Editorial: No place for xenophobia or self-interest

Bill English. Photo / Doug Sherring

Opinion

According to the Finance Minister, overseas investment regulations to be introduced in December will "provide extra clarity and certainty for potential investors". More likely it will produce doubt and confusion. Indeed, the measures announced yesterday by Bill English will almost certainly deter foreign investors, the complete opposite of the intention when the Government began its review of the Overseas Investment Act 18 months ago.

The act, itself, will not change. The Government, however, is adding an "economic interests" test to regulations. This will allow ministers to consider whether New Zealand's economic interests are adequately safeguarded and promoted if an investment offer is accepted. Additionally, a new "mitigating" factor will enable ministers to decide whether a foreign bid provides enough opportunities for New Zealand oversight or involvement. These steps would, said Mr English, introduce "extra flexibility" to consider a wider range of issues, including large-scale ownership of farmland.

The Government is also retaining the strategic asset test, which was introduced two years ago. That is unsurprising, given it tallies so closely with the thrust of the new regulations. The test, introduced to thwart the sale of Auckland International Airport to a Canadian pension fund, means ministers can decide, case by case, on international bids for "strategically important infrastructure". What that is and how it is defined has never been stated and the test has never been used. All it has achieved is uncertainty in the minds of potential foreign investors.

The new ministerial veto powers will achieve precisely the same outcome for farmland. The mere fact that the catalyst for these changes was the Chinese bid for the Crafar family farms points to their frailties. Many such investments will now be dictated by the prevailing whim, to which ministers will react. The regulations are an invitation for pressure groups to create as much fuss as possible to get the ministerial thumbs-down for what may well be desirable bids in terms of efficiency and economic benefit. Some opposition may be driven by xenophobia; others may not wish land sold to any overseas interests, whether they are Canadian or Chinese.

Clearly, there will now be added uncertainty. Overseas investment policy, rather than being based on a clear set of principles that are applied without fear or favour and that recognise the limits on foreign control, will be hostage to the ministerial pen. The downside may not stop at a pandering to populist sentiment. It is easy to envisage ministers blocking a bid that makes economic sense in terms of the country's interests but does not bode well for a state-owned enterprise. Obviously, there should be no role for self-interest in such decision-making.

The first part of the Government review of overseas investment led, commendably, to a decision that the vast majority of applications would no longer need ministerial approval. This has prompted a drop in processing time, making it easier for foreigners to do business here. The second part will, however, lead only to capriciousness, confusion and delay, as the prevailing mood is gauged.

Confirmation of this can readily be seen in the immigration policies pursued by successive governments. Rather than being founded on a set of sound and ever-present principles, they have been the victim of ministerial fancy, which, itself, has too often been captive to outbursts of xenophobia. The result has been regimes that have often been counterproductive to the national interest. Overseas investment, like immigration, has always been a key driver of the New Zealand economy. It also is far too important to be hostage to ad hoc politicking.