Overseas Investment (Forestry) Amendment Bill

Members, we now come to the Overseas Investment (Forestry) Amendment Bill. I’ll remind members that they’re able to participate remotely. If you’re on Zoom and want to take a call, please type “call” into the chat. You should also use the chat if you want to raise a point of order.

If we receive any tabled amendments, I will advise members so that they can refresh the House Papers page to see the new amendment.

Finally, it would be helpful of members to ask multiple questions—if they have them—of the member in charge during their call. Members, we now come to Part 1. The question is that Part 1 stand part.

Thank you, Mr Chair. We’re in the exciting stage of being able to ask Minister Parker some questions. I think the first thing is, when the original test was changed by the Rt Hon Winston Peters, there was already at that stage a great deal of opposition concerning those provisions, because many members—and I was one of them—expressed concern that it would lead to rapid escalation. At the time, the element of New Zealand production forest owned by overseas entities was estimated at 72 percent. I do note that the—I think it’s the Overseas Investment Office (OIO) recalculated the figure and slightly downgraded it. But, whatever the case, it was by far—even at the point that the Rt Hon Winston Peters, supported of course by the Labour Government, chose to increase it, there was substantial foreign ownership.

So here we are. Winston Peters left—I’ll just pause for a moment on that—and now we’ve got this absolute change of heart by the Minister and the Labour Party. I’d just like the Minister to explain why we arrived to this point, when already the concerns that we were expressing—that a number of people across this House were expressing, at the time it was introduced—why we’ve had this come-to-Jesus moment, if I can use that expression.

Thank you, Mr Chairman. Because we couldn’t rely upon the votes of the National Party to pass the legislation last term that we needed to close a gaping loophole in the overseas investment screening arrangements for forestry.

The situation was that under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the class of investments that can be screened under overseas investment regimes closed from the date of inception of that agreement. So unless there was a screening regime for a class of assets in place by that date, the Government of New Zealand could not thereafter introduce it unless they withdrew from CPTPP and other agreements that relied upon the most favoured nation clause relating to investment protocols, which sucked the CPTPP restriction on new classes of screening into earlier agreements, including the China free-trade agreement.

So the Government decided, and I was responsible for both the investment side of it and the trade side of it—we realised that we needed to move quickly, after the date of signature but before the agreement came into effect, to include within our screening regime classes of investment that we might want to screen in the future. Now, once a class of investment is within the screening regime, the rules as to how it is screened can be toughened or loosened under those agreements, but you can’t have a new area of screening.

The area of deficiency in forestry related to the lack of screening under the Act for forest registration rights. If you want to invest in forestry, you can either buy a freehold interest, a leasehold interest, or a forest registration right. A forest registration right can last for multiple rotations; it can last for a hundred years. It’s a bit like a very long-term lease. And unless that was within the screening regime for forestry, the country didn’t have an effective screening regime for forestry because there was an avoidance mechanism through forest registration rights. We also had evidence that that avoidance route through forest registration rights was increasingly being used by overseas investors.

Therefore, to have a cogent screening regime, we needed to include forest registration rights. We did that. The National Party didn’t favour that legislation and we were reliant on votes from the New Zealand First Party to get that, and the New Zealand First Party—and there was some good reasons for this. They didn’t want to disrupt overseas investment into our forestry sector, because they wanted more trees planted for climate and environmental reasons as well as for the interests of that industry. Therefore, they said, “Well, we will agree to forest registration rights being included in the Overseas Investment Act, but we want what the Hon Shane Jones called the primrose path.”, which was a very low regulatory route applied to forestry relative to other sectors. In order to pass the legislation, in order to have a cogent overseas investment regime, we agreed with that request, and, as a consequence, we got to where we got to.

In the period since, partly because the economics of forestry have improved, there has been an increase to the risks caused to rural communities of planting out mid-quality land in forests, in a way that is worrying some of those communities. And we think part of the answer lies in slightly toughening—not toughening to the extent that some people want, but slightly toughening—the rules that apply to overseas investment in forestry, whether it’s freehold, leasehold, or forest registration right.

