Ministers say no to Lochinver sale

September 17, 2015

Ministers have declined an application by a foreign company to buy Lochinver Station:

An overseas company’s application to purchase Lochinver Station has been declined because the benefits to New Zealand are not substantial and identifiable, Ministers Paula Bennett and Louise Upston say.

Pure 100 Farm Ltd, a subsidiary of China-based Shanghai Pengxin, applied to the Overseas Investment Office (OIO) last year to buy the 13,800 ha farm near Taupo for $88 million.

“Because Lochinver Station is classified by law as sensitive land, Ministers must consider whether the application meets the requirements set out in the Overseas Investment Act,” Associate Finance Minister Paula Bennett says.

“While we recognise and support the importance of overseas investment, the Overseas Investment Act states it is a privilege for overseas people to own sensitive New Zealand assets and therefore requires such investments to meet statutory criteria for consent.

“After detailed and careful individual consideration, we are not satisfied there will be, or is likely to be, a substantial benefit to New Zealand – a key requirement for applications of sensitive land of this size.”

While the OIO said the question of whether the benefits of the potential investment to New Zealand are or could be substantial and identifiable was finely balanced, it recommended approving the application.

“We agreed parts of the proposed investment could benefit New Zealand but in our judgement on the overall balance of evidence, the benefits are not likely to be substantial and identifiable,” Land Information Minister Louise Upston says.

“This proposed sale didn’t pass a test we are required to exercise Ministerial judgement on.

“This is an example of our system working well.  The OIO conducted a thorough investigation before making a finely balanced recommendation.  Ministers carefully assessed the evidence and ultimately came to different view.”

A summary of the reasons for the Ministers’ decision can be found here.

This decision shows the bar for overseas ownership of farm land is set very high.

It is very difficult for a would-be foreign buyer to prove that it would provide more benefits than a local one, even if the local is hypothetical.


Rural round-up

July 24, 2015

Certainty underpins healthy community :

Federated Farmers have placed an emphasis the importance of certainty within the primary sector as a key component of a thriving economy.

Speaking at the Local Government New Zealand conference, Federated Farmers president Dr William Rolleston told councils the number one issue facing the primary sector needs was certainty, and with certainty came the ability to make investment decisions that underpinned a thriving economy. 

Rolleston also spoke about the Resource Management Act (RMA), and heavy burden it placed on the rural sector.  . .

Shanghai Pengxin puts all its farms up for sale – Gerard Hutching:

Chinese company Shanghai Pengxin’s total farm assets in New Zealand are up for sale, including 16 farms and a conditional agreement to buy Lochinver Station – but they are unlikely to be sold.

Because the company wants to restructure, the Overseas Investment Office (OIO) requires it to offer its assets for sale to New Zealanders.

The 16 dairy farms totalling 7885 hectares are the former Crafar family farms, bought controversially for $200 million in 2012.

They were listed for sale on Trade Me on Sunday on a “price by negotiation” basis and by Tuesday had been viewed 657 times. . .

Paraparaumu farmer is looking to give away his best friend to a loving home – Jessy Edwards:

Brian Arnopp is being eaten out of house and home by his best mate, and it’s finally got too much for him.

So now Mr Bull is going free to a good home.

Arnopp, of Paraparaumu, has looked after Mr Bull since he was left at the 77-year-old’s farm four years ago. . .

Pipfruit industry on track:

The New Zealand pipfruit industry recently regained its position as the world’s most competitive pipfruit industry, making this year’s conference time to reflect, says Pipfruit NZ.

The pipfruit industry, which is due to hold its annual conference in Wellington in August, is one of the fastest growing primary sectors in the country. Exports have increased in value from $340m in 2012 to $536m in 2014. The industry is well on track to reach its $1bn export target by 2022.

Pipfruit NZ says the annual conference will be an important networking and educational event for the industry. . .

Time to show your true nature:

Farmers are being urged to enter the Ballance Farm Environment Awards, which now include the Auckland region.

Entries open on August 1.

Facilitated by the New Zealand Farm Environment (NZFE) Trust, the awards promote best-practice land management by showcasing the work of people farming in a way that is environmentally, economically and socially sustainable. . .

