The title of this article is what Ian Dalziel titled his cover graphic for the hard copy edition of this issue. So, it is appropriate that we address the question directly. Spoiler alert – the answer is in my subtitle for this article. But that doesn’t mean that all is without hope. At least New Zealand now has a Government that recognises that foreign control is an issue. More than that, it recognises that it is a problem and has set out to do something about it. What it intends to do, however, doesn’t amount to very much. But it’s better than nothing, which is what the previous National government did for nine long years.

Residential Housing

In late 2017 the Labour-led Government announced that it intended to amend the 2005 Overseas Investment Act (the legacy of the 1999-2008 Labour government, specifically Michael Cullen), starting by imposing restrictions on foreign speculators buying residential property. It declared that all land proposed to be sold to foreigners, including for residential housing, be declared “sensitive” and thus requiring approval under the foreign investment regime.

CAFCA commented, at the time (“Government Takes First Baby Steps On Foreign Control But Needs To Get Its Arse-Kicking Boots On, And Fast”, press release, 4/11/17, http://canterbury.cyberplace.co.nz/community/CAFCA/press-statements/government-takes-first-baby-steps.html):

“Of course, we are pleased that it is going to ban foreign speculators from buying houses. But, really, this is what our American friends would call nickel and dime stuff. We also note that real estate agents are saying that the ban is two years too late, that such speculators bolted as soon as the law required that they show a minimal connection to this country, namely by having an IRD number and a local bank account number. Still, better late than never” (referring to the minimalist measures reluctantly taken by the 2008-17 National government in relation to the Auckland housing crisis and the role of foreign buyers in that).

Foreigners buying houses is a subject to which CAFCA has not devoted much attention or time. For reasons including that it is an issue that falls more into the immigration basket than our one of foreign control, and the simple fact that it has always been next to impossible to get any accurate figures on the extent. I have been regularly contacted by journalists over the years asking exactly that question. I have always had to tell them that the only people who would know would be real estate agencies (who do very nicely out of the business).  

Lo and behold, once the Government changed and signalled its intention to restrict foreigners buying residential property, data suddenly became available on the extent of the issue. In June 2018 Statistics NZ released figures (“Just Over 3% Of Home Transfers Go To Overseas Buyers”, press release, 7/6/18, http://www.scoop.co.nz/stories/BU1806/S00151/just-over-3-of-home-transfers-go-to-overseas-buyers.htm). The “just over 3%” headline was what caught the attention of National and its transnational corporate media mouthpieces. But there were fascinating regional variations hidden within the Statistics NZ press release.

“In the March 2018 quarter, the territorial authority with the highest proportion of home transfers to people who weren’t New Zealand citizens or resident-visa holders was Queenstown-Lakes district (9.7% of all home transfers), followed by Auckland (at 7.3%). The proportion of overseas home buyers varies across Auckland. For example, it was 1.7% in Franklin and 19% in the inner city (Waitemata) in the March quarter”. Furthermore: “In the March 2018 quarter, nearly 10% of all home transfers were to corporate entities. Information on the ownership of these entities (by New Zealanders or overseas people) is not currently available”.

And Statistics NZ’s figures are not necessarily the full story. “But while official statistics and anecdotal evidence from the real estate industry indicate only 3% of sales are to overseas buyers, ASB Senior Economist Mark Smith said that number might be deceptively low. He pointed out that, within those Stats NZ figures, another 8% of sales were attributable to resident visa-holders who were not citizens, such as people who had newly migrated”.

“Another 10% were corporate entities, for which ownership information is not available. He said anything from 11% to 21% of purchases in the year to March (2018) involved a non-New Zealand citizen…While overseas buyers were not a huge part of the market, they were still a force, he said, and taking them out of the picture would make a difference” (Stuff,28/6/18, “As Many As One In Five House Buyers In NZ May Be 'Foreign'”, Susan Edmunds, https://www.stuff.co.nz/business/property/105068496/as-many-as-one-in-five-house-buyers-in-nz-may-be-foreign).

Multi-Millionaires Lobby For Luxury Homes’ Exemption

The argument that “foreign house buyers are an inconsequential part of the real estate market” was undermined by the submissions against the Government’s Overseas Investment Amendment Bill. “A lobbying push is on from business, and people living in some regions, to persuade the Government to modify its planned laws banning foreigners from buying residential property in New Zealand. Some, including several multi-millionaires, have called for luxury homes, and even whole regions, to be exempted from the proposed law”.

“In submissions to the Finance and Expenditure Select Committee, Queenstown and Northland residents called on MPs not to carve out multi-million-dollar homes, and whole areas like Northland and Queenstown, from its planned Overseas Investment Amendment Bill … Multi-millionaire Debra Schilling said the country risked losing the benefits of having wealthy people like herself bringing their money to boost the economy. ‘I immigrated to NZ in 2001 and became a citizen in 2004. I currently own a home in Queenstown valued at more than $5,000,000. I pay taxes on that home. And I pay taxes on my income. I buy services and local products, including a car for which I also pay taxes’”.

“‘I do not cost the Government anything as I do not have children in school or live off benefits. This Bill would have prevented me from becoming a valuable citizen of NZ. I support the economy that employs the people who need affordable housing and I sincerely wish the Government would act to help those families acquire their own homes. But preventing me from coming in and buying an expensive home would not have helped those families one bit’”.

