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National MPs say law change lets Government scrutinise 'every foreign financial transaction'

Newshub logoNewshub 29/05/2020 Zane Small
a sign in front of a building: Watch as National MP Andrew Bayly argues against passing the Overseas Investment (Urgent Measures) Bill. © Image - Getty; Video - Parliament TV Watch as National MP Andrew Bayly argues against passing the Overseas Investment (Urgent Measures) Bill.

A new foreign investment law change has concerned National MPs who say it gives the Government the power to review "every financial transaction involving a foreign party". 

The Overseas Investment (Urgent Measures) Bill was passed this week with the aim of protecting New Zealand assets - vulnerable during the COVID-19 crisis - from being sold cheaply to overseas investors. 

The law requires foreign investors to notify the Government of certain investments with a controlling stake in an existing business or business assets, even if it is below the ordinary screening threshold of $100 million. 

The Government will assess these transactions and, if necessary, consider whether they are contrary to New Zealand's national interest. If they are, then the transaction can be blocked. 

Associate Finance Minister David Parker used the recent sale of Stuff for $1 as an example of why the law change necessary. He said it was lucky Stuff CEO Sinead Boucher purchased it rather than an overseas investor getting a bargain.  

"It was a management buy-out, but it shows the potential for the sale of strategically important assets at fire-sale prices, and without this legislation, there is no ability for the Government to scrutinise those transactions."

National MP Andrew Bayly said the law change gives too much power to the Government - an argument reminiscent of recent opposition to the controversial legislation setting the framework for the alert level 2 rules.  

The new law will be reviewed every 90 days - but that only came about after a select committee process. Similarly, the controversial level 2 framework legislation was given a 90-day review clause only after National raised concerns. 

Bayly said the foreign investor legislation "allows the minister, and it provides for one minister, to have the right to look at every financial transaction involving a foreign party to come through his or her office". 

National MP Ian McKelvie echoed Bayly, saying "one person, whoever that minister is, is going to be making these decisions" on "every transaction that involves some segment of overseas investment beyond 25 percent". 

McKelvie is concerned about foreigners being put off investing in New Zealand. 

"We've got to remember, in the course of putting these controls in place, that we're really interfering, to some extent, in a property right or a right of people to trade their businesses that they've grown and built as they see fit."

Green MP Eugenie Sage argued the legislation is necessary to "ensure that we don't have key assets, which have dropped in value because of COVID, being alienated overseas".

Under the new law, she said if an overseas investor wants to increase their stake in a company in New Zealand to beyond 50 percent or wants to buy the first 25 percent, then that has to be notified to the Overseas Investment Office (OIO).  

She suggested the Opposition exaggerated concerns about the Government's power to review every financial transaction involving a foreign party.   

"There will be a triaged process that the Overseas Investment Office goes through and determines whether any investments need to be elevated to the Minister of Finance to consider.

"The National Party may not be concerned with iconic New Zealand businesses being snapped up at fire-sale prices by overseas investors, but this Government is."

The Government made changes to the Overseas Investment Act in October 2018 to restrict overseas people buying residential property in New Zealand.

Most overseas people are not able to buy homes in New Zealand, but certain overseas people can apply to the OIO for consent to buy one New Zealand home and live in it.   

Prime Minister Jacinda Ardern has ruled out easing the foreign buyer ban to stimulate the economy during the COVID-19 crisis.  

You can read more about the Government's new law change here

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