Why Has A Bill To Relax Foreign Investment Rules Had So Little Scrutiny?
If the Overseas Investment (National Interest Test and Other Matters) Amendment Bill becomes law, it could have far-reaching consequences. Public submissions on the bill close on July 23.
A product of the ACT-National coalition agreement, the bill commits to amend the Overseas Investment Act 2005 'to limit ministerial decision making to national security concerns and make such decision making more timely'.
There are valid concerns that piecemeal reforms to the current act have made it complex and unwieldy. But the new bill is equally convoluted and would significantly reduce effective scrutiny of foreign investments – especially in forestry.
A three-step test
Step one of a three-step process set out in the bill gives the regulator – the Overseas Investment Office which sits within Land Information NZ – 15 days to decide whether a proposed investment would be a risk to New Zealand's 'national interest'.
If they don't perceive a risk, or that initial assessment is not completed in time, the application is automatically approved.
Transactions involving fisheries quotas and various land categories, or any other applications the regulator identifies, will require a 'national interest' assessment under stage two.
These would be assessed against a 'ministerial letter' that sets out the government's general policy and preferred approach to conducting the assessment, including any conditions on approvals.
Other mandatory factors to be considered in the second stage include the act's new 'purpose' to increase economic opportunity through 'timely consent' of less sensitive investments. The new test would allow scrutiny of the character and capability of the investor to be omitted altogether.
If the regulator considers the national interest test is not met, or the transaction is 'contrary to the national interest', the minister of finance then makes a decision based on their assessment of those factors.
Inadequate regulatory process
Seymour has blamed the current screening regime for low volumes of foreign investment. But Treasury's 2024 regulatory impact statement on the proposed changes to international investment screening acknowledges many other factors that influence investor decisions.
Moreover, the Treasury statement acknowledges public views that foreign investment rules should 'manage a wide range of risks' and 'that there is inherent non-economic value in retaining domestic ownership of certain assets'.
Treasury officials also recognised a range of other public concerns, including profits going offshore, loss of jobs, and foreign control of iconic businesses.
The regulatory impact statement did not cover these factors because it was required to consider only the coalition commitment. The Treasury panel reported 'notable limitations' on the bill's quality assurance process.
A fuller review was 'infeasible' because it could not be completed in the time required, and would be broader than necessary to meet the coalition commitment to amend the act in the prescribed way.
The requirement to implement the bill in this parliamentary term meant the options officials could consider, even within the scope of the coalition agreement, were further limited.
Time constraints meant 'users and key stakeholders have not been consulted', according to the Treasury statement. Environmental and other risks would have to be managed through other regulations. There is no reference to te Tiriti o Waitangi or mana whenua engagement.
No 'benefit to NZ' test
While the bill largely retains a version of the current screening regime for residential and farm land, it removes existing forestry activities from that definition (but not new forestry on non-forest land). It also removes extraction of water for bottling, or other bulk extraction for human consumption, from special vetting.
Where sensitive land (such as islands, coastal areas, conservation and wahi tapu land) is not residential or farm land, it would be removed from special screening rules currently applied for land.
Repeal of the ' special forestry test ' – which in practice has seen most applications approved, albeit with conditions – means most forestry investments could be fast-tracked.
There would no longer be a need to consider investors' track records or apply a 'benefit to New Zealand' test. Regulators may or may not be empowered to impose conditions such as replanting or cleaning up slash.
The official documents don't explain the rationale for this. But it looks like a win for Regional Development Minister Shane Jones, and was perhaps the price of NZ First's support.
It has potentially serious implications for forestry communities affected by climate-related disasters, however. Further weakening scrutiny and investment conditions risks intensifying the already devastating impacts of international forestry companies. Taxpayers and ratepayers pick up the costs while the companies can minimise their taxes and send profits offshore.
Locked in forever?
Finally, these changes could be locked in through New Zealand's free trade agreements. Several such agreements say New Zealand's investment regime cannot become more restrictive than the 2005 act and its regulations.
A ' ratchet clause ' would lock in any further liberalisation through this bill, from which there is no going back.
