Smith Lockwood: International Finance Agreements Amendment Bill — First Reading 
Smith Lockwood: International Finance Agreements Amendment Bill — First Reading 
[Volume:639;Page:9088] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 Let me make it clear from the outset that National will be supporting the first reading of the International Finance Agreements Amendment Bill. We are supporting it for good reason. New Zealand is a country that is very much dependent on a dynamic international economic environment. The Multilateral Investment Guarantee Agency which the Minister Dr Cullen has just been referring to is all about helping to promote investment and the security of investment in developing countries. It is in New Zealand’s interests that there is successful investment in developing countries. It is in New Zealand’s interests that the developing countries of the world do well because it is just so important for a trading nation like ours. We are so dependent on that dynamic international economic environment. In my view and in National’s view that is a very powerful reason why we should be supporting this bill. 
Obviously the Multilateral Investment Guarantee Agency does some quite specific things which the Minister has referred to. One of the very important things it does is risk insurance if you like to protect investment in developing countries against some fairly tricky things that can happen. For example in some places where businesses may want to invest at times laws can change and it can be difficult to transfer local currency outside the country in question. If the host Government has a turn of mind and suddenly develops an irrational attitude it can sometimes be difficult to transfer local currency out of there. Investors can therefore lose their investment. So one of the things that the Multilateral Investment Guarantee Agency can help to insure against is that inability to transfer local currency. 
Likewise there is a need to protect against expropriation. If it is possible the act of a host Government can put at risk the investment of an investor in that county. The Multilateral Investment Guarantee Agency can help with protection against that. It can also help with protection against breach of contract. It is even possible for the agency to insure against war and civil disturbance. 
The Multilateral Investment Guarantee Agency ought to—and the experience is that it does—help to promote investment in parts of the world where investment may not flow so readily otherwise. Although some of these places are not the easiest places to invest in it is in the global interest that investment takes place. It sure is in New Zealand’s interest that investment takes place because as these countries benefit from that investment they become trading partners for New Zealand. 
I do not want to speak for the full 10 minutes but I just want to comment that the Minister mentioned the fact that New Zealand has to buy shares. We have to subscribe to 513 shares in the Multilateral Investment Guarantee Agency as part of this process. It is interesting to reflect on the number of shares that we have to subscribe to and how New Zealand is treated in that process. New Zealand will become one of 21 category 1 subscribers. It is interesting to look at New Zealand’s position in the developed world in the OECD rankings and see how other countries close to New Zealand in the rankings are treated in subscribing to the Multilateral Investment Guarantee Agency. The countries closest to New Zealand are Spain which is one place ahead of New Zealand in the OECD rankings in GDP per capita or wealth and Korea which is one place behind New Zealand in those rankings. 
What is fascinating is that those two countries that surround New Zealand in terms of our standing in the wealth stakes of the world if you like are not treated as category 1 countries. It is a measure of the extent to which New Zealand’s wealth or GDP per capita has declined that we are still treated as a category 1 subscriber yet our GDP per capita has us among countries that are actually treated as developing member countries. Both Spain and Korea are treated as developing member countries in their subscriptions to the Multilateral Investment Guarantee Agency yet they have a GDP per capita that is right alongside New Zealand’s. That is a measure of the extent to which economic policy in this country is inadequate. 
It is not just a problem of economic policy alone; there are other factors. For example Britain’s joining the EEC to go way back to 1973 put pressures on New Zealand. But inadequate economic policy has seen us fail to respond to that adequately and has seen us slip down the OECD rankings in terms of the income of our people. This legislation drives it home to us that here we are subscribing as one of the 21 category 1 subscribers to the Multilateral Investment Guarantee Agency with 513 shares to be subscribed to while the two countries next to us—one above: Spain; one below: Korea—are both treated as developing member countries under the Multilateral Investment Guarantee Agency convention of the World Bank. 
We have a lot of work to do as a country. With the Budget coming up in the next few days I hope Dr Michael Cullen in the Labour Government is giving a lot of thought to policy and to how he can stem the decline in our international ranking because since Labour has been in office we have slipped yet another place or two down the OECD rankings. We are now genuinely among the developing member countries as far as the Multilateral Investment Guarantee Agency convention is concerned. That said National will be supporting this legislation because it is in our interests that investment can flow in developing countries and that there can be some protections for those who invest in those countries. It is in our interests that they benefit from international investment. That is why we will be supporting this legislation.