The 2005 Overseas Investment Act was rammed through Parliament under Urgency in June 2005, so that the Government could have this piece of controversial legislation in place and out of the way before the election. It becomes law as of September 1. It is not simply an amendment to the existing legislation (which dates back to 1973 and has been the subject of several amendments), but a brand new Act which replaces all previous laws on the subject. It was first announced in 2003, by the Minister of Finance, Michael Cullen, as a comprehensive review of the existing law, with a view to replacing that with a new Act. It was presented to the public and media as tightening up the law, specifically in the controversial area of rural land sales to foreigners. From the outset, CAFCA saw the dangers as far outweighing any opportunities contained in it; that its provisions on land sales are very limited and hedged around with ifs and buts; that essentially it throws the door open to transnational corporations (TNCs) in the much more important sector of corporate takeovers.

We campaigned against it from the outset, and that campaign has been the cover story of every Watchdog since number 104 (December 2003). Check out those back issues at www.converge.org.nz/watchdog and also the wealth of material about the Act on the CAFCA Website at www.cafca.org.nz.

When the Finance and Expenditure Select Committee reported back the Overseas Investment Bill, as it was then, after hearing submissions (including that of CAFCA) it recommended the addition of one further provision, namely that foreign buyers of land connected to the sea, rivers or lakes would have to surrender 20 metre public access strips without compensation. This proposal actually came from a Labour MP, holding a rural electorate. The Greens, thinking it an excellent idea, agonised about whether they should support the Bill in order to get this provision enacted (this demonstrates the perils of Parliamentary politics, with all the old rationalisations about "half a loaf is better than none").

But, fortunately for the Greens’ credibility, following the combined opposition of National, Act and, more crucially, the Government's ally, United Future, this provision was dropped (these parties objected to the expropriation with no compensation proposal). United Future took the credit for this and, once done, pledged its support to the Bill. Dr Cullen said: "The issue of access will be dealt with on a case by case basis as part of the consent process rather than as a statutory and automatic provision" (5/6/05). And the Greens voted against the Bill in its entirety.

Anyway, such "special" land is a small part of the overall picture of rural land sales to foreigners (the vast bulk of which is forestry and farm land) and a very, very small part of the economy. The fact is that company takeovers by TNCs, in all the sectors that constitute the guts of the New Zealand economy,   total billions of dollars per year (not the tens of millions of "special" land sales) and the Government plans to make it even easier for those transnational corporate takeovers to proceed. That more than wipes out any gains made in the area of tightening up "special" land sales. Indeed, the latter is a mere sop.

For an extremely detailed analysis of the Act, and CAFCA's submission on it, go to www.cafca.org.nz and follow the Overseas Investment Act Links. In brief:

The Select Committee took notice of some of the numerous points raised in submissions by CAFCA and others (the great majority of submissions opposed the Bill). For example, the thresholds mentioned (such as the $100m one for company takeovers) were not actually in the Bill itself, but were to be added later by Regulation. The Committee recommended that they be included in the Bill itself (which will make them subject to future Parliamentary debate). Another example: the Committee also recommended that the new "oversight" body toughen up on the OIC's practice of willy nilly granting retrospective consents to non-complying applicants. But the essence of the Bill was unchanged. For instance, the $100m threshold might now be included in the Act itself, but the Committee did not accept the numerous submissions that it be reduced to its previous, more modest, level.

The removal of the Overseas Investment Commission is no great tragedy in itself. CAFCA has always said that its job could be done by a monkey with a rubber stamp. But its replacement agency will see a significant weakening of any oversight. For the past 32 years, the OIC has been part of the Reserve Bank. By definition, Land Information NZ is experienced with land. But land sales are very much the smaller part of the much bigger picture, maybe totalling in the tens or hundreds of millions of dollars per year. Company takeovers are where the foreign investment action is, totalling in the billions per year. There is no proposal for any new agency with any expertise in that field to be involved.

