NZ First embraces foreign investment
By Richard Harman (author)
In a surprising political move, NZ First has embraced overseas investment in the forestry industry to boost its Provincial Growth Fund.
NZ First’s Regional Development Minister, Shane Jones, has agreed to allow overseas interests to purchase land for forestry provided they undertake downstream processing of the logs produced.
The decision was part of a package of measures announced yesterday aimed at cracking down on overseas investment in land.
Environment Minister David Parker and Land Information Minister Eugenie Sage have directed the Overseas Investment Office to approve all non-urban land sales above five hectares to overseas people.
The previous Government had directed the Office to require that overseas sales of only sheep farms of above 7146 hectares or dairy farms above 1987 hectares would be required to get OIO approval. (sentence ammended to correct confusion)
The new regulations will also require that the purchasers show an intent to reside permanently in New Zealand within 12 months.
Sage says that the OIO will also have its staff beefed up so that more rigorous scrutiny of how conditions imposed on purchases are being honoured.
A measure of the lack of rigour in the scrutiny of overseas applications came last night with news that the US TV host Matt Lauer was fired yesterday by NBC after a sexual harassment case.
Earlier this year Lauer was given approval to purchase the Hunter Valley Station at Lake Hawea.
NBC News chairman Andrew Lack said in a memo to staff that it was the first complaint lodged against Lauer in his career at the network. But he said "we were also presented with reason to believe this may not have been an isolated incident."
Lauer passed the OIO's "good character" test.
The new measures will take effect on all applications to be considered after December 15, but applications currently before the office will be invited to provide more information so that they can comply with the new directive.
Additional legislation will be introduced into Parliament before Christmas to ban the sale of existing urban properties to foreign buyers.
“We believe that is ia privilege to own New Zealand land,” said Parker announcing the policy yesterday.
He said the current criteria for approving farm sales was “very very permissive.”
“Effectively only very large farms are looked at particularly seriously by the Overseas Investment office, and we just think that is too lax.
“People who commit themselves to New Zealand who pay tax in New Zealand; they are the ones who should have the first bite at buying our land."
Sage said that there would now be a greater emphasis on the criteria for increased export receipts, more processing and a really substantial benefit to New Zealand when an overseas investor goes to buy land,” she said.
Parker said the directive was only an interim solution and over the next year the Act itself would be redrafted, and those changes would narrow the gate through which applicants could pass.
“But once they are through the gate the processes will be faster.”
Parker also announced that “broadly the position in respect of business assets is unlikely to change.”
How that comment will go down with NZ First Leader Winston Peters is not ye known.
He has campaigned against foreign investment since he first formed his party in 1993.
In a speech in Auckland in July he said under NZ First foreign investment would mean just that - new investment in productive assets not just the transfer of ownership from New Zealand into foreign hands.
He was particularly critical of the sale of the meat processing company, Silver Fern Farms to the Chinese state-owned Shanghai Maling group.
Parker said Labour was considering changes to the Overseas Investment Act concerning overseas sale of monopoly businesses (he has talked elsewhere of power companies fitting that criteria) but when asked whether that included Silver Fern Farms or milk processing companies, he said no.
“We are not currently considering changes to the Act in that regard," he said.
But New Zealand First appears to be subtly changing their position on overseas investment.
As recently as August Peters was saying that over two-thirds of plantation forestry was foreign-owned.
“That we allow this is crazy,” he said in a speech to a forestry conference.
But NZ First Regional Development Minister Shane Jones yesterday said there was a specific “carve out” in the directive to the OIO for land being purchased by overseas buyers for forestry
“The new directive for forestry directs the Overseas Investment Office to place high importance on increased processing of primary products and the advancement of the Government’s policies when assessing applications for consent,” he said in a statement.
“It also emphasises that Ministers expect the Overseas Investment Office to impose conditions on consent where appropriate – for example, a requirement for the overseas investor to enter into a supply arrangement with a local processor,” Mr Jones says.
“The letter recognises that conditions imposed on forest land may need to be for longer periods given the often long-term nature of these investments.”
So how does he reocnile this carve out with NZ First’s long term opposition to foreign investment?
“As we sit here now, galling as it might be, we acknowledge that 70% of the exotic forest estate is owned by foreign interests,” he told POLITIK.
“Any extension or expansion of that, which may be useful for climate change purposes, must still meet the high quality test outlined in the letter.
“And that requires domestic processing and working with the local sawmillers and other processors.
"So in that sense, it is sending a clear signal while acknowledging that we have inherited an ownership pattern that is reflective of the Helen Clark Government and the key and English Governments.
But what may also lie behind the decision to use foreign capital to develop forestry is a recognition that this will take some pressure off the demands on capital being placed on the new Government.
The $1 billion a year for the New Zealand First’s Provincial Growth Fund was not accounted for in the Pre-Election Economic and Fiscal Update because it only emerged at the end of the coalition negotiations.
But the PREFU forecast a total new capital spending allowance of only $5.01 billion through to 2021 --- so the potential of $3 billion of that going to the Fund would clearly be a challenge for the Government.
Thus, New Zealand First finds itself in the ironic position of using overseas investment money to drive its other main policy, provincial growth.