“‘We need to attract more wealthy individuals, not keep them out. It is people like me who provide the jobs everyone depends upon’" (Stuff, 25/2/18, “Leave Regions And Millionaires' Mansions Out Of Foreign Ownership Ban, MPs Told”, Rob Stock, https://www.stuff.co.nz/business/money/101713280/leave-regions-and-millionaires-mansions-out-of-foreign-ownership-ban-mps-told). It almost makes me feel sorry for foreign multi-millionaires who are compelled to come and buy luxury mansions in Queenstown out of a sense of noblesse oblige towards the poor benighted natives.

And house sales to foreigners are what get the media’s attention. CAFCA is not complaining – that quite minor part of a much bigger picture leads to us getting into the media and having the chance to set the context. For example, I was quoted in the New Zealand Herald (26/1/18, “Locking NZ’s Door”, online at  http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11981780). That led to me being featured prominently, opposing the Property Council’s Chief Executive, in a Herald Business Debate (“Should We Shut The Door On Foreign Property Buyers?”, 30/1/18. Guess which side I was on).

Pushback From Vested Interests Got Provisions Weakened

The pushback from those who have vested interests in the highly lucrative business of selling residential property to foreigners paid dividends for them. At the time of writing, the Government had backed away from several of the original planned provisions of the Overseas Investment Amendment Bill. For example: “Trade Minister David Parker has announced a relaxing of the foreign buyers ban as it relates to apartments”.

“The Government will accept changes suggested by the majority of the Finance and Expenditure Committee in their report on the Bill. The major change concerns apartments. Originally the ban would allow foreign buyers to purchase apartments off the plans but would force them to sell them on once the building was completed. Now the ban will allow foreign buyers to hang on to apartments bought off the plan, as long as they are part of a development that is 20 or more units large.…”.

“As originally written, the Bill classed all residential land as ‘sensitive’ meaning anyone who was not a citizen or resident would have to obtain consent to buy the land. They would be allowed to buy the land if they were adding to the housing stock by building a new house or apartment - but would have to sell it on once it was built” (Stuff, 19/6/18, “Foreign Buyers’ Ban Relaxed On Apartments And For Singapore Nationals”,  Henry Cooke, https://www.stuff.co.nz/national/politics/104826974/foreign-buyers-ban-relaxed-on-apartments-and-for-singapore-nationals).

Note that David Parker made this announcement as Minister of Trade, not in his capacity as Associate Minister of Finance (i.e. his portfolio which is actually directly connected to responsibility for the workings of the Overseas Investment Act). Why? “The Government has also announced Singapore will join Australia as a ‘carve-out’ nation, with all of its citizens enjoying the same rights as Kiwis to buy property, in order to not disrupt a free trade agreement” (ibid). So, there you have it. Australia, the biggest source by far of foreign investment in NZ, is exempt from any restrictions on its citizens buying residential property here.

And now so is Singapore, because of the provisions of the NZ/Singapore Closer Economic Partnership Agreement  signed nearly two decades ago (CAFCA’s September 2000 submission on it, written by Bill Rosenberg, is online at http://canterbury.cyberplace.org.nz/community/CAFCA/publications/Trade/CAFCA%20submission%20on%20Singapore%20FTA.pdf). That’s what happens when you sign these misleadingly called “free trade” agreements (FTAs) – they come back to bite you in the bum decades later, impinge on your national sovereignty and hinder the ability of the Government to make law in the national interest.

But, ironically, the Singapore FTA was the baby of the previous Clark Labour government and this present Ardern government, which said one thing about the Trans Pacific Partnership Agreement (TPPA) when in Opposition but then proceeded to do just the opposite once in power, continues to worship the false god of “free trade” – even when it stops them doing things that they want to do, such as making slight changes to the Overseas Investment Act. More fool them.

Pushback came not only from rich foreign individuals and their local collaborators, but also from transnational corporations (TNCs), who were unhappy that the declaration of all residential land sales to foreigners to now require foreign investment regime approval would catch the likes of foreign-owned supermarkets, shopping malls, petrol stations, retirement homes and hotels that bought suburban land.

Retirement home chains were particularly aggrieved and made strong submissions to the Finance and Expenditure Select Committee. The pressure worked in that the likes of telecommunications and gas and electricity lines companies (who often have more than the 25% foreign ownership, which triggers the Overseas Investment Act) get an exemption. But retirement home chains don’t.

Farmland

This is at the heart of what the Government is trying to tighten up with its Overseas Investment Amendment Bill. As we said in a press release (“Policy Change Puts Brakes On Foreign Land Grab. Good!”, 13/4/18, http://canterbury.cyberplace.co.nz/community/CAFCA/press-statements/policy-change-puts-brake-on-foreign-land-grab.html):

“CAFCA congratulated the Government when it announced that, as from December 2017, the rules around foreigners buying NZ farmland have been tightened up. Such buyers will now need Overseas Investment Office (OIO) permission for all purchases of more than five hectares (previously, that requirement only applied to purchases of sheep and beef farms of more than 7,000 hectares i.e. more than ten times the average farm size).

“We've now had several months to assess the effect of this policy. It definitely seems to have put the brakes on the foreign land grab. Don't take our word for it. Here's what leading law firm Chapman Tripp said on March 19th (‘Overseas Investment Regime - Where Are We Now?’): ‘The new Directive Letter is clearly intended to raise the threshold for farm land acquisitions. What is not clear is whether Ministers intend to effectively close the door on future farm deals’”. 