I’d like to acknowledge the Minister for such a fulsome answer. But to be honest, my sense of history is perhaps just a little bit different in the sense that my recollection—and I was on the committee at the time, so I remember going through it quite explicitly. So at the time that the original change, which allowed up to 1,000 hectares to be acquired by a foreign owner to come in here with very loose requirements for approval—basically, you could buy up to 1,000 hectares—was, from my recollection, actually a New Zealand First initiative supported by Government. But if you want to say it was Labour supported by New Zealand First, it’s fine. But at the time that that was introduced, the members of the committee in Opposition parties were saying that they were concerned about the ability of foreigners to come and buy, with a huge amount of ease, a relative ease to come and buy swathes of land. That’s not to say that we weren’t interested in supporting the forestry industry; we were. But we were all very concerned. The Opposition parties were all very concerned about the ease of it.

So here we are. Just to go back to my original question, that was the result of arguments put up by you—and I’m talking to Mr Parker here—and New Zealand First as to why we should do that, right? Now here we are, a few years later, and, hey presto, we look like we’re going back almost to where we were before, which is a much more regulatory approach. What are the drivers, and why didn’t you listen to people at the time?

Because the National Party refused to back bringing in forest registration rights into the screening regime. That’s the reason.

💬 Andrew Bayly: So you thought it was a good idea to do 1,000 hectares?

Well, if we hadn’t done that, New Zealand would for ever have an ineffective screening regime. The member has just said he thinks there should be some restrictions on overseas investment into forestry and that there should be a consent regime around it. There would have been no effective consent regime because you could get around buying freehold and leasehold interest by buying a very long-term forest registration right. And it was happening and that was explained by me to the House at the time.

Thank you, Mr Chair. This is an industry where it’s great to see investors taking a 30-year view in New Zealand. I wish this could happen in all major projects, apart from forestry, in this country, because it would—the classic example of this forestry programme is that, if you take a 30-year view, you’re not making money until later on down the line but you’re prepared to make the investment. I think there’s a model in here which is very effective for the rest of the country. As you know, we’re very pro foreign direct investment, and we want to see more of it in this country.

I mean, the number of players in this sector—

💬 Anna Lorck: Sell off New Zealand.

I’m getting it as well—which are very limited; might be 20 or 30. They’re the ones taking the risk. We feel comfortable with this test, as it’s been reported in the bill. But one of the things that does make me nervous, and I’d like to ask the Minister a question, is: they were all asking that the regulator should be required to produce clear guidance about the factors they’ll have to have regard to and the way these will apply those factors when assessing an application under the “benefit to the New Zealand” test. To me, giving them that clarity was very important, and I would like to ask the Minister why that specific requirement wasn’t added to the primary legislation, even though the Finance and Expenditure Committee decided that wasn’t necessary.

Can I first agree with the member that the balance test here is appropriate, that it’s not as tough as the test that applies for farmland. Before I respond to his particular question, I would say that, for me, and for the Labour Party, there is something special about land. In a world where there are some—you know, there’s a lot of places overseas who’ve got more problems than we’ve got. We’re not a perfect country; we’re a pretty good country, and we’re a safe place to invest, and we’re a safe place to live. We’ve got to be careful, in my opinion, that with those attributes we don’t allow the opportunities of New Zealanders to be distorted by the interests of overseas people when it comes to land assets. I remember reading an article by Ambrose Evans-Pritchard in The Telegraph. He’s a commentator on economic issues that I follow. He’s a right-wing commentator, but I agree with quite a few of the things he says, and he says there is something special about land that is intrinsic to your sense of countryhood and self. We must be careful that we don’t separate ourselves from one of those rights of being a local Kiwi to actually have some preference in respect of land assets relative to overseas investors. That’s what drives this side of the House in respect of some of the restrictions that we’ve got on overseas investment, be it in residential land, farmland, or forestry land.

