Overseas Investment (Forestry) Amendment Bill

Thank you, Mr Speaker, and may I congratulate you, Mr Bennett, on your role tonight, having first worked with you on the Primary Production Committee. It a great way and a great start to my political career to join you there.

Anyway, to this bill. This bill aims, as we go through things, to strike the right to plant the right tree in the right place for the right reason. Not often can I say that most of what needed to be said on this bill, and where we are on the second reading, was said by the National MP Ian McKelvie. He touched on the fact that everyone in the select committee agreed with this move that will see forestry for overseas investment now come under the special test for New Zealand. I acknowledge everybody who contributed to the submissions. Thank you, Mr Speaker.

Tēnā koe, Mr Speaker, and congratulations on your appointment as Assistant Speaker.

I’m pleased to take a call for the Green Party on the Overseas Investment (Forestry) Amendment. Bill. Aotearoa New Zealand has 1.74 million hectares of plantation forestry, and about 1.2 million hectares of this is large-scale corporate forestry and only around 500,000 hectares is the smaller planted forest and woodlot. I’m really grateful for the 25 submitters and the diversity of opinions that they presented to the Finance and Expenditure Committee on the bill.

The Greens support this bill because of the way it winds back the changes that were made in 2018, inspired by New Zealand First, to facilitate overseas investment in forestry through the special forestry test, also called the “primrose path” for forestry. It was a much weaker test—in fact, it was described as a tick-box test—where overseas companies wanting to buy land, including farmland for forestry, didn’t have to demonstrate benefits to New Zealand. It was very permissive. Certainly, as Minister Parker noted, the changes made in 2018 brought forestry cutting rights under the Overseas Investment Act regime, but you still had this very permissive test.

So the bill means that overseas companies or individuals wanting to buy land for production forestry—not permanent forestry for carbon farming—would have to be assessed under the general benefit to New Zealand test, and that means that they’ve got to establish to the satisfaction of Ministers, or their delegate the Overseas Investment Office, that the purchase would result in economic benefits for New Zealand, benefits to the national environment, continue or improve public access, or improve the protection of historic heritage, for example. But with this bill, if an overseas company is wanting to buy existing production forest, then the permissive test, the special forestry test, continues to apply.

The bill does strengthen the regime, but the Green Party flags that we have tabled a Supplementary Order Paper for the committee stage which will seek to apply the farm land test to forestry, so that if an overseas company or individual is wanting to buy farmland for forestry, it would be on an even playing field if it was buying that land for farming. Essentially, that means that the application would be assessed under the same seven criteria as I noted previously, but that greater weight is given to economic benefits to New Zealand and participation and oversight by New Zealanders in the company buying the land.

It’s not often that I refer to the Federated Farmers’ submissions, but Federated Farmers and particularly their president in the Wairoa area, Toby Williams, really highlighted the impact on farming communities of the major change in land use, particularly in areas like the East Cape and around Wairoa, where you’ve got the hollowing out of the community when land goes from sheep and beef farming to forestry. The families go, the school closes, the infrastructure servicing the remaining farms becomes more expensive, and so that whole hollowing-out has quite significant social impacts.

But, more than that, it’s Green Party policy that overseas investment has to deliver really substantial benefits to New Zealand, Aotearoa. Our preference is that land ownership is reserved for New Zealand citizens and New Zealand residents, so hence our interest, as some submitters also called for, for the farm land test and not just the general benefit to New Zealand test actually applying for land bought for forestry.

One of the other issues that came up during submissions—and I was really pleased that, in the Finance and Expenditure Committee report, this was highlighted—was that, at the moment, under the law an overseas company can buy up to a thousand hectares of production forestland, with forestry cutting rights to that, without having to get any permission. And the Overseas Investment Office does not monitor this. It doesn’t require the overseas company to notify it, and so there’s no effective monitoring of the cumulative impacts of a succession of up to a thousand hectares of cutting rights in a calendar year being purchased by an overseas company. So I really hope that the Treasury and the Overseas Investment Office look at that and work out a mechanism for better monitoring.

I guess the other area where we think that it’s justified applying the stronger farm land test is just the major impacts that have occurred with forestry as a land use on the East Coast. One only has to remember Tolaga Bay and all of that slash coming down the rivers.

