At The New Zealand Initiative, we have long advocated a more welcoming stance towards foreign direct investment (FDI). Our research has consistently shown that New Zealand needs foreign capital to boost growth, and that our restrictive FDI rules have been a major barrier to attracting overseas investment.

So, we were encouraged when the new government promised FDI reform in the National-ACT coalition agreement. Associate Finance Minister David Seymour’s recent announcement of a new directive letter to the Overseas Investment Office (OIO) suggests that the promise is being acted upon with tangible policy changes.

The directive embraces the principle that New Zealand welcomes overseas investment, a crucial shift in mindset. It requires the OIO to adopt a risk-based approach, streamlining approval for most low-risk applications. It also cuts red tape by eliminating duplication between agencies in the assessment process.

The changes should make New Zealand more attractive to foreign investors by providing greater certainty and efficiency. Faster, more predictable processes for low-risk deals will encourage more global capital to consider New Zealand as an investment destination.

But even more promising is the Minister’s signal that this is just the first step in a wider reform process. The next stage will be a full rewrite of the Overseas Investment Act, opening the door to more fundamental changes to the foreign investment regime.

Our 2014 report Open for Business laid out an ambitious agenda for FDI reform. This included narrowing the definition of sensitive land, replacing screening with a notification regime, and abolishing discriminatory tests for foreign investors. The Minister’s three-stage reform plan puts comprehensive changes like these in play.

Achieving such a bold liberalisation will not be easy. Public opinion may constrain the pace and scope of reform. However, the direction is positive, and the government deserves credit for kick-starting the process of modernising our FDI rules.

As the reforms take shape, we will make a case for ambition. Ireland shows the transformative potential of embracing global capital. With the right changes, New Zealand could become a magnet for the world’s most innovative firms and investors.

The government has opened the door to a new, more liberal era for FDI. Now, it is time to step through boldly and make the most of the opportunity.

​A more welcoming FDI regime could be one of this government’s most powerful economic legacies for boosting growth and productivity.