That said, we don’t think, in general terms, there’s something quite so special about forestry. It’s a bit different from the, you know, the farmland that’s adjacent to a beautiful lake that is effectively just such a special place to be able to live in and own and control. So we think that whilst there should be controls on overseas investment in forestry, they don’t need to be quite as strict as they need to be in respect of farmland. That’s why we think the balance is struck between facilitating investment on the one hand and managing the risks on the other hand by applying the general “benefit to New Zealand” test for forestry conversions. We’re not applying that to on-sale of existing farms to another overseas buyer. One of the things that is important to an overseas owner is to be able to change the ownership of that, either through changes in shareholding in their own entity or by selling to somebody else.

In respect of whether there should have been more particularity as to some of the factors that are going to be taken into account by the Overseas Investment Office when they apply that criteria, we did hear the suggestion from some members that there should be more detail in the Act. We thought that would be too rigid, and we thought that that guidance should be provided outside of the Act rather than codified within it.

Thank you, Mr Chair. I’m interested in the Minister’s comment that there is something special about land, and previously he’s also said that it’s a privilege to be an overseas investor and own land in Aotearoa. There’s Supplementary Order Paper 219 in my name, which does seek to change the test for land being bought by an overseas investor for forestry to the farmland test, where there is attention to the participation and oversight by New Zealanders and the economic benefit that would be provided by that overseas applicant.

Mr McKelvie, in the second reading, highlighted that there wasn’t a lot of difference between a walnut tree, I think he referred to, and a pine tree. Similarly, the Green Party can’t see any difference between a pine tree and a kiwifruit vine. Now if the overseas investor is wanting to buy farmland to plant kiwifruit, they have to go through the farmland test, but not if they want to plant vines.

The Climate Change Commission has highlighted that an overemphasis on afforestation undermines, potentially, the need to reduce emissions to mitigate climate change. Given that regardless of whether you’re planting the trees for permanent carbon forestry or for production forestry, you can be part of the emissions trading scheme and claim those carbon units, what is the problem with buying farmland for forestry on an even playing field with buying farmland for farming for kiwifruit vines, for horticulture, or for whatever, given that it is land and it is a privilege for overseas investors to buy land?

We heard from Treasury that the difficulty was showing the economic return, because the trees wouldn’t be harvested for some decades, but that seems a rather superficial reason not to have a level playing field for whatever purpose farmland is being bought for. So could the Minister expand on why we can’t go back to what it was pre-2018 and New Zealand First’s involvement, and having the farmland test apply for land being bought for forestry?

Well, the first thing I would say is that we have tightened rules around investment in farmland for a number of reasons. Some of those I’ve already outlined about how we don’t want New Zealanders outbid, but often by a very small amount, by an overseas investor for the same piece of land. We tightened that by, in part, changing the letter of direction that had been given by the prior Government.

Members may recall the controversy around Crafar Farms some years ago. There were New Zealand purchasers who were outbid by a small amount by an overseas group that had purchased those farms, and it caused a furore in the country because it was one of the largest groups of farms in New Zealand. The then Government said that it was opposed. It introduced yet another condition into the Overseas Investment Act regulations, and then sent a letter around the back door to the Overseas Investment Office that said, “Oh, by the way, look favourably on applications to buy farms up to 10 times the size of the average unit of that type of farm—i.e., up to nine dairy farms—and then turn down the 10th one.”, and we didn’t like that. So we took away that letter of direction, and then we codified into the Act the regulations so that for these things, if a future Government wants to loosen up on them, they’re going to have to convince Parliament that they should be loosened up, rather than do it through executive action, which we thought was wrong.

So if you wanted to go back to the prior status quo, you sort of can’t, really, because the situation in respect of farmland is now tougher than it was before all those changes were made, and we don’t think overseas investment in forestry ought to be that tough, even though we think it ought to be a bit more rigorous than it currently is. The reason why we think the general “benefit to New Zealand” test is appropriate is that, firstly, the more stringent farmland benefit test would discourage the productive investment that we need in the production of forestry sector. Now, members might say that they wish that wasn’t the case, but, as Andrew Bayly observed earlier, about 70 percent, or thereabouts—

💬 Andrew Bayly: 72.

—72 percent—thank you—of our forests are foreign-owned and they are reliant on foreign capital, so we didn’t really want to put at risk that sector by closing that route down too strictly.

