Foreign Control - Key Facts

† indicates source. Last updated: February 2017

Note that there are often revisions to official data, leading to some changes to reported data for past years.

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Key Facts

Foreign direct investment (ownership of companies) in New Zealand increased from $15.7 billion in March 1989 to $110.8 billion at March 2016 – over seven times. As a proportion of the total output of the economy, Gross Domestic Product, it has risen from 22% to 44%. Ownership of overseas companies by New Zealand residents has not grown as fast over that period (five and a half times) so net foreign direct investment has grown over eight times from a net liability of $8.8 billion to $72.8 billion, and as a percentage of GDP multiplied over two times from 13% of GDP to 29%.

Foreign Direct Investment from International Investment Position, National Accounts, Statistics New Zealand, InfoShare series IIP088AA. GDP from National Accounts, Statistics New Zealand, InfoShare series SNE038AA.

Foreign owners controlled 36% of the share market in 2016. In 1989, the figure was 19% and it was estimated to be below 5% in 1986.

At March 2015, they owned an estimated 35% of all equity (shareholdings) and 47% of privately owned equity, including shares not listed on the stock exchange.

Foreign investors owned 28% (or $386 billion) of wealth in New Zealand whose commercial net value totalled $1.4 trillion at March 2016. This comprised housing, land, other property, plant, equipment and financial assets owned directly or indirectly by households, government and foreign investors. New Zealand residents owned a further $227 billion of investments abroad. (These totals exclude wealth held by non-profit organisations, shared natural wealth such as rivers, and human and social capital.)

1986, 1987: "Brian Gaynor: New Zealanders buy back their sharemarket", New Zealand Herald, 19 October 2013; and “Brian Gaynor: Potential problems in NZX's high level of foreign investment”, New Zealand Herald, 31 January 2015; 1989-1997: "Corporate Governance Research on New Zealand Listed Companies", by Mark Fox, Gordon Walker and Alma Pekmezovic, Arizona Journal of International & Comparative Law Vol. 29, No. 1, 2012, Table 4, p.16. 1997-2004: "Savings and the Equity Market" - JBWere submission to the Savings Working Group, November 2010, p.2. 2005-2016: Foreign Ownership Survey - New Zealand 2016, JBWere, 5 December 2016, p.2, "Ownership structure of NZX primary listed stocks since 2005". Equity estimates are non-official estimates provided by Statistics New Zealand . Wealth is calculated from Reserve Bank series C22: Household balance sheet; Treasury’s Fiscal Time Series; Statistics New Zealand’s International Investment Position: Directional basis stock of direct investment by country (Annual-Mar), InfoShare series IIP081AA.

In 2016, the Overseas Investment Office (OIO) approved foreign investment totalling $8.9 billion. The average for the decade 2007-2016 was $8.4 billion. Of the $8.9 billion in 2016, $4.5 billion was sales from one overseas company to another (all but $2.2 billion was sales from one to another on average over the decade). Only company takeovers involving $100 million or more need OIO approval, except those involving land or fishing quotas. For private Australian investors the threshold is $501 million in 2017, and is adjusted upwards each year for inflation. Until 1999, the threshold was $10 million, it then became $50 million, and from August 2005 the government increased it to $100 million.

Overseas Investment Commission and Overseas Investment Office.

In 2016, the OIO approved the sale of 362,132 hectares of freehold rural land and 103,731 hectares of leases and other interests in land to foreigners. This is a large increase on previous years: in 2015 the areas were 75,008 and 4,889 respectively. About 337,000 hectares of the freehold land and 89,000 hectares of the leases and other interests in land were from one foreign investor to another. In the decade 2007 to 2016, the average was 131,012 hectares of freehold and 51,177 hectares of leases and other interests in land approved for sale. Statistics on sales of land to overseas interests are poorly recorded and incomplete. Our best estimate is that in 2011 at least 8.7 percent of New Zealand farmland including forestry, or 1.3 million hectares, was foreign-owned or controlled and it could have reached 10 percent.

Overseas Investment Commission and Overseas Investment Office.

"Overseas Ownership Of Land: Far Greater Than The 1% The PM Claims", by Bill Rosenberg (www.converge.org.nz)

Statistics NZ figures, as of March 2016, list the biggest foreign owners of New Zealand companies as being from, in decreasing order: Australia, US, Singapore, Hong Kong, UK, Japan, Canada, Netherlands, British Virgin Islands, Cayman Islands, China, Switzerland, Luxembourg, France and Ireland (though the investments from some countries have been suppressed). All had over $60m in foreign direct investment in New Zealand. These accounted for 95% of foreign direct investment in New Zealand and Australia alone accounts for 51%. Luxembourg, British Virgin Islands and Cayman Islands are tax havens, and Ireland and the Netherlands have been used to avoid tax. A Statistics New Zealand study showed that in 2010, large proportions of the foreign direct investment from the Netherlands, Singapore, Hong Kong and tax havens was in fact from other countries, led by the UK, US, Germany and Canada. In 2016, other tax havens with investments in New Zealand companies include Vanuatu, Channel Islands, Isle of Man, Bermuda and the Bahamas, but the value of their holdings has been suppressed as “confidential”. Bermuda showed a negative investment in New Zealand companies between 2009 and 2011 and data released in 2015 showed it was negative up to 2015 (negative $1.8 billion in 2015), but all values since 2012 have now been suppressed. Germany has also showed negative investment since 2013. Negative investment suggests that the companies may have been loaded with debt to their parents or are technically insolvent.

