Foreign investment: we can't have our cake and eat it too

There is a growing public anxiety in New Zealand, fuelled by politicians, interest groups and individuals, that foreign investment is a bad thing. Yet, as you read this there is another New Zealand trade mission in China, this time from Auckland, seeking business and investment. By Dr Allan Freeth

During my involvement with the international activities and meetings of Save the Children and the World Economic Forum, I have been struck by the inner turmoil of stakeholders from the old superpowers, Britain and America.

In their heads they realise that the Indian and Chinese economies are coming into predominance. But in their hearts, they cannot give up the idea that they will continue to reign supreme.

Much the same is being seen in New Zealand with the current foreign investment debate.

In the Herald (April 4), Fran O’Sullivan reported on prospect of Fonterra partnering with a Chinese company to develop dairy farms in China. The company, Shanghai Pengxian, is the same one awaiting a government decision allowing it to buy the 16 Crafar dairy farms, around 8,000 hectares of land.

Chief Executive, Theo Spierings was reported observing in jest (so we are told) that he would rather Shangai Pengxian invest in China than in New Zealand. But even in jest, Mr Spierings is perhaps revealing that dilemma the world is facing and the need for us to adjust our cultural sensibilities.

I recognise that land has a special status in the eyes of many New Zealanders, but this is in the face of the sale of thousands of hectares to foreigners, particularly US citizens, over the past few years. I hesitate to suggest that the issue may be a cultural one as opposed to economic, but it is hard to see the extreme result being anything other than some type of xenophobic knee-jerk reaction.

Our growing anxiety about the value of foreign investment is understandable and the confused reactions seem as much a result of the mixed messages we are sending potential investors. The blame being attributed to Justice Miller is both misplaced and unfair, as the real confusion has arisen from unclear legislation and Government intervention.

Last year, I pointed out the inconsistency of the Government’s initiative to encourage greater foreign investment from Australia with the intervention in the telecommunications market that threatened the investment already made by my shareholder, Telstra. The fact that the investment announcement was made on the same day as the telecommunications legislation was introduced to the House, seemed reflective of a Government not connecting the dots for business.

Some of the anxiety about foreign investment is driven by laudable, but in my view misguided, concerns about the environment. But other concerns may be based on a fear that foreign investment, particularly in land, in some way erodes our sovereignty.

Even before the High Court ruling which sent back the Overseas Investment Commission’s decision on the Crafar farms sale, politicians, interest groups and individuals had expressed opposition to the sale of the farms to Chinese interests. Yet, as you read this, there is another New Zealand trade mission in China, from Auckland, seeking business and investment.

I am not sure we can continue a strategy of trying to have our cake and eating it, too!

More importantly, such protests fuel a growing public anxiety that foreign investment is a bad thing. In my view, foreign investment is not simply good for our economy, it is critical to our long term, sustainable economic future.

In March 2009, the Key Government made one of its most important economic announcements when Finance Minister, Bill English, announced a review of the rules governing foreign direct investment. The objective, he said, was to make foreign investment simpler and more attractive while, at the same time, protecting New Zealand’s sensitive land, assets and resources.

A short three months later, Mr English announced a number of decisions aimed at freeing up the environment for foreign investment and, in his words, showing the rest of the world that “New Zealand is open for business”.

In taking the initiative, the Government was demonstrating its belief that foreign direct investment is important to New Zealand’s economic growth and performance, accounting for a significant proportion of GDP and creating jobs.

National went into the 2011 General Election promising more investment in infrastructure, and developing a more export-focused economy, delivering more jobs for young Kiwis.

It would be difficult to find fault with those objectives, and even more difficult to see how they might be met without the continued investment from overseas necessary to support the planned and sustainable development of our resources, including minerals, energy, forestry, agriculture and technical innovation.

Do those opposed to this investment want to tell the rest of the world that New Zealand isn’t open for business? Do they understand global trade and investment is reciprocal, or do they think it is just a one-way street? Do they know that of the $60 billion in FDI in New Zealand, around $40 billion, or two-thirds of the total, comes from Australia, $10 billion from the US and $5 billion from the UK?

Do they know that China’s investment in New Zealand is around $1.8 billion mostly in the forestry sector, followed by manufacturing and commercial construction? Do they really want to send one of the world’s biggest economies a message that their money is not welcome in New Zealand?

Those opposed to foreign investment in our enterprises should consider the investment made by British firms in the nineteenth and twentieth centuries in New Zealand’s meat processing industry.

British owners and shareholders profited by that investment, but if the investment hadn’t been made by them at that time, where would the money have come from to build the plant and infrastructure? And where would our economy be today, if that investment had not been made all those years ago?

The economic contribution from foreign investment is as relevant today as it was then. New Zealanders need to learn more about the importance of foreign investment to our economy and take an active role in the debate on both sides.

Then, if they remain opposed to the idea, let the opposition be based on information and not ignorance, or the fact that they do not know how to deal with a global shift in economic and social power.