Tuesday, 4 March 2008

Economic xenophobic rubbish (updated)

This story from Bloomberg.com points out that
New Zealand toughened the rules under which it assesses international investment in local companies in a move that may further thwart a Canadian pension fund manager's bid for Auckland International Airport Ltd
This was done we are told to
help maintain local control of a company
Why do we necessarily want "local control of a company". What if "non-locals" can run the firm better than the locals? It is further noted that
The government will now judge whether overseas investment in New Zealand infrastructure deemed to be "strategically important" will help maintain local control of a company
What criteria will be applied to determine this? When is an asset of "strategically important" anyway? What properties do these assets have that makes them different from non-strategically important assets?

The article also states
"We're making it clear issues of local control have to be taken account of," Cullen said. "There's been very strong public concern about the country's international gateway passing into foreign control."
Again why is "local control" so important? Why is it more efficient to have "local control". And how does Cullen know there is in fact "very strong public concern" over this? I for one want whoever will run the airport most efficiently to be the owner and do not care if those owners are foreign. What I can't see is how these new rules will help, rather than hinder, getting control into the hands of those must able to run the airport, or any other asset.

We also learn form the article that
The government applies so-called national interest tests to overseas investments in New Zealand companies and this new criteria will be included among those tests, Cullen said. International investors will "need to prove that what they're intending to do is in New Zealand's national interest," the Finance Minister said.
What exactly is the "national interest", other than whatever will get the government most votes? As I noted in a previous message,Why do governments back losers? Two parts of an answer, we should worry when governments start talking of "national champions" or the "national interest" since the odds are things will end badly.

Also this does raise the issue of what compensation the government will give to owners of "strategically important" assets? Either these owners will not be able to sell at all, to whom they want, at a price they are happy with, or they will be forced to sell to another another buyer at a lower price. Is the government going to compensate them for this? Yet again the government walk over peoples property rights.

(HT: Not PC)

Update: Comments here on the The visible hand in economics blog.

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