New Overseas
Investment Bill Removal of scrutiny of
nearly all - by Murray Horton In November 2004 the Minister of Finance,
Dr Cullen, finally introduced the new Overseas Investment Bill into Parliament. This is
the culmination of a process that started a year earlier with the Government’s
announcement of a review of the entire foreign investment regime, conducted by officials
behind closed doors. We’ve been following this story since it first broke, in
November 2003, and I refer you to Watchdogs 106, 105 and 104 for details. These can
be read online at: Readers will note that a lot of the following is almost word the word the same as the equivalent article in Watchdog 106 (August 2004). That’s because there have been no major changes in the main points of the Bill from what was recommended by officials. Bill Rosenberg’s cover story in this issue gives the big picture analysis; the below looks at the key points of the Bill itself. Go to http://canterbury.cyberplace.co.nz/community/CAFCA/OIReview/OIReview.html and follow the links to a detailed model submission (written by Bill Rosenberg), which analyses the Bill very closely indeed. We recommend that you use it as a reference for your own submission. The first thing to make clear is that this is a completely new piece of legislation, not an amendment. It will supersede the existing 1973 Overseas Investment Act and the mid 1990s’ Overseas Investment Amendment Act. CAFCA sees considerably more minuses than pluses in it. Michael Cullen’s press release was headed "Toward a more effective overseas investment regime" and it definitely will be - for the transnational corporations (TNCs) whose ceaseless takeover of New Zealand will be made that much easier by this most obliging of governments. Don't get us wrong, we congratulate the Government in making it harder for foreigners to buy land of "special heritage or environmental value" (note: not actually stop them buying, just to make it harder). That arises directly from sustained public campaigning about issues such as the sale of Young Nick's Head, other coastal property and South Island high country stations. In his July 2004 press release, making public the officials’ recommendations, Cullen referred to "iconic" land but it seems that he’s gone off that word now, because it never appears in the Bill or his press release accompanying it. But such land, whatever the Government chooses to call it, is a small part of the overall picture of rural land sales to foreigners (the vast bulk of which is forestry and farmland) 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 TNC 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. What Is In The Bill? Once again, I refer you to the meticulously detailed model submission (see above Link) . These are some of the key points from the Bill itself and the official papers that preceded it.
Corporate Scrutiny Threshold Raised 1000% Since 1999 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. Don’t shed any tears for the OIC staff – the Bill provides for them to transfer to the new body. This replacement agency will see a significant weakening of any oversight. By definition, Land Information NZ is experienced with land. But 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. And the OIC’s policy functions will now be done by Treasury, which requires no further comment or explanation. Obviously the Government wishes to quieten public opposition about land sales to foreigners, and to simultaneously declare open slather for the much more significant transnational corporate takeovers, 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 20 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, from $50m, 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. Treasury estimates that the number of applications for corporate takeovers will drop from 20 per year to 12. That doesn’t sound like much, but that number belies the billions of dollars involved, which will now pass without scrutiny. 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 five 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. What we've been saying all along about the dangers of NZ getting entangled in free trade agreements (whether multilateral, like GATS or bilateral, such as with Singapore) is made glaringly obvious. We lose the right to control foreign investment. We welcome the tightening of restrictions on the sale of "special" land. For example, preference will be given to foreign land buyers who say that they "intend" to actually live here and take up permanent residency; absentee owners will have to satisfy stricter criteria (but note, they only have to "intend" to live here, not actually do so, before being granted consent). Plans submitted by an overseas investor in support of his/her purchase will be made conditions of consent. These concessions have 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 that of Young Nick's Head in 2002, nor the 2004 purchase of two Otago high country stations by Shania Twain (see the detailed article on the Shania Twain land purchases, elsewhere in this issue). But the great bulk of land for sale, such as run of the mill farms and forestry land, is not designated as "special" and will get no greater present protection than at present (i.e. bugger all). Implications For Maori The Crown will have a new right of first refusal over foreshore and seabed land where this would otherwise be sold into foreign ownership. Most interestingly, the Bill aims to strip the Maori Land Court of part of its current jurisdiction over Maori freehold land that is to be sold to foreigners. "The effect of the amendment is to shift the consent decision for overseas investments in sensitive land that is Maori freehold land from the Maori Land Court to the relevant Ministers under the Bill" (Overseas Investment Bill, Explanatory Note). This was not mentioned at all in Cullen’s press release. Considering that it was originally a Maori Land Court decision that triggered off the foreshore and seabed firestorm that the Government spent all of 2003 and 04 trying to extinguish, this removal of Maori Land Court jurisdiction from an aspect of land sales is significant. It was listed as an option in the officials’ recommendations, with a clear signal that Treasury regarded Maori interests as a threat to foreign investment. The Bill increases penalties for breaches. For instance, maximum fines will be increased from $30,000 for individuals and $100,000 for companies to $300,000 for both. There are new enforcement powers, including the right to get a search warrant. That is all very commendable but the proof of the pudding is in the prosecuting. It would be very interesting to know how many foreign investors, either individuals or companies, have been taken to court. In the words of rap artist Scribe’s catchy little song: "Not many, if any". An enforcement regime is useless if it’s never enforced. The OIC's brief has been to facilitate, not "hinder" foreign investment and this new Bill facilitates the OIC out of existence, and delivers a very "effective overseas investment regime" - an effective surrender of economic sovereignty. The minor concessions on some land sales are simply a smokescreen to conceal that central fact. The Government is saying to transnationals: "Come on in and help yourselves. Make yourselves at home". We’re saying that the right of admission must be reserved. This is our home, and we must retain the right to pick and choose who is allowed into it, and to profit from it. If we are to have these "house guests", then they must behave themselves and obey the house rules. Full details of the corporate misdeeds of the transnationals in our home can be found at http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Roger/index.html (If, for any reason, that Link does not work, go to www.cafca.org.nz and follow the Roger Award Links). And those Roger Award winners and runners up are only the worst offenders. There are plenty of other examples. For instance, take the July 2004 announcement by Swedish giant, Electrolux, that it will close down its Christchurch factory, with the loss of 159 jobs, moving its operations to Australia. The TNCs’ local mouthpieces can’t put a positive spin on facts like that – John Walley, the Chief Executive of the Canterbury Manufacturers Association, said: "It’s a big blow. It’s one of the down-sides of foreign investment" (Press, 13/7/04; "159 jobs to go as plant axed", Colleen Simpson). To the workers it’s considerably more than a "down-side"; it is a loss of employment and income, with all the stress that goes with that. The Electrolux closure is just another example of how transnationals go to wherever suits their interests best, with no regard for the local or national impact of their actions. They operate as a law unto themselves. Yes, New Zealand companies act the same way, but, by definition, the TNCs operate on a much larger scale. The whole world is their playground and a few Christchurch workers are just expendable assets who become collateral damage. Where Do The Parties Stand On This? It is encouraging that a couple of Opposition parties have taken a stand. Foremost have been the Greens, who are campaigning hard on this issue and have launched a Petition To Stop The Sell-off Of New Zealand. CAFCA has a longstanding policy of not endorsing any political party – we reserve the right to criticise all of them and have done so – but we’re happy to publicise and promote this petition. Green Co-Leader, Rod Donald, also intends to introduce a Private Member’s Bill, entitled the Overseas Investment (Reclaiming Sovereignty) Amendment Bill. But for it to even get to first base, it has to be drawn from the ballot of all other Private Members’ Bills. New Zealand First, which has been silent on this issue for the best part of a decade, has announced an election policy of buying back unspecified former State assets and using the Government’s new superannuation fund to pay for it (rather than investing it overseas, which is what the Government is currently doing). Party Leader, Winston Peters, has made it clear that these would be among his bargaining chips if, once again, New Zealand First holds the balance of power after the 2005 election. Media commentators were quick to point out that, prior to the 1996 election, Peters promised to buy back Forestcorp, which had just been sold by the National government, the day after the election. New Zealand First did end up holding the balance of power and became National’s