“‘What we do know is that no consents were issued for farmland between the date the Directive Letter entered into force (15 December) and the end of February’ (our emphasis) …. So, CAFCA is pleased that, for the first time in years, prime New Zealand farm land is not being routinely approved for sale to foreign buyers, whether individuals or corporations”.

That pattern has continued in the months since that press release – have a look at the January to May 2018 OIO Decisions, written up elsewhere in this issue by Linda Hill. There are not too many land sales there – they used to be a feature of every month’s worth of Decisions for many years, prior to the change of Government.

Further evidence of this now less welcoming policy to foreign land buyers came with the April 2018 announcement that the potential Chinese buyer of Landcorp's Jericho Station had withdrawn his application to the OIO, despite putting in the highest bid. A New Zealand farmer, who submitted a slightly lower bid, became the buyer of this Southland property (which would have been the first of the State-owned farmer’s properties to have been sold to a foreigner).

“Figures from the Overseas Investment Office show 11 applications to buy sensitive land were withdrawn in the six months leading up to the rule change and a further 13 were withdrawn in the six months after. The average number of applications withdrawn in each six-month period from July 2015 to June 2017 was six, the data shows” (Stuff, 29/6/18, “Overseas Investors Pull Out Of Farm Purchases After Government Clampdown”, Esther Taunton, https://www.stuff.co.nz/business/105025491/overseas-investors-pull-out-of-farm-purchases-after-government-clampdown).

And there is evidence that the OIO has finally discovered some backbone and not only declined some applications but actually cancelled some that it had previously approved. For the details, see the “OIO Increases Enforcement” sub-section of Linda Hill’s writeup of the January to May 2018 OIO Decisions, elsewhere in this issue. She specifically cites Stuff (“Wealthy Overseas Landowners Forced To Sell In Government Crackdown”, 10/5/18, Charlie Mitchell, www.stuff.co.nz/national/103678364/Wealthy-overseas-landowners-forced-to-sell-in-government-crackdown?rm=m). 

So, that’s all well and good. But (and there’s always a but) the news is certainly not all good. To once again quote CAFCA’s April 2018 press release cited above: “There are shortcomings in this new regime. It has different criteria for forestry, where the Government says that foreign investment is still necessary. There is still no provision for the public to make submissions (or for the OIO to give advance notice of applications from foreign would-be buyers). People only find out after the event. The ‘good character’ test for applicants is a joke. Most basically, the powers that be still don’t know (and haven’t made very much effort to find out) how much land is foreign-owned”.

“John Key used to say it was no more than 1% of the total. We can safely discard that. Statistics on sales of land to overseas interests are poorly recorded and incomplete. Our best estimate is that, in 2011, at least 8.7% of New Zealand farmland including forestry, or 1.3 million hectares, was foreign-owned or controlled and it could have reached 10%. It’s a safe bet that the figure will not have gone down in the years since” (ibid).

Water Bottling Export Plant Expansion Approved By Green Minister

And foreigners are still getting OIO approval to buy farmland (see Stuff, 2/7/18, “Big Cheeses From UK And US Cleared To Buy  Farms In NZ”, Martin van Beynen, https://www.stuff.co.nz/business/farming/105152372/Big-cheeses-from-UK-and-US-cleared-to-buy-farms-in-NZ). The most controversial 2018 land sale approval so far was that allowing Creswell NZ Ltd (a wholly-owned subsidiary of Chinese-owned Nongfu Spring Co Ltd) to buy an additional six hectares of land at its Otakiri water-bottling export plant in the Bay of Plenty (the full details of this are in Linda Hill’s write up of the May 2018 OIO Decisions, elsewhere in this issue).

As Linda wrote: “This was the controversial consent announced by Ministers David Clark (Associate Finance, Labour) and Eugenie Sage (Land Information, Greens) on 12 June 2018 (https://www.beehive.govt.nz/release/ministers-grant-overseas-investment-consent), because it met the legal requirements of the Overseas Investment Act despite being contrary to Green Party policy (Henry Cooke, 12/6/18, Stuff, https://www.stuff.co.nz/national/politics/104668519/green-party-members-revolt-over-water-bottling-decision)”.

“In fact, the local and regional council consents had been granted jointly just days before but will be challenged by a local group Save Our Water Otakiri and possibly also by Ngati Awa. See also NZ Herald, 6/2/18 www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11988427  and TV3 Newshub, 14/3/17, www.newshub.co.nz/home/politics/2017/03/should-companies-pay-royalties-to-export-water.html. This OIO consent highlights the need for further changes to the Overseas Investment Act, which was before Parliament at the time”. This is a classic example of the currently fashionable (but meaningless) cliché: it is what it is.

Water is a dynamite political issue per se but bottled water exports by foreign companies are a red rag to a bull issue right around the country, subject to grassroots campaigns and court cases. They extract and export vast amounts of water whilst paying a derisory sum to local government for the privilege. Try explaining this to Christchurch residents who are currently enduring chlorine in their hitherto pristine household water whilst vast quantities of the good stuff are being bottled and shipped to China, from a plant on the city’s outskirts.

