SpeechOVERSEAS INVESTMENT (EXEMPT INVESTMENT FROM OECD COUNTRIES) AMENDMENT BILLFirst ReadingDAMIEN SMITH (ACT): I move that the Overseas Investment (Exempt Investment from OECD Countries) Amendment Bill be read for a first time. I nominate the Finance and Expenditure Committee to consider the bill.ASSISTANT SPEAKER (Hon Jacqui Dean): No. I'm sorry. I need the member to read exactly what is written on the page.DAMIEN SMITH: I move That the Overseas Investment (Exempt Investment from OECD Countries) Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill.It's important that New Zealand is an attractive country for investment which will in turn support greater levels of productivity jobs and higher incomes in the future. What this bill does is it removes barriers to foreign direct investment (FDI) from OECD countries noting for the first time one of our largest sources of investment is not driven by a military ally. It does this by exempting OECD investors from being cleared by the Overseas Investment Office (OIO) with two key exemptions of a national security test around strategic business and it exempts residential land.How will this happen? The OECD countries will be added to a list of exemptions in the Overseas Investment Act. There are over 38 countries now in the OECD. New Zealand joined in 1973 and it would be a fitting tribute after 50 years to lead an initiative that countries can connect with New Zealand in a deeper fashion.The current regime forces the vast majority of FDI to be cleared by the Overseas Investment Office which places a needless barrier to investment even when there's very little risk involved. Foreign direct investment is crucial for New Zealand's small economy. Numerous studies have proven that high levels of FDI result in higher productivity higher innovation and an overall increase in the quality of life for all citizens. To grow and prosper in a competitive world New Zealand should be a prime destination for foreign direct investment. This bill will exempt investors from democratic countries within the OECD from the need to receive OIO approval to invest here except in respect of investments around land residential land and strategic businesses. These businesses and investments would still be subject to the call-in regime where national security interests are at stake. It's important that New Zealand is an attractive destination globally and it's interconnected for investment long term. This provision would streamline the process for investors from OECD countries to bring capital into New Zealand.Membership of the OECD is restricted to countries committed to preserving and advancing democracy and freedom of markets. Many OECD nations are natural allies on national security issues are the least risky source of investment for New Zealand and have a large amount of money to bring to the country. They are therefore encouraged by an efficiency allowing resources to be directed to the most valuable use introducing new technology and management techniques that drive domestic competition and productivity growth.Productivity is the sole driver of growing prosperity which is always reflected in rising per capita real incomes. New Zealand has fallen behind in this area and also it is one of the lower quartile countries for foreign direct investment anywhere in the world. Our markets need to be competitive and foreign new capital entrants should not be put off. We already face skill and distance disadvantages and there's no need to compound that with bad policy. It will also improve our balance of payments and allow our interest rates to be managed in a way that makes them competitive at a wholesale level.The latest data from the OECD shows us that one of the most restrictive regimes is New Zealand and that's primarily driven by our incredibly low screening thresholds by global standards. That undermines investment not just by foreigners who are banned from entry but also Kiwis who can't be assured they'll be able to sell their enterprises to the highest bidders and usually end up having to sell to the neighbours in Australia for a lower multiple. We attracted 80 percent less foreign investment per person in 2020 than Australia and we've consistently invested less in capital per person than all but one small advanced economy and all but one English-speaking country. Total foreign investments in New Zealand totalled $500 billion in 2020 of which FDI was $113 billion portfolio investments $221 billion and financial derivatives $18 billion with other investments totalling $77 billion. As we know there are two categories of investment: greenfield and mergers and acquisitions. But just to give you a simple example where the Overseas Investment Act is a difficult and almost terrible piece of legislation is that if a New South Wales pension fund and a Victorian pension fund owns 15 percent of national interest transaction they would have to apply separately and this would take almost a year to complete.Increased FDI is a feature of a modern global economic integrated country. How much FDI you have indicates how much export growth and R & D targets can be sustained and also how deep you are connected with the global trade around the world. Because of New Zealand's shallow capital base we need more FDI to achieve our economic and social goals. Much of this will need to come from overseas investors. We need more FDI to achieve our political and social goals create new opportunities maintain services in health and regional funding of economic growth and jobs of which one in five are FDI funded.We know there are plenty of opportunities for investors and they're very welcome here. We need to make them more welcome. Our highly innovative tech sector is the country's fastest growing. There's deep tech data real innovation in agritech which the Government has supported and we're asking for a wider base to be established. A lot of venture capital is involved in software as a service company tech and many international firms are active here. They just don't have the stability to invest here in a longer-term partnership. There's a high quality food and beverage sector plus big infrastructure builds and data centre developments and we have a big wood-processing sector which we continue under the law to allow trees to be planted.An open investment regime helps keep New Zealand interest rates down as the risk premium associated with investing here is reduced. A move away has a negative impact on our credit ratings and attractiveness to potential trade parties just at a time when it's most needed. We do need an extra leg to our economy which will generate income. This is why the purpose of this bill is to fast track that.New Zealand has been built over the last 150 years on the back of foreign direct investment. It needs to be a global player without tax exemptions to track companies. This is our best way to connect with the world and to bring capital to the country. This can be implemented fast. Exemptions to invest here by pre-approved countries will create a really durable FDI policy framework and be an additional lever for the Government and a new source of long-term revenue and taxes. Higher levels of FDI will allow New Zealand entrepreneurs access to greater levels of finance. This will mean they can invest in new technology innovate and take on the world. Foreign investment in New Zealand means that capital is deployed where it is needed most and an increase in the number of valid investors in businesses and entities in New Zealand can only be a good thing. The other way in which foreign direct investment benefits New Zealand is through spill-over benefits that arguably improve everyone's living standards. This is particularly the case with commercial direct investment. Foreign investment can be associated with negative spill-overs too and that's why this bill exempts residential land and is subject to national security tests. We believe that the biggest barrier to foreign investment isn't a threat by the capital that's out there because we have enough capital around the world; it is by politicians and their interests as parties imposing more restrictions on foreign ownership rules not working on programmes that relate to this country. In that sense this bill is apolitical and wants to derive benefits for all of New Zealand. Thank you for the opportunity to present this bill and I look forward to reaction from the rest of the House.ASSISTANT SPEAKER (Hon Jacqui Dean): The question is that the motion be agreed to.