Secondly, the risk to productive land can be managed under the general “benefit to New Zealand” test because the investor must demonstrate benefits that are in proportion to the sensitivity of the land. So proportionality in this sense means that overseas investment in our most sensitive land must demonstrate a higher degree of benefit for the land than land that is not so sensitive. Now, that sensitivity goes partly to economic productivity. We don’t want lots of our high-class lands planted out in forests, I don’t think, as a country, and there are a lot of communities concerned that you can go too far in that regard. So that now is relevant for the Overseas Investment Office as to whether this is inappropriate land to be planted out in production forestry.

It could also consider whether it is land of high conservation value, because even if it was unproductive land, sometimes there are conservation values which mean that it shouldn’t be planted out in pine forests, for example. Even though there is not an environmental test within the environmental legislation, it’s not within the Overseas Investment Act—it’s not the Resource Management Act, and it shouldn’t pretend to be.

Finally, the farmland benefit test captures a broad range of land, including that which is unproductive or unsuitable for agriculture or horticulture, and in those cases it could be disproportionate to impose a burden of the farmland test on investments in that case. So we think that this test is right for those reasons, and, accordingly, the member’s Supplementary Order Paper that seeks us to go further and apply the farmland test in respect of forestry investments won’t be supported by the Labour Party.

Thank you, Mr Chair. Now, look, I just want to touch on some of the Minister’s earlier comments. Initially I thought it was quite interesting, his recollection of how this bill came to be in the state it has been over the last few years, basically saying that the Labour Party were making the calls on it, they were driving this, and they had New Zealand First’s permission to say so. You know, what we saw was quite clearly that New Zealand First were driving this, and the Minister can say, well, he didn’t have the National Party’s support around the screening regime for forestry. I’d be interested on his views around whether that’s a necessary requirement for any other land-use purposes. He was rushing to get it through the Trans-Pacific Partnership—or with the additional letters added under that Government. And I wonder whether that was a consideration for him outside of the forestry—whether there were any other issues around horticulture, for example, or agriculture, or even aquaculture—on land use as well that needed to be considered under that, and whether they are now at risk because of the Comprehensive and Progressive Trans-Pacific Partnership agreement being in place.

Also, I’d be very keen to have an understanding from him on the adverse effects, if any, from his perspective over the last few years that the legislation has been in its current state, on those rural communities, in particular, where we have seen a significant area of land converted to forestry, fast-tracked through the OIA process under the special forestry test, and outcompeting other New Zealand potential purchasers. The Minister raised the example of Crafar Farms, a bit over a decade ago, I think it was, at that stage. But what we’ve seen in communities around New Zealand, as a result of the legislation as it currently sits, is that sheep and beef farmers have been outbid by overseas investors wanting to put quite productive land into forestry.

I was interested by the proposal put forward by the Green Party, the Hon Eugenie Sage in Supplementary Order Paper 219, looking to try and level up that playing field again, because my concern is that any time the Government is getting involved and meddling in a market, you’re seeing perverse outcomes. And that’s exactly what’s happened here. Because of New Zealand First and their influence over the Labour Party, and Labour wanting to have the Government benches, we saw a perverse outcome that significantly skewed the market and resulted in a massive increase—tens and tens of thousands of hectares—of productive sheep and beef country going into forestry.

Now, in my view, forestry should be able to compete in its own right, if it’s the most economic land use. If it has the best environmental practices on a particular area of land, then so be it; that should be justification enough without having to have special exemptions to outcompete in the market, and that’s where we’ve got to under this. So I’d be very interested to know what adverse outcomes there were from it, because I’m sure they must have done some analysis of that when considering how far to wind back those rules put in place, because the Minister touched on his view that winding it back to the level of agriculture was too far. I’m surprised by that because, actually, we still have obviously more onerous requirements for any overseas investors wanting to invest in agricultural land. That was part of the submission from Federated Farmers as well, noting that farmland to forestry, going through the general benefit, as opposed to farmland to farmland sales still having to go through the more stringent test for farming, where the benefits have to be substantial and more than what a New Zealand owner could do.

