Overseas Investment Review
HERE WE GO AGAIN
Cargo Cult Mentality Behind Drive To Liberalise Foreign Investment Law
News that the Government plans to urgently review by the 2005 Overseas Investment Act, with a view to further liberalising it, comes as no surprise. The review is due to be completed by the end of June 2009, so the Tories are in a hurry to prove their credentials to their mates, the transnational corporations (TNCs). Nor was it any surprise that the Prime Minister made the announcement at the Act Conference. This is another example of the Act tail shaking the National dog (or maybe that dog was a wolf in disguise). John Key campaigned on a policy of changing very little from what was the status quo under Labour and since winning power has systematically set about changing as much as possible. Along with moves towards privatisation in areas such as ACC, infrastructure and prisons, emasculating what is left of an “oversight” regime for foreign investors is part of that process.
New Zealand already has one of the most liberal foreign investment laws in the world, which was last “liberalised” only four years ago. The cover story of every Watchdog from 2003-05 inclusive chronicled CAFCA's campaign against what became the present Act, plus details of what is in the Act itself. You can refresh your memory at http://canterbury.cyberplace.co.nz/community/CAFCA/OIReview/OIReview.html . If the door is already left permanently unlocked, with a sign saying “Come On In and Help Yourselves”, this proposed law change will simply rip the door off its hinges (and probably offer it for sale as well, at a bargain price).
Who Is Behind It?
It is instructive to know who is behind the drive for such further “liberalisation”. Obviously the likes of Act and National (the Maori Party, which is also in the governing coalition, has been conspicuously silent about the whole subject). The Treasury ideologues, who were not given free rein during Labour's nine years in power, are making up for lost time. They didn't get things all their own way when Michael Cullen drove through the 2005 Act – for instance, Treasury argued that there should be no threshold above which foreign investors need to seek permission of the Overseas Investment Office , in other words that foreign investors should be treated exactly the same as NZ ones. Labour was not prepared to go that far and Cullen recommended to Cabinet that the threshold be $250 million. That made the Labour caucus nervous, as it was feeling the heat of public opinion, so the threshold was set at the present $100 million (bear in mind that as recently as just before the 1999 election it was $10 million, which was increased to $50 million and now $100 million. Presumably the sky is the limit as far as National is concerned). Treasury, with ex-Treasury boy Bill English as its Minister, is back in the driving seat and will be aiming to get its agenda enacted this time.
Influential law firm Chapman Tripp, which does very nicely out of acting for the TNCs and foreign land buyers, produced a February 2009 lobbying paper entitled “Removing The ‘Muddle' From the Overseas Investment Act”. The Government's terms of reference for the review bear a striking resemblance to what is urged in that paper. And foreign investors themselves are leaning on the Government. For example, Farhad Vladi, who buys and sells islands around the world (including NZ) on behalf of rich owners, told the New Zealand Herald that the present regime “had the effect of actively discouraging foreigners from buying our islands. ‘There's a resistance. We have learned that for so-called sensitive land, foreigners are not welcome'” (4/4/09, “Kiwi isles could be snapped up”, Anne Gibson ). Bill English is happy to oblige. “He wants sensitive land redefined ‘to ensure that only land of particular significance or importance to New Zealand is screened” (ibid.). As I said in the same Herald article: “Allowing islands to be flogged off to become someone's personal plaything is especially egregious because they are such an iconic part of the national landscape. Where do we stop? Shall we allow Great Barrier or Waiheke to be sold? How about Rangitoto? Perhaps Stewart Island ?”
Government Hasn't Noticed That It's Not Business As Usual
But the ironic thing is that it may not make any difference. One glaringly obvious fact about the National/Act government is that it has only a passing acquaintance with reality. It seems to have escaped its notice that the global capitalist economy is undergoing a major crisis and that retrenchment and sheer survival are currently higher priorities for many of the very TNCs whose dominance of that economy has got us into the mess we're in. Investing in NZ, regardless of how much easier it is made, is probably not on top of their To Do list at present. The global economic crisis is the reason that foreign investment in NZ nearly halved in 2008, with the Overseas Investment Office approving deals worth $10.2 billion (as compared to $19.1 billion in 07), not because of “red tape” in the approval (read “rubberstamping”) process.