However, another annex in those free trade agreements could be interpreted as allowing some flexibility to alter the screening rules and criteria in the future. None of the official documents address this crucial question. As an academic expert in this area I am uncertain about the risk.
But the lack of clarity underlines the problems exemplified in this bill. It is another example of coalition agreements bypassing democratic scrutiny and informed decision making. More public debate and broad analysis is needed on the bill and its implications.
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If there was a 'most prolific blogger while still being consistently thought-provoking' award it would be hard to beat Bomber (Martyn) Bradbury and his The Daily Blog (TDB). His writing is turbo-charged and opinionated but underpinned by powerful compassion and a strong sense of both justice and outrage towards injustice. For me he has been an acquired taste. It took a while and had its moments, but the acquiring proved to be a fascinating journey with the taste acquisition destination reached. I have also appreciated that he republishes my health system (Otaihanga Second Opinion) and politics (Political Bytes) blogs in TDB. He doesn't pull his punches. Occasionally he misses his target but more often he succeeds. He never leaves one wondering what he means. More importantly he invariably raises serious questions which deserve to be addressed. A recent case in point was his 3 July post concerning the challenge of ACT leader and current Deputy Prime Minister David Seymour to the political left in Aotearoa New Zealand: Can the left beat David Seymour and ACT. There are few questions more politically pertinent than this. As Bradbury observes, Seymour has, since 2014, taken ACT from less than 1% to, depending on which poll, a little under or over 10%. However, I have two points of disagreement – TDB's comments on 'woke' and what it means by being leftwing. 'Woke', identity politics and the absence of nuance TDB attributes in part David Seymour's and ACT's relative electoral success to the left allowing itself to be distracted by what it calls 'middle class woke Identity Politics'. I discussed this disagreement over 'woke' in an earlier post (9 October 2023): Structure and superstructure. I considered Bomber Bradbury's then published views on 'woke' too blunt and lacking nuance. Instead I advocated that identity and class politics are better understood in the context of the relationship between structure and superstructure. My criticism was that his argument: …counterposes economic discrimination and oppression to its other forms; it's either class or identity politics! This approach ignores nuance, complexity and layered relationships. In fact, these politics have overlapping layers. The use of the terms 'structure' and 'superstructure' are helpful in this respect. In this context the structure based on the mode and relations of production. Class is defined by its relationship to this production mode. The superstructure, on the other hand, incorporates the various belief systems and ideologies that help rationalise what people do and think (and why), including the law, education systems and religion. This superstructure also includes other forms of discrimination and oppression such as race, sex, sexual orientation and transgender. Sometimes it also includes religion. They exist in a largely capitalist world. But they aren't products of capitalism. They existed in earlier forms of class societies for centuries. It is legitimate to locate them in a superstructure but with an important qualification. To differing degrees, they interact with the underlying structure. Sometimes it is to the extent that it becomes difficult to differentiate. It is these 'superstructural' forms of discrimination and oppression that get labelled as identity politics. The point is not so much the label but whether they are counterposed to class discrimination and oppression or run alongside it, sometimes reinforcing and interactively. A word that should never have been invented A year later (13 April 2024) I discussed 'woke' in the context of a wider discourse on sectarianism: From French Revolution to 'woke'. I concluded by observing that: In my view the word 'woke' should never have been invented….Politics in New Zealand would benefit from a healthy debate on the relationship between class and identity politics. I regard them as interconnected and supplementary rather than opposites. Bomber Bradbury's argument about 'woke' would be strengthened by dropping the term completely (leave it to the political right; it's their political plaything) and instead articulate a more nuanced narrative about identity and class politics. He could take a leaf out of West Indian socialist intellectual and cricket commentator CLR James' 'book' who famously said 'what do they know of cricket if cricket is all that they know'. This could then be turned into 'what do they know of identity politics if identity politics is all that they know'. This could be similarly adapted for class politics. What is leftwing My second disagreement is when TDB refers to the political left in New Zealand it means the Labour Party, Greens and Te Pāti