19 Nov 2019

Government toughens OIO rules with 'national interest' test

7:01 pm on 19 November 2019
Environment Minister David Parker speaks at Parliament about the government's plan to clean up rivers, lakes and wetlands.

Photo: RNZ / Dom Thomas

The government is to apply a new national interest test to the sale of sensitive and high-risk assets to overseas buyers.

It's part of a suite of new rules announced by the government today to toughen up the rules around invest from overseas buyers.

Associate Finance Minister David Parker said under current rules assets such as ports and airports, telecommunications infrastructure, electricity and other critical infrastructure were not assessed through a national interest lens.

He said as it stood, so long as an overseas buyer was not corrupt and had the financial capability to manage the investment there was no way the government could turn down a sale, but this was to change.

"[There will be] a broad discretion for the government to reach into those transactions when it wants to and decline to approve it where we think it's not in the interests of the country."

Mr Parker said if monopoly assets like those above were to be sold the government should have the right to say they could only go to a New Zealand company.

But Local Government New Zealand president Dave Cull said while he cautiously welcomed the news, care needed to be taken when defining what was, and was not, in the 'national interest'.

"Clearly the devil's in the detail of how that test is determined - what the criteria are.

"What we don't want is a situation where a single minister can just unilaterally say, 'I don't think this is the national interest, therefore, it's a no-go'."

He said he did not want to lose the crucially needed foreign investment in local-body owned assets.

"Recently Napier port was partly privatised and the overseas capital that went into that has been used for vital infrastructure project that otherwise ... wouldn't have happened if the partial sale hadn't gone through."

National Party finance and infrastructure spokesperson Paul Goldsmith said the last thing the country needed was to disincentivise investment.

"Fundamentally New Zealand needs more investment, both domestic and international in order to grow the economy, so we don't want to put anything in the way of that."

He said excessive intervention by the government could cause potential foreign investors to baulk.

"It's the uncertainty and the long process that adds real difficulties to this.

"My simple message is that New Zealanders get their jobs, their opportunities, from somebody somewhere making an investment. And if we have less investment we have fewer opportunities, [and] we need more investment in this country."

Water bottling, military tech and the media

Mr Parker said there would also be more hoops for overseas buyers to jump through before they could purchase a water bottling plant on sensitive rural land.

The government will require considering the impact on water quality and sustainability of a water bottling enterprise.

"The sustainability of the resource is now something that the Overseas Investment Office will be able to take into account and the advice that they provide to ministers as to whether it should be approved or not.

"Currently, that's beyond the ambit of the discretion that the department or the minister have."

The government will also change the rules to apply "call-in power" - meaning it can block the overseas sale of companies that develop military technology for the Defence Force or security agencies.

"The power would only be used to control those investments that pose a significant risk to our national security or public order," Mr Parker said.

The government is also looking to control foreign investment in "significant" media companies "where these are likely to damage our security or democracy".

Enforcement powers are also being improved. The maximum fixed penalties for not complying will rise from $300,000 to $10 million for corporates.

Mr Parker said a bill to implement the changes would be introduced early next year.

Changes in a glance

Announcing the move, associate Finance Minister David Parker said the new powers would include:

  • Protections for ports, airports and communication infrastructure
  • A "call-in" power over sale of strategic assets like military technology firms and defence suppliers
  • Extend sustainability and water quality considerations to water bottling investment
  • The tests could also apply to "significant media entities"
  • Overseas investments in farmland must show substantial benefit to New Zealand
  • Lift corporate penalties for non-compliance from $300,000 to $10 million

He said the moves were consistent with global best practice and would apply to all overseas investors, irrespective of where they come from.

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