Farmers need government to heed ’10 point’ local government plan:

Federated Farmers want the government to give immediate attention to the Local Government New Zealand’s ’10 point plan’ for rates reform.

Federated Farmers Local Government spokesperson Katie Milne says the disastrous dairy payout prices in particular mean farmers want urgent action on inequities in the rates they pay to their local bodies.

“We farmers can’t control international prices. Neither can the government. But the government can legislate rates reform. It all helps, and the sooner the better,” Katie Milne says. . .

Te Karaka student awarded scholarship:

A Te Karaka student has been awarded the Mangatu Blocks and Ravensdown Scholarship, providing three years study at Auckland University.

Roland Taupara Brown completed his secondary schooling at Gisborne Boys High School where in his final year he was named Dux for 2014.

Brown says the scholarship provides him with a unique opportunity to focus on his studies in science and commerce at Auckland University. His Bachelor of Science degree will focus on green chemistry and his Bachelor of Commerce will provide the business disciplines to ensure a balance between environmental and commercial considerations. . .

Chinese-NZ partnership wins

May 9, 2015

The company which bought the former Crafar farms has won an award for turning the business around using New Zealand management, labour and skills.

Milk New Zealand, owned by Shanghai Pengxin, was last night named supreme winner at the 2015 HSBC New Zealand China Trade Association Business Awards in Auckland.

Shanghai Pengxin bought Crafar Farms in 2012 for more than $200 million.

Gary Romano, chief executive of Pengxin International, said the award was recognition for how they had run the farms.

Shanghai Pengxin’s purchase of the farms was controversial – but Mr Romano believed it had been good for New Zealand.

“Look, as a New Zealander, I did think to myself, am I doing something that’s good for New Zealand as well as my company?

“After speaking to a number of economists and thinking clearly through this I’ve come to the view that there is absolutely no downside to foreign investment.

“I think some of the things that the Overseas Investment Office does are very correct.

“So, things like making sure there’s been no money laundering, the right amount of taxes have been paid, people of good character, and that we’ve paid a fair price for the assets in a contestable process – all those things are very, very useful for New Zealand.”

He said once those tests had been passed, such investment provided oxygen for the economy. . .

The combination of foreign investment and local skills has been a winning one which shows the benefits that can result from allowing overseas ownership of some land.

Foreign ownership boosts wages:

September 5, 2014

Trans Tasman on foreign ownership:

The proposed sale of the 13,800ha Lochinver Station, near Taupo to Shanghai Pengxin, which bought the Crafar Farms in a joint venture with Landcorp, reignited the political debate about foreign investment and purchases of Kiwi land. Labour has promised to block the sale if it is not approved before the September 20 election and stop land sales over 5ha except in rare circumstances. Finance spokesman David Parker says land sales to foreigners do not increase output and do not release capital to be reinvested by the NZ owner to create new jobs. Finance Minister Bill English, however, reckons the Govt has struck the right balance between attracting foreign investment and tightening the rules for overseas investment in sensitive land.
Public Disquiet. Chinese investors have been making other investments in the farm sector: they have a minority stake in Blue Sky Meats and the Overseas Investment Office is considering an application to buy Prime Range Meats. Farm leaders have become disquieted. Federated Farmers supports positive overseas investment in NZ’s farming system but is concerned there would be little benefit to NZ if the Lochinver deal is clinched. President William Rolleston says “NZ absolutely needs foreign investment” but only if it benefits the local and national economy. He wants a “substantial and identifiable” benefit test incorporated in overseas investment eligibility criteria. Public opinion survey results this week suggest a majority of voters similarly approve of farm sales to foreigners only when it brings a significant advantage over an NZ buyer such as jobs. Almost 33% want farm sales to foreigners banned.

National raised the already high hurdle foreign buyers have to jump before a purchase is approved and benefits above and beyond those sales to domestic buyers would provide is one of the criteria.

