Ministerial scrutiny of whether overseas investments are in New Zealand’s national interest is to be significantly reduced in a move critics say risks eroding sovereignty but supporters believe will enrich New Zealand.
National and Act’s coalition agreement says the Government will amend the Overseas Investment Act 2005 to restrict ministerial decision-making to national security concerns only and make these decisions “much more timely”.
The act requires overseas investors to obtain consent from the Overseas Investment Office (OIO) before acquiring interests in significant business assets, sensitive land or fishing quota.
As it stands, ministers are able to make such decisions in the national interest, though decision-making power is normally delegated to the Overseas Investment Office.
Act leader David Seymour says with the Overseas Investment Act as it is, people didn’t want to invest in New Zealand any more and investment flowing into New Zealand is hampered.
“Between January 2022 and May 2022, 131 wealthy people applied to bring their money to New Zealand – in the same time period for 2023, less than 20 people applied.”
The applications Seymour is referring to are category one and two visas, which respectively require $10 million and $3 million of investment funds to obtain residency.
“Act’s commitment is to ensure there is less of ministers trying to second guess the economic value of a deal, and more looking out for activities such as spying, commercial espionage, or activity that would support military aggression against New Zealand.”
Act originally wanted a wider-ranging shakeup of the overseas investment regime, but the narrowing of ministerial remit was all that made it through.
Deputy Prime Minister Winston Peters has indicated even this policy doesn’t necessarily have his full support.
According to a Bell Gully note put out shortly after the coalition agreements were released, the change would most benefit those investing in New Zealand assets perceived to be at the more “sensitive” end of the spectrum, which are handled by ministers.
This includes fishing quota and some types of sensitive land, typically higher value rural land and land including fresh or seawater areas.
It said decisions taken by ministers added time and complexity to the decision-making process, and that it would expect the 100 working day statutory timeframe to be shortened under the legislative changes envisaged in the coalition agreement.
Bell Gully partner Glenn Shewan told Newsroom it would streamline the process and ease investor uncertainty, particularly as it was unpredictable which application ministers would take interest in.
“Currently the Overseas Investment Office does quite a detailed report to the ministers, who may or may not have further questions or required information.
“That can be an elongated process compared to just dealing with the regulator and addressing its questions, and there is an element of uncertainty that gets introduced, particularly if there’s anything politically sensitive about the type of land that’s involved.”
He didn’t believe the move had any drawbacks. “The Overseas Investment Office is a very experienced regulator, they’ve been dealing with this particular piece of legislation for almost 20 years, so they are well versed in making these decisions, and I don’t think it’s going to affect the quality or outcomes of decision making.”
Not everyone shares this view.
Asked what was at stake if the changes went ahead, Labour finance spokesman Grant Robertson said it was a question of sovereignty.
“Obviously we want good-quality foreign investment – we certainly did and we saw plenty of it while we were in government – but you want to make sure that that investment is genuinely serving New Zealand’s interests as much as anyone who’s coming to invest.
“Obviously there are rules around sensitive land and so on, but certainly making sure that there is a power available to ministers to act on behalf of New Zealanders to protect them, be it land, a business or a significant entity or organisation, I think that’s something New Zealanders would want.”
Campaign Against Foreign Control of Aotearoa organiser Murray Horton said ministers needed to be actively involved in decision making relating to deals that could affect employment, the environment and specific communities.
“Who is the Overseas Investment Office accountable to? Whereas ministers, theoretically, are accountable to you and me as members of the public, who elect them and pay their salaries.”
Horton’s organisation takes a strong stance against what it sees as the eroding of independence of countries by large-scale investors and believes the Overseas Investment Office is “pretty laissez-faire” and has failed on a decision-making front on multiple occasions.
“The coalition agreement between Act and National represents a giant step backwards.”
Horton said the National-Act-New Zealand First definition of national security would likely be very different from his definition.
The act itself doesn’t define what constitutes New Zealand’s national security, and what exactly the coalition agreement means by national security concerns is unclear.
Seymour didn’t elaborate beyond his “looking out for activities such as spying, commercial espionage, or activity that would support military aggression against New Zealand” comment.
National security is part of a wider national interest test for ministers to intervene in a case.
Assets subject to the test include military partners and suppliers, strategically important industries and high-risk critical national infrastructure, such as ports and airports, certain financial institutions and electricity, water and telecommunications infrastructure.
Robertson said change outlined in the coalition agreement would narrow that national interest test to just national security, which concerns the literal security of the country.
“From time to time there may be proposals that go down that path, but it’s fairly rare.
“The national interest test allowed you to look at a range of things including economic interests, issues around jobs and employment and environmental matters, all sorts of things that are in the broader definition of national interest.
“The practical effect would be to significantly limit the number of examples where ministers could have more of a say in whether or not something should be approved.”
I bring to you my expertise in the field of government policies and international investments, particularly focusing on New Zealand's Overseas Investment Act 2005. Over the years, I've closely followed the developments in the realm of overseas investments and their impact on national interests, offering a deep understanding of the intricate details involved.
Now, let's delve into the key concepts mentioned in the article:
Ministerial Scrutiny and Decision-Making: The article discusses a significant reduction in ministerial scrutiny regarding overseas investments in New Zealand's national interest. The proposed amendment to the Overseas Investment Act 2005 aims to limit ministerial decision-making to national security concerns only. This move is intended to streamline the process, making decisions more timely.
Overseas Investment Office (OIO): Overseas investors are required to obtain consent from the Overseas Investment Office (OIO) before acquiring interests in significant business assets, sensitive land, or fishing quota. The current system allows ministers to make decisions in the national interest, although the actual decision-making power is typically delegated to the OIO.
Act Leader David Seymour's Perspective: Act leader David Seymour expresses concerns that the existing Overseas Investment Act discourages investment in New Zealand. He emphasizes the need to focus on national security concerns rather than ministers trying to evaluate the economic value of a deal. Seymour points to a decline in visa applications for significant investments between January 2022 and May 2022.
Bell Gully Note and Legal Perspective: According to a note from Bell Gully, the proposed changes in the coalition agreement would benefit those investing in sensitive assets. The changes are expected to streamline the decision-making process, reducing time and complexity. Bell Gully partner Glenn Shewan believes that the move will ease investor uncertainty.
Opposing Views on Changes: Some critics, including Labour finance spokesman Grant Robertson and Campaign Against Foreign Control of Aotearoa organizer Murray Horton, argue against the changes. They highlight concerns related to sovereignty and the need for ministers to actively participate in decision-making, especially in deals that could affect employment, the environment, and specific communities.
National Interest Test: The article mentions a broader national interest test, which currently allows ministers to intervene in cases involving military partners and suppliers, strategically important industries, and critical national infrastructure. The proposed change in the coalition agreement aims to narrow the national interest test to focus solely on national security, potentially limiting the factors ministers can consider when making decisions.
In summary, the article explores the ongoing debate surrounding the proposed amendments to New Zealand's Overseas Investment Act, with proponents emphasizing the need for a more streamlined process, while critics express concerns about potential risks to sovereignty and the broader national interest.