Cullen Michael: Overseas Investment Bill — First Reading 
Cullen Michael: Overseas Investment Bill — First Reading 
[Volume:622;Page:18023] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Overseas Investment Bill be now read a first time. 
 I intend that the bill should be referred to the Finance and Expenditure Committee for consideration. The bill proposes the most significant changes to the way New Zealand regulates overseas investment in more than 30 years. On 10 November last year I announced a review of the existing Overseas Investment Act. That Act of course is now some 30-odd years old. The review had two purposes. First to ensure that New Zealand’s approach to the regulation of foreign investment focuses on those assets that really matter to New Zealanders. They include sensitive land fisheries and assets with historical or cultural significance. Second we wanted to ensure that potential overseas investors did not face unnecessary compliance costs and that foreign investment that can make a positive contribution to the economy and to New Zealand is encouraged. 
I guess those criteria with the current way New Zealand regulates overseas investment have some shortcomings. Some overseas business investors are subject to unnecessary compliance costs. On the other hand some investors who want to buy land are required to pass a test that is based only on economic development and ignores other important factors such as heritage value and access to sensitive land by New Zealand people. Further the plans submitted by investors to support purchase consents cannot be adequately enforced. In practice it is often impossible to ensure that they are completed to a reasonable standard or for the courts to impose adequate penalties in the event of a breach. 
The bill addresses those problems through a number of provisions. In relation to land investments a proposed purchase to the unimproved value of more than $10 million will no longer be screened where it is not screened for any other reason. This change is expected to affect only land sales in the main centres’ central business districts and is designed to stop purchasers of small parcels of central city land that is not sensitive from incurring unnecessary compliance costs. The criteria for land purchases will be extended to include any of economic development natural heritage historic heritage or walking access and the appropriate weighting of those criteria for any given purchase will be determined by Ministers. 
Purchasers will be required to submit management plans to take account of the criteria that have been specified and compliance with those plans will be made conditions of consent. So for example where a purchaser is required to develop walking access for the public as part of a consent to purchase and fails to meet that condition the purchaser will face penalties that could ultimately include being required to dispose of the land. 
Land adjoining some non-sensitive reserves will be dropped from screening. The most important of those will be drainage reserves within urban areas. This change is designed to ensure that the regulator focuses on those land purchases that are genuinely sensitive as opposed to most of the ones that I looked at which were around urban subdivisions adjoining drainage reserves and similar areas. 
The threshold for screening non-land business assets will be increased from $50 million to $100 million. That threshold was last adjusted in 1999 when it was increased from $10 million to $50 million. 
Ownership of and access to the foreshore and seabed is an important issue for most New Zealanders—as we have recently been seeing. The bill provides that the Crown will have a new right of first refusal where land includes foreshore and seabed and where such land would otherwise be sold into foreign ownership. The requirements on landholders who would need to comply with that new provision will be set out in regulations. 
The bill sets out what is regarded as sensitive land caught under the new regulatory regime. This includes land adjoining the foreshore or land that adjoins any lakes. It also includes lands over 0.2 hectares on specified islands and any land on other islands. It includes land over 0.4 of a hectare that includes or adjoins conservation land; land that is provided as reserves or public parks; land that adjoins land that makes up the Queen’s Chain; land that adjoins scientific scenic historic or nature reserves over 0.4 hectares administered by the Department of Conservation; land that is subject to heritage orders or land that adjoins such land; land that is a historic place wahi tapu or wahi tapu area or land that adjoins such land; or land that adjoins sensitive reserves. Any land over 5 hectares that is not urban land is also covered by the proposed regime. 
Finally if a proposed overseas investor is seeking to purchase farmland that land must first have been offered for sale on the local open market as provided for under the current Act. The rule makes no changes to the existing policy that investments in fisheries by overseas persons require consent. However the onus for obtaining consent when an overseas person wants to buy a stake of more than 25 percent in fishing quota will now rest with the overseas investor rather than the fishing company as the rules apply now. That brings it into line with the general rules around sensitive purchases. 
I now turn to the new enforcement provisions in the bill. The bill responds to previous concerns that the ex post monitoring enforcement of consents was not robust enough and lacked the necessary disincentives. The onus for monitoring conditions of consent will be on the overseas person who will be required to file statutory declarations to attest to ongoing compliance. 
The bill provides greater flexibility for enforcing non-compliance through a series of progressively stronger penalties. Administrative penalties for late filing of statutory declarations have been introduced as has a new category of civil penalties which can be used to penalise people who profit from breaching conditions or cause loss to others by breaching conditions. Continued failure to comply with consent criteria could result in court orders to comply with consents fines or civil penalties or ultimately to the court ordering disposal of the land. 
For serious offences against the regime individuals could be able to be imprisoned for 12 months and maximum fines have been significantly increased to $300000. The courts will be able to order that a mortgage be registered against any land of a consent holder to secure payment of fines and penalties. 
I believe that this bill will better serve the interests of New Zealanders than the current rules. It will ensure that overseas investors who seek to acquire sensitive New Zealand assets comply with purchase conditions that advance New Zealand’s interests. Failure to comply with those conditions will result in real sanctions. At the same time the bill seeks to remove unnecessary impediments to overseas investment where the assets being acquired are not particularly sensitive. I am confident the bill balances the need to protect sensitive New Zealand assets while recognising that overseas investment makes a positive contribution to the economy. It is with much pleasure therefore that I commend the bill to the House.