The example the Minister used around potentially non-productive land being put into forestry—their not being able to show that demonstrated additional value—I don’t accept because, ultimately, if the land is so unproductive that it can’t even generate a viable outcome or economic contribution from sheep and beef, or sheep, then surely having forestry on there will significantly increase that. So I think bringing it back would be a more appropriate consideration. Those are my initial questions, and I’ve got plenty more for him soon.

I think some of the concerns of rural communities about forests being planted in the wrong place or the quantity of forests being too great—they’re heartfelt. In some areas, they are borne out by the statistics; in some areas, they’re actually not. Overall, the number of hectares of additional forests that have been planted in the last few years is, last time I checked, still less than the deforestation in the prior decade. So I think we have to be a bit careful not to be too panic-stricken about the issue.

I’m a strong believer in the efficiency of markets, and I’m also a strong believer of internalising into economic transactions within those markets environmental externalities, and I’ve spent a fair bit of my life trying to achieve those ends. Sometimes it seems futile in the imperfections that we end up with in New Zealand, given compromises that are made either on the way through or by subsequent Governments that undo them. But one of the drivers of forestry for people that own land—and they’re not all overseas owners; they’re New Zealand owners, often—is that they’re actually doing it for the money, because they can make more money out of forestry than they can alternative land uses. Well, that’s how markets are meant to operate, including, particularly, the internalisation of environmental externalities that sometimes leads to that outcome.

Now, that said, I also recognise that economics are not the be all and end all in all transactions, including as to land use. I could make more money from my residential section if I could put up, in my residential area, a hundred-storey hotel, but I’m not allowed to because there are non-economic factors that are relevant to the planning of the use of my residential land. I also accept that, in rural areas, there are appropriate planning rules that are more than economic and go to socio-economic outcomes. If local communities don’t want their mid-grade land planted out in numbers of forests, I think they should have a planning function that enables them to do that, but that’s outside the terms of the Overseas Investment Act.

Thank you. I’m going to return to a question, but I just want to acknowledge a couple of people. The first one is the Hon Stuart Nash, who I know has deep roots into the forestry sector—very deep roots. Of course, I was watching an interchange just before, with him and the member for Tukituki, Anna Lorck. What just crossed my mind is on one side we’ve got a Minister who’s absolutely an advocate for making sure all our farmland goes into forests—I know he’s a very strong advocate—and, of course, I was thinking about Anna Lorck’s electorate and thinking, “Well, you’ve got a whole lot of farmland going into forestry, actually—very productive land.” I was just wondering how that interplay was going, that interchange. So I’m hoping the Minister, the Hon Stuart Nash, might take the opportunity to say whether in fact he supports this cutting back, this scaling back of forestry investments, because I know he is very keen that there’s an opportunity for overseas investors to come in and buy lots of land with little controls.

So I just want to go back, the last time—because this is the third time I’ve asked the question. As I understand the logic for this come-to-Jesus moment, and I hope that expression’s OK, but if I understand the logic of what the Minister said earlier, he said that, and he quoted National—but let’s just say that because there was no framework for a forestry registration scheme, the only option was to go from that point to a situation in 2018, and Winston Peters was somehow involved in it, which is described even by your officials, Minister, as being a very, very permissive arrangement for allowing foreigners to come in and buy New Zealand farmland.

So my question is: here we are, we’re going backwards; why did you think it was appropriate in 2018, whether it was your bill or Winston Peters’ bill or whoever—but, you know, the Government of the day, of which you were a member—to have such a “permissive environment” and now you think it’s appropriate, only 4½ years later, that it’s so desperate we have to scale it back?

Thank you very much, Madam Chair. I actually need to respond to that member’s comments. I am the Minister of Forestry and I am incredibly passionate about forestry, and I believe the right tree in the right place has a huge ability to influence not only our economic but our social and, of course, our decarbonisation aspirations. My vision is that in a hundred years’ time we will have a million hectares of land that is currently bare in indigenous forest. Because the thing about land use is that land use change has not kept up with the economics of farming.