 Better For Workers. An upcoming working paper by Motu Economic and Public Policy Research economists throws some light on the economics by examining how employment in foreign-owned firms affects NZ workers’ earnings. Using data from Statistics NZ’s Integrated Data Infrastructure, which tracks workers as they move between firms, the researchers found workers in foreign firms tend to receive, on average, around 14% higher monthly starting earnings than workers in domestically-owned firms. Compositional differences are the main explanation: foreign firms tend to be bigger and employ workers who would have received relatively high wages regardless of where they worked. The authors also found under-25 year olds get greater gains from joining a foreign firm and smaller losses on exit than older groups, while more highly skilled workers attract a stronger wage premium while working in the foreign-firm sector. In short, foreign firms not only tend to hire more highly skilled workers; they also remunerate these workers more generously.

A very small percentage of land  – around 2% – is in foreign ownership now.

The problem is one of perception based on emotion taking no account of the facts and benefits which include better wages for staff employed by foreign owners.

Rural round-up

August 18, 2014

The circus of foreign ownership – Dr William Rolleston:

The Election has suddenly sparked into life. It was not a policy, a pratfall or a stunt, but Shanghai Pengxin Group’s Overseas Investment Office (OIO) application to buy Lochinver Station.

While Federated Farmers has taken the principled position of trying to learn what the ‘substantial and identifiable benefit’ to New Zealand is of this proposed sale, others have gone off the proverbial deep end.  National has been far too dismissive of concerns being raised in some quarters. Labour has gone to the opposite end by announcing they’d block the sale, along with the Greens.  Meanwhile, NZ First will go further and stop all foreign sales of New Zealand farmland.  That seems to be the position of Colin Craig, who stepped into Mr Peters shoes by breaking this story.

What everyone seems to have forgotten is process.  Our overseas investment rules are meant to operate on fair play under the guise of the OIO.  Instead, it has turned into an election political circus. The coverage of which, has gone global, given the media who have contacted me. . .

Meat and fibre’s time to shine – Rick Powdrell:

Boy oh boy, doesn’t it feel good to be a sheep and beef farmer for once. Of course it wasn’t always that way.  We were the dairy industry for decades, almost as soon as the Dunedin slipped out of Port Chalmers in1882, we rode the sheep’s back.  The good times operated under a simple business model.  We grew meat and fibre and Britain needed it.

Through war and peace, these good times seemed destined to run forever.  Our success blinded us to what the bright sparks at companies like DuPont were doing.  That was until they ‘wool-jacked’ us with oil based fibres.  That wasn’t helped by lamb being seen in the 1970s as your grans’ meal. You could have lamb cooked anyway you wanted as long as it came in a roasting tin.  Other meats became trendier and in some instances, cheaper, while our industry was trapped in a Sunday roast.  . .




Demand drops for malting barley – Annette Scott:

A shrinking number of Kiwi beer drinkers is creating less demand for malting barley.

As beer consumption falls, coupled with higher prices for New Zealand barley, breweries require less malt and malting companies less barley.

Marton-based malting company Malteurop NZ operations manager Tiago Cabral said New Zealanders’ drinking habits were having an impact on the company. . .


Worth sharing - thanks The Horse Mafia

NSW $10m beef deal with China – Roderick Makim:

NSW beef suppliers have secured a $10 million export deal to the Chinese market.

Producers including Andrews Meat Industries in Lidcombe and the Northern Co-operative Meat Company Ltd in Casino are among the NSW suppliers involved in the deal, Deputy Premier Andrew Stoner said today.

Mr Stoner announced the deal while visiting Hong Kong and Shenzhen for a three-day trade mission along with representatives from a range of NSW food companies. . . .

70,000,000 reasons for sale

August 10, 2014

Tim Worstall, writing at Forbes, says there’s 70,000,000 reasons for selling Lochinver Station:

There’s a slightly bizarre argument going on over in New Zealand over the ownership of a large farm, Lochinver Station. The argument is over whether it’s right or not for it to be sold to a Chinese company. There’s so many things wrong with even having the debate that it’s difficult for we foreigners to get our minds around it. For a start the very definition of private property is that you can dispose of said property as you wish. If you can’t then it’s not actually private property any more. But more than that the basis of the argument against allowing the sale seems to be that the sale should be in New Zealand’s economic interest as a whole. Which, of course, it is, there’s 70 million benefits coming into the country in the form of the $70 million that’s being paid for it. Why the debate continues after this is a mystery. . .

