Politics

Is the focus on Asian investment in NZ overhyped?

Foreign investment in New Zealand often attracts political controversy - particularly when the money is coming from Asia. However, a new report suggests the fears don’t quite match the reality, as Sam Sachdeva reports.

In any debate about the scale of foreign investment in New Zealand, the most heated arguments tend to come around money flowing in from Asia.

For instance, NZ First leader Winston Peters has not been shy of warning of a growing “land grab” by Chinese investors in our country.

However, a piece of new research from the non-profit Asia New Zealand Foundation has attempted to bring together better information about the scale of - and changes in - Asian investment in New Zealand.

Using data from the Overseas Investment Office and Statistics New Zealand, the foundation makes the case that headlines about the growing influence of Asian investors here are not quite matched by the current data.

According to the research, the cumulative value of all Asian investment in New Zealand is still relatively small - less than 10 per cent of all foreign-owned assets, and about 17 per cent of all foreign direct investment.

The vast majority of foreign investment still comes from Australia (30 per cent) and the UK (19 per cent).

A complicating factor is the difficulty of unravelling company structures: as the report says, a 2015 study found that most Chinese investment was in fact made through companies registered in places like Hong Kong, the Cayman Islands and the British Virgin Islands.

Coupled with the rising number of foreign investments from companies with owners across multiple countries, it’s easy to see why the source of nearly a third of all foreign investments are classified as coming from “various” locations.

Investment primarily in primary

Despite this, the report says the evidence is still “reasonably consistent” in suggesting that the focus on Asian investors is overheated.

That’s not to say their influence isn’t changing. The number of investments approved by the OIO from Asian countries has more than doubled in recent years, up from 12 per cent of all approvals between 2006 and 2010 to 25 per cent between 2011 and 2015.

There has also been a change in where specifically the investment is coming from within Asia: the report speaks of a “relative shift” away from Japan, in favour of China and Singapore.

What about the location and area of investments?

Unsurprisingly, Auckland and Waikato make up the largest single chunk, with 21 per cent of OIO-approved investments going there.

The OIO data also shows that about three-quarters of Asian investment goes into our primary industries and property, with the remainder going to service and manufacturing.

“Crudely put, plants and animals together account for half of all OIO-approved investments from Asia.”

One problem with drawing too many conclusions from the research is what Asia NZ describes as a gap in the data, with no sector-by-sector breakdown for investments which don’t reach the OIO threshold.

As the OIO covers only sensitive assets like land, businesses worth more than $100 million, and fishing quota, that means there’s a paucity of data for the majority of foreign investment in small or medium manufacturing and service industries.

“This issue is too important to New Zealand’s future to be left to soundbites and uninformed debate.”

While some politicians and members of the public have an aversion to Asian investment here, it’s more than likely to increase.

With economic growth in “emerging and developing Asia” over the next two years set to be at twice the pace of Europe and the US, and six out of our top 10 trading partners now from the region, the report says Asian investment provides a great opportunity to strengthen trade and cultural ties.

“The terms on which we develop trade connections with Asia depend very much on the quality of the partnerships we forge through investment and personal interactions.”

Beyond growing profits, the report says Asian investment can also help to boost jobs in regional centres, providing more training for employees to improve their skills, and share vital knowledge of foreign markets and potential overseas partners.

The Government is certainly on the side of increasing, rather than cutting, ties to investors in Asia.

During his recent visit to Japan and Hong Kong, Prime Minister Bill English made a point of visiting companies already responsible for significant investment into New Zealand while touting for others to join them.

“We’re always open to new investment, we’ve got good relationships with these investors and others offshore, and New Zealand has a pattern of checking in with them about what’s working, what’s not working, and also what their tensions are.”

However, his comments about no “special conditions” for Chinese investors, or anyone else, suggested he is well aware of the firestorm that foreign cash can spark.

Asia NZ’s executive director Simon Draper says the foundation hopes its report will dampen down some of that controversy.

“This issue is too important to New Zealand’s future to be left to soundbites and uninformed debate.”