Large Rise in Overseas Investment Approvals in 1998
1998 Statistics from the OIC
- Bill Rosenberg
Overseas investment approved by the Overseas Investment Commission (OIC) rose in 1998 after a fall in 1997. In dollars, it is by far the largest of the decade, surpassing even the peak in 1993. Even when sales from one overseas investor to another are deducted, it is still the highest for the years the OIC has published data. Land sales rose more modestly (measured in hectares), but are still the second highest published.
The largest activities by value were telecommunications (dominated by a $2 billion project to install the new Southern Cross cable network across the Pacific, though little of that is likely to be spent in Aotearoa; and Vodafone taking over BellSouth New Zealand), finance (with Royal & Sun Alliance, and Colonial expanding in insurance, and Lloyds TSB of the UK taking over Countrywide Bank), manufacturing (dominated by the $1.3 billion takeover by Kirin Brewer of Japan of Lion Nathan) and electricity supply (see recent issues of Foreign Control Watchdog and your electricity bill). A total of $12.7 billion of general investments were approved, taking the total for the six years 1991-98 to $57.7 billion. Though the OIC gives no analysis of takeovers versus "greenfield" investmenti, our analysis of its decisions throughout the year show that the activities are largely takeovers (the Southern Cross project being a notable exception - but not really in Aotearoa). The OIC analyses transfers between overseas owners, and these are a large proportion: in 1998, while consents totalled $12.7 billion, only $7.3 billion was left after deducting investments which did not proceed or which were a sale from one overseas owner to another. There is a great deal of "churning" going on.
Forestry still dominates the land sales with 17,471 hectares (24.8%) of the total 70,540 hectares sold, but this is substantially reduced from recent years. For example in 1997, 50,749 hectares (82% of the total) were sold for this purpose. We have to go back to 1991 and 1992 to see a lower figure. However forestry still overwhelms all other uses for land purchased, taking 273,327 hectares or 61.3% of all approvals between 1991 and 1998. Close behind it in 1998 were metal ore mining (15,344 hectares or 21.8%, largely due to 12,383 hectares passing to Gold and Resource Developments when it took over the remaining shares in Macraes Mining) and sheep farming (14,319 hectares or 20.3%: mainly Glenhope Station, 5,899 hectares, and Castlepoint Station, 2,954 hectares, both in Wairarapa). Of the 70,540 hectares sold, only 44,364 were new transfers to overseas investors: the remainder were from one overseas investor to another, or where the purchaser took up New Zealand residency.
The OIC calculates the percentage of all land sold overseas during the years 1991-1998. This shows 2.03% of the farm and forest land of Aotearoa has been sold over those eight years. However that includes 6.4 million hectares of natural forest, much of which is in reserves. It is more valid to use the land available for sale for purposes of production as the base. That land (pasture, arable land, and production forest) amounts to 15.6 million hectares (according to NZ Forestry Facts and Figures '99 published by the New Zealand Forest Owners Association, with the Ministry of Forestry). During the years 1991-1998, 2.86% has been approved for sale overseas. In 1998 the number of such consents equalled 7.8% of all farm sales - up from 2.6% in 1990.
That may not sound much, but at its current rate of increase, would lead to all productive land in Aotearoa being sold within 50 to 60 years. Neither does it include all land in overseas ownership, such as land sold before 1991.
As we have mentioned, things are not quite that bad: in 1998 only 44,364 hectares were "new" sales, as opposed to churning over land already in overseas hands. That is because 17,230 hectares went from one overseas investor to another; in the case of 4,571 hectares the purchaser became a New Zealand resident; and New Zealanders retained a share of some sales - the OIC says 4,140 hectares were in this category. (We feel this latter falls into the category of doctoring statistics rather than clarifying them, because the New Zealanders were in most cases unlikely to retain control).
On the other hand, control over a further 35,034 hectares went overseas in the form of pastoral leases, and a further 446 hectares in other leases or forestry rights. In addition, the forestry rights do not include Crown forestry rights, which have been arbitrarily defined as not constituting an interest in land (under the Crown Forest Assets Act 1989). Weyerhaeuser Company of the USA acquired 60,002 hectares of such rights when it bought a total of 78,000 hectares of forest in the Nelson/Marlborough area in 1997.
Overseas control of land is thus much higher than the OIC's land sales record. As we showed in our analysis of the 1997 statistics, much more than the 445,818 hectares the OIC has recorded since 1991 was under overseas control for forestry purposes alone.
Still Few Applications Declined
In 1997, the greatest jump was in applications declined. Six applications were turned down in 1997, compared to one in 1996 - and that was the first since 1990. In 1998, six were again declined - in all cases, involving land. But the effect is minuscule: 397 hectares saved in 1998 (less than one percent - 0.6% - of the total area approved for sale), 168 hectares in 1997 and 14 hectares in 1996.
As always, the OIC statistics must be read with care: they record the applications to the Commission. The OIC notes that they include transactions which
These increase the totals without necessarily changing the real level of overseas investment in Aotearoa, or changing it to the degree stated. The OIC states that when they removed the above types of transactions from the 289 transactions in 1998 involving $12.725 billion, 212 were left, involving $7.497 billion.
On the other hand, these statistics do not include overseas investment transactions that result in the investor owning less than a 25% interest, or are less than $10 million (unless they involved land).
By land usage, the most significant changes compared to 1997 were:
By hectares, the top domiciles of land buyers were:
These are largely the same countries that ranked at the top in 1997. Switzerland has replaced the Netherlands - largely due to the takeover by Holderbank Financiere Glaris Ltd of the remaining 27% it did not already own in cement company Milburn New Zealand Ltd. Milburn owns 3,576 hectares freehold, 158 hectares leasehold, and mining licences and easements over a further 258 hectares of land. Indonesia and Hong Kong replace Singapore. The USA still dominates.
By region, the highest sales by value were:
Only Otago, Wairarapa and Canterbury were in the top seven last year.
General Overseas Investment
The amount of foreign investment approved has risen dramatically from $5.204 billion in 1997 to $12.725 billion in 1998. For the period 1991-1998, a total of $57.729 billion in investments were approved by the OIC.
The most significant activities in 1998 were:
By activity, the most significant increases over 1997 were in telecommunications and finance (mainly banks: up from nothing in 1997 to $1,897m in 1998). Utilities (mainly electricity: up from $138m in 1997 to $1,891m in 1998, an increase of $1,753m or 1272%), manufacturing and services were also significant.
The most significant decreases from 1997 included forestry, which had also fallen in 1997. Forestry is important because it is one of the most significant areas of "greenfields" investment.
By origin of investment, the top sources contained no surprises:
All except Japan were in the top seven in 1997. Leaving the top ranks is Malaysia, now well down with only $16m.
[Note: The statistical tables are not available on-line.]
Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. December 1999.
| Return to Index