If the Government had courage it would appoint a taskforce to take a lengthy look at New Zealand's foreign investment regime.

A taskforce could investigate the current state of play and come up with recommendations on whether New Zealand needs to specify exactly what its national interest criteria should be - which industries are strategic, how it should treat investment by sovereign wealth funds.

It could examine whether it needs to put a cap on foreign agricultural ownership and make recommendations on joint-venture ownership structures for sensitive assets which vest control in New Zealand nationals.

It could also look at disbanding the Overseas Investment Office (OIO). It is a fundamental absurdity that something as important to New Zealand's prospects as foreign investment is administered by an office tucked away in Land Information NZ.


The OIO's boss is simply too junior to promote foreign investment or make clear in a very public and transparent fashion just what the FDI environment is.

It would make far better sense to copy Australia, which has the Foreign Investment Review Board which includes significant commercial players who not only assess proposed investments but also promote FDI as a necessity for that country's economic development.

Interestingly, the board is serviced by the Australian Treasury and it is the Australian Treasurer who makes the call on high-profile offshore bids which affect the national interest; not two junior ministers as we have here.

One of whom was notably in Afghanistan when the latest Crafar farms approval was issued.

Right now our opaque foreign investment regime is proving to be a stumbling block when it comes to attracting international capital to make the economy hum.

You don't hear much about this in public.

But some potential investors - like Hong Kong's Li Ka-shing, who recently walked away from a multimillion-dollar bid for Powerco rather than jump through the Overseas Investment Office's convoluted hoops - now view New Zealand as "too hard".

This will not affect the Government's own $5 billion to $7 billion IPO programme. The three power companies - Mighty River Power, Genesis Energy and Meridian Energy, as well as resource company Solid Energy - all sit on sensitive land.

But even though a single overseas buyer could potentially acquire shares worth more than $100 million in such businesses, such buyers will have no real influence on their post-float operations.

In any event, the Treasury has done some background work and believes there will be no need for any OIO tussles in this arena.

The Government's lead managers for the IPO programme have high hopes a new "New Zealand Story" will emerge - particularly given the renewables profile of Mighty River Power and Meridian and the fact that we will be launching major IPOs at a time when there has been a dearth of major floats across the Tasman. This will not only lead to international investment in the five government companies but also excite interest in the proposed Fonterra's Shareholders' Fund and key privately listed companies.

But out in the private sector it's not so simple.

Local capital markets players are highly critical of the OIO's handling of major overseas applications to buy New Zealand assets. Comment is muted as none of the market players want to get attacked by snake-oil politicians for having a vested interest in clarifying the rules.

Shanghai Pengxin's successful bid to buy the 16 Crafar dairy farms for in excess of $200 million has hogged headlines.

The Shanghai Pengxin camp has gone quiet over the Crafar farms transaction. It has refused to spell out either whether the deal it struck with receivers KordaMentha has now gone unconditional (it was dependent on OIO approval) or whether it has finalised the transaction.

It would seem eminently sensible to get the deal done asap as it would be much harder for the Michael Fay-led consortium to try to get an injunction to prevent Shanghai Pengxin and Landcorp from operating the 16 dairy farms if the financial transaction is complete. But even before Fay threw a legal spanner in the Chinese firm's works, there were concerns over the OIO's processes.

Fundamentally the OIO is seen as too slow to approve applications; the timeframes for decision-making are unpredictable; it is seen as second-guessing Cabinet ministers who, in any event, are getting too much involved in the decision-making process when it comes to politically sensitive assets such as the Crafar farms, or before them, Auckland International Airport.

But don't look to the Government to review the OIO's operations, or introduce a transparent foreign investment regime which leaves overseas players in no doubt on how their applications to buy New Zealand assets will be treated.

It suits the Government to leave things as they are because it believes any attempt to overhaul the Overseas Investment Act to reflect New Zealand's strategic national interests will just court more political problems for it.

Investment players suggest the sensitive land provisions need to be separated more clearly from foreign investment aspects of the act. At present, a non-agricultural business which is adjacent to sensitive land gets drawn into the OIO process. Even if there is no appetite to revisit the act, then they say there should be a way to avoid non-rural investment proposals being referred to the OIO simply because a minor part of the deal is adjacent to "sensitive land".

In China's case "NZ Inc" needs to be proactive about the kinds of large investments it wants from China and the sectors. And that they be bundled up with the necessary consents and Treaty aspects sorted in advance.

They also note MED's NZ Petroleum and Gas (the old Crown Minerals) taking a proactive approach in putting forward large blocks of land for mineral exploration out to tender, rather than relying on the previous reactive approach.

But all of this time-consuming process would not be necessary if the FDI regime was clearly stated.

At a time when the New Zealand Story is finally about to be relaunched it is a pity that the politicians lack sufficient courage to sort out the regime.