This approval, by Minister Sage, was hugely controversial within the Green Party. “… she (explained that she) and Associate Finance Minister David Clark were guided by the Overseas Investment Act, which says such purchases must benefit New Zealand. In this case, by providing up to 60 jobs.  In short, the law is the law. Sage's hands were tied. But that must sound like weasel words to the hundreds of Party members who wonder, as in a widely reported comment by Young Greens’ Co-Leader Max Tweedie, ‘what the f... is the point of us being in Government and having this portfolio’ if decisions like this are made”. 

“Green Co-Leader Marama Davidson's statement that ‘we're very clear this does not align with Green Party policy’ is also remarkable. There has been plenty of talk in recent weeks about the credibility of the three-way Government. Much of that talk is overheated, but the chasm between what an idealistic Party wants to do and what the same, more realistic Party then must do is another body blow for the Greens, who were almost wiped out before the election over similar battles between pragmatists and purists”.

“For the Greens, political purism is both an asset and a liability. No one is particularly bothered if National, for example, contradicts itself. Pragmatism is in its DNA. But the Greens put themselves above political cynicism and claim, not without justification, that they are in it for the right reasons. Will this water saga damage the Party in the long term? Possibly”.

“If the Greens are unable to drive changes to the law that might prevent similar sales in future, and add levies to bottled water, they will look ineffectual and naive. Then the likes of Tweedie will be even more justified in asking what the point is” (Press editorial, 15/6/18, “Greens See Red Over Bottled Water”, Philip Matthews, https://www.stuff.co.nz/national/politics/104711154/greens-see-red-over-water-bottling).

Key Helps Luxury Golf Course Get Exemption

And, of course, the rich and well connected do their usual behind the scenes string pulling to ensure that the law changes don’t apply to them. National thought it had the Government in a tight spot when it highlighted an exemption under the Overseas Investment Amendment Bill for Te Arai development in Northland’s Mangawhai.

The exemption had been sought by local iwi and hapu who said that the ban on wealthy overseas buyers would further hinder their already long-delayed project. National got stuck into Associate Finance Minister David Parker, raising questions about his relationship with the developer and the latter’s American billionaire mate.

But National was left with egg on its face when it was revealed that the person lobbying for the exemption was none other than their very own John Key, on behalf of the American billionaire who plans to build a luxury golf course as part of the development. The American just happens to own the existing luxury golf resort where Key hosted former US President Barack Obama on his much-hyped and very lucrative (for him) NZ visit in 2018. Nothing more was heard from National on that subject. Behind the scenes string pulling on behalf of the rich is politically bipartisan.

Bolt Holes & Arseholes

The slackness of the OIO land sales approval regime was recently illustrated by the case of the splendidly titled Lord Palumbo. In 2015 the OIO approved him buying land on Waiheke Island for a “musicians’ retreat”. In June 2018 the NZ Herald reported that he’d sold the land, not having established any such retreat, and asked CAFCA what we thought about that (9/6/18, “No Music Gig For Waiheke Island After British Peer And Ministry Of Sound Founder Sells $8 Million Island Retreat, Quits New Zealand“, Anne Gibson, https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12066056).

We told the Herald that the OIO regime is far too lax, allowing foreign buyers with pie in the sky schemes to alienate sensitive land from New Zealanders, then walk away years later having delivered precisely nothing of what was promised. Lord Palumbo promised a musicians’ retreat. But the only retreat has been that of Lord Palumbo, back from whence he came.

A quick online search of "Lord Palumbo New Zealand" came up with a UK Times article about rich foreigners buying NZ property as bolt holes (6/2/17, “Super-Rich Seek Soft Landings With Kiwi Bolt Holes”, Bernard Lagan, https://www.thetimes.co.uk/article/super-rich-seek-soft-landings-with-kiwi-boltholes-mvj7vjrdr). It is illustrated with a photo of him with a suitably glamorous woman. So, maybe that is the real reason why he bought on Waiheke Island - a bolt hole - and told the OIO any old bullshit to get approval. That, of course, is speculation. But whatever his motive, he has obviously decided that Waiheke is now surplus to his requirements. He has bolted from the hole.

Indeed, Kiwi bolt holes are all the rage with the global 1% who are keen to get as far away as possible from any approaching sound of the tumbrils. Peter Thiel is the most notorious recent example but far from the only one. To give a more recent example: the Press reported on Texan businessman Trammell S Crow (he could only be an American with that name) who is planning a luxury housing development near Twizel, in the Mackenzie Country.

“Crow told the Dallas News this week his investment in the New Zealand project would also give him permanent residency. ‘And while he doesn't plan to relocate, he plans to gradually spend more time there’, the report said. ‘I wasn't hunting for a new real estate development in a far-flung country to mess with’, Crow told the Dallas News”.

“‘But I have been thinking for a long time where to go if things become difficult in America - not really just for social unrest but because of environmental concerns’” (6/4/18, “US Tycoon Seeks Bolthole For Sections”, John Anthony, https://www.stuff.co.nz/business/property/102807786/us-investor-backs-twizel-housing-development-eyes-new-zealand-residency-in-return-report-says).

Some foreign owners of NZ farmland make CAFCA’s job easy. Take the case of the Chinese owner of Kawakawa Station, a sheep farm in South Wairarapa. The OIO gave him permission to buy it, in 2015, but attached conditions that he must allow continued public access to a forest hut and tramping route. The owner has completely refused to do so, instead marketing the Station’s own for-profit three day walk, complete with accommodation in its own hut.

