Associate Finance Minister David Parker has stopped the overseas investment regulatory loophole that Green Minister Eugenie Sage used to block the expansion of a gold mine.
She told Parliament, when asked back in May about refusing approval for the overseas-owned Martha mine to purchase more land that “potentially, whether it contributes to carbon emissions and our net-zero target could be considered” in any overseas investment decision in the future.
But Parker yesterday said this power would not be introduced into the legislation he was unveiling.
“We’re not introducing a negative environmental test,” he said.
“That sits under the Resource Management Act or climate-related legislation rather than the Overseas Investment Act.”
At the core of the proposals to rewrite the Overseas Investment Act is a new power for some overseas investment proposals to be subject to a “national interest test” and Parker said that because the Government wanted that power exercised rarely, it would sit high in the Government administration with the Minister of Finance.
The threshold for an investment to be considered this way would vary according to New Zealand’s trade agreements from a $100 million basic level through to $500 million for CPTPP countries.
“The sorts of investments where that is most likely to apply would be infrastructure assets with monopoly characteristics, for example, airports or ports or lines companies or monopoly providers of water in the cities,” he said.
But there will be a “special case” provision which would allow sensitive investments such as those involving national security or media companies to be also referred for the same process.
However, Parker conceded it was possible that environmental criteria could be introduced into these special cases.
“In respect to very large investments, because the discretion that the Minister of Finance has is unlimited, then potentially that could be included,” he said.
“But it’s not deliberately within the design.”
In fact, Parker argued that the very fact that it was the Minister of Finance who would now be making those big decisions, that in it itself would introduce a note of caution into the process.
He said that having the Minister involved would create less uncertainty.
“The Minister of Finance rather than a more junior minister will be wary of unnecessarily turning things down if it would ruin New Zealand’s reputation as a good destination for investment,” he said.
“So that’s one of the things that we’ve been mindful of, which is while it’s not routine; it’s a power for the Minister of Finance to use if it’s necessary, but we make the point we don’t think it’ll be often used.”
And Parker stressed that the big decisions that will be needed with his tightening up of overseas investment criteria he announced yesterday will no longer be taken by junior Ministers (like Sage) but would now be taken by the Finance Minister.
Parker cited the 2008 sale of the Wellington Lines Company to a Hong Kong company and the failed Canadian bid for Auckland airport in 2007 as examples of the kind of deals that could go to the Minister of Finance for a national investment interest test.
Parker said that it was in everybody’s interests that monopoly owners received a reasonable return to encourage them to invest in their assets.
“And that’s because you don’t want to create a situation where you have under-investment in lines because that affects the wider economy,” he said.
“And you have to ask yourself, do you really think it’s in New Zealand’s long term interests to sell some of its monopoly infrastructure assets overseas?
“I think the answer to that is it depends.
“But you can’t actually take a reasoned decision on that unless it is within the ambit of what can be screened and currently you can’t screen for those reasons.”
But there is an element of how long is the string in the proposals.
And Parker seemed to concede that when he said the legislation would give future governments greater discretion in respect to large investments in monopoly infrastructure.
The “call-in” power essentially applies the same national interest test to investment proposals that fall below the legislative threshold and according to a background paper supplied by Parker’s office the power could be used in the case of an electricity company worth less than the threshold figure; a company that developed military technology but whose takeover would result in less than 25 per cent overseas ownership and in a media company worth less than $100 million. (Increasingly, most of them).
Back to 1965
The inclusion of the media echoed the situation back in 1965 when the Canadian-British newspaper proprietor, Lord Thomson’s attempted to buy the Wellington Publishing Company (proprietors of The Dominion). That triggered a takeover war with Australian publisher Rupert Murdoch.
The Holyoake National Government hurriedly passed the News Media Ownership Act to protect the Dominion.
The act limited ownership of New Zealand media companies to 20 per cent, ironically it was repealed by the Kirk Labour Government in 1973.
Parker defended the proposal saying the Government thought there were some assets that should be owned by New Zealanders.
“It’s in the interest of an open democracy that sometimes should be able to control whether its media is controlled by overseas entities or New Zealand entities,” he said.
One substantial change in the legislation will relate to overseas sales of farmland.
Under the present law, the Government can send a letter to the Overseas Investment Office, setting out its criteria for things like the sale of land.
Parker and Land Information Minister Eugenie Sage did that in November shortly after the 2017 election and required that the threshold for Overseas Investment Office (OIO) approval of rural land sales be lowered to 5 hectares.
Parker is abolishing the provision allowing a Minister to change the criteria by simply writing a letter.
“We think that changes to that in the future should be by way of primary legislation rather than just a change of government being able to write a letter and change the rules.”
The call to strengthen the Overseas Investment Act was part of Labour’s coalition agreement with NZ First but so was a proposal to put a tax on exports of bottled water.
That now looks to be a non-starter.
Parker conceded yesterday that the issue was complicated by Maori rights and interests and “some controversies it might cause around it.
That sounded like shorthand for saying any attempt at a resource rental on water would result in Maori Treaty claims.
He said that the Government was now looking at whether a levy on containers might be used as a proxy.
But in a new provision for the Overseas Investment Act, where an applicant was seeking to acquire land for extraci=ting water for bottling the environmental impacts of that could be considered as part of the decision making process.
Parker has obviously drafted the proposals wearing most of his Ministerial hats at once; Associate Finance, Environment and Trade.
He has already struck problems with his move on banning overseas house sales with strong objections from Singapore.
He looks to have taken more care on the foreign policy implications this time around.
“Why do countries always reserve in their trade agreements routinely reserve the ability to screen in the name of security,” he said.
“Most other countries give effect to it through their screening regimes.
“New Zealand hasn’t until now, but we under this announcement are.
“Is there any economic benefit to New Zealand, allowing some of these infrastructure assets that have monopoly characteristics to pass into overseas ownership?
“And if it’s arguable, sometimes the answer will be no.
“ And the downsides will be real.
“And therefore, we think the Government should in those situations, have it within their discretion to say no.
“And at the moment, the Government doesn’t have that discretion.
“So it’s not saying they would always be turned down.
“It’s just at the moment; there’s no ability to do so.”