Rush to prevent fire sale losses of NZ’s assets

WELLINGTON: Tourism operators seeking to sell to foreign buyers at low prices because of the impact of the Covid19 pandemic will face a temporary new foreign investment test announced by the Government to prevent bargainbasement sales of New Zealand assets to international investors.

Associate Finance Minister David Parker rushed legislation into Parliament yesterday to introduce temporary rules that will require proposed foreign investments to be vetted, no matter how small the deal.

‘‘Hypothetically, with international tourism at a standstill, the value of a significant tourism company may have plummeted and could be low or near zero,’’ Mr Parker said.

His statement outlined the temporary application of a new national interest test to ‘‘any foreign investments, regardless of dollar value, that result in more than a 25% ownership interest, or that increases an existing interest to — or beyond — 50%, 75%, or 100% in New Zealand business’’.

The value of such a business ‘‘would not reflect the importance of the business, so interim controls are needed to protect our national interest,’’ he said.

‘‘The process will be quick to ensure investment is not unduly delayed but it is important to have new rules that protect Kiwi businesses from being snapped up and opportunities potentially lost as they recover from the damage caused by the virus.’’

Announced last November but requiring changes to the Overseas Investment Act, the new national interest test is intended to capture a range of monopolytype assets such as electricity, water, and telecommunications assets, along with transport infrastructure such as ports and airports to ensure foreign ownership does not cut across a range of national interests, including security interests.

In the longer term, it will apply only to investments in assets worth more than $100 million, with a few exceptions, including media businesses, where lower thresholds will apply.

When it was announced last year, it was clear the national interest test was particularly aimed at potential Chinese investment in critical infrastructure.

The new rules will apply only to deals announced after the legislation is passed, which Mr Parker expects by midJune.

The temporary regime would be reviewed every 90 days, and remain ‘‘only as long as it is necessary to protect the essential interests of New Zealand while the Covid19 pandemic and its economic aftermath continues to have a significant impact in New Zealand. We need to minimise the possibility that cornerstone businesses in our productive economy are sold in a way contrary to our national interest while the pandemic is causing the value of many businesses to fail.’’ — BusinessDesk