10 November 2003 Media Statement

Iconic sites to get greater protection from ‘first principles’ review of the Overseas Investment Act

The government is undertaking a ‘first principles’ review of the Overseas Investment Act to better reflect economic policy priorities while also providing greater protection to iconic sites of special historical, cultural or environmental significance.

Announcing the move, Finance Minister Michael Cullen said the government was committed to maintaining a liberal investment regime because New Zealand needed foreign capital if it was to return to the top half of the OECD and to develop the economy to its fullest potential.

“We value the benefits foreign investors bring in terms of access to markets, technology and ideas,” he said. “But we also need to ensure that our unique cultural and natural heritage is protected.”

Currently foreigners need Overseas Investment Commission or ministerial consent to acquire 25 per cent or more of a business or property worth over $50 million; land over five hectares or worth more than $10 million; any land on most off-shore islands; certain sensitive land over 0.4 hectares; land over 0.2 hectares including or adjoining the foreshore; fishing quota.

Dr Cullen said specific questions for consideration were:
- Whether company purchases should be removed from the purview of the OIC and left to the normal disciplines of the Commerce Act;
- Whether the tests applied to the purchase of sensitive land or sites should be extended to explicitly include historical, cultural and environmental factors;
- Whether there is scope to reduce compliance costs for business transactions;
- What the appropriate governance and organisational arrangements are for implementing the screening regime.

“The review, in terms of approvals, will focus on the areas which have caused most concern: sensitive land [especially South Island high country and coastal land]; cultural and heritage issues and the monitoring process,” Dr Cullen said.

Treasury is leading the review with input from the Ministry of Economic Development, Department of Conservation, Reserve Bank, Land Information New Zealand, Te Puni Kokiri, Ministry of Fisheries, Overseas Investment Commission, Department of Immigration and Ministry of Foreign Affairs and Trade.

Work began in mid October with the aim of producing legislation in June next year to come into force in the 2005 calendar year. The public will have an opportunity to make submissions during the select committee stages of the bill.

In the meantime, the OIC will continue to process applications in accordance with the existing requirements.

Attached: full terms of reference for the review.

Terms of reference for the foreign investment review

Purpose

The purpose of the review is two fold.
First, to ensure that the overseas investment regime focuses on those assets of critical interest, such as certain sensitive land areas, natural resources (eg fish) and assets with historical or cultural significance (eg heritage buildings).
Second, to maintain a liberal foreign investment regime and to reduce compliance costs where this is feasible, while ensuring the government’s objectives are achieved.

Coverage
a. Consider what assets are of critical interest and should be subject to scrutiny by the regime, and any assets that are currently subject to scrutiny unnecessarily, while taking account of New Zealand’s international treaty obligations.

b. Consider the necessary criteria to ensure appropriate protection for the different asset classes to be covered by the regime.

c. Consider whether any flexibility in the coverage and the criteria is appropriate, in order for changes to reflect any shifting priorities that may occur over time.

d. Consider the appropriate level of monitoring and follow up on approvals

e. Consider the appropriate balance between legislation and regulation.

f. Consider how New Zealand’s regime compares with other foreign investment regimes.

g. Consider what, if any, measures should be introduced to mitigate the risks around the transitional period between announcement of the new regime and the legislation being in force.

Organisational design
h. Consider the appropriate organisational design (e.g. stand alone or attached to a department) for the delivery of the developed foreign investment screening regime.

i. Consider the appropriate governance arrangements of the OIC.

General
j. Other matters considered appropriate, with the agreement of the Minister of Finance.

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