The thing that happened in the mid-1980s, as we know, pre the loss of all the subsidies, is farmers were paid on how much land they cleared and therefore how much stock they carried. Of course, when that changed, there was a whole lot of land that became uneconomic from a farming perspective but what happened to that land is it wasn’t planted out. So the Forest Service has actually identified about 1.2 million hectares of land that is only suitable for the permanent forest category. And by the “permanent forest category” I mean land that will probably never be harvested either from an economic perspective—and by that it’s too far from a port or not close to a processing facility or too expensive to harvest—or it won’t be harvested from a health and safety perspective because, again, the ability to harvest this in a way that meets the expectations of health and safety in the 21st century just doesn’t exist, or from a conservation perspective; i.e., harvesting land which is too steep just is unconscionable.

If we can get that land planted, then we will mitigate, for example, the 5 million tonnes of silt that goes into Hawke’s Bay every single year, but we are not talking about the permanent forest category here, because this always had to go through the Overseas Investment Act if you were planning primarily for carbon. What we are talking about here is trees that are planting for harvesting. Now, the Forest Service, apart from that 1.2 million hectares that’s been identified for the permanent forest category, has also identified about 1.25 million hectares that is only suitable probably for production forestry because it is very, very marginal for farming. And keep in mind, about 86 percent of all forests in the emissions trading scheme are in classes 6 to 8 land.

So we are not taking out huge swathes of productive land. In fact, I got my forestry start dealing with a farmer in the Tukituki who won the Farmer of the Year Award. What he did is he won a whole lot of fertiliser, and that’s why he fertilised his whole farm—it made not much of a difference. So what he did is he took out every part of his farm that didn’t carry at least 3.5 stock units per hectare. And you know what? He didn’t lose one unit of stock whatsoever. He planted that marginal land in trees. And what he did—he was a guy called John Aitken, a very, very innovative farmer, and he was one of the leaders of the farm forestry movement. So what he did is he took out the uneconomic land for farming and he put it into forestry, therefore, diversifying his farm and his sources of income.

Now, I absolutely support this. The last thing I want to see is productive farmland planted in forestry. I want to see our farms, our rural landscape, a good mixture of farming, of production forestry, and of carbon farming, and it has always been about the right tree in the right place. So if anyone suggests—and to be fair, this is the first time actually anyone has suggested, certainly to my face anyway—that I want to see swathes of productive farmland planted up, that, Madam Chair and members of this committee, is the last thing I want to see. It’s why I support this to the absolute hilt and I reckon the Minister is doing a fantastic job. Thank you very much.

Thank you very much, Madam Chair, for looking past Andrew Bayly—which is a difficult thing to do, in all kinds of ways! My contribution will be brief; I don’t profess the policy background that other learned colleagues on this side of the House—and maybe even some on the other side of the House—would claim in this space. So a reasonably tight question, a narrow question; indeed, one that the Minister in the chair, might be well placed to answer, maybe almost from his legal background, and if he were to wear the hat of Attorney-General he might be equally well placed to answer it.

So it goes to the provision in Part 1, whereby clause 4, subsection (3), that the inserted subsection, new—well, I don’t want to get too caught up in cross-referencing. If the Minister is able to identify where it says, “Subsection (1C) does not apply if the relevant Ministers are satisfied—” and then it lists a number of different points of satisfaction that are needed—such that subsection (1C), which already exists in the primary legislation.

My question, really, is: what is the satisfaction of the relevant Ministers to be based on? Would it be submissions of applicants? Would it be maybe other parties who are interested in the matter—might have a commercial interest; might have a general, perhaps environmental advocacy interest; might be local to the area and have a geographical interest, therefore? And so I wonder how the Minister would contemplate that relevant Ministers, as defined and as used in the legislation, would come to that decision and feel satisfied that those various points apply.

In particular, I’m interested to know whether the Minister would feel the need to seek independent advice of those various interested parties—so advice that could be regarded as independent, such that they could come to those decisions, and thinking particularly from a point of view protecting against judicial review or otherwise questions of the decision?

So that was my sole question for Part 1, and I thank Madam Chair for the opportunity to ask it and in anticipation to the Minister for answering it.