The Government's actions in this area (as in so many others) are further evidence of its desperate cargo cult mentality. The original cargo cultists in the Pacific were so impressed with the “cargo” that came from the sky during WW2 that after the Americans had long gone, they built “airstrips” in the bush and patiently waited for the “cargo” to come back and solve all their problems. That's what the Government is doing with this proposed law liberalisation – building the airstrip and waiting for the cargo to come back out of the sky and solve all our problems.
It shows no recognition of the fact that dependence on open slather foreign “investment” (“takeover” being the correct word), free trade agreements and globalisation, by both National and Labour governments, has done nothing except turn NZ into a branch office economy, a country which has been recolonised by transnationals. Globally, the dominance of that voodoo economics has landed the world into the deep hole from which it is currently trying to escape.
Some Good News: US Postpones Negotiations On Free Trade Deal With NZ
Countries such as the US are facing this painful reality, however reluctantly, and are re-evaluating previous policies, which is why it has indefinitely postponed negotiations with NZ on the proposed Free Trade Agreement. That is one real piece of good news in this whole sorry saga. The Obama Administration is reviewing the whole model of free trade agreements that it inherited from the unlamented George Bush. Jane Kelsey , speaking on behalf of the Action, Research and Education Network of Aotearoa (ARENA), called for a similar review in NZ, saying: “It's time to jettison the simplistic line that 'whatever is good for Fonterra must be good for the country'. These agreements dig us even deeper into the failed model of global free markets, including in financial services, investment and Government procurement. We need to take off the blinkers and look at what this really means for New Zealand ” (press release, 8/3/09, “Obama Administration postpones free trade negotiations with NZ”).
Naturally the Government and Labour, which started this process whilst in Government and trumpeted the likelihood of a US/NZ Free Trade Agreement as the Holy Grail, both see this postponement by the US as a terrible tragedy for “us”. Both major parties think that even more of the same, only “better”, is the answer in regard to foreign investment and free trade policies. Very similar to a drug addict who suffers withdrawal symptoms and insists that the best solution is to give him more drugs so that he can do it all over again.
It must be stressed that the US has not cancelled the proposed Free Trade Agreement with NZ (and the other parties in the existing P4 Agreement, formally known as the Trans-Pacific Strategic Economic Partnership), simply postponed negotiations in order to have a think about it. All this does is to give us some breathing space to mobilise opposition to any such Agreement. And NZ is plunging headlong into Free Trade Agreements simultaneously with several other countries or blocs of countries (such as with the Association of South East Asian Nations, ASEAN). “Free” trade is the other great shiny mirage in the sky for the cargo cultists. Under the various free trade agreements to which NZ is already party, such as with China , any further liberalisation of the foreign investment law cannot be reversed under any future Government.
Time To Do Battle Once Again
It is truly ironic that the front man for this proposed liberalisation is Finance Minister Bill English who, as recently as December 2008, declined a proposed $250 million foreign investment proposal (namely the takeover of NZ Steel Mining Ltd, a subsidiary of BlueScope Steel Ltd, by Cheung Kong Infrastructure Holdings Ltd). Why? “Because CKI did not meet the Overseas Investment Act 2005 criteria of substantial and identifiable benefit which was relevant to the acquisition of business assets which included sensitive land” (Bill English press release, 17/12/08, “Purchase Of NZ Steel Assets Declined”). For full details of this most unusual refusal, see Quentin Findlay's article “Hold The Front Page! Major TNC Takeover Vetoed”, elsewhere in this issue (online at http://www.converge.org.nz/watchdog/20/05.htm).
Those were exactly the grounds used by Labour to stop the Canadian purchase of Auckland Airport in 2008 and they are exactly the grounds that English says the proposed liberalisation is aimed at removing. Funny therefore that he, as the Minister of Finance, had no hesitation in using them to block such a huge proposed foreign takeover only a few months ago. We need more of that sort of pragmatism exhibited by the Government, one which puts the national interest first, and less of the ideological wet dreams of those within its ranks who are still stuck in the 1980s. CAFCAx will, once again, do battle with this latest “liberalisation” of the foreign investment law. Stay posted for details.
This originally appeared in Foreign Control Watchdog 120, May 2009.
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