Also, the Minister highlighted that the sensitivity of the farmland is part of the assessment of any application by an overseas company, but, in our view, there’s far too much reliance on production values and the sensitivity is often determined by the land-use classification—whether it’s class 7 or 8 land and is marginal for farming, then it may be more easy for an overseas company to buy it for forestry. But that land-use classification and productivity for farming does not, in our view, recognise that even if land has a low carrying capacity for stock or it’s unsuitable for horticulture or viticulture and it might generate little income for the current owner, it can have significant value in terms of landscape, in terms of biodiversity—I can only think of a lot of the regenerating mānuka. And so we need to move—and this bill doesn’t do that—away from just highlighting that land is sensitive in terms of its farming use just because it has high production values. You need to look at those other biodiversity values as well.

So we support the bill because it does strengthen and fill that gap in the existing law—which has a very weak, permissive special forestry test—but we want it to go further by applying on a level playing field the farm land test to land bought for forestry as well as to land being sought to be purchased by an overseas company for farming. Kia ora.

Thank you, Mr Assistant Speaker Bennett. First, I congratulate you on your promotion. It’s good to see a fellow Hamiltonian in the Chair.

This bill addresses an almost intentional policy failure made by the previous Government, which is somewhat overdue given the issues, especially the unintended consequences—as my learned colleague Tim van de Molen stated in his previous call—which have been raised for some years now. The main objective of this bill is to better manage investments from overseas that have to this point resulted in the conversion of land to forestry to ensure there is from now on a genuine benefit to New Zealand. It is a somewhat subjective concept, but given what has unravelled over time, it is clear that the outcomes of the existing law need to be improved. In many ways, this illustrates that Government intervention by its nature, regardless of the intent, is almost always prone to unintended consequences.

We are told that the more stringent benefit to New Zealand test requires in-depth consideration of the benefits that the investment may bring relative to the current use of the land, and provides a greater discretion to decision-makers; further, that applying this test will ensure that overseas investments in forestry genuinely benefit New Zealand and that any risks brought about by that investment can be mitigated and managed. As the economics of forestry have become more attractive, we have seen an increase in these conversions. The increasing price of carbon credits plays a role here, as well as the various other reforms and incentives.

When it comes to intervention, I think it’s always good to start with the mind-set that a market should be as free as possible and without regulation and then, if necessary, dial it back from there to ensure that any market failures can be addressed. In this case, there has arguably been a market failure, albeit within the confines of regulation, that has had perverse outcomes for farmland. It should be noted that this bill, of course, as it’s in the title, only applies to investment from overseas, and I think one should be wary of how this may impact what happens with domestic investment once the playing field has been tipped in the other direction.

It’s worth emphasising, I think, as others have done, the importance of forestry to New Zealand: 1.6 percent of our total GDP. It is the third-largest product export earner behind dairy and red meat, and I think we can all agree it has a high-growth potential. The sector is heavily dependent on overseas investment, with up to 70 percent of forestry plantations being foreign-owned. So any regulation will have an impact on productivity and the economy at large. So there are risks, including that a stricter overseas investment regime may cause a decrease in investment, among other things.

The regulatory impact statement yielded an interesting point: “There is minimal data available to fully demonstrate the link between external factors, such as the ETS and raising log prices, with the levels of overseas investment in forestry as well as the potential impact of this proposal on afforestation and land use.” So to reiterate, regulation is seldom without unintended consequences, and these need to be carefully monitored and addressed.

One thing I want to note, that I reflected on, is in the first reading, Minister Kelvin Davis said that “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”. I think it’s a shame that the Minister went there and said that, because I think it’s unrelated and appears to be some sort of attempt to cover up the fact that this bill is a product of their own policy failure of picking winners and losers in their previous coalition—no pun intended.

In closing, this bill does mitigate a loophole in the existing legislation and it should, we hope, meet its objectives. However, as I stated earlier, I caution this given the impact that this could have on domestic investment. The Minister even said it himself, specifically: “increasing conversion of land into forestry, some of which is coming from overseas investors.” So there will, no doubt, be more policy work on the horizon in this sector, and with that, I commend it to the House.

