Officially, New Zealand governments welcome overseas investment. In practice, they do much to thwart it, for no good reason.
Businessman Andrew Barnes highlighted a case in point in an article last week in the Herald. Last year he negotiated the sale of the New Zealand Guardian Trust to a global company, Tricor. The intensive and complex process took 12 weeks.
Then both parties had to wait 22 weeks for the Overseas Investment Office to determine that Tricor was an appropriate buyer under New Zealand’s Overseas Investment Act. Why take so long when the New Zealand Guardian Trust had been overseas owned for much of the last 20 years, with OIO’s approval? To hold a company in limbo for five months is to put it at risk.
The question is particularly concerning because in May 2020 the government had taken some measures to make New Zealand’s regime more efficient.
These measures were summarised well in the Organisation of Economic Co-Operation and Development’s latest Survey of New Zealand that was published this week.
Regrettably, the OECD’s Survey failed to assess the materiality of these measures. Instead, it meekly nudged the government to monitor its changes and to “streamline them further if needed”.
How could the OECD not think further changes were needed? For over two decades now it has assessed New Zealand’s regime to be extraordinarily restrictive. In 2020 only eight of 84 countries were more restrictive than New Zealand on the OECD’s measure.
The key culprit is New Zealand’s onerous screening arrangements. The OECD has deemed them to be the most restrictive of all the measured countries for decades now. In contrast, the UK has no screening restrictions on the OECD measure.
Such undue red tape must make New Zealand firms less entrepreneurial and resilient. To plagiarise one wag, “ when the going gets tough, the tough start applying for resource consents”.
The OECD’s Survey opines that New Zealand’s GDP per capita could be 4% higher in ten years if our regime was no more restrictive than Australia’s. Imagine having a government that would be interested in that.
Final food for thought on materiality. In 2005, the stock of foreign direct investment relative to GDP in New Zealand was marginally higher than in Australia. In 2019, it was 52% of GDP for Australia against an unchanged 38% of GDP for New Zealand. Such differences matter. Ask Andrew Barnes.