'Extra flexibility' for foreign investment

Finance Minister Bill English Photo / Sarah Ivey

The Government has tightened foreign investment rules around the potential sale of big chunks of farmland to overseas buyers in response to public concerns over the bid for Crafar farms.

Announcing the results of a long awaited review of the overseas investment rules and legislation, finance minister Bill English said the Government had decided against changes to the Overseas Investment Act but had introduced "extra flexibility" to consider a wider range of issues including large-scale ownership of farmland.

Mr English said Cabinet had decided against altering the Act before "the real level of public concern arose around the large scale purchase of farm land.".

"So we decided to take the opportunity to make a number of changes to regulation that would help deal with those concerns."

One measure is "a new ministerial directive letter to the Overseas Investment Office " which would provide "extra clarity and certainty for potential investors about the Government's general approach to foreign investment in sensitive assets".

The letter would draw attention to the Government's concerns about "the undue aggregation of farmland by foreign investors " and large scale vertical integration by foreign investors.

"One of the motivators for Government has been the practical reality that over the next few years we could have found a number of existing large aggregated land holdings coming on the market not least of which could have been the South Canterbury Finance related holdings... that's an example alongside the Crafar farms and perhaps others."

However the new rules take effect in Decembe and will therefore not affect Hong Kong company Natural Dairy's bid for the Crafar farms which was initially intended to be the first step in a $1.5 billion vertically integrated dairy production, processing and distribution business selling into the Chinese market.

Among the several changes to regulations outside the Act were a new "economic interests" factor allowing ministers to consider whether New Zealand's economic interests were adequately safeguarded and promoted. "This will improve ministerial flexibility to respond to both current and future economic concerns about foreign investment, such as large-scale ownership of farmland," said Mr English.

Also a new "mitigating" factor mechanism would be introduced, enabling ministers to consider whether an overseas investment provided opportunities for New Zealand oversight or involvement.

The changes are expected to take effect from December and will not apply to existing applications.

"Overall, the measures I'm announcing today strike an appropriate balance. They increase ministerial flexibility to consider a wide range of issues when assessing overseas investments in sensitive land, while at the same time they provide extra clarity and certainty for potential investors and the Overseas Investment Office."

Mr English also said the Government had chosen to retain the Strategic Asset test introduced by the previous Government to block the sale of a large stack in Auckland International Airport two years ago.

Mr English said National's orgininal issue with the measure was that it was introduced half way through the transaction causing potential damage to New Zealand's reputation as a stable investment destination.