Dr Cullen points out that the last time a non-land transaction was refused permission was in 1984, and therefore we might as well virtually give up monitoring company takeovers. On the contrary - that is an indictment of 21 years of rubberstamping neglect by the OIC and Government; and a clarion call for the transnational corporate oversight regime to be significantly toughened up, not weakened.

Raising that threshold for company takeovers will remove all but the biggest of them from any scrutiny. Huge chunks of the NZ economy will be bought and sold without any official oversight at all. And remember - until just days before the 1999 election, the threshold for company takeovers was just $10m. We urged the incoming Labour-led government to roll it back to that level. They have refused to do so and are now going to raise it to $100m (an increase of 1000% in less than six years).

The removal of the need for approval for foreign land purchases of less than five hectares in area and/or more than $10m in value removes the need for any scrutiny of central business district projects that involve land. We welcome the tightening of restrictions on the sale of "special" land. This concession has been brought about by public opposition to the sale of the likes of Young Nick's Head and the sale of coastal land (primarily in the North Island) and South Island high country stations. However, this "tightening" wouldn't have stopped any of those purchases, not Young Nick's Head, nor the 2004 purchase of two Otago high country stations by Shania Twain.

The official recommendations preceding the Bill’s introduction to Parliament cited NZ's obligations under the General Agreements on Trade in Services (GATS) and the free trade agreement with Singapore as inhibiting NZ's ability to set restrictions on foreign investment. Indeed the official papers said that the new threshold for company takeovers by TNCs will become the benchmark for all future free trade agreements and the officials were anticipating that threshold would be $250m. What we've been saying all along about the dangers of NZ getting entangled in free trade agreements (whether global, like GATS or multilateral, such as the recently signed one with Chile, Singapore and Brunei or bilateral, such as the most recent one with Thailand) is made glaringly obvious. We lose the right to control foreign investment.

The Select Committee explicitly spelled this out in its Report, saying: "The majority (of the Committee) also notes that New Zealand is a party to a number of international agreements on freedom of overseas investment. These agreements were developed on the basis of the current overseas investment regime, and take into account the current restrictions and scrutiny requirements. Any amendments, such as those sought by submitters and petitioners (i.e. the Green Party petition to ban rural land sales to foreigners), that further restrict overseas investment could be regarded as a breach of our obligations under these agreements, and could result in New Zealand undergoing a consultation and arbitration process, rectifying its regulations, or being subject to trade retaliation under World Trade Organisation (WTO) rules".

That's pretty clear isn't it? Let's have no illusions that these agreements the Government is hellbent on locking us into have much to do with "free trade". They are primarily foreign investment agreements that permanently hold New Zealand's door open to TNCs, backed up with the threat of WTO muscle and penalties.

Despite the Greens’ Co-Leader, Rod Donald, putting up numerous further amendments as the Bill was rammed through its Second and Third Readings under Urgency, no further changes were made to it. The Greens, New Zealand First, the Maori Party and Act were the only parties to vote against it (the latter only because it sees no need for any restriction at all on foreign investment; as all the polls indicate that Act is destined for electoral oblivion, we can only say, in anticipation, "good riddance to bad rubbish").

Are we downhearted by the passage of this law? Yes and no. Obviously, it makes a bad situation worse. But from the outset we knew that only a major shift in the political climate would actually stop it. Both major parties were fully committed to it from the outset (National only opposed the provision that riparian access strips be taken without compensation, and Labour soon dropped that to ensure the Bill’s passage). But we believe that our prolonged campaign, which was supported by a wide range of other groups, succeeded in modestly ameliorating some of the proposed most extreme provisions. We were certainly far from alone on this one. For example, after the Act was passed, the Alliance put out a press release entitled "Labour and National join forces to sell off New Zealand" (17/6/05); the Royal Forest and Bird Protection Society also criticised it, in a statement headed "High Country left vulnerable by Overseas Investment Bill" (7/6/05).