Finance hub worth billions to NZ: study

Craig Stobo. Photo / Paul Estcourt

Building New Zealand into an international financial services centre could generate thousands of jobs and billions in earnings, a report says.

The report by the International Funds Services Development Group said research indicated a full realisation of an opportunity to develop the country as a centre for funds accounts and administration would generate revenue of about $500 million-$1.3 billion a year, tax revenue of $150 million-$360 million a year, and create 2000-5000 high quality jobs by 2020/30.

International Funds Services Development Group - a taskforce set up last year by the Cabinet - said the major opportunity was to develop New Zealand as a base for funds and an administration centre, where collective investment funds could be incorporated and serviced.

Specific changes needed to be made to tax and regulatory systems, many of which were being progressed through existing government work programmes.

"It will require only a relatively small step up from the existing work programmes to meet the conditions necessary for the domicile opportunity," it said.

International Funds Services Development Group chairman Craig Stobo said there was already a head of steam under way.

"And if we can test this with the Australian market place ... and get accepted then there's opportunities I think to try and replicate that into the biggest savings pool in the world, which is really Asia," Stobo said.

"I think if the Government can clear the roadblocks that are in place and let the private sector do what it usually does quite well which is to create jobs and build wealth, then [there is] no reason why it can't happen," he said. "I think we're well suited to it."

The report identified taxation, regulation and government support as focus areas in a first stage to meet the conditions for a funds domicile.

Stage two involved taking steps to attract activity to New Zealand, including establishing a funds servicing agency, mutual recognition for major Asia-Pacific regulators, considering the implementation of expanded regulatory initiatives and marketing.

The major costs necessary for the initiatives to succeed were largely already embedded in existing tax and regulatory reform work and the changes proposed would not require significant investment by the Government, the report said.

Institute of Finance Professionals New Zealand chairman David McLean said it was a worthwhile initiative.

"There is a bit of a gap in this region, in our sort of time zone, nobody's really done this yet," McLean said. "If you go even up as far as Singapore and up into China there aren't people who've really made a concerted effort to try and set themselves up as this type of financial services hub."

McLean, who is also head of the institutional bank at Westpac New Zealand, said it was a realistic aim to achieve over a reasonable time-frame.

"If we set this as a goal and then the things we do along the path around regulation, for example, can be consistent with that goal then I think it's potentially achievable."

Steps taken by the Government, including the Financial Markets Authority, rewriting securities law and the Financial Advisers Act were, in that respect, bringing New Zealand up to a world-class standard, McLean said.

"A lot of the stuff that's being done is certainly heading us in the right direction," he said. "Industry should really be picking up the ball now and looking at how we can help do it, how we can attract business here and if we need help from the Government come back and say what we need."

STEP BY STEP

Recommendations from the International Funds Services Development Group:

Stage one:

* Zero tax per cent rate on foreign-sourced income for non-residents.
* Non-resident investor protection to replicate or improve global standards.
* High level government support.

Stage two:

* Establish a funds agency to drive marketing and engage with international managers.
* Gain mutual recognition from major Asia-Pacific regulators.
* Consider the implementation of expanded regulatory initiatives.
* Begin an active marketing effort to establish a New Zealand brand.
* Seek to attract international funds servicing companies to relocate to New Zealand.