Associate Finance Minister David Seymour announced on Saturday that the Government will overhaul New Zealand's 'OIO' regime to encourage inbound investment, with a plan to pass amending legislation by the end of 2025.

Minister Seymour cited the fact that New Zealand has the most restrictive FDI (foreign direct investment) regime of all developed nations that we compare ourselves to, and as a result New Zealand has been "benched" by international investors. This has meant that our GDP growth, productivity and wage growth are behind where they could be.

To fix this, the Government announced that it plans to reverse the current presumption that investing in New Zealand is a privilege(and therefore that investors must justify their transaction to the Government), by replacing it with the principle that overseas investment is beneficial and can proceed unless there is an "identified risk to New Zealand’s interests".

This change in approach will be implemented by changes to the Overseas Investment Act and associated regulations based on three core principles:

1. The current broad scope of the regime will be retained, so that the Government preserves the legal option of screening all investments currently subject to screening.
2. The Act’s core tests ("investor test", "benefit to New Zealand test", and "national interest test") will be consolidated, with a starting presumption that an investment can proceed unless there are risk factors identified.
3. The Government will have flexibility to "call-in" any investments for detailed scrutiny on a case-by-case basis, and impose conditions or block the investment where there are risks to New Zealand’s national interest.

This overhaul of the regime is the third and final stage of the current Government's three stage process to "get out of the way" of overseas investment.

The changes introduced to date include:

• A new Ministerial "delegation letter" (issued in April), which took all decisions other than national interest/national security decisions out of the hands of the Government and delegated them to the Overseas Investment Office (OIO);
• A new specific Ministerial "directive letter" (also issued in April) to encourage investment in 'build-to-rent' developments; and
• A new general Ministerial directive letter (issued in June), which directed the OIO to take a risk-based approach to administering the regime and to decide 80% of all consent applications within half of the statutory timeframes.

Anthony Harper is supportive of the changes introduced to date, which have already resulted in significantly faster processing times on consent applications.

Corporate partner Lance Jones, who is one of New Zealand's most experienced advisers on the Overseas Investment Act, was closely involved in the reform process carried out by the Government from 2018 to 2021, which narrowed the scope and simplified the Act in some areas but also expanded the scope and complicated it in others.

Jones welcomes the further review of the regime, commenting, "Despite prior attempts to alleviate the issue, the Overseas Investment Act remains overly complex, with significant compliance costs and uncertainty for investors.

"We hope that this review will result in significant simplification, to enable prospective investors to proceed with confidence and encourage greater flows of offshore capital to our local businesses to help them grow and be more productive."