Foreign Control - Key Facts

† indicates source. Last updated: January 2015

Note that there have been major revisions, both of methodology and data, to Statistics New Zealand's Balance of Payments and International Investment Position series since 2013, leading to some significant changes to reported data for past years.

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Key Facts

Foreign direct investment (ownership of companies) in New Zealand increased from $15.7 billion in March 1989 to $107.7 billion at March 2014 - almost seven times. As a proportion of the total output of the economy, Gross Domestic Product, it has risen from 22% to 47%. Ownership of overseas companies by New Zealand residents has not grown as fast over that period (under five times) so net foreign direct investment has grown over eight times from a net liability of $8.8 billion to $74.2 billion, and as a percentage of GDP multiplied over two and half times from 13% of GDP to 32%.

† Foreign Direct Investment from International Investment Position, National Accounts, Statistics New Zealand, InfoShare series IIP088AA. GDP from National Accounts, Statistics New Zealand, InfoShare series SNE038AA.

Foreign owners controlled 33% of the share market in 2014. In 1989, the figure was 19% and it was estimated to be below 5% in 1986.

† 1986, 1987, 2012, 2014: "Brian Gaynor: New Zealanders buy back their sharemarket", New Zealand Herald, 19 October 2013; and "Brian Gaynor: Potential problems in NZX's high level of foreign investment", New Zealand Herald, 31 January 2015; 1989-1997: "Corporate Governance Research on New Zealand Listed Companies", by Mark Fox, Gordon Walker and Alma Pekmezovic, Arizona Journal of International & Comparative Law Vol. 29, No. 1, 2012, Table 4, p.16. 1997-2010: "Savings and the Equity Market" - JBWere submission to the Savings Working Group, November 2010, p.2. 2011: GS Annual NZX ownership survey. 2013: "Who We Are - NZ's Capital Markets - NZX", accessed 1 February 2015.

In 2014, the Overseas Investment Office (OIO) approved foreign investment totalling $9.0 billion. The average for the decade 2005-2014 was $10.2 billion. All but $3.5 billion in 2014 was sales from one overseas company to another (all but $2.2 billion on average over the decade). Only company takeovers involving $100 million or more need OIO approval, except those involving land or fishing quotas. For private Australian investors the threshold is $496 million in 2015, and this is adjusted upwards each year for inflation. Until 1999, the threshold was $10m and from August 2005 the government increased it to $100m.

† Overseas Investment Commission and Overseas Investment Office.

In 2014, the OIO approved the sale of 38,120 hectares of freehold rural land and 2,671 hectares of leases and other interests in land to foreigners. About 12,000 hectares of the freehold land and 1,000 hectares of the leases and other interests in land were from one foreign investor to another. In the decade 2005 to 2014, the average was 131,488 hectares of freehold and 43,162 hectares of leases and other interests in land approved for sale. Statistics on sales of land to overseas interests are poorly recorded and incomplete. Our best estimate is that in 2011 at least 8.7 percent of New Zealand farmland including forestry, or 1.3 million hectares, was foreign-owned or controlled and it could have reached 10 percent.

† Overseas Investment Commission and Overseas Investment Office.
"Overseas Ownership Of Land: Far Greater Than The 1% The PM Claims", by Bill Rosenberg (www.converge.org.nz)

Statistics NZ figures, as of March 2014, list the biggest foreign owners of New Zealand companies as being from, in decreasing order: Australia, US, UK, Singapore, Japan, Hong Kong, Netherlands, British Virgin Islands, Canada, Cayman Islands, China, Switzerland, Norway, France and Ireland. All had over $100m in foreign direct investment in New Zealand. These accounted for 95% of foreign direct investment in New Zealand. British Virgin Islands and Cayman Islands are tax havens, and a Statistics New Zealand study showed that in 2010, large proportions of the foreign direct investment from the Netherlands, Singapore, Hong Kong and tax havens was in fact from other countries, led by the UK, US, Germany and Canada. In 2014, Other tax havens with investments in New Zealand companies include Vanuatu, Channel Islands, Liechtenstein, Bermuda and the Bahamas, but the value of their holdings has been suppressed as "confidential". Germany showed as having a negative investment in New Zealand companies in 2013 and 2014, suggesting that the companies owned directly by German investors had loaned funds to their parents or were technically insolvent.