Kia ora, Mr Speaker. From one Bennett to another, I say congratulations on becoming Assistant Speaker. And it probably solves another problem for me because, as a first-term MP, the amount of times I’ve heard “Mr Bennett!” across these hallways—of course I’ve panicked every single time. As the youngest child I think I still have instincts of “Oh my gosh, what have I done wrong this time?” So I’m grateful that you are in the Chair, Mr Speaker; congratulations.

On this piece of legislation, obviously, coming back to the bill, we as the Government want to ensure that overseas investment continues to benefit us, to benefit New Zealanders, and this piece of legislation in this small way is going to do that. For me, as the MP for New Plymouth, we have a lot of pastoral, agricultural, beautiful farming land. We also have our high country and our areas, and there is concern around ensuring that—

💬 Hon Damien O’Connor: It’s called a mountain.

—our areas are looked after. We have more than a mountain. So this is about the right forests, the right places, for the right reasons, and on that I commend this bill to the House.

Thank you, Mr Assistant Speaker Bennett, and congratulations on your elevation to the role of Assistant Speaker. It’s great to see you there, and I hope we won’t see yourself kicking yourself out of the House.

I rise to speak on the Overseas Investment (Forestry) Amendment Bill. This is a bill that the National Party supports. It amends the Overseas Investment Act 2005 to ensure that overseas investments that result in the conversion of farmland or other land to forestry benefit New Zealand and that any risk can be better managed. The amendment will limit the special forestry test to applications for the acquisition of land that is already being used exclusively or almost exclusively for production forestry. It will no longer be available to acquire land for forestry conversions or for the acquisition or establishment of permanent carbon forests. Those applications will need to be considered under the standard benefit to New Zealand test.

This is a good thing, because this does balance the playing field so to speak and does ensure that there is a real analysis of whether investment for these purposes will actually benefit New Zealand. It addresses a concern—certainly to an extent—that has been raised increasingly around the country, but I’ve certainly heard it in my electorate in Southland, where there’s a real concern amongst our communities that productive farmland is being turned into carbon forestry without an analysis of the loss of the food production capacity of that land, without the analysis of the impact on rural schools, and without an analysis of the impact on job creation and job retention for the many agricultural businesses that support those farming areas. This is a piece of legislation that does address whether land that has been bought by overseas investors does actually benefit the country, and that certainly is a good thing.

I note that Environment Southland councillors are on record expressing concern that quality pastoral land may be lost as a result of extensive carbon farming in the future, and other entities like Beef + Lamb NZ are quoted in the media saying that the rate of whole farm sales and conversions to carbon farming in the country is out of control. This won’t address all of those concerns, certainly, but it will address that assessment of whether there is a genuine benefit to the country, through this legislation.

Under current legislation, overseas investors wanting to invest in production forestry can seek approval for the investment via a relatively permissive special forestry test, which was introduced in 2018. The Government deemed that necessary at the time to support the forestry sector and achieve the Government’s goal of stimulating investment and promoting environmental initiatives. However, since then the economics of investing in forestry have changed quite significantly. This has resulted in the significant conversion of pastoral farmland to carbon forestry. This change has been driven by the increasing price of carbon credits, emissions trading scheme reforms, and Government reforestation afforestation schemes. The issue is that the special forestry test to date allows all foreign investors to bypass the same requirements that other foreign investors undergo with the benefit to New Zealand” test. This is because the special forestry test is simpler and more permissive than the benefit to New Zealand test.

The proposed changes in this bill will have the following benefits. Forestry conversions are removed from the special forestry test. Therefore the special forestry test will only be available for the acquisition of land that is already used exclusively or nearly exclusively for forestry activities—in effect, land that is already used for production forestry. Forestry conversions will in future instead be considered under what’s called the general benefit to New Zealand test, except for forestry conversions that rely on standing consents that were granted or applied for before the commencement of this legislation. This is a good thing because the benefit to New Zealand test includes a modified lens where farmland is concerned, which sets a higher threshold. This change will bring applications for future investments in forestry into line with the same criteria that other foreign investors must undergo presently.

As I’ve said, this is a bill that National supports. It’s a more complex test, and it brings the benefits the investment will make into relative use with those who are purchasing land for other purposes from overseas, and it does give decision makers greater discretion as well in determining that assessment lens through which they must apply this.

