It is time for a rethink of our overseas investment laws. Debate has raged for years about the existence and operation of our foreign investment approval regime under the Overseas Investment Act.
To an extent, the regime stands contrary to New Zealand's liberal stance on free trade and its stated appetite for foreign investment; although on closer analysis, very few applications are declined (in fact, official statistics show no declines in 2014 or the first quarter of 2015).
Given this, the regime generates unnecessary cost, frustration and delay, especially in circumstances where a business is already foreign-owned and the new owner is looking to inject additional expertise and capital into our economy.
Two key changes are required.
The scope of the Act, particularly around the definition of "sensitive land", should be narrowed to capture fewer transactions.
And more resource needs to be committed to processing applications in a timely fashion.
The Act requires clearance for business transactions with a value of more than $100 million ($496 million for Australian investors) and in relation to "sensitive land" where there is no monetary threshold. Business applications are typically uncomplicated and faster to process.
Certain types of land investments are genuinely sensitive -- large tracts of farmland for instance, but also coastal and high-country land.
These should be protected for New Zealanders by a suitable regime.
However, "sensitive land" should be more narrowly defined. Many significant business transactions are caught by the regime merely because of an incidental land interest which has no real sensitivity and is of little value to the public.
Some of the examples we have seen in recent years seem very difficult to justify -- including short term leases of retail premises in a historic building, land next to railway lines but separated by a narrow marginal strip of land leading to a distant and uninteresting public park, industrial premises next to land containing a tertiary institution with dozens of buildings but one that is historic.
Sensitive land applications require the foreign investor to establish that their investment creates a "substantial and identifiable" net benefit to New Zealand.
They do this by reference to criteria specified in the Act, such as export earnings and job creation. The 2012 litigation flowing out of the Crafar farms saga now means the information presented by the foreign investor must be assessed against the benefits that should flow from a notional New Zealand investor.
Applications have become substantial and the Overseas Investment Office has been burdened with the difficult role of assessing complex business transactions against the criteria mentioned in the Act.
The Act does have advantages. It provides the Government with a monitoring tool.
It discourages certain types of potential investors from even attempting to buy land or assets -- no doubt the reason for the low decline rate. In addition, foreign investors are made to articulate and are, to an extent, locked into ensuring that stated benefits flow from OIO approved business transactions.
However, it is doubtful these benefits originate out of the regime itself.
Most acquisitions take place with an aim of growth and development. Capital expenditure, the opening of new markets and the introduction of new technology are typical by-products of this aim. There just doesn't seem to be any point in capturing so many of the transactions currently processed.
It is also important for business efficiency to reduce the cost and substantial delays of many applications. Certain land-based applications attract a filing fee of more than $22,000. The professional fees, and specialist reports required to prepare and accompany applications are usually greater than this.
The extraordinary amount of detail required means applications are time-consuming to process.
The OIO has the target of assessing 90 per cent of assessed applications within 50 business days of active consideration. The percentage of applications meeting that target from July 2014 to March 2015 was 73 per cent and some transactions are taking six months to process.
This is too long. More resource needs to be committed.
The net effect of lengthy processing times is to discourage or defer the introduction of the very benefits that underpin applications made by foreign investors -- in nearly all cases, by many months.
• Michael Pollard is a partner at Simpson Grierson.