Submission to the Finance and Expenditure Selected Committee of the New Zealand Parliament

SUBMISSION TO THE FINANCE AND EXPENDITURE SELECT COMMITTEE OF THE NEW ZEALAND PARLIAMENT  

OVERSEAS INVESTMENT AMENDMENT BILL

JANUARY 2018

1. This submission is made on behalf of the New Zealand International Business Forum (NZIBF) whose members are listed at Annex A.[1] NZIBF is a forum of senior business leaders working together to promote New Zealand’s engagement in the global economy.
2. NZIBF welcomes the opportunity to comment on the ‘Overseas Investment Amendment Bill’ (“the Bill”).
3. For its sustained prosperity as a nation and to enhance the living standards of our communities, New Zealand critically depends on being deeply engaged internationally through broad and deep flows of goods, services, capital, data, knowledge, technology and people. These international connections not only generate direct export earnings but also help to create the optimal conditions for productivity, innovation, job creation and economic growth for the benefit of New Zealand businesses and for New Zealanders at home.
4. Foreign direct investment is a key component of New Zealand’s economic future. Inflows of capital supplement New Zealand’s relatively shallow capital base, enable the development of productive businesses and infrastructure, facilitate the introduction of innovative new technologies and management techniques that drive domestic competition and productivity growth, and serve to generate new opportunities for employment for New Zealanders. New Zealand businesses are also themselves increasingly investing offshore, and New Zealand’s foreign investment policy settings can in turn help to encourage investment-friendly approaches from our FTA partners.   NZIBF is accordingly a strong and longstanding supporter of foreign investment in New Zealand and of provisions in our trade agreements which promote greater certainty and security for foreign investments in both directions.
5. NZIBF takes no position on the policy objectives in relation to residential housing in the Bill. We welcome the Government seeking to resolve these issues before the Comprehensive and Progressive Trans Pacific Partnership Agreement (CPTPP) is enacted.
6. NZIBF is concerned, however, at the potential implications arising from the Bill for New Zealand’s trade agreements, and for any unintended consequences for broader FDI settings.

New Zealand’s obligations under international trade agreements

7. With respect to New Zealand’s trade agreements, NZIBF is concerned that any legislative action or new policy settings in this area should take careful account of our FTA commitments.
8. We note that Australia is exempted from the proposed action, consistent with New Zealand’s obligations under the CER Investment Protocol, and in accordance with the special relationship between New Zealand and Australia. We propose likewise the exemption of longstanding FTA partner Singapore from the regulations, given the commitments under our Singapore-New Zealand Closer Economic Partnership Agreement (and in particular in relation to the definitions of the categories of investment that are subject to screening as set out in the CEP Agreement).
9. More broadly we would emphasise the importance of staying closely in touch with all of our existing FTA partners to explain the changes to our policy, to reassure them that New Zealand will continue to respect its international treaty obligations, and to emphasise the value that New Zealand continues to place on foreign direct investment that serves to enhance New Zealand prosperity.

Impact on OIO approval timeframes

10. NZIBF is concerned that the proposed implementation of the regulations, namely their administration by the Overseas Investment Office (OIO), could place a heavy additional resource burden on the Office.   A large increase in applications is likely under the new regime: the Regulatory Impact Assessment describes this as a “significant increase in volume of transactions expected…and the [OIO] will also have expanded role around compliance, monitoring and enforcement”.
11. The Office is already under pressure, commonly resulting in lengthy decision-making timeframes which attract adverse comment from current and potential foreign investors. The increase in the workload for the OIO under the new regime could result in potentially even longer approval timeframes – and for all proposed investments, not just those covered by the new policy. This would be damaging to overseas investor perceptions of New Zealand, detracting from New Zealand’s otherwise world-leading “ease of doing business” rating. It would also negatively affect any New Zealanders involved in any such transactions.   We would accordingly strongly support the allocation of substantial new Crown funding for the OIO to enable the current average timeframe for approvals of five months to be reduced even under the new regime.

Recommendations to the Finance and Expenditure Select Committee

12. NZIBF accordingly recommends that the Committee:

a) seek further advice from officials on the consistency of the proposed legislation with New Zealand’s trade agreement obligations prior to proceeding further;
b) propose the exemption of Singapore from the proposed legislation, along similar lines to the exemption of Australia, subject to the receipt of the advice mentioned in sub-paragraph (a) above;
c) recommend sufficient additional resourcing of the OIO in order to expedite its decision-making timeframes

For further information

Stephen Jacobi, Executive Director, NZ International Business Forum
Phone: 0294 725 502
Email: stephen@jacobi.co.nz

Issued by the New Zealand International Business Forum, January 2018 

ANNEX 

NEW ZEALAND INTERNATIONAL BUSINESS FORUM: MEMBERSHIP

Executive Committee
Malcolm Bailey (Chair), Chair, Dairy Companies’ Association of New Zealand
Michael Barnett, Chief Executive, Auckland Regional Chamber of Commerce and Industry (representing the New Zealand Chambers of Commerce)
Philip Gregan, Chief Executive, NZ Winegrowers
Sir Graeme Harrison, Chairman, ANZCO Foods Ltd
Kirk Hope, Chief Executive, Business NZ
Peter McBride, Chairman, Zespri International Ltd
James Parsons, Chairman, Beef + Lamb New Zealand
Alan Pollard, Chief Executive, NZ Apples and Pears
Simon Power, General Manager, Consumer Banking and Wealth, Westpac NZ
Brian Stanley, President, Wood Council of New Zealand
Philip Turner, Director, Global Stakeholder Affairs, Fonterra Co-operative Group
Steve Yung, Chief Executive, Sealord Group Ltd

Alternate Directors
Catherine Beard, Executive Director, Export NZ/Manufacturing NZ
Jeffrey Clarke, General Manager, Advocacy, NZ Winegrowers
Nick Kirton, Manager, Government Relations, Zespri
Jenny McGregor, General Manager, Trade Strategy, Fonterra Co-operative Group
Sam McIvor, Chief Executive, Beef + Lamb New Zealand
John Milford, Chief Executive, Wellington Chamber of Commerce

Executive team
Stephen Jacobi, Jacobi Consulting Ltd (Executive Director)
Fiona Cooper, Cooper Clarke Consulting (Associate Director)
Stephanie Honey, Honey Consulting (Associate Director, Lead Staffer, ABAC)

[1] The views in this submission are those of NZIBF as a whole.   Individual members may have different views on specific issues covered in this submission.