New Zealand has signed a new investment protocol with Australia meaning Australian firms and investors will be allowed to invest up to NZ$477 million (up from NZ$100 million) here without requiring screening from the Overseas Investment Office.
However the protocol would include a specific provision which preserves the right of the NZ Government to give preference to New Zealanders with respect to any share sales in SOEs, it said in a release from Finance Minister Bill English.
Likewise, New Zealand firms and investors will be able to invest up to A$1.005 billion (up from A$231 million) across the Tasman without screening. No specific time was given for when the protocol would come into effect, although the release from English said it will come into effect once both countries have established the changes in legislation or regulation.
However the thresholds only apply to 'significant business assets', with the screening thresholds for investments in sensitive land and fishing quota remaining unchanged, English said.
Investments in 'significant business assets' are described as:
Non-land investments, such as shares, plant and equipment, which involve a 25 per cent or more ownership stake in business assets worth NZ$100 million or more. Once the Protocol takes effect the screening threshold will move to NZ$477 million. For example a NZ$125 million investment in a NZ$500 million company would require approval, as the investment crosses the 25 per cent ownership threshold in a company worth more than NZ$477 million.
Aus to accept apple ruling, Gillard says
Meanwhile, Australian Prime Minister Julia Gillard said work being done to expand the Trans Pacific Partnership free trade agreement is a stepping stone to an Asia Pacific free trade community which will be as significant as the European Union or North American Free Trade Agreement.
Speaking to the House of Representatives in Parliament, Gillard said creation of such a community relied not just on the efforts of Australia and New Zealand, but foremost on an active and engaged United States. Australia would also work with key emerging markets like China and India, she said.
Gillard said Australia would accept the World Trade Organisation's ruling that New Zealand apples be allowed into Australia, after the 90 year ban was overturned last year.
"We accept the obligations of free trade," Gillard said to the House.
Here is the release from Finance Minister Bill English on the investment protocol:
A new Investment Protocol under the Closer Economic Relations (CER) trade agreement further strengthens the investment relationship between Australia and New Zealand, Finance Minister Bill English says.
Australian Prime Minister Julia Gillard and New Zealand Prime Minister John Key signed the Investment Protocol in Wellington today.
"New Zealand and Australia have one of the most open bilateral economic and trade relationships of any two countries. This relationship is underpinned by CER, which is the oldest and most comprehensive set of trade access arrangements that either country enjoys," Mr English says.
"The Investment Protocol builds on existing goods and services agreements, and aligns CER with other modern, high-quality free trade agreements.
"Australia is both the single largest source of direct foreign investment in New Zealand and is the largest overseas destination for New Zealand investment.
"The addition of investment to CER will cut red tape and compliance costs for investors on both sides of the Tasman."
Under the Investment Protocol, Australian and New Zealand investors will benefit from increases in the screening thresholds above which foreign investments in business assets require regulatory approval.
For New Zealand firms investing in Australia, the screening threshold will increase from A$231 million to A$1.005 billion. For Australian firms investing here, the threshold will increase from NZ$100 million to NZ$477 million. These thresholds will be updated annually based on changes in GDP.
The increased screening thresholds apply only to investments in significant business assets. The screening thresholds for investments in sensitive land and fishing quota are unchanged.
Further information about the Investment Protocol, including the full text, and CER is available on the website of the Ministry for Foreign Affairs and Trade atwww.mfat.govt.nz.
Closer Economic Relations Investment Protocol - Q&A
What are the main advantages of the Protocol?
Once in force, the Protocol will mean that New Zealand investors seeking to invest in Australian business assets will:
Be able to make larger investments before they hit the monetary screening threshold and are required to seek investment approval from Australia’s Foreign Investment Review Board (FIRB).
Be treated equally as well as Australian investors and at least as well as any other foreign investors. (Any exceptions to this have been clearly specified in the Protocol);
Have more certainty that their investments will be protected and will not be treated unfairly.
What are the new screening thresholds?
The new screening threshold for New Zealanders investing in business assets in Australia will increase to A$1.005 billion (up from A$231 billion). The new threshold for Australians investing in significant business assets in New Zealand will increase from NZ$100 million to NZ$477 million.
Are Australian investors currently subject to the same rules under the Overseas Investment Act as other foreign investors?
Yes, Australian investors are currently subject to the same rules as all other investors. That will continue to be the case. However, once the Protocol takes effect, Australian firms will enjoy a higher monetary screening threshold for investments in “significant business assets” than other foreign investors.
What are investments in 'significant business assets'?
They are non-land investments, such as shares, plant and equipment, which involve a 25 per cent or more ownership stake in business assets worth NZ$100 million or more. Once the Protocol takes effect the screening threshold will move to NZ$477 million. For example a NZ$125 million investment in a NZ$500 million company would require approval, as the investment crosses the 25 per cent ownership threshold in a company worth more than NZ$477 million.
Does the Investment Protocol affect investments in sensitive land or fishing quota?
No. Australian investors face the same rules as everyone else under those categories. In addition, if an overseas investor wishes to invest in a significant business asset that also includes sensitive land and/or fishing quota, the investment must be screened.
Will the most-favoured-nation provisions in the FTAs that New Zealand has with other countries mean that investors from those other countries will also be entitled to the benefits of the Protocol?
No. All of our FTAs include provisions that mean that we are not obliged to extend most-favoured-nation treatment with respect to obligations included in pre-existing FTAs. Because the Investment Protocol forms part of the CER arrangements, New Zealand’s very first comprehensive FTA, it is covered by this protection.
When do the Protocol and new screening thresholds come into effect?
Once Australia and New Zealand have both completed processes to establish the changes in legislation or regulation.
Does this mean that New Zealand can’t introduce any policies that might affect Australian investors in New Zealand business assets?
No. Provisions in the Protocol preserve New Zealand’s ability to take measures that could affect investors for a range of purposes. These include fulfilling obligations under the Treaty of Waitangi, to protect human, animal or plant life or health, or to manage a balance of payments crisis. In addition, we retain flexibility to adjust the criteria and factors - under existing investment categories - that must be taken into account when we look at investment applications.
Will the Protocol make it easier for Australian investors to buy New Zealand State Owned Enterprises, if the Government adopts a mixed-ownership model for certain SOEs?
In line with the tests set out by the Prime Minister in his first speech of the year, the Protocol includes a specific provision which preserves the right of the Government to give preference to New Zealanders with respect to any share sales in SOEs [Reservation II-NZ-4].
When was the Protocol negotiated?
Negotiations were announced in February 2005 (by then Finance Minister Michael Cullen and then Australian Treasurer Peter Costello) and were concluded in June 2010.
Where can I find the text of the Protocol and additional information about the Protocol?
The full text of the Protocol will be available on the website of the Ministry of Foreign Affairs and Trade, www.mfat.govt.nz. Copies of a brochure providing an overview of the Protocol, and the National Interest Analysis of the Protocol are also available on the MFAT website.
(Updates with protocol)