Concerns Over New Fast Track Bill for Foreign Investment

National attention is currently directed toward the government’s approach to quickly facilitating infrastructure and mining projects. Finance Minister David Seymour is now advocating for a similar expedited process aimed at foreign investment in New Zealand. However, this initiative has received minimal public scrutiny.

If the Overseas Investment (National Interest Test and Other Matters) Amendment Bill becomes law, it could lead to significant consequences. Public submissions on the bill are open until July 23rd.

The ACT-NATIONAL COALITION agreement promises to amend existing regulations. The goal is to limit ministerial decisions solely to national security issues, thereby streamlining the process.

There are legitimate concerns that piecemeal reforms complicate existing laws, yet the proposed bill introduces its own complexities that could significantly weaken the scrutiny of foreign investments, especially in the forestry sector.

Three-Stage Assessment Process

One aspect of the bill sets forth a three-stage assessment process, assigning regulators from the Bureau of Foreign Investment in Land Information NZ a deadline of 15 days to determine if a proposed investment poses a risk to New Zealand’s “national interests.”

If no risks are identified—or if the initial assessment is not completed in time—the application will be automatically approved.

A “national interest” rating will be necessary for transactions involving fisheries allocations and certain land categories, or other applications deemed significant by regulators. This assessment will reference a “Minister’s Letter,” outlining governmental policies and conditions for approval.

In this second stage, the law’s new purpose is explained as fostering economic opportunities through quicker approvals of less scrutinized investments. Notably, the investor’s track record and capabilities will not be assessed.

If regulators decide that the national interest test has not been satisfied, the Minister of Finance will ultimately make a determination based on several factors.

Concerns About Regulatory Processes

Seymour has asserted that the current investment screening system is inadequate. Yet, the Ministry of Finance’s 2024 Regulation Impact Statement, regarding changes to international investment screening, acknowledges various elements that influence investor behavior.

The statement also recognizes a prevailing opinion that foreign investment regulations should address numerous risks and that keeping domestic ownership of certain assets possesses intrinsic value.

Concerns echoed by citizens include profit movements offshore, job losses, and foreign control over significant businesses. However, this impact statement largely overlooks those factors, focusing only on commitments made by the coalition. The Financial Panel noted “notable limitations” in the quality assurance of the bill.

A more comprehensive review was deemed “infeasible” due to time constraints and the narrow scope required under the coalition’s commitments.

According to a statement from the Treasury, the urgency of implementing this bill leaves key stakeholders unheard. Environmental risks need to be managed via other regulations, including obligations under Te Tiriti o Waitangi.

Testing for New Zealand Benefits Removed

The bill keeps a version of the existing screening regime for housing and farmland but excludes current forestry activities. It also eliminates special considerations for water extraction intended for consumption.

Sensitive lands like islands, coastal areas, and conservation sites will no longer be subject to special screening regulations unless categorized as housing or farmland.

The provisions for specific forestry assessments have generally led to rapid approvals, but they lack accountability regarding the investors’ historical performance or whether profits benefit New Zealand. Conditions such as environmental restoration may or may not be imposed by regulators.

The rationale behind these changes isn’t clearly articulated, but they seem to signify a compromise for support from NZ First. This might have serious implications for forestry communities already suffering from climate-related challenges, potentially amplifying scrutiny and investment terms that could be detrimental.

Long-term Implications

These alterations may also be influenced by New Zealand’s free trade agreements. Some contracts stipulate that the country’s investment strategies cannot be more restrictive than those described in the 2005 Act.

This means once the bill passes, it could create irreversible changes in liberalization, with future adaptations becoming increasingly complex.

Despite these stipulations, other annexes of free trade agreements might provide some leeway for altering screening regulations—although official documents do not address these nuances. This lack of clarity raises uncertainties, stressing the need for broader discussion and analysis regarding the bill and its potential impacts on New Zealand’s investment landscape.