- Hon David Seymour
Associate Finance Minister David Seymour says the Government has committed to action on overseas investment, where the country’s policy settings are the worst in the developed world and holding back wage growth.
“Cabinet has agreed to the principles for reforming our overseas investment law. At the core of these principles is reversing the presumption that investing in New Zealand is a privilege and that investors must justify their transaction to the government. The new starting point is that investment can proceed unless there is an identified risk to New Zealand’s interests. This process will be guided by a government policy statement.
“These changes are designed to overcome New Zealand’s position as the most restrictive out of the developed countries we compare ourselves to. I will now be developing detailed proposals to reform the Overseas Investment Act, with the goal to pass legislation before the end of next year.
“The truth is that, in the overseas investment game, New Zealand has been benched by international investors. Being 38th out of 38 countries for openness to investment means we’re simply not in the game.
“International investors report that our rules impose significant compliance costs, delays, and uncertain outcomes. That’s not to mention the potential investors who are discouraged from even considering New Zealand as an opportunity and simply go elsewhere.
“We are 26th out of 38 for foreign investment as a percentage of GDP, which doesn’t sound so bad until you consider the size of our economy. United States, with its massive internal market, could afford to close itself off, but it is more open than us and gets more investment as a percentage of GDP than us.
“It would be bad enough if the world was standing still, but our partners, such as Australia’s Labor Government, are moving to liberalise their overseas investment settings further.
“Specifically, Cabinet has agreed to amend the Overseas Investment Act according to the following principles:
- Retaining the scope of what we currently screen (including farmland), in order that the Government retains the legal option of screening all investments currently subject to screening;
- Fast-tracking the assessment process with the starting assumption that investment can proceed unless there are risk factors identified, by consolidating the Act’s core tests (investor test, benefit test, and national interest test);
- Providing the government flexibility to call-in these investments for detailed scrutiny on a case-by-case basis, and impose conditions or block the investment where there are risks to New Zealand’s national interest.
“There’s a simple equation that is holding back wage growth: workers with more capital get paid more. They work with better tools and technologies and, as a result, they are more productive. Other countries have more capital than us because we have one of the most obstructive overseas investment laws in the world. New Zealand workers have less capital to work with so they get paid less than they could.
“I’ve seen the difference that overseas investment can make. I once visited two businesses in the same industry on the same afternoon. Both had skilled and passionate people with good ideas. One had overseas investment, though, and benefited in two ways. They had more money for machinery, and they had more know-how for manufacturing and marketing their product by receiving knowledge from their partners offshore.
“Nearly every other developed country has less obstructive laws than New Zealand. They benefit from the flow of money and the ideas that come with overseas investment. If we are going to raise wages, we can’t afford to ignore the simple fact that our competitors gain money and know-how from outside their borders.
“Attracting more overseas investment is a vital part of the Government’s economic strategy. The decisions Cabinet has taken will ensure that New Zealand is a player once again, instead of sitting on the bench.”