The owner has offered a most novel justification for his refusal to cooperate: “The owner continued to reject the proposals and wrote back in February last year (2017) suggesting it was ‘likely to adversely affect New Zealand's image overseas as a place to invest’ … The extraordinary dispute will now go to independent mediation - the first time this has ever happened”.

“If the row can't be resolved the Overseas Investment Office has the powers to order the property be sold” (Stuff, 21/6/18, “Chinese Owner Fights Access To NZ Farm, Says Would Harm NZ Image”, Andrea Vance, https://www.stuff.co.nz/business/farming/104696825/chinese-owner-fights-access-to-nz-farm-says-would-harm-nz-image).

As we said in an already cited CAFCA press release (“Policy Change Puts Brakes On Foreign Land Grab. Good!”, 13/4/18, http://canterbury.cyberplace.co.nz/community/CAFCA/press-statements/policy-change-puts-brake-on-foreign-land-grab.html): “But this new regime on farmland sales is a long overdue start, for which the Government deserves credit.

“What is needed now is a political willingness to consider NZ joining the list of countries which ban foreigners from buying rural land (not just farmland). Or just let them lease land, rather than buy it. If the Government is squeamish about doing this itself, then freeze all sales of rural land sales to foreigners and either set up a commission of inquiry into the subject or put it to a referendum”.

“There’s nothing ‘radical’ about considering a ban on foreigners owning rural land. None other than John Key said that he didn't want to see New Zealanders become tenants in our own country. Agriculture, in all its many facets, remains the most important sector of the NZ economy. It is our comparative advantage in the global market, to use the jargon. Land is the basic building block of agriculture; who owns, controls and profits from it is of vital national importance. The first step has been taken; much more please and quickly”.

“Forestry Is Going To Enjoy A Lighter Touch”

The new farmland regime has different criteria for forestry, where the Government says that foreign investment is still necessary. This is a perfect example of Rogernomics coming back to bite Labour. Jacinda wants NZ to plant a billion trees (one reason is to create a carbon sink as part of the battle against climate change) and the State will play a major role in forestry. This is reinventing the wheel, because until that 1984-90 Rogernomics Labour government (and the 1990-99 National government), NZ had a massive State-owned forestry estate which had been built up over generations.

All gone, flogged off to transnational corporations and other foreign owners as part of the privatisation mania of that era (error, more accurately). In some cases, forests have been ripped out to be replaced by dairy farms (which is a sector also subject to significant ownership and control by foreign agri-business). If that short-sighted ideology had not prevailed, Jacinda would have inherited her billion publicly owned trees on Day One of her Government.

The Government raised the prospect of including forestry cutting rights in the purview of the Overseas Investment Amendment Bill (not just the land that the trees stand on, which is the present situation). That set off alarm bells for the Forestry Owners’ Association, which said it would frighten off foreign investors from forestry.

Association President Peter Clark said: “That would be quite negative for foreign investment and negative for the New Zealand economy, because we need foreign investors in our forestry sector. It is a capital-intensive business. Foreigners now own about 65-70% of all the forests in NZ” (Rural News, 6/3/18, “Foresters Raise Concerns About Cutting Rights Changes”, Pam Tipa).

Indeed, the Government has every intention of bending over backwards to accommodate the transnational corporate owners of what used to be our publicly owned forests. The Forestry Minister, New Zealand First’s Shane Jones, waxes rhapsodic on the subject. “‘We already plant about 60 million trees a year and we've got to get to 100 million a year so potentially international capital, in partnership with landowners, could boost about a $6.4b foreign exchange earner to $10b per annum over time".

“‘Forestry is a long-term play but as the sector expands with partnership capital, the foreign exchange earnings will grow. This won't happen overnight but an increase in Japanese forestry investment would be so welcome in places like Kaitaia and the Tai Rawhiti’, he said. Although the (Overseas Investment Amendment Bill) aims to restrict foreigners' access to New Zealand housing, Jones said it freed up rules for global forestry businesses arriving or doing business here”.

“‘Forestry is going to enjoy a lighter touch. The applications to the Overseas Investment Office will no longer have to go through such a constipated administrative tract. It will be quicker and why? Because forestry has a key role to play in climate change. It will be simpler for international firms to go through the OIO when they want to sell to other international firms. It will be simpler for international firms wanting to establish commercial forests here’ he said”.

“…The Select Committee report said forestry land or land intended to be turned into forestry land will not need any consent until the total holding exceeds 1,000ha” (NZ Herald, 20/6/18, “Overseas Investment Law Change A Potential $4b Forestry Earner Boost: Jones”, Anne Gibson, https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12074112).

OIO Fails Its Own Good Character Test

In December 2017 the OIO did something very unusual – it rejected a major business takeover application. CAFCA responded with a  press release (“Overseas Investment Office Needs to Pull Finger On ‘Not Of Good Character’ Complaints”, 27/12/17, http://canterbury.cyberplace.co.nz/community/CAFCA/press-statements/oio-needs-to-pull-finger.html):

“CAFCA is pleased that the OIO has rejected the application from China's HNA Group to buy finance company UDC Finance. The reason given was that the OIO could not determine from the information provided who is the ‘relevant overseas person’ intending to make the purchase. And, therefore, the OIO cannot apply the test in section 18 in the Overseas Investment Act to determine whether that person is of good character”.

