CAFCA submission on the Overseas Investment Bill

- Bill Rosenberg

This is an edited version of CAFCA’s submission to Parliament’s Finance and Expenditure Select Committee on the controversial Overseas Investment Bill 2004. It does not include the clause-by-clause analysis and two of the appendices. The full submission is available on our Website, Recommendations are in bold (though there were further recommendations, some very significant, in the full submission).


The rationale for overseas direct investment is that it brings access to new markets and to new technology and ideas, including better management. Rather than being a statement of religious faith, this should be determined on the evidence for each investor, and monitored. Some overseas investors quite clearly bring neither new markets nor innovation and do more damage than good. For example:

When New Zealand Rail was privatised in 1993, overseas investors supported by Fay Richwhite interests bought its assets and operation for $328 million, including a 99 year lease of the track for $1 a year. They proceeded to run down the company, neglecting maintenance while extracting hundreds of millions of dollars in capital repayments and dividends which the company could ill afford. In plain words, they asset stripped New Zealand’s rail system. Results included an appalling safety record, killing and maiming staff and customers; track so bad that trains must crawl rather than run; unreliable services that lost the confidence of its corporate customers; run down passenger services; and a near bankrupt company. The Government had to hold an inquiry into its appalling safety record, and bail out rail by taking back the track. It will be paying at least $200 million to restore it to a useable state. Solid Energy alone estimates that TranzRail’s rundown of the rail track cost it $200 million in earnings from exports (Press, "$200m coal exports ‘lost’", by Marta Steeman, 11/02/05, pB10, quoting chief executive Don Elder speaking to the Commerce Select Committee). The original investors sold their shares years ago leaving us to suffer the consequences and pay to put things right.

Juken Nissho, which operates wood processing plants in Kaitaia, Masterton and Gisborne. It has a horrifying health and safety record. It had 269 serious harm notifications from 1995 to 2003, and 11 convictions under the Health and Safety Act, with fines ranging from $6,000 to $10,000. In 1997 Juken Nissho was prosecuted for exceeding permitted emissions at its Kaitaia plant. There are numerous complaints from neighbours about the effect on their health. An analysis of Juken Nissho’s New Zealand accounts from 1999 to 2003 showed that it reported losses and paid no tax. It was totally debt-financed and under normal circumstances would be insolvent. Many of the company’s transactions appear to occur through related parties and may provide a way to shift profits offshore and avoid tax.

Telecom’s overseas owners have failed to live up to the promise of making new technology available to New Zealanders. The company closed off options rather than developed new ones. Its overseas owners have sacked thousands of employees and have extracted billions from New Zealand in profits and capital, while over-charging for services (such as broadband networking to the home) which will be the backbone of the economy in the future, virtually killing others (such as Integrated Services Digital Network - ISDN) in the past, failing to develop services which are commonplace overseas until forced to, and using every possible means to keep out the competitors who would not have been necessary had it been providing a decent service. From 1995 to 2004 it paid out more than its net earnings in dividends (reported earnings of NZ$6,464 million and dividends paid out of NZ$6,698 million), for most of that time, its capital expenditure barely covering reported depreciation. It was running down its assets. More recently it has used its cash to invest (rather unsuccessfully) in Australia rather than develop the extensive new services needed in New Zealand. Investment analyst Brian Gaynor described the effect of the privatisation as follows ("Testing years ahead for Telecom", by Brian Gaynor, New Zealand Herald, 26/5/01):

"The Ameritech/Bell Atlantic/Fay Richwhite, Gibbs, Farmer syndicate walked away from Telecom with a realised capital profit of $7.2 billion. In addition, the telecommunications group paid over $4.2 billion in dividends in the 1991 to 1998 period, more than half to the consortium members.

"… These are extraordinary figures for a company that is supposed to be at the cutting edge of new technological developments. In other words, a huge amount of money had been extracted from Telecom …".

This may be continuing, and has wider implications. University of Canterbury lecturers in accountancy, Sue Newberry and Alan Robb, having analysed Telecom’s public accounts, finding for example that "Telecom’s 2004 Annual Report issued in New Zealand reports a profit of NZ$754 million, but the figure reported in the United States is reduced by NZ$604 million, the amount of Telecom’s share of Southern Cross Cables’ losses since the suspension of equity accounting", conclude that:

"Closer scrutiny of Telecom’s success narrative and of some of the accounting mechanisms it uses … raise questions about the extent to which its reported operating results and debt ratios bear any connection to an underlying reality…

"In the case of companies with significant offshore investors, there is a risk that pursuit of shareholder value currently conceptualised as maximising cash payouts and share price runs the company down in the longer term. Any short term gain to shareholders goes outside the country while the longer term losses, especially if the company collapses, are likely to be borne by stakeholders in the country. Where the company runs an essential part of the infrastructure of the economy, its collapse is politically unacceptable and almost inevitably will force a bailout by taxpayers. This has already happened in New Zealand in the case of Air New Zealand Ltd and TranzRail Ltd, both formerly publicly-owned operations, corporatised and then privatised during New Zealand’s earlier economic restructuring…

"With the recent selling down of Telecom shares by major offshore investors accompanied by the talking up of Telecom’s shares in New Zealand, the significant changes in the pattern of Telecom’s shareholders, suggests that those outside the country who have benefited from the high dividends already paid out may have removed themselves from any risk of loss should Telecom’s finances become precarious. The losses to current shareholders as well as other stakeholders seem likely to fall heavily on New Zealanders and Australians. Lazonik and O’Sullivan had pointed out that the pursuit of shareholder value may function as an "appropriate strategy for running down a company – and an economy" ("Maximizing Shareholder Value: A New Ideology For Corporate Governance", W Lazonik and M O’Sullivan, 2000. Published in Economy and Society, Volume 29, Number 1, pp 13-35). This examination of the financialised system as it affects a small country with its largest listed company listed on other exchanges besides that in New Zealand suggests that it could very well run down both the company and the economy. ("Financialisation: creating shareholder value by disconnecting from reality?", by Susan Newberry and Alan Robb, Department of Accountancy, Finance and Information Systems, University of Canterbury, paper accepted for presentation at the Critical Perspectives on Accounting conference, New York, April 2005, quoted with permission).

The concern of Newberry and Robb with the "financialisation" of company management (a single-minded focus on limited financial indicators to the exclusion of other evidence of success) should be seen in the context of both heightened competition in an economy open to virtually unlimited imports and foreign investment, and extremely high foreign debt levels in the economy. Both result in enormous pressure to perform in the short run, which can often be achieved only (or most easily) by running down the assets of an enterprise. In other words short run results are bought at the expense of long run vitality or even viability. When investors have only a short term view, or can opt out of a company or the economy with relative ease, as with many overseas investors, the risks of this behaviour are even higher.

There are many more examples of mismanagement, asset stripping and failure to invest in value added production or new technology in New Zealand: Air New Zealand under its previous ownership; Huaguang, Citic, Carter Holt Harvey and other forestry companies; the corporations whose feeding frenzy helped create the ongoing mess that is now our electricity system; the promising local manufacturers and technology companies which have been bought up and closed down by foreign buyers; and so on.

