Changes ahead for foreign investment rules

Ministers look set to get more power to say ‘‘no’’ to large foreign investments as a result of a review of the Overseas Investment Act.

New rules put out for public consultations could allow ministers to consider the ‘‘broader effects’’ of letting foreign investors buy New Zealand assets, including on national security, Associate Finance Minister David Parker said.

That would increase their ability to decline applications.

Parker said the Government should have more discretion to block the sale of large pieces of infrastructure that had ‘‘monopoly characteristics’’ and that were important to the functioning of the wider economy, on ‘‘national interest’’ grounds.

But the Government will also consider streamlining some ‘‘pernickety’’ checks on foreign investors to cut red tape, for example by reducing the ‘‘hoops’’ faced by existing ‘‘long-term reputable investors’’ who were already paying tax here.

Parker did not expect any changes that flowed from the review to have a big effect on the overall level of foreign investment.

‘‘I don’t think it will change it hugely. I think the big changes came when we banned foreign buyers of existing New Zealand homes,’’ he said.

At one end of the spectrum, ministers might get ‘‘full discretion’’ to decide whether the purchases of assets worth more than $100 million by foreign investors should be allowed, with an expectation they would decline any deals that they did not think were in the

national interest. Ministers might also claim the power to block smaller deals on specific grounds, such as national security.

Specific consideration may be given to the impact of foreign investments on water use and Ma¯ ori cultural values.

Public consultations will take place until May 24 and the Government plans to pass any law changes it decides on by the middle of next year.

Parker said the goal was to cut ‘‘unnecessary red tape while also giving decision-makers the ability to consider the broader impact of potential investments’’.

‘‘Overseas investment is welcome in New Zealand where it supports New Zealanders’ wellbeing,’’ he said.

‘‘The Government believes that to grow our economy and lift productivity and wages and grow new jobs we do need investment, both by New Zealanders and overseas investors.’’

He described the sale of Wellington lines company Wellington Electricity as the type of foreign investment that could face more scrutiny under a new regime.

‘‘I am not saying it shouldn’t have been signed off, but it should have been able to be considered whether it ought to have been sold overseas.

‘‘Monopoly assets always earn a profit – sometimes they earn an excessive profit – why would you want to ‘export’ the monopoly profit overseas?’’

The application by a Canadian pension fund to buy a 40 per cent stake in Auckland International Airport in 2007 showed up the weakness of the current rules, he said.

Although the Labour government turned down the application in 2009, it was only able to do that because the transaction would have involved more than five hectares of land, he said.

‘‘We couldn’t do that under the ‘large business criteria’, which is absurd.’’

ACT leader David Seymour blasted the consultations as a ‘‘return to base nationalism’’ by Labour.

Giving ministers wide powers to reject overseas investment would create ‘‘an even more hostile environment for overseas investors and make New Zealand poorer’’, he said. ‘‘New Zealand already has some of the most restrictive rules for foreign investment in the world according to the OECD.’’

‘‘Overseas investment is welcome in New Zealand where it supports New Zealanders’ wellbeing.’’ Associate Finance Minister David Parker