Policy-makers have been not too fussed about how or where this investment was applied. Much of it therefore has done no more than result in the change of ownership for existing assets.
Among the big arguments in favour of this approach, selling our companies to foreigners would benefit the economy by introducing better management, give these companies better access to overseas technological know-how, bring them into global marketing networks, facilitate their access to capital, and so on.
In this climate, the Overseas Investment Commission quietly got on with the job of considering overseas investment proposals, task essentially requiring it to rubber-stamp applications, according to critics like Winston Peters in the days before he became the minister in charge of the outfit.
Maybe it mislaid the stamp-pad last year, because it declined seven applications for consents, ruling them out on the grounds they were not in the national interest. On the other hand, the commission’s rubber stamp of approval was slapped on to 225 consents during the year. This was 80 fewer than in 1999, but the value of “net” investments increased 17 percent from $3.5 billion in 1999 to $4.1 billion last year.
This “net” figure is among the several changes the commission has made to the presentation of its data, to account for the fact that both parties to transaction it considers increasingly are overseas owned. Its approval for Lion to drag Montana into its lair is but one example.
The biggest “net” investments by value, accounting for 73 percent of the total, were in manufacturing ($1.2 billion); forestry ($1.2 billion); and electricity, gas and water supply ($0.6 billion).
Among the biggies in gross terms were the $5.8 billion “investment” by Norske Skogindustrier ASA’s to acquire Fletcher Challenge Paper.
This deal is splendid example of billions of dollars being pumped into our economy not for new forestry developments that will provide new jobs, but to enable the Norwegians to buy existing assets during the restructuring of Fletcher Challenge.
This is different from asset creation, the sort of investment that builds new economic assets and generates wealth and future prosperity, popularly talked about as “greenfields” investment.
While previous governments were reluctant to intervene to steer foreign money towards greenfields investments, the Clark government has been running several programmes of economic assistance targeted at development. Investment New Zealand’s job is to encourage foreigners to come and look at New Zealand while Industry New Zealand looks for ventures needing seeding and takes serious investors to look at greenfields opportunities.
Those initiatives have been supported by policies generally aimed at maintaining regulatory environment friendly to business, such as the programme to reduce compliance costs, and tax regime designed to encourage research and development investment.
A left-leaning majority of members of Parliament’s finance and expenditure committee wants the Overseas Investment Commission to play greater role in encouraging greenfields investment.
Under existing rules, the commission has to bring the “national interest” into account only when land or fishing quota are involved. To do this, it should consider the creation of new job opportunities, the introduction of new technology and business skills, the introduction of extra investment for development purposes, the development of new export markets or increased export market access for New Zealand exporters, and whether individual investors intend to live permanently in New Zealand.
Government and Green members of the committee recommended extending those criteria to other investment proposals. It also recommended the Government lower the threshold for investment in financial assets from $50 million to $10 million.
National and Act committee members expressed minority view, saying they saw no need to change the commission’s levels of scrutiny.
The status quo may well be preserved despite the majority viewpoint. The Government can’t control foreign investment too rigidly so long as the country is running the huge balance of payments deficits that make the country dependent on foreign money.
There are just two ways of financing these deficits. We can increase our overseas debt or we can sell assets. Thus more and more profits generated here flow out to overseas shareholders, or more and more interest payments flow out to overseas creditors. We also must run interest rate and investment policies that keep foreigners happy.
Meanwhile the commission serves as smoke screen, giving the public the impression it is busy scrutinising, assessing and monitoring foreign investments while its staff quietly grant consents at the rate of around three week.

Bob Edlin is Wellington-based economic commentator and journalist.

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