New Zealand is one of the most dependent countries on foreign investment, certainly in the developed world, and rivalling even highly dependent developing countries. In 2003 according to the United Nations, the only comparable developed countries which had more of their economy owned by foreign investors (as a percentage of Gross Domestic Product - GDP) were Ireland and Malta. The Netherlands, Sweden and Switzerland also had more, but they have huge overseas investment of their own, far more than the foreign investment present in their home economies. So one would have thought that if the advocates of floods of foreign investment were right, we would have a brilliant export record by now in high technology exports, and superb management (however that is defined).

We don’t. Most of the thriving areas of technology development have been driven by New Zealand companies – only to be bought out too frequently by foreign investors wanting an easy way to corner new technology. Even the Prime Minister has expressed concern about this pattern. The record on productivity increases is mediocre by world standards. And good management? The recent report by the Government-backed Workplace Productivity Working Group made an admission which was surprising given the heavy involvement of business in the report:

"There is a widespread perception, although little hard evidence, that weaknesses exist in the quality and quantity of New Zealand’s stock of leadership and management capability. Concerns centre on the ability of New Zealand managers to take advantage of changing business environments, through such measures as marketing, innovation management, and building networks and relationships".

Our last few years of relatively high growth in GDP and low unemployment have been at time when foreign direct investment (FDI) has levelled out and is largely sales from one overseas owner to another (though overseas debt and portfolio investment have continued to rise and it is now widely acknowledged that New Zealand is over reliant on foreign capital).

There is much more that could be said on these matters, but two decades of the most rapid increase in foreign investment New Zealand has seen, probably since the 19th Century, certainly challenges any assumption that overseas investors bring good management, technology, ideas and new markets. The best that can be said is that some overseas investors may bring these benefits. Many we know from our experience do exactly the opposite.

For this reason, if we are going to accept overseas investment we must pick and choose. We must have the power to decide which investors should be let in, and which should be rejected.

Indeed even consultants employed by the Government at the early stages of its "growth and innovation strategy" conceded that some overseas investment was poor and we needed to be selective. The Boston Consulting Group’s 2001 report on how to target FDI conceded that:

"Although the nation has at times attracted significant quantities of FDI, the quality has been poor. Almost all FDI in New Zealand has involved privatisation or merger and acquisition activity with little flow-on benefit. Export-oriented greenfield investment has been sparse, and is generally concentrated in low-growth, low-return sectors".

It proposed that New Zealand should be selective about which foreign investment it chose. We note that the Finance and Expenditure Committee, in its 1999/2000 Financial Review of the Reserve Bank of New Zealand, focusing on the Overseas Investment Commission (OIC), recommended as follows (reporting in 2001):

  • Government and Green members recommend that the Government examine whether to extend the application of the national interest criteria to proposals which do not involve the purchase of land or fishing quota.
  • We recommend that the Government re-examine the investment threshold that triggers scrutiny by the Commission. The Greens and New Zealand First believe the threshold should be dropped to $10 million (it was increased from $10m to the present $50m in 1999. Ed).
  • Government and Green members recommend that the Government consider requiring the Commission to consider the impact on social well being, environmental sustainability and economic sovereignty (for example balance of payments implications, impact on productive capacity) when assessing whether an overseas investment will accrue the fullest possible benefit to New Zealand.
  • Government and Green members recommend that the Government examine the feasibility of introducing a code of corporate responsibility which investors would need to agree to and against which the Commission would monitor compliance. The content of that code to be developed from sources including the so-called "bad boy" legislation which has been adopted by several States in the USA and the Organisation for Economic Cooperation and Development’s (OECD) guidelines for multinational enterprises.
  • Government and Green members recommend that the Government consider expanding the ‘national interest’ test to include three additional criteria: environmental impact of an investment, the impact on the social fabric of the local community and compatibility with Treaty of Waitangi obligations.

Selection is hardly a radical idea. It is precisely what we do to select people who want to come to live in New Zealand permanently. Though immigrants are welcomed by most – they genuinely do bring in new ideas, skills, and diversity – we take great care to choose whom we let into New Zealand permanently. We select on the basis of their skills, their character, their numbers, and other criteria.

And yet the damage potentially done by one badly behaved immigrant pales beside a huge transnational corporation misbehaving in New Zealand. The loose, almost non-existent rules on foreign investment privileges corporations over ordinary people. The usual defence is that overseas investors are subject to New Zealand laws, implying this is sufficient control. It quite clearly is not. If immigrants behaved like the companies whose records are outlined in this submission, they would probably be deported. Further, it is not a crime to asset strip, massively avoid tax, or run down strategic infrastructure, but it is hugely damaging to New Zealand.

We should reassert the right to control entry of corporations likely to damage the country, monitor their behaviour, and revoke their right to stay, or require appropriate behaviour, if they cause damage. Quality of overseas investment matters. Investment income sent overseas is a drain on the resources available to New Zealanders. Interest and dividends remitted overseas cost us $8.9 billion in the year to March 2004, of which $4.9 billion resulted from FDI. That’s as much as our total milk powder, butter and cheese exports, and many times more than any new trade agreement promises, let alone delivers.

Reinvestment is low. While in the 2004/05 year it has been unusually high, the ten year average shows less than a quarter of profits being reinvested in New Zealand. In the ten years ended March 2004, 22.7% was reinvested. In some years more profits were extracted than earned.

For these reasons, our approach in this submission is that the legislative framework should enable intelligent selection of foreign investment, and the application of conditions on investors once accepted. It currently does not. The new Bill is somewhat better for investment in land, which we applaud, but much more could be done. But in the end, land is a tiny part of the economic picture where overseas investment is concerned. Its value is tens or hundreds of millions of dollars per year compared to billions of dollars in core areas of economic and social life.

We do not consider the current Bill provides a satisfactory framework. We are deeply concerned that an opportunity is being missed to put in place a solid framework for selection. We would prefer that the Bill be withdrawn and redrafted with this in mind. However the submission, without prejudice to this view, points out where improvements could be made to the Bill before the House.


Land, though in itself a small part of the value of overseas investment in New Zealand, has special significance to most New Zealanders, and to our economy. We believe there is wide agreement that controls on overseas ownership of land should be tightly controlled. Reasons for this follow.


Overseas ownership encourages speculation on rising land prices as the land becomes available to a wealthy international market beyond the reach of most New Zealanders. Corporate farming, land bought solely for investment, increased prices of dairy-capable land resulting from the 1994 General Agreement on Tariffs and Trade (GATT, now the World Trade Organisation – WTO) settlement, and the temporary boom in timber prices in the mid-1990s, all made speculation highly likely. Tourist and "lifestyle" properties in locales such as coastal areas and the high country are obvious targets.

Speculation raises the price of land above its earning capacity. Land becomes unaffordable to new farmers or those wishing to expand their farms. Rates become unaffordable to existing landowners. Speculation also encourages neglect as only the resale value of the land matters, not its productive capacity, cultural or natural values.

