By Tracy Withers
New Zealand tightened rules for major international purchases of farmland and will now require buyers to show how an acquisition benefits the nation’s economy.
The measure will allow the government to respond to current and future concerns about foreign investment, Finance Minister Bill English said today in an e-mailed statement after concluding a review of foreign investment rules.
The decision came after a backlash against overseas buyers targeting farmland, as they seek a foothold in the meat and dairy industries that generate about a third of the nation’s exports. A TV3 poll last month showed 76 percent of respondents wanted rules toughened following reports a Chinese company planned to acquire several properties, including the country’s largest family owned dairy company, Crafar Farms.
“The government decided it should take some measures to deal with genuine concerns that were raised,” English told reporters in Wellington. Today’s move “signals to any overseas investor that where there are significant infrastructure assets, the New Zealand government will be shining a light on the transaction,” he said.
In March, Hong Kong-based Natural Dairy (NZ) Holdings Ltd. said it was in talks to buy as many as 24 more farms. Crafar had appointed administrators in October last year.
English said the government expects more properties to come onto the market at a time when credit is tight, limiting the prospects for local buyers.
Central bank governor Alan Bollard told Agence France- Presse that New Zealand needed to carefully manage its relations with China.
“I’m talking about export of primary product and the extent to which it’s processed in New Zealand and owned in New Zealand, or not,” AFP cited Bollard as saying. “The story in some commodity areas is that already processing is moving to China. There are questions about how much of that is inevitable and how much isn’t and can be done in New Zealand.
“That also relates to commercial relationships with China,” he said, according to the news agency.
As well as the “economic interest” test, the government will also introduce a “mitigating factor” measure to determine whether the investment provides opportunities for New Zealand oversight, such as establishing a head office in the country.
The government will send the Overseas Investment Office a ministerial directive to clarify policy on purchases of so- called sensitive land, which includes areas adjoining the coast or conservation areas.
Last year, the government made changes to speed up processing of foreign investment and announced a review of the Overseas Investment Act, aimed at making it easier for local companies to access funding.It decided to leave the Act unchanged, English said today. That includes retaining the strategic asset test, which the government had planned to replace, as it will enhance the power of ministers to deal with applications. The test was introduced by the previous administration and used to block the foreign purchase of Auckland International Airport Ltd. in 2008.