Facts and myths on foreign investment

April 29th, 2013 at 9:00 am by David Farrar

The NZ Initiative have released today a comprehensive 75 page report detailing the facts and myths around in New Zealand.

A summary of some key findings:

  • Despite popular myth, New Zealanders actually earn more than they spend. National resident unit savings has been positive for the last 38 of the last 41 years.
  • High debt is not the fault of the private sector. While levels of private debt may be high, these stem from the legacy of historical government policies between 1974 and mid-1980s.
  • The future debt burden will depend on future internal competitiveness and the gap between New Zealand’s growth rate and the yield in the debt.
  • Despite concerns to the contrary, Asians are not taking over New Zealand.  In fact, in 2012 Australians owned 55% of foreign investment in New Zealand, while ASEAN nations owned only 3.1%.
  • Offshore investment is a two-way street. New Zealand is not a ‘takeover’ target by foreign investors. In fact, the OECD regards New Zealand’s regime for screening inwards investment as one of the most restrictive in the world; and
  • New Zealand has been heavily dependent on international capital since colonial days, and this is normal for a young, growing country.

Some facts I found interesting are:

  • Foreign investments in NZ exceeded NZ investments abroad by 4.4% of GDP in 1973 and 64% in 1989. Today it is 72%.
  • The Australian share of FDI in NZ increased from 32% in 2001 to 56% in 2012.
  • The Asian share of FDI in NZ increased from 1.9% in 2001 to 3.1% in 2012.

The report is full of facts, figures and charts. A great contribution to our economic knowledge, and hopefully will improve the level of debate on foreign investment.

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9 Responses to “Facts and myths on foreign investment”

  1. Graeme Edgeler (2,972 comments) says:

    Despite concerns to the contrary, Asians are not taking over New Zealand. In fact, in 2012 Australians owned 55% of foreign investment in New Zealand, while ASEAN nations owned only 3.1%.

    This is a rather stupid comparison given that the concern expressed most frequently is about foreign ownership by non-ASEAN Asian countries, particularly China.

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  2. Nigel Kearney (1,097 comments) says:

    People are not that interested in facts and theories, especially economic ones. They are interested in stories.

    If foreigners purchase a business previously owned by New Zealanders, you can tell a story about the amount of profits going offshore.

    If the Canadian pension fund had been allowed to buy Auckland airport shares, the previous NZ shareholders would have used the cash to invest elsewhere, creating jobs and generating profits. But we will never know where they would have invested, what jobs would have been created, and what the profits would have been. That makes it very hard to tell a good story.

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  3. KiwiGreg (3,278 comments) says:

    “In fact, the OECD regards New Zealand’s regime for screening inwards investment as one of the most restrictive in the world”

    Of the 55 countries the OECD covers we are in fact the 6th most restrictive (this compares with “ease of doing business” where we are at or close to the top).

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  4. Kea (13,567 comments) says:

    Despite concerns to the contrary, Asians are not taking over New Zealand.

    Yeah but they look different, so that must be bad, surely ?

    I think that pretty much sums up the approach taken by those opposed to Asian investment.

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  5. RRM (10,099 comments) says:

    Cool – I know what I’ll be reading on the way home tonight now. Thanks for posting this!

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  6. smttc (767 comments) says:

    Please do not think that the facts can overcome the ignorance and stupidity spouted in this country about foreign investment, especially by the likes of Winston Peters. No chance.

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  7. gravedodger (1,575 comments) says:

    Pity Wussel wont read it, then again he is another economic wizard in the same class as Mr Trotman, The Mangoskin Distributor and the History Teacher.

    Cripes, Shane “porn king” Jones looked like he had caught a rash in his crotch on Q&A, and had a throat infection.

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  8. Jack5 (5,278 comments) says:

    Nigel Kearney posted at 9.14:

    People are not that interested in facts and theories, especially economic ones. They are interested in stories…

    Fair bit of truth in that, Nigel. However, we’re getting plenty of stories about foreign investment. PR high-flyers were hired to help sell us on the Chinese bids to buy the Crafar farms.

    Nigel also posted:

    ..If the Canadian pension fund had been allowed to buy Auckland airport shares, the previous NZ shareholders would have used the cash to invest elsewhere, creating jobs and generating profits…

    What if they spent the cash on overseas travel and blew their cash in casinos in Australia or more exotic spots? Or on imported DVDs – or cars? The latter might create a few jobs in retail or on car repair shops, but bugger all.

    If citizens aren’t savers, a cash boost from hocking off assets overseas won’t give them the propensity for delayed gratification typical of citizens of progressing countries – yes like China, or even, still, Germany. I’m not suggesting decades of wars and turmoil and suffering such as Chinese and Germans endured.

    If the great sociologist Weber was right, there is a strong link between national philosophies such as puritanism and confucianism and peoples’ propensity for work, saving, and education.

    Consider our weekend orientation, and preoccupation with saving bird species and the utopian issues of multiculturalism and minority rights, and our debates on which days to observe national holidays. From this is there any real chance of solid economic progress in NZ? Other than an oil strike, of course – whoops, I forgot we don’t want drilling and fracking.

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  9. unaha-closp (1,067 comments) says:

    » The Asian share of FDI in NZ increased from 1.9% in 2001 to 3.1% in 2012.

    The report is full of facts, figures and charts. A great contribution to our economic knowledge, and hopefully will improve the level of debate on foreign investment.

    The report might be full of facts, but the point of interest is not a fact.

    ASEAN does not equal Asia.

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