Media Release: No reason for rushing ‘urgent’ OIA changes through Parliament
Wellington, 18 May 2020 - More time for scrutiny of the proposed changes to the Overseas Investment Act is needed, particularly when thousands of Kiwi businesses teeter on the edge of bankruptcy.
The Government tabled the Overseas Investment (Urgent Measures) Amendment Bill last Thursday for its first reading on the same day. It gave the public only two fully working days to make submissions. The deadline is 4 pm today (18 May).
A policy report by New Zealand Initiative senior fellow Dr Bryce Wilkinson, called FDI: Unjustified urgency, said this is simply not enough time for proper scrutiny and consideration of the issues and options.
He said the Bill has many concerning features, but the newly-inserted urgent measures look particularly egregious.
Troublesome aspects include new powers for the Minister to prohibit any overseas investments which may be contrary to what appears to be an ill-defined national interest test and dropping the OIA threshold from $100 million to zero dollars.
The latter measure compels the Government to assess changes in equity ownership that may be insignificant in economic or security significance.
“The Government has made no meaningful public interest case for adopting these measures, yet the hurdles they impose can be expected to exacerbate business failures and job losses. This is contrary to the government’s objectives for Budget 2020,” Wilkinson said.
The Government’s reasons for urgently pushing through the amendment to avoid overseas interests buying up large swathes of Kiwi businesses at “bargain prices” as a result of the Covid-19 lockdown.
However, Wilkinson said the only meaningful test of whether a price is a bargain price is whether another buyer would pay more.
“The case for the Bill seems to presume that there are two values for New Zealand assets: the market value and the Government’s value.
“No law is needed to stop people selling shares, houses, cars or any other asset when prices are low,” he said. Sellers are protected by competing buyers, not the law. Moreover, politicians have neither the incentive nor the knowledge to assess whether an asset’s market price is too high or too low
“It is not the Government’s business that needs saving, nor its money which is at stake,” Wilkinson said.
Blocking foreign direct investment (FDI) may be justified in cases where New Zealand’s national security or public health is in jeopardy.
But Wilkinson said these situations are rare and where they occur the cost burden should fall on taxpayers under the benefit principle of taxation. To impose that cost on the thwarted seller is manifestly unfair and opens the way to majoritarian exploitation.
“Rushed legislation for no good reason put the public interest at risk,” said Wilkinson.
“It is offensive to give the public only two working days to respond to legislation of this nature.”
Dr Bryce Wilkinson is available for comments. To schedule an interview, please contact:
Nathan Smith, Chief Editor
P: 021 065 3314