Māori. Unfortunately most of the commentary in the mainstream media around leftwing and rightwing is along the lines that one is what the other isn't; one ends where the other starts and vice versa. This becomes at best bland or meaningless and at worse absurd. Even more unfortunately TDB is uncharacteristically consistent with this mainstream media paradigm. I discussed this question well over two years ago in Political Bytes (30 April 2023): What being leftwing really means. I said that: One way of looking at differentiating between the political left and right is a continuum between collective responsibility and individual responsibility. This leads into the role of the state and to questions over whether healthcare access and educational opportunities, for example, are a right or privilege to one degree or another. …It isn't a bad way of looking at what is left-wing and what isn't. However, it is not enough. We can to better than this. Being left-wing has to be seen in the context of the material system that governs our daily lives. Today in New Zealand, and for the overwhelming majority of the planet, it is capitalism. Wealth accumulation the main driver of capitalism After discussing capitalism's prime driver (limitless wealth accumulation) I observed that: Being left-wing is about wanting to end, or even significantly curtail, the dynamic of wealth accumulation as a driver of societies. This might be through evolutionary or revolutionary means. But what it does require is transformational change. There is a good argument that both the Greens and Te Pāti Māori are transformational (or at least significantly so) this can not be said of the Labour Party. Writing in the context of Labour then being in government, I commented that: Transformational is what the current Labour Party in government is not. It is a political party not of the left but instead of social liberal technocrats with some collectivist impulses. Social liberal values are good and the political left benefits from sharing them. In fact, many people on the political right also share these same values (or at least some of them). In conclusion: …social liberalism of itself does not transform a society which, more than anything else, has wealth accumulation as its dynamic. …The political left needs to expressly differentiate itself from social liberalism in order to overtly focus on economic (as well as social) justice and protecting nature from the ravages of wealth accumulation. If the term 'left-wing' is to mean anything other than not being right-wing or just having some collectivist impulses, then this needs to happen. Bomber's aim nevertheless deadly accurate In his own expressive literary way, however, TDB is right on the mark in describing the effectiveness and interconnections of the hard rightwing Taxpayers' Union, New Zealand Initiative and Atlas Network. TDB is correct in identifying the high level of their lobbying power, particularly through social media describing them as a '…stable of astroturf organisations to generate lobbyist talking points camouflaged as the opinion of the people.' Bomber Bradbury's most telling point, however, is his assessment of David Seymour describing the latter as '… a philosopher before he is a politician and he believes in a far right libertarian economic platform…' Elsewhere he has approvingly quoted leading Labour MP Willie Watson who has described Seymour has the most dangerous MP in Parliament. Again he is on the mark. The reason behind this assessment is that Seymour is a conviction politician; a hard right libertarian. It does not mean that he isn't contradictory. For example, whereas a libertarian might be expected to support small business, Seymour and ACT have a strong orientation to big business, including as donors, with all its consequential anti-libertarian monopolistic traits. But it contrasts with the prevailing opportunism traits of both Christopher Luxon and Winston Peters. Opportunism allows the ability to bend and change somewhat; conviction much less so. In Bomber Bradbury's forthright manner he concludes: The Left [sic] have underestimated Seymour for too long. They need to engage with him in a completely different way and understand they need to push back by offering better solutions and by defining him far more ruthlessly when they do attack him. I agree although I would put it this way. The far right speak in slogans, the rightwing speak in sentences, the leftwing speak in paragraphs, and the far left speak in footnotes. This gives the political right a big advantage. To counter this the political left (plus social liberal technocrats) need to express themselves in plain language sentences that are also translatable into good soundbites. Ian Powell Otaihanga Second Opinion is a regular health systems blog in New Zealand. Ian Powell is the editor of the health systems blog 'Otaihanga Second Opinion.' He is also a columnist for New Zealand Doctor, occasional columnist for the Sunday Star Times, and contributor to the Victoria University hosted Democracy Project. For over 30 years , until December 2019, he was the Executive Director of Association of Salaried Medical Specialists, the union representing senior doctors and dentists in New Zealand.
