By Alex Tarrant
Finance Minister Bill English has announced ministers will be given new flexibility from December to reject the sale of 'sensitive' farmland to foreign buyers under a new 'economic interests' test.
However the new flexibility to reject land sales will not apply to applications before December, meaning the bid by May Wang/UBNZ for the Crafar Farms would be judged under the previous rules.
Prime Minister John Key asked for a review of the Overseas Investment Act after public controversy arose around the sale of the Crafar Farms to UBNZ/May Wang, which is backed by Chinese money.
English said there would be two new measures under the benefit test used to assess investments in sensitive land. The Act itself would not be changed, he said. Changes would be to regulations outside the Act.
"A new “economic interests” factor allowing ministers to consider whether New Zealand’s economic interests are adequately safeguarded and promoted," English said.
"This will improve ministerial flexibility to respond to both current and future economic concerns about foreign investment, such as large-scale ownership of farmland," he said, adding there would also be a new 'mitigating' factor to consider.
"A new “mitigating” factor enabling 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."
'Farm values could fall - community ready'
Meanwhile, Bill English told a news conference the new rules could potentially make it harder for farmers to sell their farms.
Ministers will have extra flexibility to consider a wider range of issues – including large-scale ownership of farmland - when assessing overseas investment applications for sensitive land, Finance Minister Bill English says. At the same time, a new ministerial directive letter to the Overseas Investment Office will provide extra clarity and certainty for potential investors about the Government’s general approach to foreign investment in sensitive assets.
“In recent months, ministers have carefully reviewed the current framework for considering overseas investment applications – particularly in light of issues with respect to farmland ownership,” Mr English says. “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.”
The Government last year made several changes to simplify overseas investment rules, cut red tape and speed up processing times for applications. “In the past year, application processing times have dropped to an average of 38 days – down from 63 days in the year to August 2009,” Mr English says. “That has made it easier for local businesses that need foreign investment to grow.
“The second part of our review looked at the Overseas Investment Act itself. On balance, we have decided against changing the Act, because it would cause a degree of uncertainty that would outweigh potential benefits.”
However, the Government has agreed to make several changes to regulations outside the Act.
· Two new measures under the benefit test used to assess investments in sensitive land:
- A new “economic interests” factor allowing ministers to consider whether New Zealand’s economic interests are 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.
- A new “mitigating” factor enabling 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.
- Providing more clarity about the Government’s policy on overseas investment in sensitive assets, to be set out in a new ministerial directive letter from the Finance Minister to the Overseas Investment Office. This will provide advice to the OIO about which factors in the benefit test are likely to be more or less important in assessing particular types of investments.
These changes are expected to take effect from December. They will apply to applications received after this date and will not apply retrospectively.
The Government has also decided to retain the strategic asset test. Although the test has not been used in the two years since it was introduced, on balance ministers concluded that removing it would reduce their flexibility in dealing with investment applications for sensitive land.
“It’s important that we welcome beneficial foreign investment and recognise the positive contribution it makes to New Zealand through increased jobs, capital and access to export markets,” Mr English says.
“At the same time, the Government recognises there are genuine public concerns about aspects of certain types of overseas investment.” “Taken together, the changes I have announced today achieve an appropriate balance.”