“But what if the OIO had been able to determine who is ‘the relevant overseas person’ behind HNA Group and could therefore apply the good character test? The OIO's record on good character is not reassuring. It is one of the few conditions imposed on foreign buyers in the Overseas Investment Act. It only applies to individuals owning or controlling a company; the corporate misdeeds of the company itself are not covered”.

“That sounds good in theory but CAFCA is at pains to point out that we have been making ‘not of good character’ complaints for 20 years and not one of them has ever been upheld by the OIO (or its predecessor the Overseas Investment Office [OIC]). Click on this link to our Website http://www.sitelevel.com/query?query=good+character+complaints&crid=0c76d290&B1=SiteLevel+Search and you’ll find pages of links to numerous Watchdog articles on the subject over many years. It's a roll call of transnational corporate villains. Here is an extract from one such article, which gives a small taste of the scale of the problem:

“‘For the details on this see 'Good Fellas: The OIO And The Nature Of Being A ‘Good Character' by Quentin Findlay, in Watchdog 124, August 2010, http://www.converge.org.nz/watchdog/24/02.htm and his earlier article in Watchdog 123, May 2010, 'Monkeys With Rubber Stamps: The Overseas Investment Office', http://www.converge.org.nz/watchdog/23/08.htm. Also in that same issue: 'Waste Management: Another ‘Good Character' Case From The CAFCA Archives', Murray Horton, http://www.converge.org.nz/watchdog/23/09.htm and 'Tommy Suharto: One Who Was Never Put To ‘Good Character' Test', Murray Horton, http://www.converge.org.nz/watchdog/23/10.htm)”.

“Nor was it only CAFCA that was getting the run around from the country's foreign investment rubber stampers. Back in 2000 Ministers in the Labour government overrode advice from the OIC and refused permission for Brierley's to sell its stake in Sealord to foreign fishing companies. We got the whole file from the OIC and Government, which revealed that the OIC consistently rejected advice and evidence from relevant Ministries that several of the applicants did not meet the good character provisions ('Sealord Sale: OIC Exposed', Bill Rosenberg, Watchdog 95, December 2000, http://www.converge.org.nz/watchdog/95/8sealo.htm)”.

“So, there is a long, long history of the OIC and OIO rejecting any complaints (which were always backed up with evidence) about the lack of good character of various applicants. In the early 1990s the OIC approved Tommy Suharto, a notorious criminal, to buy Lilybank Station in the Mackenzie Country. Whenever CAFCA raised this subject their only 'defence' was that they approved him before the good character requirement was included in the Overseas Investment Act’".  

“The OIO has consistently defended the ‘good character’ of all the various ‘characters’ who have applied to it. Kim Dotcom is the most high-profile recent example (this was written up, in great detail, by James Ayers in Watchdog 129, August 2012: ‘Kim Dotcom And The Good Character Test: Money Versus Power’, http://www.converge.org.nz/watchdog/30/06.html)”.

“CAFCA's complaints are neither ‘frivolous’ nor ‘vexatious’. Furthermore, there is no legal obligation on the OIO to respond to such complaints by any deadline (in contrast to the Official Information Act). Our latest such complaint was lodged in December 2016 – as of December 2017 we have received no response (we don’t mean ‘no decision’, we do mean ‘no response’). So, if our complaints are not rejected, they are simply ignored. So, when it comes to the ‘not of good character’ test, the OIO needs to get its act together.  Or, better still, the Government needs to get its (Overseas Investment) Act together”.

What CAFCA Wants Changed

Two things happened as a result of that December 2017 press release. Firstly, the OIO finally acknowledged our December 2016 “not of good character” complaint. It took them 13 months to do that much. At the time of writing, many months later, we are none the wiser as to the actual substance of our complaint. Secondly, a journalist from the major media asked us to provide examples of “not of good character” complaints (there is no shortage – the above list is by no means exhaustive). And she asked: “What does CAFCA want the OIO to change specifically with the character test?”.

I replied to her (28/12/17): “The major thing CAFCA wants is the ‘good character’ test to be extended to the transnational corporations themselves, not being simply confined to the person or people owning and/or controlling them. And to actually have a definition of ‘good character’ in the Overseas Investment Act. Here are the recommendations on this subject that we made in our submission to the 2005 Overseas Investment Bill (which became the current Overseas Investment Act):

“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” (CAFCA’s whole submission, written by Bill Rosenberg, is online at http://canterbury.cyberplace.co.nz/community/CAFCA/OIReview/2005/CAFCA%20Submission%20indexed.pdf. It is still very relevant today).

Current Case In Point: Matt Lauer

It was announced in late 2017 that US TV host Matt Lauer had become the latest high profile American celebrity to be outed and fired for sexually harassing women. Lauer is a controversial recent foreign buyer of prime NZ rural land, namely Hunter Valley Station on the shores of Lake Hawea. He is controversial here because he has not honoured his promise of continuing to allow public access through the property. The OIO approved his purchase in February 2017. The circumstances surrounding the abrupt termination of his highly lucrative US TV career made him a candidate to be examined by the OIO for “being not of good character”.

But, no: “‘After investigating the matter and taking legal advice, we have reached the position that we have insufficient evidence at this time to take proceedings against Mr Lauer for breach of the condition’, Land Information NZ Deputy Chief Executive Policy and Overseas Investment Lisa Barrett said” (Stuff, 8/6/18, “Disgraced US TV Anchor Matt Lauer Holds Onto Hunter Valley Station”, Andrea Vance, https://www.stuff.co.nz/national/104512790/disgraced-us-tv-anchor-matt-lauer-holds-onto-hunter-valley-station).

