Parker DavidOVERSEAS INVESTMENT (FORESTRY) AMENDMENT BILLSecond ReadingHon DAVID PARKER (Minister for the Environment): I present a legislative statement on the Overseas Investment (Forestry) Amendment Bill. DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon DAVID PARKER: Thank you Mr Speaker. I move That the Overseas Investment (Forestry) Bill be now read a second time.DEPUTY SPEAKER: It's the (Forestry) Amendment Bill"—can you just read that again.Hon DAVID PARKER: The Overseas Investment (Forestry) Amendment Bill. DEPUTY SPEAKER: Yeah. Hon DAVID PARKER: Sorry if I misread that to the House. Do you want me to repeat that or is that OK?DEPUTY SPEAKER: No that's good.Hon DAVID PARKER: Thank you. First can I thank the Finance and Expenditure Committee for their efficient and effective deliberation over the bill. I'd also like to thank the 25 submitters who took the time to consider the bill within a shorter window than normal and I'm sure those submissions assisted the committee in its deliberation.Before I get into those submissions some context. In 2018 changes were made to rules relating to overseas investment in production forestry. Those changes struck a balance we wanted to facilitate investment in the forestry sector by minimising the regulatory burden while ensuring we closed gaps in the screening regime for investment forestry. That's why on the one hand we required overseas investors acquiring forestry via forest registration rights to apply for consent under the Act.Forest registration rights allow an overseas investor to plant and harvest forestry on someone else's land sometimes for multiple rotations lasting many many years. They can have very similar effects to long-term leases or freehold purchases which are controlled under the Act but forest registration rights weren't. So until we made that change overseas investors could acquire forest registration rights without any screening which is a clear way around the rules and effectively made them ineffective. That way around the regulation was increasingly being used and if we hadn't made that change urgently before the Comprehensive and Progressive Trans-Pacific Partnership came into effect we could never have made the change in the future because of the rules in that agreement.On the other hand we recognised that overseas investment is important to support the sustainable growth of the private sector so we at the same time introduced a special forestry test—a streamlined test for overseas investment in production forestry—because we wanted to stimulate that in part because forest planting rates had dropped under the prior Government with the drop in the price of carbon which had stayed at low levels for a long time. We knew that these changes were a delicate balance and that's why we included in the legislation the requirement that the 2018 changes be reviewed. The review found that in the period since much has changed because the carbon price has risen and the Overseas Investment Act has more generally been simplified. For that and other reasons afforestation has taken off.So in this new context the special streamlined process for investment in forestry conversions is no longer needed which is why we have this bill. Again it seeks to strike a balance reflecting this new context by increasing the oversight of forestry conversions by applying the more stringent general "benefit to New Zealand" test in place of the special forestry test and by maintaining the special forestry test for investment in existing production forests.As mentioned 25 submissions were received on the bill and submitters fell into three camps. Some thought we were restricting investment too much and that this could be to the detriment of our economy and our climate change goals. Others thought we should be doing more to restrict the amount of overseas investment in forestry. Those in support who were the third group thought that the bill was an appropriate way to balance managing the risks of the forestation with supporting investment that brings benefits to New Zealand. Submissions also identified areas where further clarification was needed and I thank submitters and the committee for progressing these changes.So turning to the key issues raised some submitters were concerned that the bill could discourage investment negatively impacting forestry investment and our climate change goals. However the bill isn't about stopping investment in forestry; rather it's making sure that the investments demonstrate benefits to New Zealand. Productive investment is and remains welcome. To achieve this the bill requires investors to pass the "benefit to New Zealand" test. This allows consideration of a wide range of factors including the economy the environment historic heritage and public access to the land. In respect of the environment I should say that it is deliberately limited because it's not the Resource Management Act and it should not be primarily an environmental test under the Overseas Investment Act. That is for environmental legislation that applies to overseas investors and New Zealand and visitors alike. Anyway applying this broader test the bill creates incentives for investors to invest in a way that delivers benefits against these factors. This helps channel overseas investment into areas that will result in productive development of the forestry sector to support our economy and to achieve our climate change goals. I do recognise that any change to any law creates some uncertainty. To help with that the regulator will have initial guidance online at the bill's commencement. More detailed guidance as to how the "benefit to New Zealand" test will consider forestry related investment will follow once the changes have had time to bed in.Federated Farmers and some individuals were concerned that the bill did not go far enough to prevent overseas investors converting land into forestry. I'm confident that the risks posed by overseas investment into our most productive farmland can be properly managed in the way that this bill provides. Investors will need to show that the benefits of their land are proportionate to the sensitivity of the land. This proportionality element is appropriate. In practice this means that there will be a higher bar for any investor who wants to convert any of our most sensitive land into forestry. The high bar will apply for example to the most productive farmland the land of the highest conservation value or the land of the highest cultural value. In the alternative in practice a lower threshold applies to lower quality of land—I don't want to criticise the land but different productivity classes of land—where forestry has a range of benefits to New Zealand. This flexibility is baked into the Act and it will mean that investors now have incentives to target their investment into land that is best suited to forestry and to avoid land with high productive environmental or cultural values. The alternative would have been to apply the Act's more restrictive "farmland benefit test". The Government considers the "farmland benefit test" would have not been appropriate for forestry investments. It would have had a negative impact on the forestry sector's access to foreign capital and could have posed and would have posed a disproportionate burden in some cases. The approach taken in the bill is like other exemptions from the farmland benefit test which the Act provides for when that test would provide an undue burden.Finally I briefly note that the Government is also investigating broader regulatory settings. We're considering changes to the emissions trading scheme. The climate commission has recently reported on that and in addition we're considering improvements to the planning and environmental regulation of forests. I acknowledge members of the select committee who are concerned about the monitoring of the 1000-hectare exemption for forestry rights. I've asked officials to report back to me on this matter and I will ensure the committee is updated in due course. I commend the bill to the House.DEPUTY SPEAKER: The question is that be motion be agreed to."