[comment caption=Do you agree with National's plan to ease restrictions on foreign investment in NZ?]Finance Minister Bill English is planning to simplify foreign investment rules. National, in Opposition, opposed the previous government's restrictions on overseas ownership of Auckland International Airport. Business Editor Dene Mackenzie investigates.
Overseas investment can play an important role in economic recovery and job creation, Finance Minister Bill English says.
The current overseas investment legislation is cumbersome and the rules are often difficult to interpret.
"While our overseas investment screening regime is not the most important factor for attracting foreign investment, we think there are significant improvements we can make.
It has taken too long to process some overseas investment proposals - as a result of the complexity of the legislation - which has added costs for foreign investors and might have turned some of them away."
Current rules were complex and processing a sensitive land application involved the assessment of 27 criteria and factors.
The process was too long and too uncertain, Mr English said.
Some progress was being made in reducing the time but the Government wanted to reduce it further.
Many investments in land had to be screened under the Overseas Investment Act because they adjoined areas such as recreation reserves.
A rest-home had to be screened because it was next to a playing field, Mr English said.
Land Information Minister Richard Worth would lead a broad review of the overseas investment rules, he said.
The Green Party predictably threw up its arms in protest at the planned review of the overseas investment application proposal.
Green MP Kennedy Graham said the Government seemed keen to put the "for sale" sign up on land currently off-limits to foreign investment.
"There is a reason that rules around overseas investment in sensitive land is complex. We don't necessarily want overseas investors buying large chunks of pristine New Zealand land and turning them into golf courses or amusement parks - or coal mines."
The Government and Act New Zealand seemed intent on greater foreign ownership of New Zealand for the sake of uncritical economic growth but when New Zealand firms fell into foreign ownership, dividend payments flowed offshore, further worsening the current account deficit.
Passive investment into New Zealand should not be confused with productive investment.
The former exploited the country's productive capacity, doing nothing to enhance growth or productivity.
"New Zealand, if anything, actually needs smarter foreign investment rules, not weaker ones as National is proposing," Dr Graham said.
Dunedin lawyer Lesley Brook, from Anderson Lloyd, believes overseas investors will welcome the review.
Overseas investors and their associates needed consent to acquire sensitive land or significant business assets in New Zealand.
The current legislation was complex and the process for obtaining consent was unnecessarily long.
"We are aware that some overseas investors are deterred by the time that the process takes."
Currently, many decisions must be made by the Ministers of Finance and Land Information.
The Overseas Investment Office, a division of Land Information New Zealand, had limited delegated authority.
The review was likely to empower the investment office to make more decisions itself, rather than making recommendations to the ministers, she said.
"This is one way in which the process could be significantly shortened."
The Government also proposed to examine the degree to which issues such as conservation, heritage protection and walking access might already be well covered by existing legislation, Ms Brook said.
One example of that was the requirement for an application for resource consent under the Resource Management Act.
The sorts of land considered "sensitive" would also be reviewed.
"We agree with the Government that the current rules mean that many investments in land need consent even though the land is not of particular significance or importance to New Zealand."
The application process now required the same level of detail from all applications, with additional factors to be considered relating to the benefit to New Zealand if the investment was not controlled solely by New Zealand citizens and residents.
Ms Brooks suggested that a much simpler process could be introduced for overseas investors who were extending their current investments in New Zealand, where those current investments had Overseas Investment Office consent.
"Overseas investors make a valuable contribution to the New Zealand economy, which is particularly significant in the present economic climate," she said.
ABN Amro Craigs broker Chris Timms said having the applications considered by the commission rather than MPs would give more certainty to investors about how the rules were applied.
Sensitive land, significant business assets, or even fishing quota all fell within the rules.
Asked what would attract foreign investors to New Zealand, Mr Timms said large overseas pension funds saw this country's infrastructure assets as providing a good return on investment and things like airports, ports and energy companies were attractive buying.
However, in the case of the attempted takeover of Lyttelton Port Company by Hutchison Port Holdings, there was concern about the ability of the Hong Kong company to influence container trade by pushing all of its cargo through one port.
In the case of the Auckland International Airport, the Canada Pension Plan was looking for a passive investment with a reliable income.
New Zealand was attractive for foreign investment because of its stable and democratic political climate.
Overseas investors were not looking at what an infrastructure asset would generate next week or next year, but took a long-term view on the income stream year-on-year, he said.
Mr Timms was non-committal about whether it was a good or bad thing for overseas investors to take a stake in New Zealand companies.
Often, New Zealanders did not have the ability to buy into the companies and overseas investors had deeper pockets than most New Zealand investors.
"When banks get tight on capital and companies look to fund further development, then unless the government stumps up, there is a limited times you can tap retail investors to fund you. Overseas investors can provide the capital."
A majority stake in a company could mean profits being repatriated offshore and New Zealanders having little influence in pricing of things like electricity or port charges, he said.
Whether New Zealanders wanted to have electricity companies in the hands of a non-New Zealand based organisation was up for debate.
The current economic downturn made some New Zealand companies cheap buying but it also meant prospective investors were getting fussier about what they wanted to buy.
"A couple of private equity funds we deal with see it as a great opportunity. People are not as aggressive on taking over companies because they have to have cash, not debt.
"Overseas investors have enough problems in their own market, but that will change," Mr Timms said.
