As anticipated in prior releases, the coalition Government has today issued a new Ministerial Directive Letter setting out the Government's general policy on, and approach to, overseas investment under the Overseas Investment Act 2005 (Act). This letter repeals and replaces the prior Government's November 2021 Directive Letter in its entirety.
Highlights of the new Directive Letter include:
- A clear shift in policy to strongly encourage overseas investment – the new Directive Letter clearly states that Government policy is to attract overseas investment to grow prosperity for all New Zealanders, acknowledging that New Zealand's investment needs significantly outweigh our scarce domestic capital.
- A direction to the Overseas Investment Office (OIO) to administer the Act in a manner that focuses on realising the benefits of overseas investment to support New Zealand's economic objectives.
- Clear statements that the Government assumes (and therefore the OIO should assume when administering the Act) that overseas investment is both generally beneficial and in the national interest. These statements have implications for the way the benefits test and national interest test is approached.
- A direction to the OIO that if a potential risk identified by the OIO is addressed by another regulatory regime then the risk should be considered to be mitigated unless there is "compelling evidence to the contrary". For example (as noted in the accompanying announcement), there is no reason for the OIO to assess whether mergers will decrease competition, which is already assessed by the Commerce Commission.
- A direction to the OIO that it take a 'risk-based approach' to administering the Act, including placing reliance on statutory declarations made by Applicants rather than seeking to verify information provided, unless there is reason to suspect the information is false. This should improve processing times.
- A direction that the OIO decide 80% of all consent applications within half of the relevant statutory timeframe. This is significant. The accompanying announcement notes that the Overseas Investment Regulations 2005 will be updated to include a new reporting requirement on the extent to which the OIO meets this new objective for timeframes. We have already seen evidence on multiple consent applications decided this year that the OIO is already achieving these much faster timeframes on low-risk applications, as a result of process changes that the OIO implemented at the start of the year.
Time will tell as to how the OIO implements some of these directives in practice, and there will be a learning curve to be traversed by the OIO with the Ministers before the approach settles. The OIO has already released its own update regarding the new Directive Letter in which it comments that, going forward, it will generally require less supporting evidence from applicants and will limit consultation with other Government agencies to specific situations, such as where there are national interest considerations, or where a central risk or benefit in the consent application requires consultation. The OIO also noted resource management consent processes as an additional area where certain risks previously considered by the OIO in the context of some consent applications would now be considered appropriately managed under the Resource Management Act.
The announcement by Minister Seymour accompanying the new Directive Letter contains further points of note. It opens by pointing out that New Zealand is currently rated as having the most restrictive foreign direct investment policy out of the OECD countries in the OECD Foreign Direct Investment Regulatory Restrictiveness Index. It concludes by commenting that the new Directive Letter is part of a three-part process to better enable overseas investment. The first steps have been completed, being the delegation of consent decisions to the OIO and the issue of the new Directive Letter itself. The next step, according to Minister Seymour, will be to "rewrite the Overseas Investment Act".
We will continue working closely with officials and experts as they develop and implement the consultation process and prepare the amending legislation.