Absentee Ownership

Approval by the OIC of absentee ownership of land by overseas interests is commonplace. The dangers include the owners’ inability or unwillingness to properly control the use of the land leading to rundown or inappropriate use of the land. Speculation and investment solely for capital appreciation are temptations. Profits go overseas.

Vertical Integration

Some companies attempt to control the marketing of a product from soil to overseas market. This can reduce market opportunities for New Zealand farmers, and/or reduce prices paid to them. It makes possible transfer pricing (where a transnational company artificially prices goods to make profits in the country where taxes are lowest). It reduces the foreign exchange earnings of the country. Only two generations ago, farmers found themselves at the mercy of vertically integrated British-owned meat companies. The pitfalls became clear when Britain entered the European Community. Recent examples include timber, wines, wool, meat, barley and horticultural produce.

Preservation Of Land Of Special Importance

It has become more and more difficult to maintain public access to high country, coastal land, and other land of special importance as it becomes owned by overseas residents and companies for private purposes or tourism. Consider the number of South Island high country stations that have passed into overseas hands. Some examples: Cecil Peak (13,686 hectares), Kinloch (885 ha.), Woodbine (2,501 ha.), Lilybank (2,136 ha. pastoral lease), Otamatapaio (9,110 ha.), Rugged Ridges (12,684 ha.) Glenroy (5,003 ha.), Erewhon (13,573 ha. pastoral lease, jointly Australian and New Zealand owned), Cone Peak (3,486 ha. pastoral lease), Mount Aitken (2,391 ha.), Makarora (2,185 ha.), Coleridge Downs (1,899 ha.), and Walter Peak (375 ha. freehold, 25,758 ha perpetually renewable Crown Lease).

Other recent significant South Island sales include Glenhope Station on the Lewis Pass Road (9,265 ha. pastoral lease), and Glazebrook Station, Waihopai Valley (9,094 ha.). Recent North Island sales include the historic 661 ha. Nicks Head Station and the 5,899 ha. Glenburn Station (both coastal); Poronui Station (6,334 ha.); and Puketiti Station (3,616 ha.), which controls access to one of the country’s longest caves. The creeping overseas takeover of TrustPower includes 3,919 hectares of land, and the sale of Contact Energy included 8,631 hectares, much of it in scenic or sensitive areas.

Providing Benefits

Until the 1980s, overseas ownership of a property happened only if the new owner brought new techniques, skills or expertise to New Zealand that could not be easily acquired in other ways. Many recent overseas purchasers have made such claims, but these are rarely tested.

How Much Land Is Overseas Owned?

One disturbing aspect of land ownership is that there is no publicly available reliable information or even reliable statistics on overseas ownership of land in New Zealand. CAFCA maintains a record of all decisions made by the OIC (that it has not suppressed details of) on our Website, including land sales. These go back to 1994, but we have earlier information that has not been published on the Website. The OIC publishes statistics but they are only for approvals given by it, and then only since the early 1990s. There is no complete information on overseas ownership of land that was acquired prior to that time. There is no information on sales by overseas owners back to New Zealanders. The OIC does not collect or provide information on the value of land sales it approves. In addition, the OIC’s method of collating its statistics confuses rather than clarifies. In particular, its definition of "net sales" is not the common sense meaning of "net" (sales to overseas owners less sales by overseas owners to New Zealanders) but instead a contrived measure that counts only (for example) 25% of the land area if it is only 25% overseas owned, despite the fact that that 25% ownership may well bring control of the land. There is a similar problem with its treatment of "net" investment dollar value.

Within these limits of reliability we estimate using OIC data that just over one million hectares of New Zealand land is overseas owned. This is 7% of New Zealand’s commercially productive land (pasture, arable land and production forest). We believe this is an underestimate. It additionally does not include the large area of land controlled by overseas owners of forestry and other rights over land, as distinct from the land itself. Land owned or managed by overseas forestry companies totals over one million hectares on its own.

Estimate Of Overseas Land Ownership In NZ

According to the Overseas Investment Commission (OIC), ("Appendix A of a Briefing Paper on the Overseas Investment Commission", available on their Website at

"OIC estimated that approximately 777,500 hectares of New Zealand land was foreign owned as at 31 December 1997 (this figure included 276,857 hectares of freehold land which the OIC had approved for sale to overseas persons for the period 1/1/91 to 31/12/97 and approximately 500,000 hectares owned by Fletcher Challenge and Carter Holt Harvey). This represented 2.8% of all New Zealand land and 3.6% of all forested and arable land".

The OIC has approved the sale of a net 292,013 hectares since then to December 31, 2003, (the latest annual statistics available), making a total of 1,069,513 hectares (just over a million hectares) foreign owned as at December 31, 2003. It is likely to be more than that as it appears that the OIC counted only Fletcher Challenge’s and Carter Holt Harvey’s land ownership prior to 1991. In addition, all the problems with the OIC’s definition of "net" apply (see "How Much Land Is Overseas Owned?").

In correspondence with Rod Donald MP (14&15/2/05), the OIC has confirmed that it is "more comfortable with the one million hectare figure total estimate" than other estimates it has made. It has also calculated that the "net" sales from January 1, 1998 to June 30, 2004 (six months beyond the above calculation) is 269,197 hectares (a fall from the December 31, 2003 figure) and that the transfer to overseas entities more than 25% owned (i.e. not using their "net" method) was 279,607 hectares over the same time period. The latter would give a total of 1,057,107 hectares foreign owned at June 30, 2004.

New Zealand has 15,600,000 hectares of pasture, arable land and production forest (NZ Forestry Facts And Figures 1999 NZ Forest Owners Association, Ministry of Agriculture and Forestry), so 6.8% of our commercially productive land area is foreign owned. The largest owners are the forestry companies, who own or manage approximately 1,800,000 hectares of forest land. They own most but not all of what they manage – some is in forest cutting rights or leases for example. We estimated that in 2003, at least 1,018,000 hectares was overseas owned or managed, using information from the publication NZ Forest Industry Facts And figures 2002/2003 (NZFOA, MAF). Some of this is of course counted in the above 1,069,513 hectares. Since then there have been substantial changes in forest ownership, and the table of ownership published by NZFOA and MAF has not been updated. However we doubt that the area in foreign ownership has changed significantly as most of the area sold by foreign owners has been to other foreign owners.

Analysis Of The Bill – General Matters

Government Intentions

In a Media Statement announcing the tabling of this Bill in the House (10/11/04, "Toward a more effective overseas investment regime"), the Finance Minister, Dr Cullen, announced not only some of the terms of the Bill but also the following points:

  • Overseas applicants wanting to buy land but not intending to reside in New Zealand will have to include in the asset management plan attached to their application how they will manage any historic, heritage, conservation or public access factors relevant to the property as well as any economic development planned.
  • Plans submitted by an overseas investor in support of his/her purchase will be made conditions of consent.
  • To keep costs to the taxpayer down, the onus of compliance will be on the overseas investor. Investors will be required to report regularly on how they are complying with the terms of their consent and outline any reasons for non-compliance. Monitoring will continue until all obligations have been met.
  • The threshold for screening non-land business assets where the proposed acquisition entails a 25% or more shareholding will be raised from $50 million to $100 million. It was last adjusted in 1999 when it was increased from $10 million to $50 million (the last time a business application not involving land was turned down was by Sir Robert Muldoon, in 1984).

