Overseas Investment (Forestry) Amendment Bill

on behalf of the Minister for the Environment: I present a legislative statement on the Overseas Investment (Forestry) Amendment Bill.

ASSISTANT SPEAKER (Hon Jacqui Dean): That legislative statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Overseas Investment (Forestry) Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. I intend to move that the bill be reported to the House on or before 1 August 2022 and that the committee have the authority to meet at any time while the House is sitting, except during oral questions, during any evening on a day where there is a sitting of the House, and on a Friday in a week in which there has been a sitting in the House, and outside the Wellington area, despite Standing Orders 193, 195, and 196.

This Government welcomes sustainable, inclusive, and productive overseas investment. This investment improves New Zealanders’ living standards and connects us with the world. This is why we have recently simplified the Overseas Investment Act 2005, cut unnecessary red tape, and reduced the number of low-risk transactions being screened. We also want to make sure that overseas investment continues to strongly benefit New Zealand. This bill does just that. It ensures that forestry conversions by overseas investors continue to bring broad benefits to New Zealand. These investments will now be considered under the same rules as other investments in sensitive land known as the “benefit to New Zealand test” rather than under the streamlined special forestry test. This will channel overseas investment into the right forests in the right place for the right reasons.

This shows, again, that the Government is responsive to New Zealanders’ views that overseas investment should be sustainable, inclusive, and productive. These changes build on our earlier action to ban overseas purchase of existing homes so that New Zealanders are not outbid by wealthy overseas investors, to set a high threshold for the acquisition of farmland to reflect its economic and cultural importance, and to provide new tools for better managing investment in strategically important businesses, reducing risks to New Zealand’s national interest or national security.

In 2018, we made changes to the Act’s forestry provisions. For the first time, we brought into the regime overseas investment in forestry-cutting rights. We needed to do that swiftly before the Comprehensive and Progressive Trans-Pacific Partnership came into force, otherwise the opportunity would have been lost. Because we took action when we did, future Governments will have the power to control overseas investment in forestry. At the same time, we introduced the special forestry test. This reflected the country’s economic context at the time, where supporting forestry production and forestry investment was desirable for a variety of reasons.

The economics of the forestry sector have since changed. The sector has become a much more attractive prospect to investors. This is resulting in increasing conversion of land into forestry, some of which is coming from overseas investors. New Zealanders are concerned that forestry is not always being planted in the right places for the right reasons. We’ve heard these concerns. This bill will ensure overseas investment continues to benefit New Zealand. Forestry will always be a very important sector to our economy. It will make a vital contribution to our climate change goals. The Government recognises that high-quality foreign investment is important, and continues to welcome this. But we need to get the balance right. This bill and a suite of related Government policy work under way—such as changes to the emissions trading scheme—will ensure we do. The bill does this by requiring forestry investments to demonstrate what benefits they will bring to New Zealand, such as environmental and economic benefits. This will help ensure any investment supports our rural communities to thrive and that our overseas investment is productive and sustainable. This Government is confident these changes will not be barriers to productive and sustainable investment to our forestry sector.

The special forestry test is still available for overseas investment in existing forestry. We are also making a range of minor and technical changes that will provide investors with clarity about the rules to help with their operation and effectiveness. The removal of the special forestry test only means that conversions are now treated the same as any other overseas investment in non-urban land. It’s important to note that last year, we made major changes to streamline and simplify the benefit to New Zealand test that will now apply to these forestry conversions. I mention this to assure you that we’re not going back to the way things were prior to 2018. Major improvements have been made since then to how the Act works. The benefits of the proposed investment will only need to be compared against those of the current state of the land. Previously, a complex and highly theoretical exercise was required to be undertaken.

The benefit factors under the benefit to New Zealand test have also been streamlined to seven broad factors rather than 21 specific factors. This is much simpler and allows investors to make a holistic case for their investment. The seven factors are: (1) the economic benefits, (2) the benefits to the natural environment, (3) public access, (4) protection of historic heritage, (5) advancing a significant Government policy, (6) oversight or participation by New Zealanders, and (7) consequential benefits. And finally the benefits to New Zealand will need to be proportionate to the size, scale, and nature of the investment, so conversion of highly productive farmland will be required to demonstrate proportionately higher benefits than conversions on land that is marginal or lower quality. Again, this helps us ensure overseas investment continues to benefit New Zealand. More broadly, we recently made other improvements to the Act, including introducing statutory time frames for decision makers to make decisions where there was previously no time frame, and repeated investors no longer needing to satisfy the investor test each time they apply for consent.

So, in conclusion, the Government supports and welcomes high-quality foreign investment in forestry and will continue to do so. However, as economic and regulatory contexts have changed, we have taken action to make sure overseas investment continues to benefit New Zealand. In summary, this bill ensures the Overseas Investment Act 2005 supports New Zealand with balancing the needs for forestation with the wider needs of local communities, regional economies, and the environment. It means we will have the right forest in the right place for the right reason. I commend the bill to the House.

Thank you, Madam Speaker. Well, what goes around, comes around. Anyway, I’ll get back to the bill: the Overseas Investment (Forestry) Amendment Bill. I was thinking, what goes round comes around, all right. Anyway, the National Party will support this bill to select committee, and we do it because I think that—and I’ll get into the reasons why we’re doing it, shortly. But I’ll also get into the reasons why the bill came about in the first place, and why it’s caused the problems it’s caused.

It effectively amends, as the Minister said, the Overseas Investment Act 2005, to ensure that overseas investment that results in the conversion of farmland or other land to forestry benefits New Zealand and, I guess, that’s really key to any foreign investment, or overseas investment in New Zealand—it’s important that it benefits New Zealand. And I think that, in this case, we’ve seen some—as we often do with Government interference in processes and industry and businesses—extraordinary results as a result of that interference. We’ve had a history of it in this Parliament, of interfering in things—particularly related to land, interestingly. If you go back to a particular Government of some many years ago—only one or two of us will remember it—supplementary minimum prices were introduced, for example, and distorted the land in New Zealand and, in fact, caused a lot of the problems that, interestingly, we’re seeing up the East Coast, with respect to forestry.

