On Sunday the Government announced further detail of its proposed reforms of the Overseas Investment Act (OIA) aimed at encouraging overseas investment. The package announced is intended to simplify the regime, further speed up decisions and provide more confidence to investors, while still protecting New Zealand's national interests and most sensitive asset classes.  

Key aspects of the proposed reforms (discussed in the Cabinet Paper) are:

1. The scope of the regime (i.e., the transactions that are screened) will remain the same.
2. The existing 'benefit to New Zealand' test, 'investor test' and 'national interest test' will be consolidated into a single modified national interest test that will apply to all in-scope overseas investment transactions other than investments in 'farmland', 'residential land' and fishing quota (for which the existing frameworks and tests will be retained).  
3. The starting presumption under the new test will be that an investment transaction can proceed unless there are national interest risk factors identified.
4. The new combined test will have a 15 day fast-track consent process.  After 15 days the transaction must either be approved by the OIO (consent granted) or escalated for a national interest review (by the responsible Minister) if there are reasonable grounds to consider the transaction may be contrary to the national interest.  
5. The OIA’s purpose statement will be amended to refer to the benefits that international investment can provide to New Zealand’s economy, balanced with the proportionate management of risks to New Zealand’s national interest.  
6. The OIA will be amended to provide that one of the functions of the Ministerial Directive Letter (MDL) is to identify any risks or factors that decision-makers need to or should consider when granting consents, imposing conditions or declining transactions on national interest grounds.
7. The 'national security and public order' (NSPO) notification and call-in regime will be retained but amended to:
   • include new regulation-making powers allowing the Government to add new categories of 'strategically important business' (SIBs); and
   • direct that certain categories of NSPO call-in transactions (i.e., transactions involving a particular class of SIB) that are currently voluntarily notifiable will instead be mandatorily notifiable.

A new Overseas Investment Bill will be drafted to reflect the above changes, with the intention that the Bill will be passed into law before the end of 2025.

The Ministerial Directive Letter will also be updated before the Bill enters into force, to provide guidance on the scope and application of the new consolidated national interest test.  

The primary impact of the proposed changes is that all transactions that are currently subject to either or both of the "significant business assets" consent regime or the 'sensitive land' (other than 'farmland' or 'residential land') consent regime will now be subject to only a 15 day national interest screening. This means that the vast majority of transactions will now receive consent within 15 days, and they will not require the investor to positively satisfy the 'investor test' (which currently applies to all consent applications) or the 'benefit to New Zealand test' (which currently applies to all 'sensitive land" consent applications).  These are significant changes which should be well received in the market and send the right signal to investors at a critical time for the New Zealand economy.  

The changes to the OIA's purpose statement and related presumption in favour of overseas investment unless national interest risk factors are identified are also important signals to international investors that there has been a favourable shift in how New Zealand screens foreign investment.

The statutorily elevated role of the Ministerial Directive Letter will enable Ministers to influence the operation of the OIA regime in line with the Government’s policy objectives without amending legislation. This is intended to support a more durable and responsive regime but in doing so will allow the Government of the day more flexibility to impose its particular priorities on the application of the regime.

Overall these reforms will result in increased certainty and significantly reduced timeframes for most consent applications, which should alleviate some investor concerns with the current regime and thereby encourage investment.

Minister Seymour, who is leading the coalition Government's pro-investment reforms, commented that the reforms will make it "easier for Kiwi businesses to attract investment, expand, and pay higher wages".