The Overseas Investment Office says it is engaging with interested investors before a formal application is lodged to weed out doubtful transactions.
The office is using pre-application meetings with overseas investors to discuss what information it requires, and a triage process where senior staffers effectively vet applications before they’re accepted for assessment, Land Information New Zealand acting chief executive Lisa Barrett told parliament’s finance and expenditure committee yesterday.
The process has given investors the opportunity to withdraw their applications if circumstances change or if it appears unlikely they’ll get approval, she said in response to questions from Labour MP Deborah Russell.
“As a result of improved processes that we’ve done with pre-app meetings and triage, we found that around a third of applications initially were not being accepted to the office to start off with,” Barrett said.
“Through that triage and pre-app meeting, it was evident they were not going to have any chance, or that they didn’t have enough information to come to us and they needed to wait.”
The office, part of LINZ, often gets caught in politically charged debates when MPs question the desirability of foreign buyers of land and businesses.
Last year, the committee tasked the Auditor-General with examining how the OIO collected and managed its information amid concerns it was taking too long to make decisions. The Auditor-General found that while the office was providing the right advice to its decision-making ministers, its enforcement and monitoring functions were lacking.
In the 2018/19 year-to-day, the OIO has approved 30 of the 33 applications for significant business assets it’s received. One application lapsed and two were withdrawn. On non-residential sensitive land, it’s approved 35 of 58 applications, with two declined, two lapsed and 19 withdrawn.
Last year’s ministerial directive to the OIO to tighten rules for foreign buyers’ applications for sensitive land was seen at the time as deterring investors in rural property, triggering a spike in withdrawals.
National MP Paul Goldsmith questioned how many would-be investors had been deterred by the regime. Barrett said that was hard to answer.
“We deal with a catchment of very specialist lawyers in this space, who are well-versed on what’s required to get through an Overseas Investment Act application. So often they will address those issues and we might not necessarily know about it,” she said.
National MP Andrew Bayly noted that investors would spend on average $100,000 to make an OIO application. Barrett said the decision to proceed with an application is judgement the purchaser has to make relative to the level of investment they’re proposing.
The directive last year has also led to an increase in the time the OIO is spending on sensitive land applications, which has climbed to 72 working days from the high-60s. Significant business applications are tracking at 35 working days.
The OIO has also restructured its enforcement and monitoring functions, separating the two into separate teams to get better information around where breaches occur and to take court action where it can.
Barrett said the OIO increased its enforcement activity significantly in calendar 2018, issuing 24 compliance letters and three public warnings. It reached two settlement agreements, took three disposal-of-property actions, one court proceeding, and imposed six penalties for late provision of information.
“We’re also focusing a lot more on court action to get some precedent value around the regime itself, so I’m anticipating that we will be taking more court proceedings in future months,” she said.
While politicians often decry sales of property and businesses to overseas investors, the country’s shallow savings pool struggles to meet its investment needs.
At Dec. 31, the nation’s net international investment position was negative $167.3 billion, or 57 percent of GDP.