And then we saw the Dairy Industry Restructuring Act come along, and it did the same thing: it distorted the land use in New Zealand. We’ve seen this bill, or the results of what I’ll get into in a moment come along and now, to some extent, a potentially distorting land use in New Zealand. And I think that’s the real challenge. But we’ve got to be very careful, as a Parliament, that whenever we introduce things or, I guess, get involved in business—and one could think of the supermarket business, for example—whenever we get involved in those sorts of things, we run a very serious risk of creating situations that we don’t envisage at the time.

I want to talk for a minute about a bloke who used to sit over in that corner over there, and espouse the billion tree programme at length in this House, day after day. And when you think about that billion tree programme, and of course this piece of legislation that effectively has now been to some extent repealed evolved from the thought that the Government of the time had that there was a need to encourage overseas investment in New Zealand forestry to get our trees planted.

Interestingly, right now in New Zealand, nearly 80 percent of our forestry is owned by overseas investors and, actually, if you think about what’s going on in the industry right at this moment, it’s actually a very good thing, because they have realised their responsibility to New Zealand, on the whole, and I think they’re doing an outstanding job. But they also give some stability to the harvesting sector which, if it weren’t for those large corporates owning large pieces of forestry in New Zealand, we wouldn’t have that stability—or any stability—around harvesting. And we’ve seen very big changes in price in the forestry sector in the last six months come and go very quickly and, of course, the fuel crisis and the transport crisis right now or—I wouldn’t say it’s a crisis—the large price hikes are causing significant challenges for the forestry sector right now, with respect to export and the way that we harvest our trees, and the way we operate, with respect to the export of timber.

And just interesting, while I’m on that topic, the very interesting thing is that if we didn’t have that very large export potential or capacity in our log situation, we wouldn’t have enough logs harvested to provide New Zealand with its own timber, because only about a third of those trees, effectively, stays in New Zealand; two-thirds gets exported. That’s around about how it works. We keep the best logs in New Zealand because they’re the ones we need. If it wasn’t for that, the forestry industry itself wouldn’t be able to continue to harvest.

Anyway, back to the real point of the bill. You see, the Government at the time thought we had no ability—they thought, at the time, we need to plant a billion trees, and we need to encourage the planting of those trees. What they didn’t think of was that we had no ability to grow the seedlings, we had no people to plant the trees, we potentially had no capital to plant the trees with, and we potentially also had no land to plant those trees on. Hence, this Act was changed to allow foreign investment, pretty much willy-nilly, in New Zealand to plant trees. They could buy a large piece of land—weren’t allowed to live in the house, interestingly, but they were allowed to buy the land. So they had to subdivide the house off and get rid of it, because they weren’t allowed to live there, but they were allowed to own the land and plant the trees. So it was an extraordinary piece of legislation, when you think about the results.

As I said earlier, it’s very easy to think about things in hindsight, because things change very quickly. Of course, I guess you could have anticipated what would happen as a result of this very large investment being made in New Zealand by, potentially, overseas investors—not necessarily for the betterment of the forestry industry in New Zealand, though. Because, effectively, they had the ability to come into New Zealand, plant vast areas of trees, and there was no guarantee—even though the overseas investment rules, the conditions were that they should be for harvest, those trees—long term that would happen. That’s the real problem with it. And so what could have happened was they could have come into New Zealand, effectively, purchased the land, planted the trees, taken the income from the carbon, and shoved it into their tax haven, wherever it was around the world, and that would be the last we’d ever see of them. That’s the real threat that, I guess, was occurring in New Zealand, and it’s the reason the Government has acted, in this respect, to try and tidy that situation up. I very much doubt that it will effectively tidy it up, because I think there will be more action needed to achieve that than has already happened.

So I just want to talk for a moment about the forestry industry, though, because it is a very important industry to New Zealand and, whatever we do with respect to legislation, it’s very important that we don’t get involved in, I guess, distorting the way forestry is managed, planted—even owned—in New Zealand. Because it’s a hugely important industry to New Zealand, and I think, in my maiden speech to Parliament, I was accused by the industry of saying you can’t eat trees. Well, I think we will be eating trees, shortly, and I think it’s going to be very interesting, because I think the potential for this industry is massive, and it would be a great tragedy if we ended up with a whole lot of trees locked up because of the carbon situation—if we had trees locked up that weren’t harvested in the long term. That would be not at all good for New Zealand and, I guess, to some extent this bill is attempting to address some of that challenge.

The other thing that intrigues me about the forestry industry and the potential for trees is we’ve seen massive changes in harvesting methods in New Zealand in the last 10 years, and I think that the next 10 years will see that incrementally grow, and I think we’ll be harvesting trees in 20 or 30 years’ time that we don’t envisage at the moment will ever be harvested. So I think that’s another factor that’s very important when it comes to who owns these trees, where they’re planted, and how they’re planted. So I think that improvements in technology and all that sort of stuff are so dramatic in this sector that I think we’re going to see a great change in the way those things are used. I think we’ll also see a lot of change in the way the complete tree is taken out of the forest, whether it’s processed on site or taken away to be processed. I think we’ll see a massive change in that respect.

So back to the bill. I do think that this bill will be interesting as it goes through the discussion of the select committee. I guess just the last thing I want to say about the Overseas Investment Act is that we’ve listened for a long, long time in this Parliament to members of this Government, or in Opposition, absolutely criticising and attacking this piece of legislation every way they could. It’s ironic that they’ve now got the bill or put the legislation in place where they’ve got to now start repealing some of the stuff they were totally opposed to 10 years ago, themselves. Really interesting times, but that’s what happens when you’re, I guess, around here too long. So, Madam Speaker, we commend the bill to the House.

Thank you, Madam Speaker, for the opportunity to be able to take a call.