To add insult to injury, it was revealed in July 2018 that: “Taxpayers could be forced to pay millions of dollars in compensation to disgraced TV host Matt Lauer to guarantee public access to his high country station” (Stuff, 22/7/18, “Controversial TV Star Expects Millions To Give Public Access To South Island Station”, Andrea Vance, https://www.stuff.co.nz/national/politics/105595864/controversial-tv-star-demands-millions-to-give-public-access-to-south-island-station).

The Walking Access Commission’s Operations Manager was quoted: “The issue of compensation may be tricky; the ‘optics’ of taxpayer money being paid to a very wealthy American with a tarnished reputation are not clear” (ibid.). Released official documents revealed that there was actually discussion of rising the compensation money via a crowdfunding appeal!

Acting Prime Minister Winston Peters weighed into the argument, saying that neither the previous National government nor the OIO had done their job in 2017 when Lauer’s purchase was approved without that public access being guaranteed. “I’d do my utmost to ensure that the taxpayer didn’t pay any money (compensation) at all”. Peters also said there needed to be changes to the law (Radio NZ, 24/7/18, “Winston Peters: Overseas Investment Office ‘Didn’t Do its Job’ Over Matt Lauer Sale”, https://www.radionz.co.nz/news/political/362479/winston-peters-overseas-investment-office-didn-t-do-its-job-over-matt-lauer-sale). 

The OIO Threshold: Playing With Figures

Although the Government is toughening up the approval regime for foreigners wanting to buy New Zealand rural land, we've seen no action, nor any indication that there will be any action, in the much more important area of transnational corporations (TNCs) buying up New Zealand businesses. To quote from a CAFCA press release (“Time For Action From Govt On Foreign Takeover Of Businesses:Tell Them The Garage Sale Is Over”, 10/5/18, http://canterbury.cyberplace.co.nz/community/CAFCA/press-statements/time-for-action-from-govt-on-foreign-takeover-of-businesses.html):

“Here is one example. Under the Overseas Investment Act the threshold for business takeovers not requiring OIO approval is anything under $100 million. But - National’s Trans-Pacific Partnership Agreement Amendment Act 2016 amended the Overseas Investment Act to allow them to change the threshold to $200 million by Order in Council. Labour has already done a complete back flip on the TPPA and signed it. CAFCA asks: does Labour intend to increase that threshold to $200 million and, if so, when?”

“A $200m threshold will exempt a lot of foreign takeovers from appearing in the OIO's records (and that has been the case throughout the history of the OIO and its predecessor, the Overseas Investment Commission). The threshold started at $500,000 in the 1970s; then was increased to, firstly, $2m and then to $10m, where it stayed for a long time”.

“Immediately before Labour was elected in 1999, National increased it to $50m. CAFCA lobbied the incoming Labour government to roll it back to the previous level. We were ignored. Michael Cullen's 2005 Overseas Investment Act - the current one - increased it to the present $100m. And that was presented as a ‘compromise’: Cullen wanted it at $250m - Treasury lobbied for the abolition of any threshold”.

“Each time it has gone up that has meant more and more foreign takeovers flying under the OIO radar. And that's not to mention Australian investment which gets special treatment under Closer Economic Relations (CER).  Australian investment - the single biggest source of foreign investors into NZ - under $477m does not require OIO approval. Others (e.g. China) can already access the $200m threshold under Most Favoured Nation treatment that is granted under existing free trade agreements”.

“A lot of foreign takeovers already take place under the existing $100m threshold without requiring any OIO approval or scrutiny. Obviously, this trend will only increase if that threshold is doubled to $200m. One result of all this is the quite misleading impression that the buy up of NZ by transnational corporations is ‘slowing down’. Whereas, all that is happening is that less and less foreign ‘investment’ (meaning takeovers) is being officially recorded.

“CAFCA calls on Labour to not increase that threshold to $200m. And to not simply freeze it at the present $100m but to roll it back to a much lower figure. This is exactly what Labour has already done in relation to land sales to foreigners i.e. making a whole lot more of them subject to OIO approval. All that we ask for is consistency. And a commitment to tighten up NZ's laughably ‘come on and in and help yourselves’ foreign investment regime. This would be a first step and send a positive signal to the TNCs - the garage sale is over”.

Business Takeovers: Business As Usual

Which brings us to the guts of the matter. And to quote from yet another CAFCA press release (“Government Takes First Baby Steps On Foreign Control: But Needs To Get Its Arse-Kicking Boots On, And Fast”, 4/11/17): “But land sales, although they get a lot of attention, only involve tens of millions of dollars. The real guts of any modern economy, the high rollers' lounge of the capitalist casino, is the business sector. That's where the billion-dollar deals are done”.

“And we've heard nothing from the Government about what, if anything, it plans to do about the transnational corporations that so dominate the NZ economy (apart from the commendable, but comparatively minor, aim of trying to get them to pay their fair share of tax). For example, what does the Government plan to do about the cosy cartel of Australian-owned banks, who suck billions out of the NZ economy every year?”

“Let's go from the general to the specific. What is the Government going to do about South African-owned insurance company Youi, an unrepentant corporate repeat offender? It won the final (2016) Roger Award for the Worst Transnational Corporation Operating in Aotearoa/New Zealand. You can read the damning Judges' Report at http://canterbury.cyberplace.co.nz/community/CAFCA/pdf/roger-award-2016-judges-report.pdf”. 