The debate continues because of emotion and politics.

. . . To which I would just add that one about the 70 million benefits. A foreigner (a corporation, an individual, it doesn’t matter) is bringing money into the country to pay for Lochinver Station. The price that’s being paid is, by definition, everyone’s best guess as to the total current value of all of the future profits from that farming operation. This is thus an addition of $70 million to New Zealand’s capital stock. Before, there was the farm worth $70 million. After the sale there will still be the farm, which will still employ people, pay taxes and so on. And also the family operation that used to run the farm now has $70 million. The deal adds to the capital stock of the country and what makes a place richer is increasing the amount of capital that is added to the labour of that place. Thus there’s 70 million benefits to the sale, each dollar being paid over being a benefit of one dollar.

Other than a xenophobic appeal to economic populism (and those with long memories might care to ponder on where said autarkic populism led the economy under Robert Muldoon) there’s really nothing at all to support the idea that Lochinver Station cannot be sold to anyone at all who wants to buy it.

Private property rights and economics mean nothing to the xenophobes opposing the sale.

They also fail to see the benefits to the seller and the country from those $70,000,000 and all the other money the would-be purchaser, Shanghai Pengxin,  will have to put into the farm to meet the very strict criteria of the Overseas Investment Office.

Labour tries to out-Winston Winston

August 5, 2014

Labour has forgotten that is trying to out Winston-Winston Peters on sales of land to foreigners:

The next Labour Government will keep rural and residential land in Kiwi hands, Labour’s Finance spokesperson David Parker says.

“New Zealanders are sick of seeing their farms and homes sold to overseas buyers with the profits and opportunities going offshore. No overseas person has the right to buy our land.

The opportunities stay here where the land is, so do the jobs which go with it.

The profit is only what’s left after costs – including the purchase price, wages, repairs and maintenance, development and tax – are paid.

A friend is New Zealand manager for overseas investors who own several farms. That company reinvests all its profit in the farms and adds more money from other investments elsewhere for development which includes a very expensive experiment with organic farming.

Their money is making the farms better and they are putting far more into the country than they are taking out.

“In all but the rarest of cases, sales of rural land to overseas buyers will be banned. Non-resident investors will also be banned from buying existing Kiwi homes.

What will those rarest cases be and who will decide?

“Changing who owns what already exists does nothing to increase New Zealand’s output. It just sells off New Zealand’s profit stream and kills off the Kiwi dream of owning our farms and homes.

It could increase New Zealand’s output if the investment improved production.

“Labour will reverse the current approach so that overseas buyers of rural land will have to prove they will create more jobs and exports than any New Zealand investor. Given New Zealanders are among the best farmers in the world it is an extremely hard hurdle to get over.

The hurdles overseas must leap are already very high and include the creation of jobs.  Among other conditions local buyers don’t have to meet but foreigners do is allowing public access.

New Zealand farmers are very good but they often lack the capital to be even better.

“This will ensure our farms are not priced out of the reach of New Zealanders.

If that is the case it would also mean the vendor gets less to invest elsewhere.

“We will also limit the discretion of the minister to ignore recommendations from the Overseas Investment Office.

“Labour will also restrict sales of residential homes to any non-residents unless they intend to move here, helping to keep the Kiwi home ownership dream alive, especially for young New Zealanders currently locked out of the housing market.

“The National Government is ignoring the legitimate concerns of New Zealanders about New Zealand land and houses being sold to overseas interests.

These concerns are largely based on emotion rather than facts.

A very small proportion of farm land is owned by foreigners and the problems with housing are largely a result of planning restricting the supply in Auckland and the earthquakes in Christchurch.

“Instead of accusing New Zealanders of being xenophobic, John Key and Steven Joyce should respect New Zealanders’ desire to keep New Zealand land in New Zealand hands,” David Parker says.

The accusation of xenophobia is because the protest is loud when it is a Chinese buyer and quiet to non-existent when it is from other countries like the USA, Britain, Australia or Germany.

Wee parties can get away with outrageous policies because they can always use the excuse they didn’t have the numbers to get them enacted.

The bigger parties are usually more circumspect.

