The Treasury

Overseas Investment Act 2005

Publication of Ministerial Directive Letter Under Section 35 of the Overseas Investment Act 2005

8 December 2010

Colin MacDonald
Chief Executive
Land Information New Zealand
Private Box 5501
Wellington 6145

Dear Sir

Ministerial Directive Letter

1. This Ministerial directive letter is made pursuant to section 34 of the Overseas Investment Act 2005 (the Act) and directs you as the regulator about:

   a. the Government’s general policy approach to overseas investment in particular sensitive New Zealand assets;

   b. the relative importance of different criteria or factors in relation to particular assets;

   c. the level of monitoring required in relation to the conditions of consent;

   d. the powers of the regulator, with regard to compliance with, and enforcement of conditions of consent;

   e. the criteria for including reserves, public parks, or other sensitive areas on the list required to be kept by you as regulator by section 37;

   f. the intention to reside in New Zealand indefinitely under section 16(1)(e)(i) of the Act;

   g. the acquisition of special land; and

   h. other matters relating to your functions, powers or duties.

The Government’s General Policy Approach to Overseas Investment in Sensitive New Zealand Assets

2. The Government’s overall policy approach to overseas investment in sensitive New Zealand assets is to achieve a balance between ensuring those assets are adequately protected while facilitating overseas investment that provides benefits to New Zealand. While the Government acknowledges the purpose of the Act and the consent regime it establishes, the Government wishes to minimise any unnecessary delays or administrative costs in the consent process. The Government’s general policy approach is to enable those investments that meet the statutory criteria for consent to proceed, by ensuring that they are not hindered by administrative issues and that the regulator’s resources are used efficiently.

3. The Government considers that the benefits of foreign investment can accrue over the long term and for some investments in sensitive land, substantial and identifiable benefits may not occur for a number of years. The Government thus directs the regulator, when considering the factors set out in section 17(2) of the Act, to give equal weight to longer term benefits as to any immediate benefits.

Factors Considered of High Relative Importance for Investments in Particular Types of Sensitive Land

Context

4. The land-based primary sector forms a particularly important part of the New Zealand economy, reflected by its contribution to exports and Gross Domestic Product. The Government has two specific concerns about overseas investment in the land-based primary sector. The first concern relates to overseas investment in vertically-integrated firms which involve production, processing and distribution of products from the land-based primary sector on a large scale. The second concern relates to the aggregation of farm land by overseas investors which may not be beneficial to New Zealand’s economic interests, for example, in relation to New Zealand’s ability to:

   a. be a reliable supplier of primary products in the future;

   b. supply a product to the global economy that forms an important part of New Zealand’s export earnings; and

   c. protect strategic and security interests.

5. The Government has introduced two new factors into the Overseas Investment Regulations 2005 (“the Regulations”) to respond to these concerns: the “economic interests” factor and the “mitigating” factor.

High Importance Factors

6. The Government acknowledges that each application for consent for an overseas investment in sensitive land must be considered on a case-by-case basis and, if section 16(1)(e)(ii) applies, assessed against each of the factors in section 17(2) and in the regulations for relevance to the overseas investment.

7. The decision maker may determine the relative importance to be given to each relevant factor when determining whether an investment will, or is likely to, benefit New Zealand (or any part of it, or group of New Zealanders) and (where applicable) whether the benefit will be or is likely to be substantial and identifiable.

8. Given the importance of the land-based primary sector to the New Zealand economy, the Government directs the regulator that the factors outlined below are of high relative importance to the determination of whether overseas investment in “large” areas of “farm land” (as defined by the Act) will, or is likely to, benefit New Zealand (or any part of it, or group of New Zealanders) and whether the benefit will be, or is likely to be, substantial and identifiable:

   a. Section 17(2)(a)(i)–(vi) – economic benefits;

   b. Regulation 28(i) – the “economic interests” factor; and

   c. Regulation 28(j) – the “mitigating” factor.

9. As an indicative guide, an overseas investment in farm land would be considered “large” if it were to result in the relevant overseas person owning or controlling an area of land that is more than ten times the average farm size for the relevant farm type. The Government does not expect that relatively small parcels of land, for example land brought for “lifestyle” purposes, would fall within this direction.

10. The acquisition of “large” areas of farm land could occur in one transaction or over a number of transactions over time. The Regulations expressly allow the decision maker to consider other investments by the relevant overseas person (see, for example, Regulation 28(e) and (g)). Given the Government’s concerns in relation to overseas investment in the land-based primary sector, the Government considers that existing overseas investments in farm land by the relevant overseas person or the individuals with control of the relevant overseas person (“the Person”) may also be relevant in assessing whether New Zealand’s economic interests will be adequately promoted. The Government therefore directs the regulator that Regulation 28(i) will generally be relevant to overseas investments in farm land and directs the regulator to have regard to the Person’s existing farm land investments in applying that factor. If there is a conflict between Regulations 28(e) or 28(g) and