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Govt mulls abolishing strategic asset test for foreign investors

Thursday 23rd July 2009

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Foreign investors will face much lower hurdles than in the past under proposed changes to the overseas investment regime, Finance Minister Bill English announced today.

Abolished with immediate effect is the requirement to have Ministers consider foreign investment applications on anything other than sensitive rural land or land adjoining waterways - a move that should cut two weeks off application times and reduce Ministerial applications by 40%.

Decisions on all other applications will be handled by the Overseas Investment Office.

More fundamentally, the Government is proposing to do away with the "strategic asset" test inserted by the previous Labour-led Government, on the basis that there was no legal definition of such assets, and most of those which appeared to fit the criteria already had significant measures of protection. The measure had caused confusion and uncertainty without protecting New Zealand's interests.

"Our own stock take shows that unique assets, when overseas ownership might post a risk to New Zealand consumers, are in public ownership or protected by other restrictions," English told a lunchtime meeting of the Trans Tasman Business Circle in Wellington.

"As a final reserve power, we will consider a new national interest test - similar to those in other countries" to balance certainty for investors with safeguards for the New Zealand national interest.

Such tests were common but rarely used in other countries, operating as a backstop to "allow governments, on the basis of credible evidence, to decline an investment application where this is necessary to protect vital economic interests and where these concerns cannot be addressed under existing laws".

"That's a pretty high hurdle," English said.

Legislative changes to give effect to these and other possible changes to the Overseas Investment Act would be ready for introduction to Parliament by September for passage by the end of the year.

Other changes under consideration are a review of the thresholds determining which foreign investment proposals should be vetted at all; a new clause preventing changes to overseas investment rules occurring while transactions are under consideration; and considerably simplifying screening for sensitive land proposals.

As a further immediate measure, ownership changes involving certain types of assets which are already overseas-owned and would therefore not significantly alter the status quo, would be exempt from the OIO process.

English presented the changes as one part of the Government's commitment to improving productivity and reducing barriers to investment and economic growth.

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