There is a great myth that New Zealand is open for business and is a very easy place for anyone to invest. Little could be further from the truth – according to the OECD, New Zealand is actually performing very poorly compared to other countries in the race to attract overseas capital.

Out of the 55 countries measured by the OECD’s regulatory restrictiveness index, New Zealand has the sixth most restrictive foreign investment regime in the world – and is far more restrictive than both the OECD and the non-OECD average. New Zealand is now more restrictive than all the ex-Soviet Union states, Latin America, and the Middle-East countries bar Saudi Arabia. China, Indonesia, India and Japan complete the list of five countries more restrictive than New Zealand.

A sector by sector breakdown in Verboten! Kiwi Hostility to Foreign Investment, a new Research Note by The New Zealand Initiative, reveals even more disturbing trends.

FDI restrictiveness comparisons are important precisely because they are comparative measures, not objective standards: New Zealand competes on the same basis as all other nations for capital. Investment restrictiveness is also 100% controlled by government policy, not by less tangible factors such as history or culture. New Zealand operates a very restrictive regime in many different sectors – even where we are competitive; it is in sectors where most other nations also have restrictive regimes.

This should concern New Zealand’s businesses, policymakers, politicians, and indeed, the community at large. Most evidence shows that FDI positively contributes to jobs and incomes in the host country. Countries with higher levels of FDI generally have higher levels of productivity.

You won’t hear any of this from advocates of further restricting New Zealand’s foreign investment regime. There is a ‘free lunch’ mentality that argues ‘New Zealand’ in general benefits from restricting foreign investment which individual New Zealanders don’t have to pay for. This view, although widespread, is mistaken. All New Zealanders end up paying through a higher cost of capital and lower property prices.

New Zealand is a small, young country, it needs foreign capital to grow and will continue to do so in the foreseeable future. This is nothing to be ashamed or scared of; rather, we should be excited about it as the opportunities are immense.

Luke Malpass and Dr Bryce Wilkinson’s Research Note, Verboten! Kiwi Hostility to Foreign Investment, was released by The New Zealand Initiative this week.