Labour has forgotten this in trying to out Winston Winston Peters with this dog-whistle to the xenophobic.

It is also ignoring the benefits from the sale:

Stevenson Group, the concrete, quarrying and engineering firm that owns Lochinver Station, ran an extensive tender before agreeing to sell the 13,843 hectare farm to Shanghai Pengxin and says it will reinvest the funds in other businesses. . .

 The Stevenson family has owned Lochinver for 60 years but started as a drain-laying business in 1912, expanding into quarrying and construction in the late 1930s, and making concrete blocks from 1946. The original 5,260 ha Lochinver farm was acquired in 1958 and the family expanded to 16,595 ha “breaking the wild country into farming land” with “an enormous amount of hard work.”

“Farming is not the core business of Stevenson Group,” chief executive Mark Franklin told BusinessDesk. The company is freeing up capital to invest in other businesses such as expanding its Drury quarry, he said.

Franklin said the company had “really intensive discussions with lots of people both domestically and internationally. You can be very clear, anyone who was interested, I have spoken to.”

While Lochinver has a rateable value of more than $70 million, the purchase price hasn’t been disclosed. Still, Franklin said Pengxin’s offer wasn’t necessarily the highest on price alone and his company had considered a range of factors including retention of workers and the future of the property. Lochinver was more a farm enterprise than a farm. “In New Zealand a lot of people own farms but this is part of a supply chain.”

He said Pengxin had a long-term strategy to build a vertically integrated business.

The value in the property was “in its ability to grow a lot of grass,” which made it attractive for both dairy support and wintering stock, he said. Sheep farming was likely to remain a core part of the business. . .

The owner gets a large amount of money to invest in its core business, the new owner will bring money into the country, spend more on running and improving the property which will require employing locals and using local goods and services.

Federated Farmers which supports foreign investment in general has some concerns over the sale of Lochinver.

While Federated Farmers supports positive overseas investment into New Zealand’s farming system, it is concerned the potential sale of Lochinver Station to Shanghai Pengxin Group Co. Limited, may not provide sufficient benefit to New Zealand.

“Since there is no requirement to publicly notify applications to the Overseas Investment Office, Federated Farmers is frankly uneasy about the potential sale of Lochinver Station to Shanghai Pengxin,” says Dr William Rolleston, Federated Farmers President.

“New Zealand absolutely needs foreign investment but it has to be of benefit to the local and national economy. 

“That is why a ‘substantial and identifiable benefit’ test was incorporated into the overseas investment decision tree, further bolstered in 2012 by a High Court decision adding a “with and without” counterfactual test. 

“This was to ensure any investment, such as the one being proposed, has benefit over and above just making a farm work better.  Since Lochinver Station is highly regarded in farming circles there must be something very special and we are keen to know what that is. . .

He might be reassured by a speech Prime Minister John Key made to Federated Farmers in 2010:

. . . I want to take this opportunity to outline the Government’s position on overseas investment and talk about the changes we are making to the approvals regime.

In summary, we recognise the huge contribution that overseas investment makes to Kiwi jobs and Kiwi incomes.

New Zealand benefits from openness, both in trade and in investment.

However, New Zealanders have legitimate concerns about some aspects of overseas investment, particularly when it comes to land.

I share those concerns.

Good policy is a matter of striking the right balance.

We have reviewed the rules around overseas investment. For the most part, we think those rules are appropriate and the overall legislation is sound.

However, we have made a few adjustments to the approvals regime and given ministers increased flexibility to consider a wider range of issues when assessing proposed investments. . .

What I want to say first is that you, as individual farmers, and as members of Federated Farmers, have been right in the middle of recent debates about overseas investment, because a lot of those debates have been about land.

I’m sure that between you, you have some strong views and quite possibly some mixed views about overseas investment.

Unfortunately, much of the debate in recent months has been stirred up by politicians who are more concerned about getting on the news than they are about well-thought-out policy.

We are likely to see more of this tub-thumping and political posturing in the lead-up to next year’s election.

Politicians who were unwavering advocates of trade and investment when they were in government have somehow turned into defenders of Fortress New Zealand while in opposition.

Their views appear to have changed 180 degrees, for the sake of politics.