I seek the House’s indulgence just for a quick moment to acknowledge Professor Stephen Levine who’s just celebrated 50 years—anniversary—at Te Herenga Waka Victoria University of Wellington. For those members who have not had the pleasure of meeting Professor Levine, you’ll see him in Copperfields most days. His stamp will be seen right throughout the walls of Parliament and right throughout the walls of public sector where many of his interns now work. But I have no doubt that some of his interns were probably working for members who ushered both the Overseas Investment Act 2005 or the changes that were made in 2018. It’s those changes made in 2018 that this bill revisits.

Under the current legislation, overseas investors who are wishing to acquire an interest in production forestry can seek approval for the investment by a relatively permissive special forestry test. This reflected the need at the time to support the forestry sector and to achieve the Governments goal of stimulating forestry investment. Since then, however, the economics of investing in forestry have changed considerably and it’s become more attractive for overseas investors.

This Government does welcome sustainable, inclusive, and productive overseas investment. The changes in 2018 sought to simplify the Overseas Investment Act by cutting unnecessary red tape and reducing the number of low-risk transactions being screened. But we needed to also balance that with the overall purpose of the Act: that our resources here in New Zealand are a taonga and we want to make sure that the overseas investment continues to strongly benefit New Zealand.

So this bill ensures that the forestry conversions by overseas investors continue to bring broad benefits to New Zealand. These investments will now be considered under the same rules as other investments in sensitive land, known as “the benefit to New Zealand test”, rather than under the streamlined special forestry test. The removal of the special forestry test only means that conversions are now treated the same as any other overseas investment in non-urban land. This will channel overseas investment into the right forests, in the right place, for the right reasons.

It’s fitting that this bill comes to the Finance and Expenditure Committee, as we scrutinised the last bill. One aspect that I’m really keen to look at more closely is the transitional and saving provisions in Part 2 of this bill; as any astute policy maker will be astute to, is that any time you shift tests, the question applies as to what happens to current applications for consent—so that transitioning period. So I’m looking forward to scrutinising the bill further, and I commend this bill to the House.

Thank you, Madam Speaker. I’m very pleased to take a call on the Overseas Investment (Forestry) Amendment Bill at its first reading and join my colleague Ian McKelvie in supporting it. I am speaking this evening as the National Party spokesperson for land information—which does include oversight of the Overseas Investment Office—but also with my rural communities hat on, who, I think, more than most have been quite fearful watching the impact of what they determine as the Government’s inaction on this issue. At its most basic, the bill aims to address the increasing number of land-use conversions we’ve seen, particularly in that class 6 to class 8 land, and the ease with which these conversions have occurred under the special forestry test, which is set out in the Overseas Investment Act and is the brainchild of that party formerly known as New Zealand First.

Afforestation has become more and more common in recent years, as the price of carbon has begun to rapidly escalate, and many New Zealanders have watched with horror the largescale conversion of farmland. As a sheep farmer’s daughter, it has been a painful discussion around the dinner table on many an occasion. Whereas the price of carbon at the outset of this law was about $30 a unit, in the intervening years it’s climbed to about $75, and some would predict it could well end up being at about $200. But, even at the current carbon prices, it’s not unheard of for the profitability of forests to be around $2,000 per hectare, and when you look at hill country sheep and beef farming at around $400 a hectare and finishing at about $750 a hectare, you can understand why these largescale land-use conversions are taking place.

Overseas investors have been allowed access to this land, to take advantage of these carbon prices using this more streamlined special forestry test. Under that test, about 23,000 hectares have been acquired by overseas interests for full forestry conversion, and that includes about 8,000 hectares of class 1 to 5 land, which, we all know, is highly productive pastoral land.

There has been particular concern raised by groups, like 50 Shades of Green, that this conversion has come at the expense of local communities and their schools, and land and farm that has been in particular families for generations. And that really does need to be explored at select committee, because, in the absence of any coherent strategy from the Government, which has been working in this space for about—oh, how many years?—four years, since 2018.

Federated Farmers has also expressed concern on behalf of rural communities. I think the Meat & Wool chair William Beetham said it very well when he said—and I quote—“The recent spike in the afforestation of sheep and beef farms is not the result of consumer-driven demand but heavy-handed and short-term Government policies designed to incentivise more trees regardless of whether or not it is the right tree in the right place.” He also made the comment, of the current settings that this bill is looking to change, that “Overseas investors can simply plant pine trees, claim the credits, sell them, and take huge profit overseas while New Zealanders carry the consequences now and into the future.”

Which brings me to my next point: there has been a total lack of clarity from the Government about a plan, or even who is taking the lead, on dealing with issues like the overseas investment framework. In Budget 2022, which we heard just recently, it appears that Minister Nash had responsibility through his $30-odd million industry transformation plan, but we also have Minister O’Connor, who’s the Minister for Land Information and holds that delegation, whom we haven’t heard from. We were expecting Minister Parker to bring this legislation to the House tonight; instead, we have Minister Davis. And I think that paints a picture of a very confusing set of circumstances for both industry and farmers and really highlights a lack of ownership from this Government.

The changes that this bill seeks to bring about, we on this side of the House would say are a no-brainer and should not have taken this long to get to this point. Rural communities expect leadership and not haphazard legislation made up on the fly, on the hoof, according to how the polls are reading. On this side of the House, we understand the flow of direct foreign capital and the importance it plays in New Zealand—it is the key to securing sustainable economic growth—but we also understand that it must not come at the detriment of our ability to remain as one of the most efficient primary production sectors in the world.

So we on this side of the House very much look forward to hearing the evidence that will be presented, no doubt, to the select committee, and watching that committee work through these details of this bill, and therefore we do commend this bill to the House.

Before I take a call from Ingrid Leary, as I assume the Chair, I’m conscious that I’ve already spoken in this debate. You’re stuck with me; there are no other presiding officers available. Ha, ha! So I’m just really assuring members that I will try my very best to remain impartial. Ha, ha! Ingrid Leary.

