His name is Mark Dunlop, of Wellington. It’s worth emphasising that he is not a member of ours, we’d never previously heard of him or had any dealings with him and, basically, we wouldn’t know him from a bar of soap. In many respects he made the same points that CAFCA made in our submission, although we would disagree with him in at least one of his key points. His submission and supplementary submission (presented when he appeared before the Committee in person) are worth quoting in some detail.

"I am a self-employed lawyer and analyst who worked at the Overseas Investment Commission (OIC) on a fixed term contract from January through August 2004. The role I performed at the OIC focused on compliance and enforcement…I have many concerns about New Zealand’s current regulatory framework for foreign direct investment (FDI), and the proposal under the Bill.

"I oppose the Bill in its current form. The Bill is fundamentally flawed, as it does not provide the framework, including supporting structures and safeguards, necessary to facilitate or ensure only positive and high quality investment that is beneficial to New Zealanders". Dunlop outlined his seven main criticisms of the Bill, several of which are also points that CAFCA made. He called for:

• the primary objectives and approach to be prescribed in the Bill itself, and not tacked on later under Regulations (which also should apply to the various thresholds, such as that below which scrutiny is not required, either in land sales or corporate takeovers);
• the resolution of the fact that the regulator, whether the OIC or the body whch will replace it in the Bill, is "inherently conflicted in endeavouring to carry out its prescribed functions in an objective manner" (he defines those conflicting primary roles as "advisory, administrative and monitoring compliance");
• the Bill does nothing to redress the dearth of statistical information on the "amount and geographical spread of New Zealand land owned by overseas persons";
• business takeovers should be subject to a "national benefits or national interest" test;
• the emphasis needs to be on greenfields business investment (i.e. new investment) rather than simply takeovers;
• and getting rid of the widespread practice of retrospective consents by the OIC.

Dunlop is not a whistleblower. Neither in his submissions, nor in his dealings with the Herald, would he name any names or give any details as to what led to his misgivings about the current regime. But he left the Committee in no doubt as to his conclusions, based on those observations. Quoting the Bill "that it is a privilege for overseas persons to own or control sensitive New Zealand assets", he says: "It is indeed a privilege for overseas persons to own or control NZ assets, however, I have observed that in far too many cases that privilege has been, or is being, abused by overseas investors and their New Zealand agents and advisors… my experience at the OIC, rightly or wrongly, left me with the distinct impression that there is widespread evasion of our overseas investment rules relating to land…During my time at the OIC I observed that there is almost a certainly a significant level of non-compliance with the existing FDI regulatory regime both in terms of compliance with conditions of consent, and, moreover, compliance with the regime in its entirety, i.e. there are many instances of the requisite consent failing to be obtained in a timely manner, if at all. Although the latter type is arguably of greater concern than instances of the former (as those, at least in theory, are subject to the the scrutiny of the regulator), it is my considered opinion that there is almost certainly a major historic and ongoing problem with avoidance or evasion of the regime as a whole….

"Given the public interest at stake I find both the evidence of significant non-compliance and the lack of information on the actual extent of non-compliance to be very disturbing. Arguably even more disturbing is that there are no instruments, either currently in place, or proposed under the Bill, to endeavour to resolve the wider compliance issues and to capture the data necessary to verify the actual extent of the problem… One final observation I would make in relation to the issue of non-compliance with the current regime is that it is clearly the case that those offending are not just the investors themselves. They are invariably assisted, or in some cases poorly advised, by New Zealand advisors or agents who are prepared to exploit the current inadequate compliance and enforcement complonent of the current regime. In my experience it is only in exceptional circumstances that an instance of non-compliance was clearly inadvertent and unintended…

In his supplementary submission Dunlop said: "I will not be ‘naming and shaming’ any foreign investors or their NZ agents and advisors, as to do so would be entirely inappropriate and could jeopardise the OIC’s investigations (what OIC investigations, I cynically wonder. Ed.). Suffice to say that my experience at the OIC Secretariat left me with the distinct impression that there is widespread evasion of our overseas investment rules, particularly in relation to land investments…". There is an obvious opening for either the media, and/or a politician not so shy about "naming and shaming" these evaders, to do their job, dig deep and tell us all about them. We’ve got the word of an insider that the practice is widespread and systematic.

It is not my intention to quote at length from Dunlop’s submissions. I refer you, instead, to the summary of CAFCA’s submission and our supplementary submission which appear elsewhere in this issue. As I’ve already said, Dunlop made many of the same points that we did – not because he is a member or supporter of ours, but because our submission (which, in its full 58 page version, has been available on our Website for quite some time now), obviously makes perfect sense to a wide spectrum of New Zealand opinion, including even those who have very recently worked for the OIC and have seen for themselves what goes on there. Dunlop only directly mentions CAFCA once: "The OIC puts at approximately 1% the level of privately held New Zealand land held by overseas persons. However, I understand that CAFCA puts the figure at around 7%. Why the difference and why does the Bill not provide measures to address the information deficiency in this area?". Why indeed?

But he is worth quoting, precisely because it’s not being said by us or our mates, but by an insider, and one who doesn’t mince his words. "Absurd" is one conclusion he comes to, in a couple of areas. "Like many New Zealanders, it strikes me as absurd that foreign investors can acquire our strategic business assets with no requirement that there be social, economic or other benefits to New Zealand…The prospect of investors being responsible for self-monitoring their level of compliance by way of declarations perhaps only once every two years is, quite frankly, absurd. This may not be the case if, as with our tax regime, the regulator has an express and unambiguous mandate, and is properly resourced, to enforce compliance".

On that subject, he recommends: "all (his emphasis. Ed.) overseas investments for which consent is required must be properly scrutinised in the first instance, and then closely monitored and routinely audited by the regulator. The monitoring and enforcement provisions in the Bill are a step in the right direction overall. The problem is that the statutory framweork and the conflicted regulator sets them up to fail".

He summarised his analysis thus: "The Overseas Investment Bill is fundamentally flawed. It does not provide the framework, including supporting structures and safeguards, necessary to facilitate or ensure only positive and high quality overseas investment that is beneficial to our economy, society and environment. The implementation of a transparent and robust regulatory regime will only be possible if the fundamental issues canvassed by many submitters, including myself, are addressed, and our recommendations given effect to".

And so say all of us. The Government needs to take heed of the fact that a broad base of New Zealanders, including even those who have worked in and personally gained from the foreign investment regime, are saying that the regime works more in the breach than in the observance and that this new Bill will do nothing to improve on that, it is fundamentally flawed and should be withdrawn and replaced by an Overseas Investment Bill that has real teeth and which puts the national interests of the New Zealand people as its highest priority. Currently the light is permanently on green for foreign investors; ideally we’d like there to be rather more of the red light, but even amber would be an improvement. The trouble is that the Government and the ideologues in the bureaucracy are colour blind, wilfully blind, in fact, to the glaringly obvious.