That is a shame, because at stake here are New Zealand jobs, New Zealand incomes, and New Zealand futures.

The reason we allow investment to flow between countries – both into New Zealand and out of New Zealand – is because it benefits New Zealanders.

We don’t do it for any other reason – we do it because we benefit from it.

In particular, overseas investment in New Zealand creates jobs, boosts incomes, and helps the economy grow.

Overseas capital can make things happen here that wouldn’t otherwise happen, grow businesses that wouldn’t otherwise have the means to grow, create jobs that otherwise wouldn’t exist, and pay wages that are higher than they would otherwise be.

Overseas capital makes New Zealand a vastly more productive country.

So there is absolutely no way we could enjoy the standard of living we do without overseas investment.

And part of that standard of living is being able to afford the education, law and order, and health services that our families want.

A recent study concluded that overseas investment in New Zealand lifted national income by around $5 billion between 1996 and 2006. That is an estimate of the return to New Zealand from overseas investment, over and above the cost of paying interest and dividends on that investment. . . .

He gave examples from the wine industry.

Since the year 2000 the number of wineries in New Zealand has almost doubled, and the industry directly employs 6,000 people.

This expansion of the wine industry into one of our most important export industries has largely happened because of overseas investment.

That investment has not just been into big producers, like Montana, but smaller wineries like Craggy Range, Sacred Hill, Dry River and Te Awa.

Overseas investment has allowed the industry to grow exponentially, and also develop from being a small and family-based sector into a more capital-intensive and technologically-advanced industry with real global connections.

Overseas investment also plays a positive role in New Zealand agribusiness, providing a vital source of capital for ongoing expansion and growth. PGG Wrightson, Synlait, CRV Ambreed and Anzco are good examples of such investment. . .

He also pointed out investment is a two-way street.

New Zealand businesses and individuals are themselves investing abroad.

There has been considerable investment, for example, by New Zealand dairy farmers in overseas farms. Fonterra, of course, has processing facilities in a number of different countries.

A free flow of investment also allows New Zealanders to diversify their savings across different countries and different industries. Most of the savings that are in the Super Fund, for example, and in many KiwiSaver funds, are invested overseas.

In fact, the total amount of equity investment into and out of New Zealand is surprisingly balanced. According to the latest figures, New Zealanders have around $53 billion of equity invested abroad while overseas investors have $61 billion of equity in New Zealand.

So international flows of investment – both into and out of New Zealand – are very important for our standard of living. . .

Then he addressed concerns about foreign investment:

I’m sure most people have these concerns from time to time, because as New Zealanders we have a very real and very profound sense of attachment to the land.

For one thing, our economy is based on agriculture so we recognise and respect that the land has an important economic value.

We also have a strong tradition of aspiring to own land – our own house, section, lifestyle block, farm, or block of native bush. We are not entirely comfortable as tenants – we want to put our roots down and call some place our own.

We also value outdoor pursuits – tramping, hunting, fishing, camping and picnicking – and even when we don’t do those activities, we like the fact that we could if we wanted to.

Our tourism marketing is very focused on New Zealand’s natural beauty, and we’re proud of it.

I have recently said myself that we don’t want to end up in a position where New Zealanders are tenants in their own country.

So I think the fact that people are concerned with overseas ownership is perfectly legitimate.

But we should be careful not to let those concerns get out of hand.

For a start, about a third of New Zealand – including our most iconic land – is protected by being in the conservation estate. So no-one from overseas can come in and buy Mt Taranaki or the Franz Josef Glacier, for example.

Second, it is a simple fact that land can’t change nationality. People can change nationality, of course, and factories can be relocated overseas. But a piece of land in New Zealand will always be here in New Zealand.

Because it will always be here, the use of that land will always be subject to New Zealand laws and regulations. And ultimately we as New Zealanders get to determine what those laws and regulations will be.

Third, and contrary to what some people might think, there hasn’t been an acceleration of overseas sales in recent years.

In fact, as at a couple of days ago, only 11, 203 hectares of land has been sold so far this year. That is certainly well below the peak of 380,000 hectares that were sold in 2006.

Fourth, the issue of whether businesses and properties are owned by New Zealanders or people from overseas, is for the most part, squarely in our own hands.