International Investment Position, Statistics New Zealand: Directional basis stock of direct investment by country (Annual-Mar), InfoShare series IIP081AA. Note that these statistics are compiled on a different basis from those also from Statistics New Zealand above, so the total, $97.4b, does not match. These are compiled on a "directional" basis, based on ultimate nationality of ownership; the above are on a "balance sheet" basis, based on residency of the company. Industry statistics below are also compiled on a directional basis.

Mallika Kelkar. (2011). "The ultimate sources of foreign direct investment (p. 19). Presented at the New Zealand Association of Economists (NZAE) Conference, Wellington, New Zealand. Retrieved from http://stats.govt.nz

The Financial and insurance services sector, which includes the four big Australian owned banks, accounted for by far the biggest part of foreign ownership of New Zealand companies by industry in March 2016, with $34.0 billion. Next was Manufacturing at $14.4 billion. Other industries having more than $1 billion of foreign investment were in decreasing size, Agriculture, forestry, and fishing; Retail trade; Wholesale trade; Rental, hiring and real estate services; Information media and telecommunications; Electricity, gas, water and waste services; Professional, scientific and technical services; and Mining. $16.6 billion was unable to be allocated to an industry because of the way foreign direct investment is estimated, or was suppressed as being confidential.

Source: International Investment Position, Directional basis stock of direct investment by industry (Annual-Mar), InfoShare series IIP080AA - Statistics New Zealand. See note regarding country statistics.

Transnational corporations (TNCs) make massive profits out of New Zealand. These can truly be called New Zealand's biggest invisible export. In the year to March 2016, they were $8.3 billion. Over the last decade they have averaged more than the combined exports of seafood and milk powder. In the decade 2007-2016, TNCs made $78.6 billion in profits from New Zealand. They made an average rate of profit on their shareholdings of 12.0% (10.6% in the year to March 2016). Only 22% was reinvested (only 20% in the year to March 2016). Profits have averaged two and a half times the increase in foreign direct investment holdings each year.

Balance of Payments: Current account primary income (Annual-Mar), InfoShare Series BOP058AA; Current account investment income by sector (Annual-Mar), InfoShare series BOP059AA; and Balance of payments major components (Annual-Mar), InfoShare series BOP055AA – Statistics New Zealand.

Another $8.0 billion left New Zealand in the year to March 2016 made up of investment income from debt and smaller shareholdings (portfolio investment), making a total $16.3 billion. Over the last decade this has averaged more than the combined dairy and forest product exports. More than two out of every five dollars of the $16.3 billion went to the owners of New Zealand’s banking sector: $6.8 billion. The investment income from overseas ownership of the banking sector (“Deposit taking corporations”) after taking account of its small investment income from abroad, accounted for four out of every five dollars of New Zealand’s current account deficit in the year to March 2016: $6.3 billion compared to $7.8 billion. The investment income deficit (income on New Zealand investment overseas less income on foreign investment in New Zealand) has been greater than the current account deficit for all but two years since 1989, which further increases New Zealand’s foreign liabilities.

Exports: Key Statistics Table 7.04 - Value of principal exports (excl re-exports), InfoShare series EXP005AA - Statistics New Zealand.

Foreign investors are not great for employment – they only employ 17% of the workforce (down from 21% in 2000), despite owning a large proportion of the economy. Foreign ownership does not guarantee more jobs. In fact, it quite often adds to unemployment. TNCs have made tens of thousands jobless.

Business demography statistics: Enterprises by industry and overseas equity 2000-15, Statistics New Zealand, available in NZ.Stat.

Foreign ownership has not improved New Zealand's foreign debt problem. In 1989, total private and public foreign debt stood at $47.5 billion, equivalent to about two-thirds of New Zealand’s Gross Domestic Product. As of March 2016, it was $257.1 billion (or $294.6 billion including derivatives), equivalent to 102% of New Zealand's Gross Domestic Product despite all of the asset sales and takeovers.

Source: Statistics New Zealand as follows: International investment position (IIP) (Annual-Mar) – InfoShare series IIP088AA; External lending and debt by sector and relationship (Annual-Mar) – InfoShare series IIP078AA; International non-equity financial instruments by sector (Annual-Mar) – InfoShare series IIP074AA;
New Zealand's A&L - Level 3 Components (Discontinued March 2000) (Annual-Mar) – InfoShare series IIP007AA; GDP(P), Nominal, Actual, Total (Annual-Mar) – InfoShare series SNE038AA.

* Non-official estimates provided by Statistics New Zealand with the following caveats:

Sector estimates are based on current available data sources Annual Enterprise Survey (AES) uses specific line-codes which are not normally released at this level Non-household sector equity estimates have not been fully analysed - therefore we expect some revisions when this is completed Extended savings data from the Household Economic Survey (HES) - Household Net Worth Survey due to be released next year will be confronted with current estimates and may result in revisions.

Value is calculated by the author by removing double counting due to enterprises themselves owning shares, and this can be approximate only.

 

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