None of these aspects are part of the Bill. They are apparently intended to be implemented by Regulation. We make further comment below on the wide use of Regulation proposed in this Bill. We strongly object to the last two points, and, while supporting the first two points, submit that they should be embedded in the legislation with only details to be determined by Regulation.

Regarding the third point, putting the onus of compliance on the overseas investor is an invitation to disregard the law. We detail below the long standing practice of the OIC allowing retrospective approvals, and the large number of such approvals. This indicates that there are many overseas investments in New Zealand that are operating illegally (that is, without approval). Clearly many investors do not comply with the law already. We see no reason why a "self-reporting" regime will do anything but encourage that attitude. We therefore submit that there should be active monitoring and investigation of compliance with conditions by the Regulator (though see our submission on the Regulator below), rather than self-reporting. The Regulator should have sufficient resources to do a credible job of this.

Regarding the fourth point, we strongly oppose a further rise in the threshold, which was raised five-fold without public consultation only five years ago. It is a very significant weakening of the regime. Indeed, it should be returned to $10 million as it was in 1999. It will become very difficult to change, as it is embedded in trade and investment agreements which the Government is negotiating. For example, the free trade treaty recently agreed with Thailand, includes the statement that "The NZ$50 million threshold will increase to NZ$100 million on coming into force of proposed New Zealand legislation to amend the overseas investment regime" (in Annex 4.2 New Zealand’s Schedule on Investment). We note that this was agreed before the Bill had even been opened for public submission, let alone full debate in the House.

We consider quite irrelevant the parenthesised statement in Dr Cullen’s release: "(The last time a business application not involving land was turned down was by Sir Robert Muldoon in 1984)". This is a reflection not of the lack of need for a strong regime, but of the weakness of a regime which allows anything to proceed. Throughout most of the 1990s, for example, it operated under instructions from the then Government to the Overseas Investment Commission to grant consents unless there was good reason to refuse them – described by Dr Cullen himself as a presumption in favour of approving applications. (e.g. 8/5/00 press release by Dr Cullen, "Foreign bids for BIL’s Sealords stake declined"; and Hansard, 9/5/00). It indicates the need to strengthen the regime, not weaken it.

The following are examples of investments which fall between the current $50 million threshold and the $100 million threshold proposed, from 2003 and 2004. Many of them are highly significant for economic, environmental or social reasons.

  • Pacific Equity Partners Pty Limited of the USA paid $91 million to acquire the Australian, New Zealand and Hong Kong businesses of WH Smith. In New Zealand the businesses include the major book chains Whitcoulls and Bennetts.
  • Sime Darby Motor Group (NZ) Limited, of Malaysia paid $61,830,000 plus a potential additional consideration of up to $5 million to acquire Truck Investments Limited. Its businesses include truck sales companies that sell Hino, Mack and Renault brands and Truck Stops which operate that national chain spare parts and service outlets for trucks.
  • Sky City Entertainment Group Limited paid $93,750,000 for Aspinall (NZ) Limited. Aspinall (NZ) owns 40.5% of the Christchurch Casino.
  • AMP NZ Office Trust, owned 43% in Australia paid $71 million for Mobil on the Park, 35 Waring Taylor Street, Wellington and $75 million for the BNZ Centre, 1 Willis Street, Wellington.
  • Telecom New Zealand Limited, owned 72% overseas, paid $62,346,000 for the information technology services company Gen-i Limited.
  • Macquarie Goodman Nominee (NZ) Limited, owned 60% in Australia, paid $72m for the Fletcher Challenge complex at 810 Great South Road, Penrose, Auckland.
  • Macquarie Goodman (Highbrook) Limited and Macquarie Goodman Funds Management Limited (as manager of the Macquarie Goodman Industrial Trust), owned 90% in Australia, paid $68,389,158 for Highbrook Development Limited which owns 153 hectares at Highbrook Drive, East Tamaki, Auckland.
  • Vero Insurance New Zealand Limited of Australia (the former Royal and SunAlliance) paid $68m for the motor vehicle and consumer goods warranty and credit insurance business of Autosure Group Holdings Limited and Crown Insurance Corporation Limited of Aotearoa (including those brand names).
  • Macquarie Goodman Industrial Trust of Australia paid $63,450,000 for the Trinity Park industrial development at 600 Great South Road, Auckland.
  • Fletcher Residential Limited (owned 52% overseas) paid $80,411,250 for a residential subdivision of 17.5 hectares at Schnapper Rock Road, Albany, Auckland, comprising 350 residential lots.
  • Alesco Corporation Limited of Australia paid $53m for Biolab Limited and TechDev company, which is the largest supplier and distributor of scientific consumables and instruments to the biotechnology and scientific industries in both Australia and New Zealand.
  • UBS Timber Investors of the USA paid $81,227,436 for trees in and a forestry right over 6,400 hectares of mature age trees of Tahorakuri forest in the Central North Island, Bay of Plenty (note that only forestry rights and trees were sold; there was no land involved so this would not be caught as a land transaction unless forestry rights are included as an interest in land).
  • Australian Radio Network Pty Limited, owned 50% by Clear Channel Communications Inc of the USA, 20% by Independent News and Media PLC of Ireland, and 30% in Australia paid $56,719,448 for the remaining shares in the New Zealand Radio Network Limited.
  • TrustPower Limited paid $92,500,000 for Cobb Power Ltd which owns the Cobb Hydro Station on 16.7 hectares of land in Cobb Dam Road, Upper Takaka, Nelson.
  • ING Retail Property Fund Australia, owned in the Netherlands, the UK, and Singapore, paid $52,650,000 for the Meridian Centre, at 267-285 George Street and 49 Filluel Street, Dunedin, Otago.
  • Brunswick Corporation of the USA paid $54,500,000 for 70% of Navman NZ Limited (with an option to buy the remaining 30% by 2005). Navman is a New Zealand based electronic manufacturer of marine electronics and general navigation products.
  • Tech Pacific Holdings (NZ) Limited, owned in the Netherlands, Hong Kong and the UK, paid $96,284,549 for Tech Pacific (NZ) Limited. Tech Pacific is a leading software vendor.
  • iiNet New Zealand Limited of Australia paid $57,152,188 for the iHug Group of companies. The iHug Group is New Zealand’s third largest, and one of its most innovative, internet services provider providing services such as dialup and Asymmetric Digital Subscriber Line (ADSL) services, telephony services, wholesale broadband and Web services in New Zealand and Australia.
  • B Digital Limited of Australia paid $80,400,000 for Digiplus Investments Limited. Digiplus operates in New Zealand and primarily in Australia, where it offers local, national and international and mobile telephone calls and Internet services.