While the Government obviously didn’t foresee this in 2018—the resulting lowering of the bar—this is a good step for remedying that, and National commends this bill to the House. Thank you, Mr Speaker.

Kia ora, Mr Assistant Speaker Bennett. As you are a new Speaker, it is, of course, incumbent upon us all to put you through your paces a wee bit, so I’ve managed twice to try to take a call that was not my own—you’re welcome! I’d like to congratulate you on your new appointment.

I’d like to congratulate the members of the Finance and Expenditure Committee and also the submitters for their excellent work on this bill. This is an important matter. I’m slightly surprised the Māori Party have chosen not to take their call on it, but I am the beneficiary of that decision.

Forestry is exceptionally important to New Zealand. We are here tonight to, hopefully, pass a bill which will refine the measures we took in 2018 to encourage forestry investment. We now turn to the point which we always promised to do, to review it. Changes have happened, as previous speakers have said. We therefore tighten the regulatory regime to make sure that forestry will truly benefit New Zealand. I commend this bill to the House, and I will now make like a tree and leave.

First of all, congratulations, Mr Assistant Speaker Bennett, on your appointment. This is a bill that I was part of the select committee hearing on, and it’s one that really tries to balance the risks that are associated with overseas investment with the benefits of it. The benefits of investment in things like long-term forestry are something that was very apparent in the submissions. We had people explain to us how long those investments are and how good for the country they are, and I was very much convinced by those arguments.

What the bill will do is it will remove the current test and go to a test which is a common one. It’s the change to the benefit to New Zealand test. And that test, for people who don’t know about it, really boils down to: is there a benefit to New Zealanders, compared with the state of the land at the present time in its use in forestry? So it’s a good, solid test, and it involves looking at the economic benefits of this, along with those benefits to the natural environment. I think it’s a great bill. I commend the bill to the House.

Todd Müller.

It’s Muller, but that’s fine. What a great night this is. If I may, Mr Speaker, the House is unaware that when I arrived in 2014, a certain member of Parliament from Hamilton West was appointed as my mentor. So this is a great day for both of us, celebrating his achievement. And as you all can understand, looking back over my eight years, the arc of my career in no small way is because of the contribution of David Bennett—you know, the ups and downs. I thank you, sir. But it is great to see you finally acknowledged by this House and esteemed, as you are, sitting there basking in your bipartisan glory.

Can I just spend a moment reflecting on this bill. I do wonder what David Parker and Damien O’Connor must think when they’ve got to sit and usher this legislation through. I’ve known these guys for quite some time, and, actually, despite the fact they’re on the red team, I do respect them. I think they bring a bit of horsepower certainly to their side of politics. But they had to sit back in 2018, when the then Government, which they were a critical part of, put the original Act into place. All of us on this side of the House said that this will lead to an unintended consequence, because, essentially, you are reaching out to investors that want to spend money in this country, saying: “We welcome your capital, but we really welcome your capital if it’s going to go towards farming and if it’s going towards forestry. In fact, we welcome it so much that we will give you a permissive free pass so you can come in here, you can buy up forestry, you can buy up sheep and beef farms to put into carbon farming, and welcome on in.”

The irony of the fact that that was promoted by an anti-foreign investment party like New Zealand First is one thing, but the double irony, from my perspective, is that same bill had David Parker and Damien O’Connor standing up over that side of the House extolling its virtues, knowing in here, because those gentlemen had been around for a little while, that what they were putting in place was a public policy nightmare, that it would create the incentives for capital investment to roll on in, and it did, and turn up to the Wairarapa—and I see the newly minted Minister looking down, reading his papers, as he should. He’s a reasonably impressive performer on the red side, too, but I bet he, as a junior backbencher, watched the ushering of this, going “My goodness me. This is going to play well in Wairarapa. Not!” But he still had to say all the right things and not at the right time, saying “This is a fantastic public policy initiative.”

No, it wasn’t; it was hopeless. And those of us who actually know a thing or two about how the primary industries work said many times to the Government: “This isn’t going to work. Through these incentives you are going to distort the market. You’re going to attract capital in a way that is a false economy, and you will see sheep and beef farms and other land turn into long-term forestry.”, and that’s exactly what has happened. So guess what! They get rid of the New Zealand First component of their Government, and what’s the first thing that comes out of Damien O’Connor’s and David Parker’s sphere? It’s: oh, actually, let’s wind this back, because actually it’s a nonsense.