A timely interjection from you, Mr Speaker; I was just going to say that one of the most sensible things I’ve heard this evening was from the member Ian McKelvie, who talked about this piece of legislation “getting it right”. Certainly the special forestry test at the time—in 2018—was the right test for those circumstances. But all laws need tweaking. Business changes, circumstances change, and what we are doing with this legislation is tweaking to make sure that we get the balance right between getting the benefit for New Zealand from overseas investment as well as managing the risks.

I remember when I first was elected into Taieri having a really good walk around a couple of farms, both run by Federated Farmers farmers. One was Simon Davies, a former Federated Farmers Otago chair, and then Mark Patterson’s land. They were pointing out to me where forestry was becoming increasingly popular and showing me where there was overseas investment happening, and at that point we could already see that there might need to be some tweaks going forward because of the way that the Act was working.

So what this piece of legislation does is it really just recalibrates. It takes out the special forestry test that was introduced in 2018, which was relatively permissive and was needed at the time to support the sector and was also needed to stimulate the forestry investment. Instead, it has come up with—as the Minister has shown—seven conditions that prove benefit to New Zealand rather than a whole lot more complex ones. It is much more nuanced, and now there is no hypothetical—so it’s really looking at the situation at hand rather than trying to do a hypothetical test about what would be of benefit to New Zealand. So this is just about streamlining those regulations and laws worked at the time. Forestry has become increasingly popular; we need to recalibrate, we need to get it right, as Ian McKelvie said. This is a good piece of legislation that I commend to the House.

Tēnā koe e te Māngai o te Whare. The Green Party will be supporting the Overseas Investment (Forestry) Amendment Bill. As others have noted, this bill is in response to the changes to the Overseas Investment Act that New Zealand First promoted in 2018. Those changes created what the Hon Shane Jones, then forestry Minister, described as the “primrose path” for forestry because this special forestry test was much easier for overseas investors wanting to buy land for forestry than if they had wanted to buy land to farm it. Buyers didn’t have to prove that their land purchase was going to provide any particular benefit to New Zealand, they simply had to be of good character, they had to commit to replanting the trees if they were harvested, and they had to commit to maintaining any existing arrangements around the supply of logs to domestic suppliers or arrangements around public access.

And so, as with the increase in carbon price now up to nearly $77 a tonne, there was quite a lot of interest from overseas investors in permanent forestry for carbon farming. There has been a major expansion in forestry. It’s been valued not just for the fibre it produces but also for carbon credits. But under the Overseas Investment Act, it wasn’t possible to use the special forestry test for carbon farming, only for forestry—for plantation pine and harvesting. But since that primrose path was introduced in 2018, there’s been some 36,000 hectares of farmland which has been approved for sale to overseas investors for forestry.

Radio New Zealand did a series in 2019 called Green Rush, which really looked at the purchasers, and they highlighted that of the 10 largest private landowners in Aotearoa New Zealand, the top four of those were all overseas-owned forestry companies. They were companies like Tuamata Plantations, which has a big Canadian forestry company as its major shareholder; the Malaysian-based Tiong family, associated with Suharto’s regime; the Australasian-based New Forests Asset Management: they amassed some 66,000 hectares of their 77,000 hectare landholdings in less than four years, starting from 2016; and Matariki Forests, number four on that list, is owned largely by the US-based Rayonier forests. So while we’ve certainly got significant overseas investment in the dairy sector, in processing factories like Westland Dairy, that’s less about owning the land. And so this whole primrose path meant that Ministers and the Overseas Investment Office had very little discretion in assessing these applications and weren’t able, really, to decline them. It also meant that very little information was collected and there was no assessment of whether there was a benefit to New Zealand.

I acknowledge the work of 50 Shades of Green and also Federated Farmers. 50 Shades of Green were very generous in organising field trips. We took one in the Wairarapa to see the actual land-use change that was happening, to see the areas that were going into forestry that had been formerly farmed. People like Mayor Craig Smith of Wairoa were highlighting the 10,000 hectares of hill country farmland that was going into forestry, and a really genuine concern that this major landscape change would lead to the hollowing out of rural communities because of the fewer jobs involved in forestry—in the planting, some in pruning, but not those ongoing jobs. And that hollowing out, then, of jobs, of people involved in local communities, in voluntary organisations like volunteer fire brigades. Also, there was concern about large-scale exotic forestry, the increasing fire risk with drought in eastern areas, the risk of wilding conifer spread, and just that monoculture of pine because of the lack of diversification into other species, and the increasing prices that this land was going for if it was being sold to forestry companies.

So now the bill puts forestry on the same basis as other land-based investments, but it is still a weaker test than if an overseas investor wanted to buy farmland to farm, because it doesn’t include matters like the oversight and participation of New Zealanders being of relatively high importance, which is a factor that Ministers have to consider when there are applications to buy farmland. But it does bring in those seven criteria under the benefit to New Zealand test, things like: is there an economic benefit; will there be jobs created or retained; will there be technology or business skills introduced; will there be environmental benefits, like the protection of significant indigenous vegetation; will there be public access to the coast, the foreshore, lakes, and the like? So that is a more even playing field.

There are also some more minor changes. There have been some issues where if there have been former farmhouses on land bought for forestry conversion, those have only been able to be rented out to people involved in the forestry operation. This allows them to be rented out more widely, but does prevent any overseas owners living in those, so it should make the regime more workable.

The Green Party has a stronger view on overseas investment, wants a threshold that’s lower in terms of business investments, but we will be supporting this bill and were heartened by the comments by Barbara Edmonds that the Finance and Expenditure Committee will be looking at the transitional provisions. Because I still have a concern around standing consents, which are these consents given to companies if they have complied with our overseas investment laws, enabling them to make a number of transactions to purchase land without having to go back to the Overseas Investment Office for permission each time. And the existing rules, under the bill as I understand it, will apply to these standing consents or to those who applied for standing consents before the bill comes into effect. I have a concern that that may spark a bit of a gold rush in relation to standing consents and applications to purchase, so I would really encourage the Finance and Expenditure Committee to look quite closely at that. But this is a bill which does seek to improve the position and put forestry on a more even foothold with other land-based overseas investment applications.