While proposals for implementing the new regime with regard to the requirement for asset management plans and the undertakings in these being made conditions of consent have merit (and should be used for all, not only land, investments), the regime should not be a self-reporting one. There should be active monitoring and investigation of compliance with conditions by the Regulator. These matters should be embedded in the legislation, not left to Regulation. The Regulator should have sufficient resources to do a credible job of ensuring compliance.

There should be no further rise in the dollar threshold for transactions. It should be lowered to $10 million.

Definition Of Overseas Ownership

The Bill continues the 25% overseas ownership threshold throughout for an investment to be classed as an "overseas investment". Yet control can be achieved at a much lower level. Statistics New Zealand use 10%, the common standard internationally. It states in its publication "Balance of Payments – Sources and Methods 2004" (p77):

"A direct investment enterprise is an incorporated or unincorporated enterprise in which a direct investor owns 10% or more of the ordinary shares or voting power (for an incorporated enterprise) or the equivalent (for an unincorporated enterprise). Direct investment enterprises comprise branches (unincorporated enterprises), subsidiaries (incorporated enterprises that are more than 50% owned by the direct investor), and associates (incorporated enterprises that are between 10 and 50% owned by the direct investor).

"A direct investor may be an individual; an incorporated or unincorporated private or public enterprise; an associated group of individuals or enterprises; a Government or a Government agency; an estate or trust; or an international organisation which has an investment of 10% or more in a direct investment enterprise in an economy other than the one in which the direct investor resides.

"An enterprise that has significant long-term operations in more than one economy is divided into separate entities in each economy. These entities are always in a direct investment relationship: the head office constitutes the direct investor and its branches constitute the direct investment enterprises".

The publication references this definition to the International Monetary Fund’s (IMF) Balance of Payments Manual most recent (fifth) edition and to the second edition of the OECD Detailed Benchmark Definition of Foreign Direct Investment. So both the IMF and the OECD use a 10% threshold. So does UNCTAD, which publishes the authoritative annual World Investment Report (see for example its latest report, "World Investment Report 2004: The Shift Towards Services", p345). Even in this Bill, in Schedule 2, a threshold of 20% is proposed for amendments to the Credit Contracts and Consumer Finance Act 2003.


Consistent with international standards, the threshold for defining overseas ownership should be lowered from 25% to 10%.

Power To Set Thresholds

The Bill proposes that the thresholds at which approval is required for overseas investment, including:

  • minimum land areas for the various types of sensitive land,
  • minimum value of investment,
  • the definition of "associated land"

may be set by Regulation. This allows changes to be made by the Executive without public consultation. One particularly important instance of this is changes made as a consequence of international treaty commitments, especially given that such international commitments can be made without Parliamentary approval. The thresholds are in practice crucial as to the effectiveness of the legislation. High thresholds would make it almost completely ineffective.


The definitions of all thresholds, including that of "associated land" should be within the Bill, rather than by Regulation.

Definition Of "Good Character"

The test of "good character" is used in a number of places, but not defined in the Bill (clause 17, 19, new 73 {new section 57G}). Given that, according to the OIC, there is little case law to define it, it should be defined within the Bill. We note that the OIC commonly assures itself of "good character" of individuals by asking for a statement to that effect either from their solicitors or the individuals themselves. This is a completely ineffectual process, obviously open to abuse. The onus should be on the Ministers through the Regulator to properly investigate good character and independently satisfy themselves that it holds.

To give one example. In May 1997, CAFCA provided evidence to the OIC that two people controlling Wharekauhau Holdings Ltd, which owns the Wharekauhau Lodge and Farm, appeared not to be of good character. One was on the basis of a New York Times report that one of the directors had provided substantial financial support to a terrorist organisation, namely Renamo in Mozambique. It quoted the US State Department asserting that "100,000 civilians may have been murdered as a result of widespread violence and brutality by the rebel group. Victims were beaten, mutilated, starved, shot, stabbed or burned to death". The second was from Time magazine and which alleged ethically highly questionable, though not illegal, business practices by another director. This article was the subject of legal action and the Time statement on the outcome of the action as far as the director was concerned did not withdraw the allegations (one of these directors is now dead; the other remains as a director).

The OIC responded, saying "our enquiries have not revealed any information to refute that [either of the two directors] are of ‘good character’ as that term is used in the Overseas Investment Act 1973. Accordingly we will not be taking the matter any further". We asked for the reasons for its decision, and a copy of documents relevant to the decision. It supplied them with numerous deletions. While it had "made enquiries" through "other agencies" following our May 1997 letter, it apparently primarily relied on "certificates" by the two directors that they were of "good character". Its report on our "allegations" (4/2/98) stated that "the Commission interprets [the good character condition in the Overseas Investment Act] as requiring a certificate on the eligibility of the applicant company directors who are overseas persons". These certificates were simply a signed statement as follows: I confirm that I, ______________ continue to meet the eligibility criteria specified in section 14A(1)(a)-(c) of the Overseas Investment Act 1973.

The OIC appeared to be taking these statements as the baseline for the truth about these matters, and requiring evidence to "refute" these certificates. It is not clear what investigations it made of the evidence we provided. Regarding the definition of "good character", the OIC’s report of February 4, 1998, stated that the term "is used numerous times in New Zealand legislation and is not once defined". It listed three contexts for the term:

  • In relation to the registration of persons to membership of various professions;
  • In determining whether to grant New Zealand citizenship under section 8 of the Citizenship Act 1977; and
  • In screening overseas investors to New Zealand.

It reviewed a court decision regarding the term, and concluded: "It is clear that, when determining "good character", convictions are not the only factor to have regard to. However, the term ‘good character’ must be considered in relation to the context in which it is used". The law is therefore very unclear on this matter, and this leads to exceedingly weak enforcement in the present context. This is added to by the OIC’s sloppy methods of satisfying itself that the criterion is met. The regime simply invites abuse.


The term "good character" should be defined in the Bill. Its definition should reflect court interpretations, but should be wider than criminal convictions, including adherence to common ethical standards, and absence of acts that would be illegal in New Zealand or which have given rise to adverse civil court findings.

The practice of relying on certificates of adherence to criteria provided by applicants, persons controlling investments, their legal representatives, or other associated persons, should be prevented by the legislation. The Ministers and Regulator should be required to be satisfied on the basis of evidence before granting approval.

In addition, the "good character" criterion, and indeed the other three "core" criteria common to all investment (that relevant individuals have business experience and acumen; financial commitment; not individuals of the kind referred to in section 7(1) of the Immigration Act 1987) apply only at the time the decision on an application is made. Unless an explicit condition is attached to a consent, an individual investor could subsequently exhibit bad character, poor business practice, lack of sufficient financial backing, and so on, without any review of the approval being possible.


At least the four criteria common to all investments subject to the Bill be required to continue to hold after consent has been given. An appropriate amendment to clause 29 would accomplish this.

