Wednesday, June 19, 2024

New Ministerial directive takes aim at foreign investment

Associate Minister of Finance, David Seymour, has today issued a Ministerial directive letter to Land Information New Zealand (LINZ) to make consent processing timeframes faster under the Overseas Investment Act. 

“New Zealand is currently rated as having the most restrictive foreign direct investment policy out of the OECD countries in the OECD Foreign Direct Investment Regulatory Restrictiveness Index,” said Mr Seymour.

“Processing times are currently too long, and this poses a barrier for investors. Budget 2024 started to get wasteful spending under control, but in order to have a strong growing economy New Zealand needs to be more welcoming to investment.”

Decisions on consent applications under the general benefit test take 89 days on average.

“This creates uncertainty and impacts the attractiveness of investing in New Zealand. This affects New Zealand businesses that rely on overseas investment for capital or for liquidity. With the new directive letter, we’re making things faster and removing bureaucracy,” said the Minister.

The directive letter sets an expectation that LINZ, the regulator for the Overseas Investment Act, will process 80% of consent applications in half the statutory timeframes for decisions. LINZ will have the full statutory timeframe to process the remaining 20% of consent applications to manage complex and higher-risk applications.

“To accomplish this objective, the directive letter directs LINZ to take a risk-based approach to verifying information and streamlining consent processes. This recognises that the majority of consent applications are low-risk and should be processed more efficiently.”

“We’re introducing a principle that we welcome investment. In order for New Zealand to retain world class public services New Zealand needs to be the preferred destination for ideas, investment, talent. 

“Reduced barriers to investment from people and businesses means greater prosperity for Kiwis. If we want world-leading businesses and public services, we need the money to pay for them. Today’s announcement is part of making this happen.”

The changes also bring balance to how applications are assessed by removing duplication across different parts of government, said Mr Seymour.

“There’s no reason for LINZ to be assessing matters already covered by other domestic regulation, such as whether mergers will decrease competition, which is already assessed by the Commerce Commission,” he said.

“With the new letter, we’re removing bureaucracy to help make things faster. And with LINZ processing low-risk transactions more quickly, it can focus effort and resources on assessing higher-risk applications.”

The new directive letter replaces the previous Government’s directive letter dated November 2021.

“Grant Robertson’s letter was 12 pages, ours is five pages. We’re getting out of the way.”

The letter is in force from today, and all applications assessed by LINZ from this date will be subject to the updated directive letter.

The Overseas Investment Regulations 2005 will be updated to include a new reporting requirement on the extent to which LINZ meets this new objective for timeframes.

The directive letter is part of a three-part process to better enable overseas investment, said Mr Seymour.

“Firstly, fewer decisions be made by Ministers than before however, some high-risk deicsions, including all national interest and national security transactions, will still be decided by Ministers. Secondly, the new letter has been introduced.”

The next step will be to rewrite the Overseas Investment Act, he said.

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