ACT would like to support this bill at its first reading. It’s worth putting in context how important this industry is, forestry, for New Zealand. It accounts for about 1.6 percent of New Zealand’s GDP, which equates to about $7 billion in September 2020. It’s the third-largest export product earner behind dairy and meat. There is a potential target to reach—an extra $3 billion to reach $10 billion. It contributes an annual gross income of around $5 billion and directly employs 38,000 people in production, processing, and commercialisation. It accounts for around 11 percent of the land use in New Zealand.

So a strong forestry industry contributes to many of the Government’s priorities, including regional development, employment, and mitigating climate change. The forestry sector is heavily dependent on inward investment, with up to 70 percent of forestry plantations being foreign-owned. This means routes for screening such investments have a particular impact on the sector.

At the moment, the Crown’s forest estate is roughly around 31,500 hectares and the total land registered under the emissions trading scheme is 333,000. So the overseas investment, the results, and the conversion of farmland or other land for forestry benefits New Zealand. I like the aspect of the bill that more risks can be managed here. New Zealand has consequently seen an increase in forestry investment since the period of Mr Jones.

But making changes to this overseas investment regime is not without risk. For example, a stricter overseas investment regime may cause a decrease in overseas investment generally. Overseas investors would probably likely see an increase in processing times for applications and increased uncertainties that come with this application.

Overall, any changes perceived as New Zealand tightening its investment regime to reduce overseas investment, and therefore impacting New Zealand’s attractiveness for foreign direct investment more generally, would become an issue. Any reduction in overseas investment in New Zealand forestry may cause a decrease in the value of land held by landowners.

There’s also a clear risk to the Māori interests. Māori own at least 30 percent of the land containing New Zealand’s plantation forests, but not always the trees themselves. They’re often partners for overseas forestry investors. So, obviously, at the select committee we must take that into consideration.

It’s amazing listening to Mr McKelvie offer a longer-term history, but what has happened since 2018 has been remarkable in this industry. It was made quite easy before the economics changed to lots of farmland being turned into pine. So we’ve closed the loophole with this bill and subject forestry to the standard overseas investment test, redefining to the benefits to New Zealand test.

The major area of changes that I like, as well, is there’s no more promise of special forestry test; it’s New Zealanders who don’t want foreign investment turning farmland into pine have got a voice. It’s happened rather rapidly due to incentives and carbon pricing, and foreign investors lose a permissive loophole into offshore forestry investment in New Zealand.

So there’s lots to be accredited here in the bill, but certainly I think more work needs to be done on the economic impacts and not disrupting the industry whilst catering to local communities and satisfying the concerns that are actually in regional New Zealand. And to that effect, ACT will be supporting the bill, and we look forward to working on it in the select committee.

Thank you, Mr Speaker. It’s a pleasure to follow a speaker from the ACT Party who is talking about the strategic value of keeping land in New Zealand ownership, so I congratulate that speaker, Damien Smith, because I think what this bill shows is that ownership of land is strategic, because, as a country, it is important that we understand that the use of that land and what we produce on it is what makes this country survive and thrive.

I do want to correct one of the speakers—I think the member from Selwyn—who spoke very eloquently but was really looking at the wrong Act, because this is not about carbon farming. This is actually about production forestry. Now, you’re listening to someone here who had his fingers quite badly burnt, excuse the pun, by trees and forestry. In the 1980s there was a rush to get into the new “greenrush”, which was forestry, in many farms. I was involved in an enterprise where we stuck some trees on the back of a farm, without giving it any, really, great thought about how difficult and expensive it was going to be to actually harvest them, not to mention the fact they were the wrong tree in the wrong place, because they were too wet, and they weren’t even that good for firewood, at the end of the day. So I did have a little experience of understanding how important it is to get the right tree in the right place at the right time—but, of course, pain has no memory, so it will, of course, not stop me from getting involved in such ventures into the future!

But this really is about making sure that we understand that where we put those trees, and the type of trees that we do put in the ground, is all about balancing. It’s not about a decision being made in a board room in Vienna or in London, where the sort of investment availability will always ensure that any New Zealand options are dwarfed financially. It means that when we decide, as a country, whether we are going to allow this to happen, there is a test applied: is this going to be good for this country?

And only that we had made so many of those decisions in the years leading up to this time. If you drive around New Zealand, you look at rural communities, you’ll see everywhere you go there’ll be skeletons of old sheep yards, skeletons of old cow sheds, where once there were quite thriving communities. Where now we have one dairy farm, there were often about 15, maybe 20. And, of course, now we have that one farm, and it means the local schools—it means the whole local community—has suffered accordingly. And, of course, the way the previous legislation was being administered, it meant that our rural communities were changing the shape of New Zealand. We were changing the shape of our communities. We were changing the shape of our schools.

So this legislation goes some way towards balancing that, to ensure—and you’ve, again, heard the previous speaker, and all previous speakers, talk about the value of forestry, the need to ensure that we do have access to trees in the future. I heard one very wise speaker, earlier on, talking about how we just don’t know how the science is going to change—whether we’re actually going to be simply processing trees in the place they grow. It may well be that things have changed so greatly. So this bill will give us the options to make sure that we can keep to what is, I think, a very central mantra around forestry: ensuring that we have the right tree in the right place at the right time. Thank you, Mr Speaker.

Thank you, Mr Speaker. This legislation got its genesis in the New Zealand First coalition agreement with the Labour Party, which required an exemption for overseas investors into buying land for the purposes of forestry, and to get the billion trees. It’s taken the Government many years to get to the position of tonight—which is a start. But do not be fooled. They will use this, going around the farming communities, saying, “Look what we have done, getting rid of that foreign exemption.” But it doesn’t actually get rid of the foreign exemption because there are three tests. One is a general benefit test, the second is a farmland test, and the third is the forestry test. Now, they’re getting rid of the forestry test, true, but they’re putting it into the general benefit test. They’re not putting it into this more stringent farmland test.