However even with the above amendments, there is a major failing in the "good character" criterion. It applies only to individuals, and not to bodies corporate. It should also apply to bodies corporate, not just individuals, given New Zealand and international experience of overseas investment in recent years. For example:

  • Waste Management International, the former US parent of Waste Management New Zealand, was allowed to invest in New Zealand despite a long and appalling record of bribery, bid rigging, price fixing, price gouging and environmental breaches, and tens of millions of US dollars in fines and penalties. It had over US$170 million in fines against it between 1980 and 1996 with one judge citing fraud and dishonesty as part of the company’s operating culture. The State of Indiana blocked Waste Management’s expansion plans under its "good character" law.
  • Archer Daniels Midland (ADM) was allowed to take part ownership of Canterbury Malting Company even though some of its executives were imprisoned in the US for massive international price fixing crimes for which it was fined US$100 million. It was described by Janet Reno, US Attorney General: as follows:

"Archer Daniels Midland has agreed to plead guilty and pay a $(US)100 million criminal fine, the largest criminal antitrust fine ever, for its role in two international criminal conspiracies to fix the price of lysine, a feed additive used to ensure the proper growth of livestock, and citric acid, a flavour additive and preservative found in soft drinks, processed foods, detergents and other products. Because of these illegal actions, feed companies, poultry and swine producers, and ultimately America’s farmers, paid millions more to buy the lysine additive. Also, manufacturers of soft drinks, processed foods, detergents and other materials, paid millions more to buy the citric acid additive, which ultimately caused consumers to pay more for these products" ("Rats In The Grain: The Dirty Tricks and Trials of Archer Daniels Midland, The ‘Supermarket to the World’", by James B Lieber, Four Walls, Eight Windows, 2000, p38). In June 2000, the European Union fined ADM and four Asian companies $US105 million for price fixing (on top of a $C16 million fine for ADM, in 1998, for price fixing in Canada).

  • MCI/WorldCom (partner with Telecom in the cross-Pacific Southern Cross Cable, which took over Internet service provider, Voyager) and Tyco (owner of Wormald, Armourguard, and Rhino security companies, plus several manufacturing operations in New Zealand), are both the subject of huge accounting scandals in the US. Scott Sullivan, the former Chief Financial Officer of WorldCom, which in 2002 filed for the largest bankruptcy protection in US history, has admitted in court to lying on more than a dozen occasions about the financial health of the company. The former Chief Executive Officer of WorldCom, Bernard Ebbers, has been found guilty of orchestrating the biggest fraud in American corporate history and awaits sentencing. He could spend the rest of his life in prison (e.g. Press, "Ebbers found guilty", 17/3/05, pB7). Former Tyco International chief executive Dennis Kozlowski and former chief financial officer Mark Swartz are also on trial for stealing $US150 million ($NZ193 million) of unauthorised bonuses and defrauding shareholders by selling stock whose price they inflated by misrepresenting Tyco’s financial condition. They face 31 counts of stock fraud, falsifying business records, grand larceny and conspiracy. Kozlowski is a former director of New Zealand subsidiaries Tyco New Zealand Ltd and Danks Bros Ltd. (Sydney Morning Herald, "Former Tyco chief ‘concealed nothing’", by Andrew Dunn, 29/1/05).
  • The Noboa family, owners of Bonita Bananas in Ecuador, were given approval by the OIC, in August 2002, to own 30% of Turners and Growers (through Bartel Holdings Limited). Human Rights Watch released an April 2002 report entitled "Tainted Harvest: Child Labor and Obstacles to Organizing on Ecuador’s Banana Plantations." The New York-based group found children as young as 10 or 11 often working 12-hour days and handling dangerous fungicides, while getting paid an average of US$3.50 a day. The New York Times reported the employers included Noboa plantations (New York Times, "In Ecuador’s Banana Fields, Child Labor Is Key To Profits", by Juan Forero, 13/7/02). Bonita pays its banana workers some of the lowest wages in Latin America. According to a 2000 study by US/ Labor Education in the Americas Project (US/LEAP), a banana worker’s average monthly wage was US$500 in Panama, US$200 to US$300 in Colombia, US$150 to US$200 in Honduras, and US$56 in Ecuador. This is being used by other transnational banana companies to bargain down wages in other countries in Latin America. In response to strike action by workers to try to raise the wages, Noboa responded by using armed men, many wearing hoods, who pulled workers out of their homes, beat them and shot several, one of whom lost his leg as a result. "In a May 31, 2002 meeting with US/LEAP staff, two US Congressional aides, and a representative of the US embassy, Mr. Alvaro Noboa openly admitted that his company brought in the security guards, claiming that workers were damaging (or about to damage) his property. No evidence has been provided to substantiate this claim nor was it explained why the eviction, even if necessary, was carried out by private security guards in the dead of night rather thanthrough the normal legal process" (
  • Edison Mission Energy which controlled the privatised Contact Energy from 1999 until 2004, is a subsidiary of Edison International Inc. which is also the parent holding company of Southern California Edison, a company heavily involved in the collapse of California’s deregulated electricity system in the late 1990s. Edison Mission was a joint venture partner with General Electric (GE) of the US in an Indonesian project involving the construction of the country’s first private power station. The joint venture eventually won the deal after securing crucial contacts within the then ruling Suharto family and their close associates to get the project approved. Deals with the Suharto family and associated senior Government figures included commitments to purchasing excessively priced coal supplies and boilers from companies associated with them, and giving some an essentially free share in the project. The company got President Suharto to personally approve its high prices. There was no competitive bidding, and there is evidence that Edison overruled its partner, GE, to waive a requirement that its Indonesian partners sign a "no corruption" clause in the contract. The result was that the project, Paiton One, was one of the most expensive power deals of the decade, anywhere in the world. PLN, the state-owned electricity company, said that it didn’t want to buy any electricity at all from the Edison-GE plant in 1999. The US Government, whose agencies provided loans for it, pressured PLN to buy the power at the high contracted price. Edison applied heavy political pressure to get the deal (Wall Street Journal, 23/12/98, "Wasted Energy: How US Companies And Suharto’s Circle Electrified Indonesia. Power Deals That Cut In First Family And Friends Are Now Under Attack. Mission-GE Sets The Tone", by Peter Waldman and Jay Solomon, pA1) .

The principles underlying this are virtually identical to those underlying the requirement for good character for individual investors, but more generally, are analogous to the requirements placed on permanent immigrants to New Zealand. Given that the effects of bad behaviour of a large corporation can be far greater than that of a badly behaved individual, protections such as we propose are long overdue.

A corporate code of conduct would be an appropriate way to define good character for companies. It would cover such matters as asset stripping, tax evasion, high levels of tax avoidance, health and safety records, compliance with human rights, labour, consumer and environmental protection laws and employment and customer agreements, court convictions and losses in civil cases. This has precedent. As mentioned above, a number of US states have good character or "bad boy" laws. There are a number of international "codes of conduct" that could form the basis for such legislation. CAFCA’s own "Corporate Code of Responsibility" provides a useful checklist.


