Media release: Lochinver Station decision shows OIA not fit for purpose
Wellington (17 September 2015): The New Zealand Initiative today said that Cabinet’s blocking of the Lochinver Farm sale to Shanghai Pengxin shows that the Overseas Investment Act (OIA) is not fit for purpose.
The decision goes completely against NZ’s international reputation as a place to do business, but is unfortunately consistent with New Zealand’s poor OECD ranking for openness to foreign investment.
Ministers vetoing the deal cited a lack of economic benefits to New Zealand but ignored the benefits all property owners enjoy when they are free to sell to the highest bidder: the higher price then received.
Savills capital market executive Kevin Richards has been quoted as saying in the context of this case that there is obviously a big gap between what New Zealanders and foreign buyers will pay. The proposed sale price of $88 million compares with a CV of about $70 million.
To ignore the benefit to New Zealanders of this gain is ridiculous from an economic and commercial perspective.
Senior Research Fellow Dr Bryce Wilkinson commented, “If the public do indeed benefit from this decision, fairness and equity demand compensation of the vendor who has been made to bear the cost.”
“This decision reveals the arbitrariness the OIA confers on decision makers. The OIA requires the Overseas Investment Office (OIO) to consider a multitude of potentially conflicting considerations and weight them arbitrarily. Ministers overturned the OIO's approval recommendation because they put different weights on the relevant considerations.”
“Fundamentally arbitrary decisions about investment matters must have a chilling effect on investment, which is an economic harm. Yet this is the OIA.”
The New Zealand Initiative's 2014 publication, Open for Business: Removing the Barriers to Foreign Investment, identified the above flaws in the OIA, amongst others. It called for the OIA to be amended. There should be a presumption in favour of the vendor's property rights. If there is a good public interest reason for stopping a sale, the question of compensation should be addressed.
ENDS
Dr Bryce Wilkinson is available for comment. Please contact:
Dr Bryce Wilkinson
Senior Fellow, The New Zealand Initiative
Phone +64 4 472 5986
bryce.wilkinson@nzinitiative.org.nz
About The New Zealand Initiative
The New Zealand Initiative is an evidence-based think tank and research institute, which is supported by a membership organisation that counts some of the country’s leading visionaries, business leaders and political thinkers among its ranks.
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