Hon Bill English
Minister of Finance

23 July 2009 Media Statement

Government simplifies overseas investment

The Government has simplified overseas investment rules to make it easier for local firms to access scarce global funds, Finance Minister Bill English says.

The changes are aimed at making overseas investment in New Zealand simpler and more attractive, while at the same time safeguarding our most sensitive assets. The changes are the first part of a two-part review, with the second part focusing on changes to the Overseas Investment Act itself.

"Overseas investment can play an important role in economic recovery and job creation by providing the funds for local firms to grow. However the current rules are too complex and too difficult to interpret," Mr English says.

"At present 98 per cent of all applications are approved. That is why we have cut red tape for overseas investors. This will make the process simpler, faster and cheaper, meaning more local firms get the investment they need when they need it."

Under the changes Ministers have delegated greater decision-making powers to the Overseas Investment Office, which will be able to decide all applications barring rural sensitive land or land adjoining waterways. The changes take effect immediately.

"This move alone is expected to reduce the number of ministerial decisions by 40 per cent and cut about two weeks off application assessment times."

In addition, several types of transactions of a minor, technical or temporary nature have been exempted from the Act. Examples include some underwriting transactions and sales within a group of companies with shared ownership. These transactions result in little or no change to the overseas ownership of sensitive assets.

In the next few weeks the Government will consider the second part of the review, aimed at improving three main areas of the Act. Issues include:

• Whether the thresholds determining which land and business investments are screened are set at the right level – so we ensure that only genuinely sensitive assets are captured.
• Providing greater certainty for investors, by removing the ability to substantially change overseas investment rules during applications – avoiding the situation we saw last year with Auckland Airport.
• Considerably simplifying the screening of investments in sensitive land, while ensuring that overseas investors are subject to a higher standard than domestic investors. This will ensure investors do not have to meet arbitrary requirements of government departments and that, where it exists, other legislation is used to address New Zealand interests.

The Government will also consider removing the previous Government's strategic asset test, which was never properly defined and created considerable confusion and uncertainty.

"Instead, as a final reserve power, we will consider a new national interest test –similar to those in place in other countries. This would balance providing certainty for investors with safeguarding the interests of New Zealand.

"In the rare times this test is used, the Government would be required to lay out to the public and Parliament its reasons for declining an investment. This will be clear and transparent," Mr English says.

The overseas investment review is part of a wider review of bureaucratic red tape led by Mr English and Regulatory Reform Minister Rodney Hide. An update on the other reviews is attached.

Regulatory review update

Resource Management Act, phase 2
The Government introduced legislation in its first 100 days, streamlining and simplifying processes under the Act. Phase 2 of the reforms aims to deal with more complex issues such as water allocation, urban design and infrastructure. Detailed scoping work is underway and officials will start reporting back to Cabinet in the next month. In regard to water policy - a new collaborative process, the Land Water Forum, has been set up to progress this area.

Electricity Sector
The Government is concerned about the performance of the electricity market, as well as the overlapping roles and possible duplication of effort between the Electricity Commission, the Commerce Commission and Transpower. A Technical Advisory Group has been established and is finalising a discussion document. This will be considered by Cabinet in coming weeks.

Telecommunciations Act
The aim of the review is to streamline specific elements of the telecommunications regulatory regime with a focus on ensuring compatibility with the Government’s broadband strategies and initiatives. It is looking at the Telecommunications Service Obligations (TSO), recognising the need to retain free local calling and other principles of the TSO for local telephone service. Terms of reference for the TSO review have been finalised. Public consultation on proposed TSO reforms is expected to commence in September. An assessment of the related Kiwi Share has concluded that changes to the foreign ownership rules relating to Telecom are not warranted at this time.

Emissions Trading Scheme
The Government established a special select committee to review the NZ ETS and that committee is expected to report back at the beginning of August. The Committee's report will contribute to the Government's plans to amend the Climate Change Response Act this year to align with its election manifesto. The outcome should be a more workable scheme that does not unfairly penalise New Zealand’s internationally competitive industries.

Building Act
The aim of this review is to reduce the costs, complexity and implementation of building consent processes and address the capability of builders. Cabinet will consider terms of reference for the review in coming weeks.

Holidays Act
This review will identify improvements to the Act that will make it easier for employers and employees to understand and apply. Issues up for discussion include 'relevant daily pay' and whether employees should be able to trade their fourth week of leave for cash. Terms of reference for the review have been agreed. Public submissions opened this week. A Ministerial Advisory Group will report back to the Minister of Labour later this year.

Regulatory quality
The Government is committed to improving the quality of any new regulation. Work has been done on several proposals, including improving the regulatory impact analysis regime. These are expected to be considered by Cabinet in coming weeks.

Foreshore and Seabed Act
The review was part of the confidence and supply agreement between National and the Maori Party. The aim was to review the application of the Act and assess whether it adequately maintains and enhances mana whenua. The report of the Ministerial Review Panel on the Foreshore and Seabed Act has been released. Cabinet will consider the issue in coming weeks.

Weathertight Homes Resolution Service
Aim is to review the current approach and also quantify the problem. The review will consider alternative approaches to weathertightness with less emphasis on process and greater emphasis on getting problems fixed. Terms of reference are being developed.

Air quality standards
The aim is to review New Zealand's air quality standards under the RMA to ensure they are practical and achievable. The review will look at the costs, benefits and proposed timetable of the new standards, which were intended to take effect in 2013. Terms of reference have been agreed and the Environment Minister has appointed a Technical Advisory Group to review the standards. It is expected to report back to the Minister in October.

Securities Act
The aim of this review is to update, improve and where possible simplify the Act. Initial work has begun on a discussion document focusing on scope, disclosure, collective investment schemes and regulatory institutions. It will be finalised later in the year.

Food Act
The NZ Food Safety Authority has completed a review of whether there would be benefits in updating and modernising the current Food Act with a new Food Bill. Cabinet is expected to consider a report on the review in coming weeks.

Raw milk regulations
Officials are working with industry to design a more equitable pricing scheme for raw milk. Under current regulations Fonterra must supply a set amount of raw milk to other dairy producers. Officials are expected to report back to Cabinet in coming months.

In the next 18 months the Government is also planning to review
• Financial market regulation
• Local Government Act and regulations

ENDS

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