Plea to free up foreign investment
The right to sell property to anyone across the world should be guaranteed unless ownership triggers national security concerns, says a briefing paper for the new government.
24 October 2023
In a series of research reports in 2013 and 2014, the New Zealand Initiative claims the country’s foreign direct investment (FDI) regime residing in the Overseas Investment Act 2005 (OIA) is among the most hostile towards foreign investment of those measured by the Paris-based OECD, and foreigners’ ability to invest directly in NZ depends on decisions by bureaucrats in Wellington.
It found there is no foundation for fears about foreigners “taking over” New Zealand’s land and resources. The stock of inward FDI as a percentage of GDP is about a third lower than it was 25 years ago. The country’s stifling investment regime reduces the value of NZ’s resources, the briefing paper says.
International data shows that well-managed FDI benefits domestic economies. Countries that invite international investors typically boost their competitiveness by attracting not just foreign capital but also the accompanying technologies, management expertise, and access to overseas markets.
Perhaps not surprisingly, other developed economies like the UK do not have laws like our OIA, the Initiative says.
Instead of broadly prohibiting foreign investment (subject to regulatory approval), other developed countries are more open to foreign investment, subject to national security interests.
I. Abolish the Overseas Investment Act (OIA) After abolishing the OIA, the government should enact a limited protection regime against any kind of foreign ownership that could potentially harm New Zealand’s national security interests.
2. Subject all investors to the same rules All investors, domestic and foreign, should be subject to the same rules. This will create a level playing field and remove any advantage domestic investors may have over foreign investors. This will also promote fair competition and create an environment that encourages investment and innovation.
3. Protect property rights The freedom to sell property to whoever one wishes should be guaranteed unless foreign ownership triggers national security concerns. Where national security is at stake, appropriate compensation should be made to would-be vendors unable to sell their property to the highest bidder.
This will protect the country’s interests and respect property rights.