Finlay McDonald on Overseas Investment Act

Bending over backwards for foreign coin

By FINLAY McDONALD - Sunday Star Times

Last updated 13:19 22/03/2009
When governments announce a "review" of some piece of policy or legislation you know what it really means: we're out to change this but, for appearances' sake, we'll go through the motions of inviting submissions and "opening it up for discussion".

If you doubt this, just wait for the "outcome" of the government's review of our overseas investment regime.

When I heard Bill English announce it, I almost laughed. After all, New Zealand already has one of the most liberal foreign investment regimes in the developed world. Claiming it needs further liberalisation is akin to saying bullrush has too many rules.

Or as Murray Horton of the Campaign Against Foreign Control of Aotearoa put it with characteristic wit: "If the door is already left permanently unlocked, with a sign saying 'Come On In and Help Yourselves', this proposed law change will simply remove the door - and probably offer it for sale as well."

As usual, though, the cheerleaders of deregulation were pretending such an overhaul was vital for the public good. The head of the New Zealand International Business Forum offered this piece of highly researched wisdom: "Anecdotal evidence suggests that some foreign investors are deterred by our procedures even though most applications are in fact approved."
Say what? So just in case there are some impatient buyers out there who won't even form an orderly queue to snap up the local bargains, we should get that rubber stamp moving still faster . . . so sorry to have kept you waiting, sir!

And rubber-stamping it is. Before it was folded into Land Information New Zealand, the Overseas Investment Commission acted like a hotel doorman, ushering in everyone from billionaire kleptocrats shopping for scenery to multi- nationals in the market for repatriated profits.

In this the commission was ably assisted by laws designed to ease the process. The previous Labour government's Overseas Investment Act in 2005 bumped up the threshold for foreign buyers needing official approval from $50 million to $100m. If there was anything positive in that legislation it lay in marginally increased protection against foreigners buying land of "special heritage or environmental value". This was largely a sop to that annoying sentimental streak in many New Zealanders, who don't like the idea of flogging off bits of their birthright to any old Tommy Suharto, let alone Dick or Harry.

But while land sales have immediate symbolic resonance, it's the wholesale buying up of our commercial assets that the system has truly enabled. Since we put out the welcome mat in the 1980s, nearly half the sharemarket has fallen into foreign hands and nearly all of our major companies are substantially or totally foreign controlled. Billions in dividends and profits have flown offshore since.

Overseas investment rules are themselves part of a bigger picture - free trade deals and our bipartisan commitment to Gatt form the framework within which we are almost obliged to hustle for foreign money. The textbook justification for this, of course, is that capital, expertise and access to bigger markets flow in with the cash. Jobs and growth are created, we become part of the great global economy whose benefits should be obvious to all.

In truth, the massive hikes in foreign investment and ownership over the past decades have done little to improve our lot. New Zealanders have become increasingly indentured to foreign masters, working harder and longer for less. This is the process the current government wants to make even more "efficient".

So where's the outcry? Maybe the Maori Party will draw another line in the sand over mana whenua - if they're not too busy doing private prison deals with their new mates, that is. Don't expect much noise from Labour. It would be an act of considerable philosophical contortionism if they were to repudiate the essence of the very legislation they nurtured to its present state.
No, unless public sentiment is roused sufficiently by the prospect of another Auckland airport or similarly strategic asset being put on the block, review will duly become reality and, by the time the global economy picks up again, our overseas investment express lane will be open for business.