Editorial: The Government has a lot riding on attracting foreign investors - can new initiatives deliver?

Prime Minister Christopher Luxon has regularly declared “New Zealand is open for business” since winning power. Photo / Mark Mitchell

Editorial

Embattled and struggling in polls, the coalition Government has a lot riding on attracting more foreign investment into New Zealand.

Beyond the usual levers that help turn this country’s economy – such as agricultural exports, tourism and house prices – boosting foreign investment is one of the few big ideas it has offered to underpin its “growth” mantra.

“New Zealand is open for business,” Prime Minister Christopher Luxon has declared regularly since winning power.

So far signs of a surge in international investor interest have been muted, but three new initiatives may shift the dial.

A new wealthy migrant visa category, which opens on April 1, may help drive interest.

New Zealand Trade and Enterprise says it has seen a 230% increase in inquiries since the policy was announced.

This week the Government unveiled a new tax policy and hosted an investment summit. Together, these three moves need to deliver some tangible results.

In an effort to encourage wealthy foreigners to stay and invest more, the Government has announced it will tweak a controversial tax rule.

It is proposing to make a change to the Foreign Investment Fund (FIF) regime and says it will consider a wider revamp that could also benefit Kiwi investors.

The rules can penalise those with investments of more than $50,000 in offshore entities. While that affects Kiwis, it hits migrants harder, as they are likely to have more money invested offshore.

Rather than pay tax on dividend income, the rules require investors to pay tax on 5% of what their shareholdings are worth every year.

This means investors need to pay taxes even if they don’t receive any income from their investments.

The Government is proposing to give some foreign investors, with assets that are hard to liquidate, the option of paying tax when they receive income from their investments.

This is a sweetener for foreign investors, although there have been calls for more sweeping tax breaks to emulate the likes of Singapore and Ireland.

But this is a Government that is, by its own admission (and some would argue by its own constraints), seriously cash-strapped.

It has ambitions to fast-track big infrastructure investments in the hope that they will help deliver the kind of economic productivity growth.

To do this without massive levels of new borrowing, it has committed to developing public-private partnerships (PPPs).

More than 100 businesses and firms are in Auckland for the Government’s Global Investment Summit, which wraps up today – including some major international players like the big Chinese banks.

Whether this will be a hard sell or simply a networking exercise aimed at facilitating future discussions remains to be seen.

Ideally, it will be both.

Already there have been indicative bids. A large Italian firm has confirmed it will bid to build and run the first 26km stretch of the Northland Expressway, one of New Zealand’s most expensive road projects.

In reality, there aren’t many other projects ready and waiting for a major PPP deal.

But successful implementation of just one would put a template in place to deliver future growth.