Treasury: drop all screening of foreign investment

That is the headline from an article from the NBR last week.

Acting Secretary to the Treasury Gabriel Makhlouf  has hit out at critics of foreign investment in New Zealand, saying Treasury has consistently recommended removing all screening.

The British civil servant who arrived in this country 15 months ago told the New Zealand Institute of International Affairs that lowering foreign investment would be counter-productive to growth ambitions.

Small, high productivity economies relied heavily on international connections of people, capital, trade and ideas, he said.

He advocated the reduction of costs and distortions associated with capital inflows, particularly tax.

"If we are to continue to screen foreign investment, and Treasury has consistently recommended removing all screening, it needs to be kept to a minimum and under constant review," he said.

The article continues by noting that Makhlouf made the obvious point that,

[...] it had become fashionable to question foreign direct investment, arguing there was a loss of control of land assets and profits were exported.

The issue was really how the land was used, rather than who owned the land, Mr Makhlouf said.

Regulatory mechanisms governing land use applied to all land owners irrespective of nationality.

And for the Canadian economist whose name I forget, I note that Makhlouf used the following example,

"Some of you might have followed the story of the big Swedish furniture outlet called IKEA, and its attempts to find a site for a store in the North Island," Mr Makhlouf said.

The company ran into so many obstacles that it eventually abandoned its plans to establish a New Zealand branch. Domestic policy settings relating to roading infrastructure, the Environment Court process and the approach of the local council managed to sink IKEA’s plans.

Not the kind of outcome that will attract foreign investment, and New Zealand needs foreign investment to cover the gap we have between national savings and national investment. Otherwise we will have to reduce investment, which will not help the economy or our growth, or cut consumption, which people don't seem too keen on.