As widely anticipated, the New Zealand Government has announced further changes to the overseas investment framework which governs foreign investment in New Zealand.
The latest announcement results from the second stage of a two-part review of the overseas investment framework announced by the Government last year. The first stage saw several changes made to the regime to simplify the overseas investment rules and allow for more efficient processing times of overseas investment applications, requiring fewer applications to be determined by the relevant Ministers.
Under the latest changes, the Government has decided against changing the Overseas Investment Act 2005, as originally planned, instead opting to introduce extra flexibility for the relevant Ministers to consider a wider range of issues when considering overseas investment applications in sensitive land. The Overseas Investment Regulations 2005 will be amended to include two new measures under the test determining whether an overseas investment in sensitive land will, or will be likely to, benefit New Zealand.
A new 'economic interests' factor will allow the relevant Ministers to consider whether New Zealand's economic interests are adequately safeguarded and promoted, and a new 'mitigating' factor will enable the relevant Ministers to consider whether an overseas investment provides opportunities for New Zealand oversight or involvement.
The changes give the relevant Ministers broader powers to decline applications involving sensitive land, reflecting the topical issue around overseas investment in New Zealand farmland. The new 'mitigating' factor will see investments that provide for local involvement, such as appointing New Zealand resident directors, being regarded more favourably by the Overseas Investment Office. Both factors are considered by the Government to be of relatively high importance when assessing overseas investment applications involving New Zealand farmland.
A new ministerial directive letter to the Overseas Investment Office will also be issued, with the Government hoping to provide extra clarity and certainty around its approach to investment by potential foreign investors in sensitive land.
The Government has indicated that these changes to the overseas investment regime will not take effect until December 2010 and will only apply to applications received after this date.
Note: Sensitive land includes non-urban land (including farmland) of more than five hectares in area, land on certain islands and conservation land or land adjoining the foreshore, a lake, conservation land, a regional park or a reserve.
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