Give and take
Asian and foreign investment in NZ
Signs in foreign languages create a distorted perception of overseas investment, writes Catherine Harris.
It’s a fact that New Zealand spends more than it earns, and the money that fills that gap comes from overseas. Foreign direct investment, or FDI as it’s called, helps extend dairy factories, buys farms, get start-ups going and companies exporting.
Often that money is from Australian or other overseas institutions in the form of bank funding. But it also comes from people moving here, buying houses and starting or investing in businesses.
With Asian immigration on the rise, Asian, and in particular Chinese, investment is often in the spotlight, although research shows that that’s disproportionate.
Studies show that most of the big overseas purchases, of sensitive land or $100 million-plus assets, stem from our traditional allies.
Less than 10 per cent is from Asia, and some of it offers access to huge export potential. Yet Asian, and in particular Chinese, investments are often the target of debate about profits going overseas, or political control.
Those who believe ‘‘money is agnostic’’ point out that we don’t seem to have the same concerns about the US or UK.
This debate found echoes in the news this week. At the same time as a conversation raged about Kiwi racism, Chinese company Qianlong withdrew from the purchase of Jericho Station. The station will instead go to the next closest bidder, a New Zealand farmer.
With the Government introducing tighter laws around foreign purchases of housing and smaller land parcels, Professor Natasha Hamilton-Hart, a management and international business expert at Auckland University, believes it is time for a mature debate about FDI.
As small businesses with Asian signage spread around Auckland, she says people get a heightened sense that things are changing. Yet the real issues are the much bigger investments weighed by the Overseas Investment Office.
She believes that when we talk about ‘‘geographic origin’’ of investors, we’re really talking about other things.
For instance, money from Japan versus China should make no difference. ‘‘But the investment we’ve had from Japan, for instance, has had quite a different profile from the investment from China, in terms of the sectors it has gone into, and the way companies are being run, the kind of management and technology and expertise that’s being brought in.’’
It’s not widely understood that New Zealand needs inward investment just to pay for our way of life, Hamilton-Hart says.
‘‘It’s all part of our international liabilities. It’s a claim on New Zealand held by foreigners, and for New Zealand what makes the situation quite odd, because New Zealand is very unusual among most countries, not even just developed countries, is that the claims that foreigners have on us are far, far bigger than the claims we have on the rest of the world.
‘‘Our outward investment is very low in comparison to inward investment, and that means we are net indebted.’’
The real question, in her view, is whether the investment is raising productivity. ‘‘I don’t think that has a great deal to do with geographic origin, ultimately.’’
So, she says, it’s worth having a conversation about that, ‘‘about the benefits and vulnerabilities that it creates, because in the end, the level of foreign investment in New Zealand is neither good or bad, but it’s what New Zealand does with that investment’’.
One person who does know the value of Chinese investment is Jason Wang, who works for Auckland business incubator The Icehouse.
Wang came to New Zealand four years ago. A professional venture fund manager, he helps facilitate Eden Ventures, a $10m Chinese-led fund aimed at growing high-tech start-ups.
One of its first investments was Gung Ho Ventures, a Kiwi-led pizza company in China.
Wang says Icehouse now has around 40 Chinese ‘‘angel’’ investors in its network. He describes Eden as ‘‘a New Zealand entity investing in New Zealand companies’’.
He says his biggest battle in New Zealand is not Kiwi prejudice, but encouraging Chinese New Zealand residents to broaden their
investment horizons.
‘‘For lots of the Chinese coming to New Zealand, the best and easiest way for them is always the property market because it’s transparent and a low entry barrier, and that’s how they got rich in China.
‘‘But there’s way more contributing things they could do by investing in local early stage companies.’’
His views echo the vision statement on Eden Venture’s website: ‘‘We believe in the power of start-ups shaping the world, no matter where they are from.’’
‘‘Our outward investment is very low in comparison to inward investment, and that means we are net indebted.’’ Natasha Hamilton-Hart