Heightened FDI scrutiny in New Zealand . . .
New Zealand’s Overseas Investment Office (OIO) announced yesterday that it will increase the government’s power to block foreign investments for national security reasons. Until now, foreign direct investment (FDI) in New Zealand was screened only for financial measures and corruption. The move comes after a New Zealand China Council survey showed that New Zealanders are concerned about foreign investments, but less so if investments are closely monitored and align with national values. While there is growing concern in the West about China’s investments and use of technology, the New Zealand government made it clear that the move to tighten its foreign investment policy is not aimed solely at Chinese investments.
Security prioritized over economic growth . . .
Through its new ‘national interest test,’ the New Zealand government will screen investments in airports, ports, electricity, military technology, telecommunications infrastructure, media companies, and water bottling, among others, if it senses a threat to its democracy. FDI in New Zealand reached C$96 billion in March 2019, with the largest sources being Australia (C$49B), Hong Kong (C$8B), and the U.S. (C$6B). Despite the dynamic New Zealand economy, some pundits worry that added bureaucracy could delay investments by months, hinder economic opportunities, and discourage businesses in some sectors.
Mitigated effect in Canada . . .
The new screening will only apply to investments of over C$90 million, and C$170 million for CPTPP members. In comparison, Canada reviews investments under its ‘net benefit to Canada test,’ which also includes more lenient treatment for fellow CPTPP members, among others. The Canadian test was implemented in 1984 and, along with a national security review process added in 2009, has focused particular attention on investments by state-owned enterprises and in sensitive technologies posing the greatest security concerns. While the test has been applied to many investments, Canadian distrust in foreign investment remains high. APF Canada’s National Opinion Poll showed in 2019 that 59% of Canadians perceive “too much” high-tech FDI from China. Perhaps low transparency in Canada’s review process limits the effect the process has on public opinion. Nonetheless, it will be interesting to examine what effect the changes in law will have on New Zealanders’ opinions on FDI.