† International Investment Position, Statistics New Zealand: Directional basis stock of direct investment by country (Annual-Mar), InfoShare series IIP081AA. Note that these statistics are compiled on a different basis from those also from Statistics New Zealand above, so the total, $97.4b, does not match. These are compiled on a "directional" basis, based on ultimate nationality of ownership; the above are on a "balance sheet" basis, based on residency of the company. Industry statistics below are also compiled on a directional basis.

Mallika Kelkar. (2011). "The ultimate sources of foreign direct investment" (p. 19). Presented at the New Zealand Association of Economists (NZAE) Conference, Wellington, New Zealand. Retrieved from http://stats.govt.nz

The Financial and insurance services sector, which includes the four big Australian owned banks, accounted for by far the biggest part of foreign ownership of New Zealand companies by industry in March 2014, with $30.6 billion. Next was Manufacturing at $12.7 billion. Other industries with more than $1 billion of foreign investment were in decreasing size, Professional, scientific and technical services; Agriculture, forestry, and fishing; Retail trade; Electricity, gas, water and waste services; Rental, hiring and real estate services; Wholesale trade; Mining; Information media and telecommunications; and Health care and social assistance. $17.2 billion was unable to be allocated to an industry because of the way foreign direct investment is estimated, or was suppressed as being confidential.

Source: International Investment Position, Directional basis stock of direct investment by industry (Annual-Mar), InfoShare series IIP080AA - Statistics New Zealand. See note regarding country statistics.

Transnational corporations (TNCs) make massive profits out of New Zealand. These can truly be called New Zealand's biggest invisible export. In the year to March 2014, they were $9.0 billion. Over the last decade they have averaged more than the combined exports of seafood and milk powder. In the decade 2005-2014, TNCs made $75.7 billion in profits from New Zealand. Only 28% was reinvested.

† Balance of Payments: Current account primary income (Annual-Mar), InfoShare Series BOP058AA; Current account investment income by sector (Annual-Mar), InfoShare series BOP059AA; and Balance of payments major components (Annual-Mar), InfoShare series BOP055AA - Statistics New Zealand.

Another $7.4 billion left New Zealand in the year to March 2014 made up of investment income from debt and smaller shareholdings (portfolio investment), making a total $16.3 billion. Over the last decade this has averaged more than the combined dairy and forest product exports. More than two out of every five dollars of the $16.3 billion went to the banking sector: $6.7 billion. The investment income from overseas ownership of the banking sector ("Deposit taking corporations") after taking account of its small investment income from abroad, exceeded New Zealand's current account deficit in the year to March 2014: $6.3 billion compared to $6.0 billion. The investment income deficit (income on New Zealand investment overseas less income on foreign investment in New Zealand) is typically at least as great as the current account deficit which further increases New Zealand's foreign liabilities.

† Exports: Key Statistics Table 7.04 - Value of principal exports (excl re-exports), InfoShare series EXP005AA - Statistics New Zealand.

Foreign investors are not great for employment - they only employ 17% of the workforce (down from 21% in 2000), despite owning a large proportion of the economy. Foreign ownership does not guarantee more jobs. In fact, it quite often adds to unemployment. TNCs have made tens of thousands jobless.

† Business demography statistics: Enterprises by industry and overseas equity 2000-14, Statistics New Zealand, available in NZ.Stat.

Foreign ownership does nothing to improve New Zealand's foreign debt problem. In 1989, total private and public foreign debt stood at $47.5 billion, equivalent to about two-thirds of New Zealand's Gross Domestic Product, and worth $86.2 billion in March 2014 dollars. As of March 2014, it was $232.8 billion (or $250.3 billion including derivatives), equivalent to 101% of New Zealand's Gross Domestic Product despite being helped out temporarily by $19.8 billion of insurance claims for the Canterbury earthquakes and all of the asset sales and takeovers.

† Source: Statistics New Zealand as follows: International investment position (IIP) (Annual-Mar) - InfoShare series IIP088AA; External lending and debt by sector and relationship (Annual-Mar) - InfoShare series IIP078AA; International non-equity financial instruments by sector (Annual-Mar) - InfoShare series IIP074AA

New Zealand's A&L - Level 3 Components (Discontinued March 2000) (Annual-Mar) - InfoShare series IIP007AA; GDP(P), Nominal, Actual, Total (Annual-Mar) - InfoShare series SNE038AA

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