By Brian Fallow
WELLINGTON - The Overseas Investment Commission approved nearly $2 billion worth of inbound foreign investment in the first half of this year, but all but $200,000 of that was to buy existing assets or businesses.
The 105 applications approved, collectively worth $1.97 billion, included the $1.2 billion purchase by
US-based Edison Mission of a controlling stake in Contact Energy. Just one application was rejected.
None of the approvals related to the start of a new business or the extension of an existing one.
One was for "further capitalisation" - a $200,000 investment in Gibbston Valley Wines by the Montagnat family of New Caledonia.
Apart from land purchases, where the threshold is lower, commission approval is required for investments above $10 million in which foreign investors have 25 per cent or more of the enterprise.
The overwhelming preference of foreign investors for buying existing businesses rather than establishing new ones continues the pattern of the previous three years.
Of a total of $15.2 billion in approvals over 1996, 1997 and 1998, all but $2.8 billion related to the purchase of existing assets.
Of that $2.8 billion, $2 billion is the Southern Cross transpacific telecommunications cable which reached Auckland at the weekend. A 1996 forestry investment by the Chinese accounts for most ($600 million) of the remainder.
Auckland University economics Professor Tim Hazledine said: "It's a worry that we are not regarded as a place you would want to set up a new venture. But if New Zealand was a basket case they would be pulling out."
Foreign firms which have already invested here seem to have better things to do with their local profits than reinvest them.
According to Statistics NZ, of the $10.5 billion in profits earned by foreign investors in the three years to March 1999, $9.4 billion was paid out in dividends and only $1.1 billion retained in the businesses.
That contrasts with the previous three years, 1993-96, when $5.2 billion of the $9.5 billion in profits was retained.
A survey of foreign investors, commissioned by the American Chamber of Commerce and conducted by Professor Peter Enderwick at Waikato University last year, found several reasons for increased disenchantment with this country.
They were MMP-related political instability, slow growth and excessive regulation, taxation and compliance costs.
