Difficulty investing in NZ, study finds

New Zealand operates one of the most restrictive foreign investment regimes in the developed world, missing out on much needed investment, says a new Research Note from The New Zealand Initiative. In Verboten! Kiwi hostility to foreign investment, Luke Malpass and Dr Bryce Wilkinson analyse the latest data from the OECD, finding that despite popular myth, New Zealand actually operates the 6th most restrictive regime of the 55 developed economies measured by the OECD. But it is the sector by sector breakdown that is most worrying. "New Zealand has the most restrictive regime of all 55 OECD measured countries in manufacturing," says Mr Malpass. New Zealand has become comparatively restrictive over the past two decades. Of the four criteria considered by the OECD, almost all of New Zealand's restrictiveness is in the 'screening and prior approval category.' This is entirely due to the Overseas Investment Act 2005. "Bluntly put, New Zealand relies more than any other OECD country on ministries and ministers second guessing investment intentions and possible outcomes, and on the most contrived criteria. A full 35 out of the 55 measured countries had similar no restrictions at all," says Malpass. The Overseas investment Act was meant to retain a liberal foreign investment regime but instead states that 'it is a privilege for overseas persons to own or control sensitive New Zealand assets.' It introduced a 'sensitive land' category of any land over 5 hectares or 0.4 hectares near water. "The definition of sensitive land is absurdly broad," says Malpass. "Many bars and hotels on the Wellington or Auckland Waterfronts are 'sensitive land'; any manufacturing operation with a reasonably sized site or attached freehold land is 'sensitive land.'" Commenting on the research findings, Dr Oliver Hartwich, executive director of The New Zealand Initiative, says: "All New Zealanders bear the cost of high barriers to foreign investment. They raise the cost of capital for all firms and all householders borrowing on mortgages. They reduce New Zealand's economic growth potential. We need an FDI regime that follows international best practice, even if it means scrapping most of the Overseas Investment Act." The report is available here: http://www.nzinitiative.org.nz/fdirestrictiveness.html

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