Bodies corporate should also be subject to "good character" provisions, based on a Code of Conduct.

Flexibility In Criteria

In the current Overseas Investment Act, the Ministers (of Finance and Lands) have a significant degree of flexibility in the criteria they use, in two ways. Firstly they may regulate for new criteria; and secondly they may use other criteria as they think fit "having regard to the circumstances of the particular overseas investment". This appears in the criteria for investment in both farm land (section 14D(2)(f) and (g)) and non-farm land (section 14E(c) and (d)):

  • Such other matters as may be prescribed:
  • Such other matters as the Minister and the Minister of Lands, having regard to the circumstances of the particular overseas investment, think fit.

Virtually identical provisions are in the Fisheries Act 1996, section 57(4)(b)(ii) and (iii). They remain in similar form in the 57H(2)(b) proposed in clause 73 of this Bill for decisions on ownership of fishing quota. However for investments other than in fishing quota, the Bill proposes only prescribed matters, and then only for investment in sensitive land (cl.18(2)(f)). We submit that Ministers should retain the right to use other criteria, not just ones in the Bill or in Regulation. This right should apply to all investment, not only in sensitive land. The model should be as is proposed for fishing quota investment, and as is in the current legislation.

A recent example of the value of this – or rather, the dangers of not having such a power – was in the approval given to Prime Infrastructure to take over the electricity lines company, Powerco. The Minister of Finance, Michael Cullen, was clearly outraged at the deal. In a rare public release on an OIC decision, he complained that he had approved it:

"… primarily on the basis of precedent and advice that a judicial review would likely succeed were the application declined. The purchase complies with New Zealand’s regulatory framework so the Government cannot credibly intervene to prevent it and Ministerial decisions under the Overseas Investment Act are subject to appeal in the courts. It is not the Government’s role to interfere in lawful commercial transactions, especially when they are as far advanced as this one is and as strongly supported by shareholders," Dr Cullen said.

"The buyers clearly meet the criteria of the Act in that they are of good character, have demonstrated the necessary financial commitment and have relevant business experience. It is, however, with great reluctance that I am letting the deal proceed as there were aspects of the process that concerned me.

"Although the Audit Office found that the New Plymouth District Council was not required under the Local Government Act to consult ratepayers before deciding to quit its shareholding in Powerco, consultation would have been desirable given the size and significance of the asset involved.

"And the decision by the (Stock Exchange’s) Takeovers Panel to grant a waiver allowing Prime to structure its offer differently for New Zealand and overseas shareholders can only be described as unfortunate given the shambles which ensued," Dr Cullen said (Media Statement by Dr Michael Cullen, "Powerco sale reluctantly approved", 21/10/04,

However we note that, as with other issues of interpretation, the OIC has been exceedingly cautious in advising the Ministers on their power under the "such other matters" provision. In the case of the 2000 applications to buy out Brierley Investments Ltd’s 50% share of the Sealord Group, the OIC interpreted this provision as being quite limited. In its internal documents, released to CAFCA under the Official Information Act, the OIC stated in commenting on a submission: "as the negative impact claimed by [suppressed] is supposedly generic to all foreign fishers it is not a matter than can be considered under the ‘other’ category in section 57(4)(b)(iii) as it is not a matter that relates to the circumstances and nature of the particular application". The OIC’s view was that general objections cannot be taken into account, only ones specific to the case. The interpretation is debatable and, if accepted, has a bizarre effect. It is as if a doctor was told that she could not advise a patient against smoking because it does not relate to the specific circumstances the patient is consulting her about, despite the fact that in general it causes cancer and a host of other health problems.

The aspects of any particular investment proposal cannot be expected to be anticipated. Even Regulation is too inflexible, and this appears to be recognised with respect to fishing quota. We cannot see why weaker powers are needed in other forms of investment.


In clauses 18 and 19, Ministers should have the right to both take into account such other matters as they think fit and prescribe additional criteria by regulation. It should be made clear that this can apply to generic matters as well as those strictly specific to a particular application.

Retrospective Consents And Exemptions

The OIC regularly gives retrospective consents to applicants, sometimes for purchases going back several years. For example, in July 2004, the OIC gave Riverside Casino Limited, which owns the Hamilton Casino, retrospective approval for acquiring the land on which the Hamilton Casino is sited. It had been operating on a site it did not have a legal right to own since 2000. According to the OIC, "Consent was not sought by RCL at the time of acquisition as the fact that the property was entered in the Historic Places Trust Register was overlooked".

In August 2004, it gave retrospective consent to Awassi (NZ) Limited, owned 80% by George Antonios Assaf of Australia and 20% by Hmood Al Ali Al Khalaf of Saudi Arabia, to acquire 385 hectares of leasehold at 5494 State Highway 50, Tikokino, Hawkes Bay for $313,913. The approval was for a transaction dating back to 1998. The OIC stated that "The Applicant entered into a lease of the subject property from 1 July 1998 for a term of three years plus a further three years right of renewal. The lease expired on 30 June 2004 and has not been renewed or extended. Consent was not obtained by the Applicant at the time of entering the lease due to an oversight by the Applicant’s then legal advisor".

In September 2004, the OIC gave Young Nicks Forest Partnership retrospective approval to acquire 413 hectares at Williams Road, Muriwai, Gisborne for $1,063,125. This was a forestry development promoted by Roger Dickie (NZ) Ltd of Aotearoa which dated back to 1997. There were at least 17 approvals given retrospectively in 2004 alone. In addition one application was refused retrospectively.

Retrospective consents should not be allowed without penalty. Otherwise it becomes an invitation to ignore the law. It is like offering unlicensed drivers a retrospective licence after they are caught. In addition there are wide provisions for exemptions from the legislation, both in the current Act and in the proposals in this Bill. We submit that provision for exemptions from the legislation should be strictly limited and the conditions under which exemptions can be made spelt out in the legislation, rather than be left to regulation. Such exemptions could negate the effect of the legislation and so should not be left to regulation.


Retrospective consents under Clause 26(1)(e) should not be allowed without penalty, and then only in exceptional circumstances.

If retrospective consent is not granted then the transaction should be regarded as cancelled unless the parties to the transaction obtain a court order to the contrary. Clauses 26(2) and 28 should be amended accordingly.

Provisions for exemptions from the legislation should be strictly limited, and the conditions under which they can be made be part of the legislation, not subject to regulations. Clause 61(1)(j) and (k) should be deleted and explicit provisions for exemptions inserted.

The Regulator

In order to have a greater assurance of independence, the Regulator should have the status of a Parliamentary Commissioner (like the Parliamentary Commissioner for the Environment) rather than being the permanent head of an existing Government agency as is proposed. The current Overseas Investment Commission has shown itself to be inadequate in its task, to robustly interpret and implement the legislation, to resist possibly ultra vires instructions from Ministers (i.e. instructions beyond their legal powers. Ed.), to safeguard the public interest, and to give balanced advice to the Government of the day on the advantages and disadvantages of foreign investment. Evidence for these assertions is given elsewhere in this submission and as follows.

