COMMENT:

Realpolitik dictates that David Parker will not be so direct — or naive — to admit straight up that the decision to promote a discussion paper on a "national interest test" is due to the coalition's fears that Chinese-backed interests are gaining too large a grip on assets they believe should fit squarely within New Zealand's competitive advantage.

This would be seen as xenophobic and unfair.

But it is instructive that the discussion paper says that strategically important industries (like transport and media) and critical infrastructure (like electricity distribution networks and financial markets) could "provide opportunities for espionage or sabotage, and allow investors to exert inappropriate leverage over New Zealand".

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This gets to the heart of a behind scenes debate that coalition ministers have waged in recent months.

It is sharpened by the debate over Spark's intention to involve Huawei in its upgrade to 5G and the move by the Government Communications Security Bureau (GCSB) to join its American and British counterparts in saying links had been established between the Chinese Ministry of State Security (MSS) and a global campaign of cyber-enabled commercial intellectual property theft.

Go back a decade and the previous National Government was also preoccupied with establishing a "national interest" test.

I wrote then that, "the Government could use its proposed new 'national interest test' to block acquisitions by substantial overseas players — like India's state-controlled Hindustan Petroleum Corp — if Kiwis are uncomfortable about the source of proposed investments.

"That's the upshot of the Government's intention to insert a national interest test into its rewrite of New Zealand's foreign investment rules.

"Overshadowing the still murky criteria is the political litmus — or 'smell test' — which in reality is what most national interest tests are about."

This was July 2009 when newly minted Finance Minister Bill English was advocating that New Zealand should follow Australia and introduce a "national interest test" into our foreign investment laws.

The National Government never did introduce a formal test.

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It ran up against the blunt reality that New Zealand firms were not exactly flavour of the month during the international credit crunch that followed the Global Financial Crisis.

Investment was being courted from China — and elsewhere — to prop up New Zealand firms that may have collapsed without new capital.

But a decade on — after multiple strategems employed by both the National Government (and before it Labour) — to disguise the fact that they were each operating de facto tests — a fully-fledged discussion paper is now out for debate.

The "national interest" test promoted in Parker's discussion paper is comprehensive.

There are multiple options presented. There is also an opportunity for submissions before the coalition Government finalises its position.

It puts Cabinet ministers clearly in the box seat when it comes to having more discretion to approve or reject applications from overseas investors to buy assets.

Importantly — without spelling it out too directly, as the Government clearly does not want to offend major trading partners whose firms are interested in acquiring assets which fit squarely within New Zealand's own areas of competitive advantage — it reserves to ministers the ability to decide on a case-by-case basis whether proposed acquisitions do in fact have economic benefits to New Zealand.

It would also allow "risks to national security" to be examined as well as the effects on international relations from taking a particular view.

It is instructive that at his press conference, Parker singled out the Canadian pension fund's bid to buy Auckland Airport as one of the examples why a national interest test is needed. He told journalists it couldn't be turned down on the basis of it being a bid to purchase a significant business asset. Rather it was blocked under the sensitive land criteria of the Act.

"It was legitimate, but it was absurd," he said.

From Parker's comments it is clear that New Zealand's airports are among those infrastructure assets with monopoly characteristics which the Government believes should not be sold overseas.

He also singled out the sale of the Wellington Electricity Distribution Network to a company associated with Hong Kong billionaire Li Ka-shing as another he would have liked to see considered under a national interest test.

"But perhaps more importantly, if a monopoly asset is earned by an overseas owner, and that overseas owner gets into financial trouble, they may be disinclined to invest in their New Zealand asset, which can be to the detriment of the wider New Zealand economy," he said.

In the background is the fact that New Zealand companies like Vector were aggrieved that a Hong Kong infrastructure company could out compete them on price and operate a tax efficient structure to maintain their investment.

The proposed changes are sweeping. If implemented in full this country's reputation as an open economy for investors will come into question.

But it's worth remembering that New Zealand would simply be joining other nations like Australia in putting its interests first.