coalition partner, with Peters as Treasurer. Nothing more was heard from him on the subject in the two years that he held that job (see Watchdog 84, May 1997, "Winston’s Petered Out", by Murray Horton). So, CAFCA won’t be holding its breath about Winston’s latest pronouncements, but it is interesting to see him revisit this issue. There are even some minor rumblings in Labour’s ranks. Not directly about the Overseas Investment Bill – they consider that they’ve done enough by reducing the proposed threshold for transnational corporate takeovers from $250 million to $100m. But there was an intriguing report in the New Zealand Herald (10/11/04, "Reining in global giants", John Armstrong). It quoted an internal Party discussion document, produced for the November 2004 Party Conference, as saying that Labour should "consider pushing for the adoption of binding international rules to control the behaviour of multi-national companies. The working paper on foreign policy…also suggests the Government could work with local companies and trade unions to develop a code to cover New Zealand-owned firms that operate abroad. The document argues that globalisation has freed international companies from the framework of national regulations. That has fuelled a ‘race to the bottom’ as countries seek to compete on the basis of cheaper labour costs. The document suggests the possibility of New Zealand advocating a new enforceable framework of rules for so-called ‘trans-national corporations’. The framework, which would be managed under the auspices of the United Nations, would seek to ensure foreign investment was a ‘force for good’ by generating jobs and importing new ideas, technology and innovation. The next step for the Government would be to explore whether such guidelines could be made enforceable and extended globally…". If this sounds familiar, it’s because it is, right down to some of the language quoted. Since 1998, CAFCA has been promoting our Corporate Code of Responsibility (copies available upon request; it’s only a single side of an A4 sheet, most unCAFCAteristic), and we have spread it far and wide among many sectors of society, including central and local government politicians. Perhaps some of them are now taking notice. Our Code is specifically aimed at transnationals operating in this country (for instance, there are references to the Treaty of Waitangi), but we would be delighted to see an international code, enforceable under international law. The Green Party Petition To Stop The Sell-off Of New Zealand specifically calls for establishing a Code of Corporate Responsibility as one of its "stricter requirements on foreign investors wanting to buy buildings and businesses to ensure that all investments genuinely benefit New Zealand…" But, on the debit side, Progressive Leader, Jim Anderton, continues his sad decline. This is the same Jim Anderton who, as the then Alliance Leader, campaigned hard against the transnationals in the 1990s, on issues ranging from the sale of Forestcorp to the proposed Multilateral Agreement on Investment. Latterly, Jim has been calling for a cut in the company tax rate, in order to attract foreign investors. Not even Michael Cullen supports that. And Jim was the target of outraged East Coast forestry workers (see the story about Ernslaw One, elsewhere in this issue) who blamed him for costing them their jobs. The Progressives’ solitary other MP, Matt Robson, has backed Anderton on both the tax cuts and the Ernslaw One debacle. The Fight Is On We can’t reply on politicians to win this battle for us. As per usual, it will have to be fought out at the grassroots. Since we first learnt of this review (now a Bill), CAFCA has been publicising its dangers far and wide. And we have received a positive response from groups ranging from Maori activists to church networks. It is encouraging that the media recognises us as the specialist group in the field – as soon as Cullen introduced the Bill, TVNZ sent a crew round to get a soundbite from me for that night’s One News. It was only a few seconds, but as the great majority of New Zealanders get their news from the TV1 6 p.m. news bulletin, a hugely influential few seconds. Bill Rosenberg’s cover story in this issue is a version of an article published in the Press, Otago Daily Times and Independent. Ironically, his article (which he had submitted to the Press weeks before) was suddenly published there because of the hubbub surrounding the Shania Twain land purchases in September (see article elsewhere in this issue for details). I say ironic because both Cullen and the OIC made it clear that the Twain applications were processed according to the existing rules, not the new rules regarding purchases of "special" land which this Bill will introduce. In fact, Shania Twain was never mentioned in Bill’s article. Now that it we’re dealing with a Bill, and not simply a review, the campaign needs to be stepped up a notch. And CAFCA needs all the help we can get .What You Can Do Our Website now has a whole page devoted to the Bill. Go to www.cafca.org.nz and you can download the leaflet, the submission, the Bill itself, plus all the previous Watchdog articles about it. Non-Members:
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