Now, I can’t for the life of me fathom why it isn’t treated the same as other farmland. The Labour Party were elected, and the Green Party supported them, on the basis that they were going to stop overseas investment in foreign land. This bill still allows that. It’s under a more permissive general test for forestry to buy farmland than for any other purposes to buy farmland in New Zealand. So New Zealand farmers need to be aware of that detail. This is another smoke-and-mirrors attempt by the Government. It does make a change in that area and we do support it because it is a step in that area. But if the Parliament and the Labour Party were genuine about treating farmland the same, then why isn’t it under the farmland test? Why is it under a general test that is more permissive? It’s because they still want forestry to go ahead, and they still want people to come in and buy forestry.

Because the two requirements for a Minister to approve it are that the land is to be, basically, exclusively used for forestry—well those overseas investors are already doing that. The second test is that it has to be for plantation forestry. Well, the 20,000 hectares that my colleagues have talked about satisfy both of those tests. They’re for forestry, they’re plantation forestry—generally not carbon farming that those overseas investors are coming in to buy. So I want to know why the Labour Party isn’t consistent. This should be under the farmland test, if the Labour Party truly believed in what it stood for.

The only reason the Green Party—because I can’t believe the Green Party actually agreed with this because they’re all for the billion trees, right? The only reason they’ve agreed for it is because they know it doesn’t make a hell of a lot of a difference. They know that those two tests are going to be satisfied to any Minister. Is it going to be 20,000 hectares that’s now sold overseas that’s going to stop tomorrow? I doubt that very much. It might reduce a little bit. But the Green Party is still clapping because they get what they want. The Labour Party’s going to go into those rural seats and say look what we’ve done, we’ve actually done something for you—which is not true. Because the test that is actually applied is the general benefit test.

So if the Labour Party wants to be honest with those voters that they’re worried about losing, put it in the farmland test. Make it as tough as any other farmland to get. That would be consistent and that would be honourable from the Labour Party.

So we will support this to first reading. It will be a step in the right direction. Personally, I think that all farmland should have the same test. If the Government of New Zealand decides that that is a test that is more stringent, and that doesn’t want overseas investors to buy farmland—well so be it. But forestry still will get an exemption. It’s just a watered-down exemption, and it’s the exemption which Ministers can approve, and that is a result of this legislation.

So I think farmers should be very much aware of what this legislation says. Don’t be hoodwinked into thinking that this gets rid of all those foreign buyers that we’ve talked about in the past and they’ve been battering on the door of those rural Labour MPs offices. They’re still going to be there, they’ve just got a different regime to go through. And it’s all going to be a year later before we see how many of their Ministers approve in all those sort of things after the election. This is just a smoke-and-mirrors attempt, in some ways, from the Labour Party to do that.

Let’s be honest, guys. You know what you’re doing here; you haven’t really changed. Look, the Green Party’s voting for it—that’s the guts of it, you know. If you really change, the Greens will be jumping up and down going “Well, where’s our trees?” And so we need to see this legislation go through a select committee and actually see what’s in the guts of it. Thank you, Mr Speaker.

The member the Hon David Bennett has no grounds to be smug. He stands up today and presents himself as someone that’s advocating for farm owners at the expense of forestry conversions.

I asked the Parliamentary Library: how many questions have the National Party asked about carbon farming or farm conversions since the last election? I asked the Parliamentary Library how many times a National Party MP has made a general debate contribution about farm conversions to forestry, be it production or carbon forestry. The answer is zero. Not one contribution all of this term—18 months.

They stand here tonight with the gall to pretend that they are worried about this issue. But they have not used a single opportunity in the general debate—and the general debate is a chance for any MP to speak about any issue that they care about. They present themselves to be the party of rural New Zealand, and they have said nothing.

They have also not taken any opportunity to ask a question about this to any Minister. Why? Because they do not care about this issue. There’s another reason to amplify why they do not care. At the last election, there was one party and one party alone that presented a policy solution to this issue. It was the Labour Party. The National Party had no policy and you can always tell when you hit a nerve. That’s when they start to yell. You know when you’re making a point that really hits home and Nicola Grigg stands up and dedicates her entire speech to carbon farming, despite the fact this bill has nothing to do with carbon farming.

This is entirely dedicated to production farming and it is the right thing to do. But do not stand up and pretend that you are fighting for farming communities and trying to stop farms being converted to carbon forests when you’ve done nothing about it. No policies, no questions, no general debate contributions. Laugh all you like, but you have done nothing. I wrote the policy for the Labour Party. I put it forward to the Labour Party. They adopted it. They are implementing it.

There are three parts to addressing this issue; this bill is the first part. The second part is the consultation document that this Government put out that said, “How about we actually put in native forests instead of pine forests?” That was a result of this Government and its rural MPs actually listing to their constituencies.

What did the National Party do? Nothing. What was the third part that we’re going to do? We are in the process—and soon to be announced—to give local communities the ability that they used to have, but that Government took it away, to actually put this as a consentable activity. Local communities actually say where these conversions can actually happen in their communities. Instead of seeing full-scale conversions of farms to carbon forests, actually indicating that, “These are the areas we want them and these areas we don’t.” How about we encourage farmers to work together, find a band of land on their farm and a band of land on the other farm?

If we carried on like they’re doing—doing absolutely nothing about it—areas in my electorate like Pongaroa and Tīnui, and in other areas like Wairoa, will continue to be converted. Why? Because that is the settings of the emissions trading scheme (ETS).

If David Bennett wants to accuse parties of being honest, how about they be upfront? What we’re seeing here in terms of conversions for carbon forestry is the result of the ETS—the ETS that has been in place for many, many years and that Government did nothing about it.

We need to plant trees. The question is: “Where?” The question is not why; we know why. We just need to figure out where we put it. Now, if we carried on like that lot wants us to do, we would see rural communities decimated. The gall, that’s what’s got me. The gall that they stand up today and pretend that they care when they have genuinely done nothing about it. No press releases, no policy, no speeches, no questions. Laugh all you like; you know it’s true. You’ve done bugger all about it. This is the Government that’s actually doing something about forestry, and that’s why I’m voting for this bill.