What I mean is that no-one can be forced to sell their business to an overseas investor, just as no farmers can be compelled to sell their land to foreigners.

Obviously with mortgagee sales or receiverships things get a little more complicated but, in general, people who feel very strongly that New Zealand-based assets should remain in New Zealand hands are free to sell only to New Zealanders.

The problem is that it’s people who don’t own the land who are complaining and wanting to dictate to whom the owners can sell.

Moreover, New Zealanders can always buy land and other assets back. What makes that difficult isn’t the rules around overseas investment, it is the fact that New Zealand has a poor savings record and therefore a relatively small stock of capital available for investment.

If, as a country, we saved more, we would own more of the assets in New Zealand, including land, as well as being less in debt to overseas lenders.

Finally, there are specific safeguards contained in the Overseas Investment Act and in the regulations which the government makes under that Act.

Over the past year or so the Government has been reviewing this system of rules, to make sure we have got the balance right between three key objectives:

welcoming desirable investment, in recognition of the benefits it brings for New Zealanders

providing a stable investment environment, where the rules are settled and everyone is clear about what they are; and

addressing public concerns about overseas investment, particularly in regard to land.

This review has come to three conclusions.

The first conclusion is that the Overseas Investment Act is a fundamentally sound piece of legislation.

The Act makes it clear that it is a privilege for overseas people to own or control sensitive New Zealand assets.

In particular, it lays out that foreign investment in land is only acceptable if it substantially benefits New Zealand, according to a range of factors which include, among other things:

  • the creation of new job opportunities in New Zealand
  • the introduction into New Zealand of new technology
  • increased export receipts for New Zealand exporters
  • the introduction into New Zealand of additional investment for development purposes
  • increased processing in New Zealand of New Zealand’s primary products
  • protection of native bush and other indigenous vegetation; and
  • protection of game species and walking access.
  • In addition, farm land has to be offered on the open market so that New Zealanders can bid for it as well.

These are very stringent criteria.

In fact, these are the very same criteria that Phil Goff was trying to pass off as brand new policy a few weeks ago. I welcome his endorsement of the current provisions of the Overseas Investment Act which, of course, was passed by his government back in 2005. . .

The third conclusion we came to was that a couple of additions should be made to the existing rules.

These additions would make sure that all public concerns about overseas investment, both now and in the future, could be covered off under the rules.

So the Government is adding two more factors that ministers must consider when they assess the benefits of a proposed overseas investment in New Zealand land.

The first new factor is very wide-ranging and looks at whether New Zealand’s economic interests will be adequately promoted by overseas investment.

This will allow ministers to consider, for example, whether any of our key exports are in danger of being controlled by an overseas entity, or whether there are non-commercial motivations driving a proposed overseas investment.

The second new factor is a “mitigating factor” which looks at whether the investor has a meaningful commitment to New Zealand involvement in the running or oversight of the investment.

That could include, for example, part ownership with New Zealanders, appointing New Zealanders to the board, or listing on a New Zealand exchange.

These two new factors will be weighed up alongside all the existing factors when ministers consider applications for investment.

We are also going to outline the Government’s policy on foreign investment more clearly by amending the Directive Letter issued to the Overseas Investment Office.

This will make things clearer for both the Office and for overseas investors.

So in conclusion can I stress that we allow overseas investment to flow between countries – both into New Zealand and out of New Zealand – because it benefits New Zealanders.

With the appropriate checks and balances in place, this investment is good for jobs, wages and growth.

After reviewing the overseas investment regime, and making some amendments to it, the Government is satisfied that we do now have the appropriate checks and balances. . .

National strengthened those checks and balances.

Foreign investors must jump very high hurdles and if they don’t meet the conditions imposed on them by the OIO – conditions which are strictly monitored – they cannot keep the property.

The Overseas Investment Office has yet to make its decision on the sale of Lochinver.

If it does approve the deal, the strict criteria it must apply, made stricter by National, will ensure that the benefits to New Zealand are greater than any which would come from the sale to a New Zealander.


Get every new post delivered to your Inbox.

Join 1,715 other followers

%d bloggers like this: