their shareholdings of 11.8% (10.8% in the year to March 2017). Only 24% was reinvested (though 39% in the year to March 2017). Profits have averaged three times the increase in foreign direct investment holdings each year.
Balance of Payments: Current account primary income (Annual-Mar), InfoShare Series BOP058AA; Current account investment income by sector (Annual-Mar), InfoShare series BOP059AA; and Balance of payments major components (Annual-Mar), InfoShare series BOP055AA - Statistics New Zealand.
Another $7.8 billion left New Zealand in the year to March 2017 made up of investment income from debt and smaller shareholdings (portfolio investment), making a total $16.4 billion. Over the last decade this has averaged more than the combined dairy and forest product exports. More than two out of every five dollars of the $16.4 billion went to the owners of New Zealand's banking sector: $6.9 billion. The investment income from overseas ownership of the banking sector ("Deposit taking corporations") after taking account of its small investment income from abroad, accounted for four out of every five dollars of New Zealand's current account deficit in the year to March 2017: $6.3 billion compared to $7.7 billion. The investment income deficit (income on New Zealand investment overseas less income on foreign investment in New Zealand) has been greater than the current account deficit for all but three years since 1989, which further increases New Zealand's foreign liabilities.
Exports: Key Statistics Table 7.04 - Value of principal exports (excl re-exports), InfoShare series EXP005AA - Statistics New Zealand.
Foreign investors are not great for employment - they only employ 18% of the workforce (down from 21% in 2000). Foreign ownership does not guarantee more jobs. In fact, it can add to unemployment such as in examples of private equity takeovers including NZ Rail, Feltex, Cadbury's and Dick Smith Electronics.
Business demography statistics: Enterprises by industry and overseas equity 2000-17, Statistics New Zealand, available in NZ.Stat at http://nzdotstat.stats.govt.nz/WBOS/Index.aspx?DataSetCode=TABLECODE7608.
Foreign ownership has not improved New Zealand's foreign debt problem. In 1989, total private and public foreign debt stood at $47.5 billion, equivalent to about two-thirds of New Zealandï¿½s Gross Domestic Product. As of March 2017, it was $262.8 billion (or $287.9 billion including derivatives), equivalent to 97% of New Zealand's Gross Domestic Product (106% including derivatives) despite all of the asset sales and takeovers.
Source: Statistics New
Zealand as follows: International investment position (IIP)
(Annual-Mar) - InfoShare series IIP088AA; External lending
and debt by sector and relationship (Annual-Mar) - InfoShare
series IIP078AA; International non-equity financial
instruments by sector (Annual-Mar) ï¿½ InfoShare series
New Zealand's A&L - Level 3 Components (Discontinued March 2000) (Annual-Mar) - InfoShare series IIP007AA; GDP(P), Nominal, Actual, Total (Annual-Mar) - InfoShare series SNE038AA.
* The Annual Balance Sheets are still being "refined" in some aspects and are described as provisional, with significant revisions each year. Equity values are provided by SNZ and the above proportions of equity values are calculated by the author by removing double counting due to enterprises themselves owning shares; this can be approximate only.