The Overseas Investment Amendment Bill No.3 has been reported back to Parliament from the Finance and Administration Select Committee for its Second Reading. It contains large chunks of new material, much of it about interests in water, but also to relax scrutiny on some forms of foreign investment, to relax controls on investment by foreign governments, and to allow ministers to impose conditions on overseas investments.
ECO argued in our submission to the Select Committee that “benefit” to New Zealand should be defined to make it clear that this means “net benefit”, so that the likely costs and harms from any overseas investment would have to be taken into account.
That issue arose when foreign mining company Oceania Gold was granted approval to buy two dairy farms to use as places to dump toxic tailings and waste rock from their gold mining operations in the Hauraki district. The decision, made by Ministers David Parker (as Attorney General) and Grant Robertson (Minister of Finance), considered a reapplication for such approval. This was after the then Minister of Lands, Eugenie Sage, had declined the application on the basis that the short-term benefits were outweighed by the long-term harms of such toxic waste to be dumped on the land sought.
The Bill as reported back does not change either the definition of “benefit” to “net benefit” or the decision test to “net benefit”. ECO’s view is that the net benefit is the only rational test for a public decision. We also argued the test should be for net public benefit, not simply for private benefit, but the bill put forward for its second reading does not do that either.
The one-eyed test – to consider only benefits, and a narrow range at that, and not to consider dis-benefits, costs, or harms, was the subject of Coromandel Watchdog of Hauraki’s appeal against the Ministers’ decision to grant Oceania Gold’s application approval. That appeal failed on the basis that the absurdity of only considering one side of the ledger was indeed what the law required (Coromandel Watchdog of Hauraki v Minister of Finance & Others  NZHC 2345).
We had hoped that MPs would require a proper evaluation of both the benefits and costs to NZ, broadly defined. Sadly not. As the Commentary Section of the Bill explains in text under the heading “Other proposed amendments to the bill, Clarifying the operation of the benefit to New Zealand test” the reported back version of the Bill reinforces and embeds the one-eyed assessment. This is on the grounds that this would provide more certainty to [foreign] investors and the regulators! Presumably the latter do not want to go to the trouble of “a holistic cost-benefit analysis” as the Commentary notes. This Bill dismisses informed and balanced public decision making. The MPs who redrafted the Bill evidently think that certainty for foreign investors should trump proper consideration of all the costs and benefits, monetary, social, and environmental, and the impacts on New Zealanders.
The main assessment criteria are in Part 1 of the Bill, clauses 6A, 8 and clause 10 (revised section 20). There is some concession in a provision that Ministers have to consider a (very poorly defined) counterfactual. In that case, direct costs can be considered and deducted from the assessment, but not indirect costs and even then there are restrictions on what may be considered – so no environmental harms or costs are likely to be taken into account.
Only when the investment concerns bottled water and other water for human consumption are slightly more considerations allowed.
What the Bill does do is to contain “guidance” and examples that might be followed, and to allow consideration of environmental benefits, employment, and other matters, but not such costs (Cl 8 re Section 16A, Clauses 8 and 9). Clause 9 replaces the original section 17 with a new version.
The result is a confusing mish-mash which most of us will find impossible to tell whether it must or only could be applied and some of the most vital New Zealand interests are put out of consideration.
The Bill continues the conception of “sensitive land” to include farm-land. In the definition of “sensitive” land has been restricted further (Cl10 – new S20). Alarmingly, an existing requirement to advertise farm-land for sale to New Zealanders first, is to be removed for any “unproductive” farm land. As the Green Party notes in its dissenting opinion, it was the requirement first to advertise to New Zealanders the sale of farm-land that alerted people to the proposed sale of the fossil-rich taonga, Foulden Maar to a Malaysian company who wanted to mine that amazing fossil record to make fertiliser in palm oil plantations.
Fishing quota are also included in the considerations.
Just to make the decision making even more confusing and less certain, a new Section 20AA is introduced by Clause 10B, which provides for many “Exemptions from definition” that allow Ministers to waive requirements but provides for such exemptions to be made public with reasons, and then allows Ministers to decide not to make these public, on wide grounds.
There are also large new sections in the Bill, including new Schedules or new Parts in Schedules.
Some of these relate to fresh and sea water areas and interests, with lengthy provisions. Overall the many changes are designed to tip the process in favour of foreign investors, to allow extensive Ministerial discretion to allow exemptions, and to provide for privacy for the applicants and others involved in transactions and secrecy from the New Zealand public.
In ECO’s view, this revised Bill should be reopened for public scrutiny given that it contains a huge amount of new material and new drafting.
You can see this Reported back version of the Amendment Bill here