ASSISTANT SPEAKER (Ian McKelvie): Order! Order! I’ll just remind members on my left that if you hadn’t made so much noise, the member wouldn’t have had to speak so loudly.

Hopefully I can be slightly softer in my volume, Mr Speaker! Thank you for this opportunity to speak on the Overseas Investment (Forestry) Amendment Bill. As we’ve heard in previous speeches, in 2018 there was a change to the Overseas Investment Act. The timing in 2018 related to the Comprehensive and Progressive Trans-Pacific Partnership.

💬 Hon David Bennett: Do you agree with Kieran? Have you been standing up in caucus on this?

There is still quite a lot of noise. I might have to be louder! At that time, in 2018, there was the special test created for plantation forestry. This is the test that the bill doesn’t quite remove but does change for most types of plantation forestry.

The amendment does not apply to carbon forests; we’ve just heard that very articulately said by the previous speaker, Kieran McAnulty—that carbon forests have nothing to do with this legislation at all, before today or after this bill is passed through the House. Carbon forests are regulated quite separately, and as the previous speaker said, there is consultation at the moment on whether or not the emissions trading scheme settings should change so that they don’t apply to these exotic forests all the time and instead incentivise indigenous forests. That has the benefit of being better for biodiversity. We’ve heard also, from the Hon David Bennett there, about the various different tests that are in the Overseas Investment Act that we have currently and how these will apply. He has said that the farm test should apply rather than the normal test, but regardless of which one should apply, the point here is that the permissive test won’t apply to new forestry, new plantation forestry. It will still apply to existing forests but not to any conversions.

We know that this permissive test in the Overseas Investment Act has led to a lot of foreign investment into plantation forests in New Zealand. We’ve heard that today this bill is about rectifying some balance in the system, because we know, as the Hon Eugenie Sage talked about, that there has been a hollowing out of communities with some of the additional plantation forestry both from this international investment but also to acknowledge the carbon farming as well that’s happening, which this bill does not address. We’ve heard from those rural areas that there are concerns. We also know that there is a balance in terms of letting in and enabling benefits to New Zealand from the capital from foreign investment. So that is what this bill is trying to achieve. We’ve heard also that it’s going to go to the Finance and Expenditure Committee; so they will be able to address the concerns raised tonight. Thank you, Mr Speaker.

Thank you very much, Mr Speaker. Well, we’ve heard from Mr McAnulty, “You can tell when the Opposition’s had a raw nerve touched, because they start shouting”, and he started shouting—he did, Mr McAnulty. He really got into it. He also said that the Opposition has taken no general debate contributions on the subject. Well, I would ask Mr McAnulty to ask the Parliamentary Library of himself how many general debate contributions he has made on this subject. How many questions has he asked his ministerial colleagues? How much attention has he paid? Well, he’s given us a three-part plan. He’s told us that he’s got an announcement to make tonight. He’s told us what the third one will be. He’s made the classic announcement about an announcement, in other words, and we can’t wait to hear more detail about what they are not going to do.

He’s criticised us for issuing no press releases on the subject. Well, ironically, the press releases on the subject are about all that that member has achieved, if even he had done that. If he were to print them off and shred them, he’d be doing more to affect the forestry sector than any ideas he’s had that have come into practice so far.

Now, I don’t pretend to have great knowledge in the area of forestry. I’m humble, at least, about that. Mr McAnulty would be wise to make a similar confession, rather than pretending to the contrary. But therefore, I do take the opportunity, at first reading, to say that this is an opportunity to ask, from first principles, what it is that the legislation is designed to achieve. What is the context of the legislation? That’s the word that it used, and I’m going to come back to that, because it’s got much to say about why things are so very different in 2022 than just a couple of years ago, when the same Government, but a previous term of the same Government, had different changes to make in that space, and how much sense it all made then, according to some of the very same people that stand up now and tell us why, of course, it all much change. We’re living in a completely different world, in the forestry sense, in 2022, apparently.

So let’s be honest: whereas the explanatory note talks about the economic and regulatory context having changed, and, therefore, it’s important to consider the environmental, social, economic, and other impacts on investment. The reality is, it’s not so much the economic and regulatory context that have changed; it’s the political context. Others on this side of the House have noted, quite rightly, that it was the political context. The first term of the Labour Government, propped up by New Zealand First—or vice versa; take your pick—that came up with this sort of bizarre idea that forestry should be treated in the way that they did.

The National Party pointed out the anomalies at that time; we’re still pointing out anomalies in the way that the Government handled it. Notwithstanding that, we’re saying, “Well, they’re going to have a bit more of a sensible approach, no longer shackled to their coalition partner.” Some might say it was a coalition of losers—I wouldn’t use that term myself—but the three-headed monster, the three-headed beast that was the last term of Parliament—the Government that put together such anomalies as the previous policy in relation to forestry investment. We’re apparently moving away from that; so far as it goes, that is to be celebrated.

So the bill says that it aims to ensure that overseas investment in forestry benefits New Zealand. There’s a little bit of the “how”, but more of that detail will be thrashed out, of course, at select committee, and that’s one of the reasons that we have the first readings, so we can flag the things that the select committee process should aim to uncover. Mr Bennett has given a typically thoughtful contribution—

💬 Nicola Grigg: Very thoughtful.

“Very thoughtful”, Nicola Grigg points out. Her own contribution was also very thoughtful. So the thoughtfulness, on this side of the House, at least, is aimed to understanding what the issues are, pointing out the kinds of areas that we want to hear from submitters at the select committee, and, of course, these relate to the balance between the New Zealand benefit test, the forestry benefit test, and the farm benefit test, and how those all interact and relate, and, of course, what will be the best outcome overall for New Zealand, not only in terms of the environment but also, of course, the economy, social, and other impacts of investment.

So it’s been touched on by almost all speakers—I think probably all, actually, now I think of it. The context of this bill includes the overseas investment regime as a whole. So the Overseas Investment Act—often referred to as the OIA, confusingly, I suppose, for those uninitiated in the area, because it’s the same acronym as the Official Information Act, not to be confused. As the bill points out, this is the main way in which overseas investment is regulated or managed in this country.