Now, they don’t say, “it’s a nonsense.” They’re not honest with New Zealand, saying, “Fair cop. Actually, what we put forward in the last Parliament was wrong. It’s distorted a market. It has created huge pain in the primary sector, huge anger in Wairarapa. They’ll never forget this, as they watch all that beautiful land, so much of it, turn into green when actually it’s better sheep and beef country.” But here they are, back saying: well, actually, no, it was a public policy mistake and now we’re going to rewind it. I guess they get some credit for acknowledging the mistake in the first place. But why aren’t you honest with New Zealand? Why didn’t you stand up in your speeches and say, “Actually, we got it wrong. We shouldn’t have done it like this. We did, but we got it wrong.”? Instead, we have all this fluff and nonsense and nonsense and 30-second contributions that actually this is part of a long-term plan for the growth of the primary sector and the growth of Forestry New Zealand. Absolute waffle, absolute nonsense, and New Zealand can see through that at 50 paces.

So what does this bill do? Well, it does what it should do, which is to say that capital that comes into this country that is interested in investing in the primary industry has to follow the same New Zealand test that every other foreign capital has to do. It has to demonstrate that it’s actually going to be a benefit to New Zealand Inc. Not some sort “get out of jail free, go straight to go” special permissive test that was there previously. It rights a wrong, as it should.

Now, since I seem to be in the mood of handing out some bouquets this evening, I do want to acknowledge the contribution of Eugenie Sage. I don’t normally find myself nodding to her contributions. But I thought her relatively rational and dispassionate assessment of what went on over the last four years, what is indeed included in this legislation, and the feedback that the select committee reflected on summarised the changes very well. So I’m not going to go through all of those again. It obviously got unanimous support from the Primary Production Committee.

But I do want to conclude with this final message: this Government needed to be honest, as opposed to framing this as part of a strategic intent that was their plan all along. They needed to stand up and say: “We were part of something that delivered an outcome for the primary sector that was wrong, and that resulted in a distortion which has seen good sheep and beef farms hoovered up by foreign investors to put long-term carbon farming on. It wasn’t the right incentive, and this is an attempt to fix that wrong and actually get it back to an appropriate balance in terms of the incentives for foreign capital.” That’s what they should have said, and their silence does not do them credit on this issue. Thank you.

Thank you, Mr Assistant Speaker Bennett, for allowing me to take the final call on the second reading of the Overseas Investment (Forestry) Amendment Bill. I note that when I took a call on the first reading of this bill it followed you, so, good to see your change in position, and it was a good speech you made as well that I followed.

We’re talking here about the Overseas Investment Act, and we’ve heard the other speeches as well say that this is the piece of legislation where we really take some care to say to those overseas investors with some capital, “What is the benefit going to be, to New Zealand, for your investment here?” This bill relates, though, to the forestry conversion. We’ve heard from the previous speaker, Todd Muller, that the current legislation has incentivised these conversions of what could be quite highly productive land into forestry.

So there are different tests, at the moment, for investment into sensitive land. In this context, sensitive land is agricultural, rural land. So there’s currently the special forestry test. It doesn’t apply to carbon farming, but we have heard from the Finance and Expenditure Committee report that it’s become a tick-box exercise, so this has clearly become too permissive. Then there’s another test, which is the benefit to New Zealand test. So that is that there has to be some analysis and agreement that there are economic benefits for New Zealand, that there are natural environmental benefits, that there’s some continuation or increase in the ability for the public to access that land. Then there’s this third test that we’ve also heard about in some of the speeches today, particularly in the Hon Eugenie Sage’s contribution, and that is the farmland benefit test. This is a more stringent test than the benefit to New Zealand test and puts more weight on the economic benefits and those considerations of the investment.

So we know that the select committee has recommended moving these forestry investments to the benefit to New Zealand test. This seems to be a sensible check on those forestry conversions that they do benefit New Zealand, and I commend it to the house.

Motion agreed to.

Bill read a second time.