On May 8, 2000, the Treasurer (Michael Cullen) stated in a press release, "Foreign bids for BIL’s Sealords stake declined" (and in similar terms in a formal letter to the OIC):

"We note that the previous National Government’s delegation to the Overseas Investment Commission to make such decisions contained a presumption in favour of approving applications. This presumption was in the general context of all applications under the Overseas Investment Act. Our revocation of that delegation in the case of Sealords applicants also, as a consequence, revoked for those applications the policy statement containing this presumption.

"In any case, we have been advised that, in that respect, the delegation made by the previous Government may well be ultra vires the legislation and that we should approach the applications with no such or any other presumption".

Dr Cullen made a similar statement in reply to a Parliamentary question from Damien O’Connor, MP:

"I have received advice that delegations made in November 1999 to the Overseas Investment Commission by the previous Minister of Fisheries and the previous Treasurer may be ultra vires the Fisheries Act 1996 and the Overseas Investment Act. The delegation instructed the Overseas Investment Commission to grant consents unless there was good reason to refuse them. Both the Fisheries Act and the Overseas Investment Act require an even-handed approach to applications, with no prior presumption" (Hansard, 9/5/00).

We refer readers to a detailed analysis of the OIC’s handling of the 2000 applications to buy out the Brierley Investments Ltd interest in Sealords, which was declined by the Ministers, who overruled the OIC’s views (a subsequent application was accepted). This covers many of these and other points, with important implications for this legislation.

The OIC has also argued, when amendments to the Overseas Investment Act have previously been proposed, for draconian provisions allowing it to suppress information in the interests of investors, but clearly contrary to the public interest. In the case of the 1994 amending Bill, for example, the Privacy Commissioner felt obliged to intervene. Consistently with this, in the particular example of the Sealords case, the OIC (unsuccessfully) urged the Ministers to resist making public their decisions or even how many applications they had been considering, including providing written samples of ways to avoid answers to queries they might receive. We are also concerned that insufficient expertise in business-related matters exists in the proposed agency, Land Information New Zealand. Independent policy advice to Government on overseas investment is required.


That implementation of this legislation should be the responsibility of a specialised Parliamentary Commissioner, not an existing agency. Section 3 of the Bill should be amended accordingly.

We address matters concerning the Regulator and use that terminology in this submission for clarity, but that is without prejudice to this strong recommendation.

Responsibilities Of The Regulator

There should be a right for the public to make submissions on applications made by investors under the legislation (a comparable process to that of the Commerce Commission for example). At present the public may make submissions, but have no right to do so, and as a matter of practicality are unlikely to be able to do so. This is because applications are not publicly notified. Unless a person hears about an application by other means (such as through the news media), and hears about it before a decision has been made, a submission is pointless. In addition, sufficient information about each application needs to be made public for an informed submission process.

The OIC for many years resisted providing information on a regular basis to CAFCA and to the public. It has been more forthcoming in recent years, but is still very backward compared to other Government agencies. This legislation should take the opportunity to reinforce the responsibility of the Regulator (or, as we recommend, the Parliamentary Commissioner) to make information and statistics on decisions under the Act (including details of decisions) readily available to the public.

In addition, as indicated elsewhere in this submission, there is a desperate lack of reliable information on overseas ownership of land in New Zealand. The Regulator should also have the role of collating and then maintaining a database of overseas land ownership, including information on its use and locality.


The responsibilities of the Regulator should include, in Clause 32, notifying applications publicly, and providing sufficient information about them to allow informed public comment, and inviting and considering submissions from the public prior to making its decisions.

The responsibilities of the Regulator should also include, in Clause 32, to make information and statistics on decisions under the Act (including details of decisions) readily available to the public, and providing reports to Parliament.

The public should have the right to make submissions on decisions and on changes in guidelines, regulations, and lists of sensitive reserves and parks (in Clause 38).

The Regulator should also have responsibility for collating and maintaining a database of overseas ownership of land in New Zealand, including information on its use and locality. The database should be available to be searched publicly, and statistical information deriving from it should be made publicly available.

Urban Land

We oppose the proposed distinction between urban and non-urban land. This is for a number of reasons. The definition of "non-urban land" (Clause 6) appears to exclude roads and areas used for public services (such as schools, hospitals, local community facilities) if they could be described as commercial, industrial or residential. That description is likely if privatisation occurs. So, for example, the definition would appear to make the acquisition of roads by overseas investors, or their construction for operation, exempt from the legislation unless it fell within the "significant business" category. This is a major concern, as such acquisitions raise huge public concern, and are amongst those most needing scrutiny.

Land in an urban environment may be sensitive even if not adjoining parks, reserves, or other land defined as sensitive under the Bill’s Schedule 1. For example an urban subdivision may have significant effects on neighbours and the general community. A prominent location may make a commercial building of significance for reasons other than those described.


All land, not only "non-urban land" should be subject to the legislation.


We support the higher penalties for offences against the legislation proposed in Subpart 5. However, fines should be higher for bodies corporate, and individuals in control of such bodies should be liable to imprisonment (as are individuals breaching the legislation). Otherwise individuals can escape responsibilities under the legislation simply by hiding behind a corporate body. In addition, affected members of the public should be able to take court action against investors breaching the legislation. This right should not be the sole preserve of the Regulator.


In Subpart 5, fines should be raised for bodies corporate, and individuals in control of such bodies should be liable to the same penalties as individuals breaching the legislation.

Affected members of the public should have the right to take court action under Clauses 48-52 without requiring the consent of the Regulator.



1. We support the higher penalties for offences against the legislation proposed in Subpart 5. However, fines should be higher for bodies corporate, and individuals in control of such bodies should be liable to imprisonment (as are individuals breaching the legislation). Otherwise individuals can escape responsibilities under the legislation simply by hiding behind a corporate body. In addition, affected members of the public should be able to take court action against investors breaching the legislation. This right should not be the sole preserve of the Regulator.

2. World Investment Report 2004: "The Shift Towards Services", United Nations Conference on Trade and Development (UNCTAD) Annex Table B6. Inward and outward Foreign Direct Investment (FDI) stocks as a percentage of Gross Domestic Product, by region and economy, 1980, 1985, 1990, 1995, 2000, 2002, 2003, p399ff.

3. "The Workplace Productivity Challenge", report of the Workplace Productivity Working Group, p48.

4. "Building the Future: Using Foreign Direct Investment to Help Fuel New Zealand’s Economic Prosperity", The Boston Consulting Group, 2001.

5. This is available from CAFCA or on our Website.

6. This was "Sealord Sale – OIC Exposed", by Bill Rosenberg, published in Foreign Control Watchdog 95, December 2000, and available on the Watchdog web site at, but not included here for reasons of space.

It takes a lot of work to compile and write the material presented on these pages - if you value the information, please send a donation to the address below to help us continue the work.

Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. April 2005.


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