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Government introducing a national interest test for foreign investment, to stop strategically important companies being snapped up by foreign buyers at bargain basement prices

Government introducing a national interest test for foreign investment, to stop strategically important companies being snapped up by foreign buyers at bargain basement prices

The Government is fast tracking parts of its reforms to the Overseas Investment Act to introduce a national interest test to the approvals process for purchases of New Zealand assets by overseas entities.

The national interest test was due to be introduced as part of wider reforms to the Act, which will proceed through Parliament over coming months.

However Associate Finance Minister David Parker said the COVID-19 crisis has made it necessary to introduce the national interest test urgently, to prevent overseas investors snapping up New Zealand companies and strategically important assets at bargain basement prices in the wake of the pandemic and the recession which is expected to follow.

The national interest test will apply to any foreign investments, regardless of dollar value, that result in more than a 25% ownership interest, or that increase an existing stake in a New Zealand asset to or beyond 50%, 75% or 100%.

"We need to minimise the possibility that cornerstone businesses in our productive economy are sold in a way contrary to our national interest while the pandemic is causing the value of many businesses to fall," Parker said.

"Hypothetically, with international tourism at a standstill, the value of a significant tourism company may have plummeted and could be low or near zero.

"That value would not reflect the importance of the business, so interim controls are needed to protect our national interest," he said.

Parker said the test was being introduced as a temporary measure that would be reviewed every 90 days.

Once the temporary measure ended, the minimum threshold for the national interest test would be increased to transactions of $100 million or more (or higher if set by the terms of an international trade agreement), as well as investments in sensitive land or fishing quota.

The urgent amendment to the Overseas Investment Act would also provide the Overseas Investment Office with enhanced enforcement powers and the Government was aiming to have the measures in place by mid-June.

"The changes we are introducing do not mean New Zealand is closing the door on foreign investment, only that the Government should have the ability to ensure that such investments are in line with our national interest," Parker said.

"This Government welcomes productive, sustainable and inclusive foreign investment."

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30 Comments

Are those percentages for a single stake, or a percentage of total ownership? If the former, how can they prevent a consortium picking up a controlling interest? If the latter, will we see a secondary market for foreign-owned shares of NZ company?

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"This Government welcomes productive, sustainable and inclusive foreign investment."

Ah well, then, there will be a 100% rejection rate.

How about including that test to the sale of farm land that is land use capability classification (LUC) of 1 to 6 to ensure land suitable for sustainable animal and cropping production does not get locked away in pine forests.

We already have a test in that regard, it's called 'Sensitive Land' and here's the definition;

https://www.linz.govt.nz/overseas-investment/what-you-need-do-if-you-are...

What happened to the test when 50,000+ ha of plantation pine went into dirty dairy mid-2000's!
Not withstanding NZ was primarily forested land before mass burning took place.. Balance approach with fundamental economics with FULL cost of business needs to decide the market, not ideology or out-dated thinking!

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"We need to minimise the possibility that cornerstone businesses in our productive economy are sold in a way contrary to our national interest while the pandemic is causing the value of many businesses to fall," Parker said.

About time too! Get on with it and bring in the bill.

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Agree totally. Australia did this last month as aussie companies were being snapped up by foreigners. This is unprecedented times and kiwi companies that have put their blood and sweat into building their businesses need all the support to get through. There are definitely sharks circling more than the general public will ever know. We also need to encourage made in NZ products over imported.

Yes agree with you too, especially on; We also need to encourage made in NZ products over imported. :)

For decades, general taxpayers in NZ have subsidised low-value sectors by plugging the funding gap for the shortfall from low-wage migrants.

Going forward, why can't we provide the same support to productive sectors instead by targeting fees-free education to areas of essential skills (engineering, IT, building trades, etc.), reforming the outdated RMA and ensuring more of the tax burden is shared by speculators.

Yep. NZ was very very slow on introducing this. But 25%? Sounds too high to me.
On this topic: Silver Fern Farms... Mataura Valley Milk.... What are we thinking????

Maybe we need to encourage Made in NZ goods to be priced at local prices that take into account our wages and standard of living, instead of making us pay international prices for the bits that aren't good enough to be sold overseas.

So subsidise consumers?

No, the price they are being sold internationally is at a profit and includes transport. Local consumers are being ripped off.

Exactly. Every country I have travelled to I have checked the price of NZ butter and without fail it has been cheaper overseas. I saw NZ (export quality we don't even get here) cherries in Cambodia which were cheaper than the much poorer quality version purchased at Pack N Save.

Might want to consider the many ways in which average taxpayers subsidise local producers, only to pay ridiculous premiums here on the same products that are found cheaper everywhere else in the world.

Absolutely. Not sure why this has any temporary measures - if its in our interest to protect our businesses from being picked off right now then why would it not also be in the future?

Good on them for making a start, I'd love to see National put on the spot and have to state their position on this now.

Yes and some accountability and transparency.

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There ought to be an instant rejection if the buyer has anything to do with the CCP

But there are very well run businesses in Taiwan, Hong Kong, Singapore that might want to invest their expertise in NZ. We let them do so and then the CCP gains control over their home country.
Can I assume the NZ National Party has not invested in any Kiwi businesses.

That would be grand. Unfortunately, we are more than happy to let our important infrastructure be run by the likes of Wellington Electricity, which is really CK Infrastructure Holdings, who do the bare minimum to maintain the integrity of such core assets and structure themselves in such a way that they pay a pittance in tax. It's disgusting.

Good government. What does Simon say about what they would have done?

Awesome! Too bad we have next to nothing left to sell off to foreigners.

Plenty of land to sell. Those billionaires need good locations for their mansions (according to Goldsmith). After this shift to WFH, any business can be operated from the warmth of your home.

A step in the right direction. We should have done this weeks ago but at least Govt has made a start. Beware in tumultuous times the vulture buyers who will predate on our current vulnerability. David Parker be more honest: " We encourage foreign investment, not foreign control".

Yes please, and make it retrospective too.

WEL Networks in Hamilton has just announced it is selling the ENTIRE central North Island ultra fast fibre network to an Australian Company. This is an incredibly valuable public asset and must stay that way. Are the board trustees corrupt? Royal Commision into those trying to sell vital infrastructure with no stakeholder mandate!

Ditto that.

Here's the crunch...what if the business wasn't viable to current owners and would go into liquidation and a lack of investment appetite from NZ'ders for said business! There would be a wasted opportunity to prop up a business with capital...

If it is not viable then it will depend on why. It will likely be not viable to foreign ownership too, but their interest will be the foothold here, and run the business at a tax loss for other reasons.

Protection of sovereign assets. A lot of companies will be under stress and may look to a foreign cash parachute. Companies own lots of land so make sense.

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