Foreign investment: The Good and the Bad.

The Herald this morning has me wondering if there is any intelligent life on Earth.

"Govt wants to cut red tape around overseas ownership" reports that the existing Act:

"...regulates the acquisitions by overseas persons of 25 per cent or more ownership or control interests in sensitive New Zealand land, significant business assets where the value exceeds $100 million, and fishing quota."

I'm left wondering if the National party will ever learn the difference between good foreign investment and bad foreign investment. 

Good: They bring the capital, build the factory, create real jobs. The 25% issue isn't a problem as they are building a NEW business, not just buying one that already exists and then increasing prices and making us all pay (yet again) for the loans they used to buy it. 

Bad: The foreign "investor" buys the local business / factory, gets any tax breaks, runs it into the ground, shuts it down and moves to Thailand or wherever....leaving us without an industry we used to have and no base from which to innovate anew. Our balance of payments over time demonstrate the consequences of this sort of "investment": we import more and more of what we used to make and economies of scale mean there will cannot be a local competitor or alternative. 

An example of bad foriegn investment would be multi-national Heinz buying Goodman Fielder Wattie and within a few years moving pretty much everything to Australia. We won't be building a new competitor and we now import much of what we used to make...and the threat of jobs going overseas is used to keep wages down here. 

Another example would be a software company recently bought by a US corporation. The NZ-based, global unit had its best year ever in 2008 and has seen a strong start to 2009, but the employees won't be getting a pay rise, in line with the US HQ's global policy on pay rises for all its units. Further, a hiring freeze is in place despite the local unit growing rapidly. The NZ business's rewards and requirements have been subsumed into the global picture where an NZ-owned company in exactly the same situation would have behaved quite differently. 

Good for New Zealand? I don't think so. I leave you to thing on it. 

 

We should happily solicit and support "good" foreign investment and thumb our noses at the bad. 

Why National is always - not just this term - in a rush to support bad investment is something I have never understood. It appears to be a lesson they aren't able to learn. one could be forgiven for thinking their aim on government - from insurance to banking to infrastructure to pretty much anything - was ensure as much as possible of it passes into foreign hands as soon as possible. 

They don't say that, of course, but looking at their actions tells a very different story.