And I think it’s worth noting that foreign investment in itself is not a bad thing, as one might possibly have thought if one arrived from another planet and listened to debates in the last Parliament. Indeed, some of the debates were conducted, I think, by people who had arrived from another planet, or New Zealand First as they were known. Anyway, so they made a case that it was a terribly bad thing for people who don’t come from around these parts to do such horrendous activities as planting trees and building houses and so forth, and how dare they! But actually, we’ve always taken the approach that some degree of foreign investment is a good thing in itself. Of course we need to mitigate any risk that too much of a good thing will have negative effects, and so it’s right and proper that we have a regime where we say that if the benefit to New Zealand overall is greater by having a certain activity, notwithstanding that it’s done by some of these terrible people known as foreigners—which I hasten to add for the benefit of anyone who might have tuned in at just that moment was heavily ironic in the context of New Zealand First’s position on the subject in the last Parliament.

So we’re talking about the conversion of farmland, and this is the really gnarly issue. So colleagues of mine who know more about rural New Zealand than me—and that’s most of them—have spoken with eloquence and passion, indeed, about the need to ensure that rural communities are well serviced by the activities that are taking place on the land that surrounds them, and indeed that they live on. Of course, forestry is one such activity; it’s a legitimate thing in itself, it has benefits in terms of the environment, but also it comes at something of a cost and the cost is, obviously, not just in dollar terms. And if we’re on that subject, cost can go the other way of course—we can actually actively make money from forestry, most obviously from wood products and so forth, but also of course the carbon aspect under the emissions trading scheme and so on.

But the cost in the more general sense is that if we use the land for forestry, then by definition we cannot use it for other things, which are precluded by the planting of trees. Farming, in the more traditional sense, is of course one of those. In all of this, it’s important that we understand that if one-off decisions that are made, such as Greg O’Connor had the grace to acknowledge he’d made some bad decisions in his past—I mean we know that because he’s obviously a member of the Labour Party—but also in relation to our forestry investment. And I think he would acknowledge I’m using the term reasonably loosely; by his own telling of the anecdote it was an experiment into which relatively little thought was put, whereby they would sort of whack in a few trees and sort of see what became of it, was a growing problem. Anyway, so the afforestation can take place, and historically I think has taken place, in a reasonably haphazard way—it’s been more of a natural process. Obviously, growing a forest is natural to some extent anyway, with photosynthesis and so forth—I’m just really digging into my fourth form science here, Mr Speaker, as you can tell we’re getting close to the end of my 10-minute contribution, thankfully.

So the Government’s goal of stimulating the forestry investment is said to have been a need at the time that the relatively permissive special forestry test was introduced in 2018. Well it seems to me that what’s changed in the last four years is that the Government has taken a different form. You know, you win some, you lose some—the good news is that New Zealand First is no longer with us in the Parliament; the bad news is that Labour sort of filled the gap and then some. So there we have it, you can’t win them all, Mr Speaker, but we do intend to win the next one—I was going to say, “As you know”, but I don’t wish to bring you into the debate. Mind you, you’re already wearing a couple of different hats with your sort of spokesperson role, and you’ve acknowledged that.

💬 Hon David Bennett: Bring him in.

Mr Bennett encourages me to bring him in, but I don’t think I would do that. I will just say that a wise man once said that you can’t eat trees—or something like that—which, obviously, I suppose, depends what you’d call a tree as opposed to a plant, and I wouldn’t know where we draw the line. But in 40 seconds we’ll have a good idea where to draw the line. But anyway, that person who made such a profound comment that trees can’t be eaten was, I think, alluding to that fundamental tension that we were talking about before—the mutual exclusivity of planting certain types of forest, as compared with farming the land. So I think these are the factors that will go into the test, ultimately, when it becomes an amendment to the law, and at select committee it will be very seriously thrashed out. I’m sure we’ll have lots of good discussions there; I welcome the submissions that will come in and the consideration by fellow MPs in that forum.

What a terrible contribution that was. That was awful. I remember in school learning about monologues, and that’s exactly what that was. It had no reaction—not even from his colleagues—especially when he went to bust out a few jokes. Nobody was laughing around him. Why? Because he didn’t really know what he was talking about. So come over to this side of the House. We know rural communities. Remember, they gave us their votes in the last election, and we’re going to make sure that we look after that.

Rotorua is the home of forestry in New Zealand, and I am stoked to be able to stand here and give a better contribution than that, because it was actually our grandfathers, it was our uncles, that grew up working in the mills and in the bushes all around the Waiariki rohe. It was our grandparents and our parents that used to go into the mill and work really long days, and they used to have to go into the forests and do their yards, because that was what they needed to do to support their families. When it comes to forestry, our side of the House know about it a lot more than that side do.

Why do we need to change this? Well, we need to make sure that we are doing right by those of our grandfathers and parents that had to do the long yards in the forestry sector. We want to make sure that we are applying the same rules, so when it comes to overseas investment, we want to make sure that we’re continuing to have that benefit to New Zealanders, remembering it was our grandparents and our parents that did the hard works on this. We want to make sure that we’ve got the right forest in the right place for the right reasons. We’ve got to make sure that the proposed changes are also going to help manage those increasing concerns that New Zealanders have around the difference between planting out our farms and managing farm to forestry conversions, particularly in relation to pastoral land and land that’s otherwise important to local economies and communities, such as my community back home in Rotorua.

As is the case with all other overseas investments in non-urban land, forestry conversions will need to go through the standard benefit to New Zealand test, instead of through the special forestry test. That’s what we’re talking about. That’s what that side tonight is going to agree to, and I commend it to the House.

Motion agreed to.

Bill read a first time.

ASSISTANT SPEAKER (Ian McKelvie): The question is, That the Overseas Investment (Forestry) Amendment Bill be considered by the Finance and Expenditure Committee.

Motion agreed to.

Bill referred to the Finance and Expenditure Committee.

Instruction to Finance and Expenditure Committee