Foreign investment: Govt issues guidelines

Finance Minister Bill English. Photo / Mark Mitchell

The Government has issued guidelines around its new rules for foreign investment in farmland to the Overseas Investment Office, setting a high threshold at which its new "economic interests" test and "mitigating factors" will be given emphasis.

The economic interests factor allows ministers to consider whether New Zealand's economic interests are adequately safeguarded and promoted in proposed farm purchases.

The mitigating factor enables ministers to consider whether an overseas investment provides opportunities for New Zealand oversight or involvement, for example, by appointing New Zealand directors or establishing a head office in this country.

"The letter, sent this week, directs the Overseas Investment Office (OIO) to give these factors high relative importance in any decision of whether overseas investment in large areas of farm land is likely to benefit New Zealand," Finance Minister Bill English said.

The definition for "large" areas of farm land has been set at ten times the average size of any given type of farm. Based on Statistics NZ data, the average dairy farm is 172 hectares, so the threshold will be 1720ha. The average sheep farm is 443ha so the threshold will be 4430ha.

"The new factors are in addition to a range of existing factors and a good character test designed to ensure overseas investment results in genuine benefits to New Zealand," said Mr English.

The new thresholds are cumulative to capture the aggregation of large holdings through a series of smaller transactions.

The rejig of foreign investment rules around farmland was prompted by concerns about potential large purchases of New Zealand farmland such as Hong Kong company Natural Dairy NZ's bid to buy the Crafar family's dairy farms which total 8000ha.

Federated Farmers President Don Nicolson welcomed the new guidelines as "broadly in line with Federated Farmers' emerging policy on foreign investment".

Federated farmers wanted the new tests to apply "only to where there is mass aggregation of farmland".

"This appears to be the case with the Government's new trigger point for the new 'economic interests' factor.

"These trigger points, I feel, go some way to reducing or eliminating the risk of political whimsy, which Federated Farmers had wanted to see in the new rules."

A spokesman for the Overseas Investment Office said the office was unable to provide information around how many applications to buy farms in recent years would have triggered the new tests.

The new rules required the OIO to request and assess additional information from applicants not currently collected, for example, an applicant's existing land holdings and the use of that land.