“Here's one quote from that: ‘Needless to say, although the company was successfully prosecuted and  fined a token sum last year, not one of the managers and executives responsible has been prosecuted, the company continues to operate in New Zealand under its Reserve Bank licence, Youi remains a full member of the New Zealand Insurance Council, Hansard records no mention of the scandal in Parliament, television continues to carry the company’s deceptive advertising, and the Chief Executive Officer on whose watch it all happened has been promoted’".

“Here's another specific example, although much bigger, older and much more entrenched. What is the Government going to do about the country's biggest bludger, the transnational owners of the Bluff smelter? They have twisted NZ governments, both National and Labour, around their little finger for at least 50 years. If Jacinda Ardern is serious that climate change is her Government's nuclear free issue, then she will have to confront and face down the smelter's owners”.

“And do better than the Clark Labour government which folded when the smelter owners threatened to leave the country if Labour brought in an emissions trading scheme. Memo to Jacinda - if they threaten to go, hold the door open for them and help them load their suitcases into the airport shuttle. And make sure that they (those recipients of corporate welfare par excellence), and not the NZ taxpayer, foot the bill for cleaning up their mess”.

“That would involve Labour facing up to the 2003 and 04 indemnities signed by Michael Cullen, Labour's Minister of Finance at the time, accepting that the taxpayer, and not the smelter owners, would be responsible for the cost of cleaning up toxic waste produced by the smelting process. Hands up all those who knew about that”.

“… We wish this Government well but its aims are truly modest vis a vis this vital issue. It needs to be a lot bolder. Labour in Government is always terrified of upsetting business (it left it to Winston Peters to start making slightly critical comments about capitalism). It is scared of provoking a business backlash (which was threatened by business against the Clark government in the 2000 ‘winter of discontent’).

“In other words, a capital strike, class warfare from the top down. And instead of asking the people who voted it in to back it in such confrontations, Labour always buckles to business (which, in this country, means business dominated by transnational corporations). Our advice to the Government on how to approach this subject is simple and succinct - less arse kissing and more arse kicking”.

653% Increase In Foreign Control In 28 Years

It's useful to be reminded of the sheer relentless scale of the issue of foreign control of Aotearoa (of which we’re the campaign against). Every year Bill Rosenberg updates CAFCA’s Key Facts (which exist both as a hard copy flyer, and online at http://canterbury.cyberplace.co.nz/community/CAFCA/key-facts.html. That link is to the text-only version. You can also view them online as graphs at http://canterbury.cyberplace.co.nz/community/CAFCA/key-facts/cafca-key-facts-2018-with-notes.pdf [PDF version]. They can also be viewed there as a Powerpoint).

Each time they are updated we publicise them to the media and to the public.  Now, we at CAFCA tend to get a bit blasé about this stuff. So, it’s useful to view it through the lens of the major media, where the latest update was reported as a major business story, a revelation no less (NZ Herald, 21/2/18, “Foreigners’ Financial Stake In NZ Up 653% In 28 Years, Says Lobby Group”, Anne Gibson, https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11998864).

That Herald article basically reproduced a goodly chunk of the Key Facts, without feeling the need to question any of the facts or invite any opposing spokespeople to comment on it. That’s because CAFCA is recognised as the leading expert in the field. So, from 1989 until 2017 – the latest year for which Bill could get official statistics – through cycles of Labour and National governments; under Prime Ministers Lange, Palmer, Moore, Bolger, Shipley, Clark, Key and English; under both FPP and MMP electoral systems: foreign control of the New Zealand economy increased 653%. That’s a sobering fact.

Don’t Expect Much & You Won’t Be Disappointed

So, now it’s the turn of Prime Minister Ardern (and temporary PM Peters). To conclude, we need to look again at the question posed in the title to this article (and the cover graphic): is control of foreign control within our grasp? Well, the Labour/New Zealand First/Green government recognises there is a problem and has resolved to do something about it (which is better than the big fat nothing done by the previous National government. For that, CAFCA congratulates them). But, as I said in the subtitle to this article: if only that was more than wishful thinking.

The “something” which this Government is doing doesn’t amount to much – some restrictions on foreigners buying residential houses, which was always the least consequential aspect of the issue (and those restrictions have since been watered down). More substantively, some restrictions on foreigners buying farmland, which is a long overdue response to an issue that outrages New Zealanders right across the full spectrum of society.

Once again, there are all sorts of loopholes and exemptions – the entire forestry sector, which is a huge feature of land sales to foreigners; water bottling export plants; luxury golf resorts; prime real estate sold to millionaires and billionaires for bolt holes. And of the biggest feature of the whole foreign control issue – namely transnational corporations hoovering up local businesses and the wholesale dominance of whole sectors of the economy by transnationals – well, this “transformative” Government has neither said nor done a thing.

It’s very much business as usual. Indeed, one of its very first actions was to back flip on the TPPA and sign NZ up to a deal that entrenches and extends the domination of the NZ economy by transnationals. As we’ve always said, what we’re experiencing is recolonisation but by company rather than country. This Government is simply ameliorating some of the most visible and egregious effects but otherwise actively facilitating the process. As the old saying goes – don’t expect much and you won’t be disappointed.