Thank you, Madam Chair. The information that the Minister relies upon is essentially the summary of submissions as analysed by, well, the summary of the application, because there’s not a third-party submission process. That’s the summary of the information that is provided by the applicant for the consent.

There are some general provisions relating to forestry land, such as that it is forestry land that, on occasions, are not true of part of the land; there could be, for example, a house and curtilage that is part of the land that is not going to be forested, but the Overseas Investment Office can none the less say that overall this falls within the class of forestry land and should be approved according to that net-benefit test.

I move, That the question be now put.

Thank you, Madam Chair. Thank you. I just wanted to come back to my earlier question the Minister hadn’t addressed yet either, in relation to his comments around the need to progress this change back in 2018, I believe it was, with haste to ensure that the appropriate changes could be made before the Trans-Pacific Partnership came into being.

💬 Hon David Parker: Comprehensive and Progressive.

And yes, with the additional letters that the Government chose to add to embellish it somewhat and try and sell it better to the public, having opposed it very vehemently over the previous campaign election, up and down streets across New Zealand. But I digress somewhat. Anyway, the extra letters and suddenly it was all OK.

So I’m interested in whether or not there are any other land uses that have potentially been impacted in his mind—or could be impacted—by not having been put through the same process that he was very actively keen to put forestry through, and whether that’s something that we need to be addressing under this or potentially in a future iteration as well.

Then I just wanted to pick up on the comments from the forestry Minister as he came in with his contribution as well. Because I thought it was quite interesting that he was a strong, fierce lion in support of maintaining property rights for agricultural purposes and yet, four years ago, was nowhere to be seen when New Zealand First were advocating for this particular bill.

I think it’s really important because I’ve heard consistently from a lot of farmers who have been very concerned by the impact that this has had. And the Minister made the comment that we haven’t yet seen a level of afforestation at a level in line with the deforestation that happened over the previous decade.

I’m interested to know whether he is setting that as a benchmark; that he wants to see that same number of hectares converted back into forestry before he will be satisfied that we might make changes that bring the tests to a comparable level for agricultural land and also for the forestry land as well. I’ll leave it there for now. Thank you.

I’m sure many members present will join with me in saying that they miss the provincial champion and the billion trees that he promised.

I actually agreed with some of the reasoning of New Zealand First at the time. They observed that the forest industry had suffered quite a lot of uncertainty in the prior years, caused in part by some rapid changes to the price of carbon, which at times discouraged and then encouraged deforestation. Because the price of carbon—when it dropped to $2 a tonne—saw lots of people chopping down their forests at a time when they could do it very cheaply, including through purchasing, if they wanted to, Ukrainian hot air units that were admissible at the time into the New Zealand emissions trading scheme.

So New Zealand First were concerned that whilst we introduced forestry registration rights into the screening regime, that we didn’t disrupt the forestry sector, and that’s one of the reasons why. Although they agreed for the green forest registration rights into the scheme, they wanted an easy regulatory path.

Are there other areas that we see the need to change regulation on? No, we did urgently—one of the reasons we opposed the Trans-Pacific Partnership when the prior Government was promoting it was that they were refusing to move on overseas ownership of New Zealand homes, which, if we hadn’t moved on before the Comprehensive and Progressive Agreement for Trans-Pacific Partnership came into effect, no future Government would have had the regulatory space to control overseas ownership in New Zealand housing stock, which is something that we fixed at the time.

Thank you, Madam Chair. I’m very grateful for the opportunity to talk. I just want to acknowledge the Minister of Forestry and his contribution, because he talked about that utopian vision for land and forest living in harmony, and, obviously, he referred to the Aitken farm where he thought it was fantastic that their farmer had planted up, obviously, steep, unproductive land, left the productive soils, and that actually had a beautiful arrangement which he’s very supportive of. I think everyone in New Zealand probably shares that view.

But, unfortunately, the 2018 regulations didn’t actually create that. What the 2018 regulations did has actually made it much more permissive for foreigners to come and buy that land. The rules now under this arrangement—up to a thousand hectares. Now, let’s assume this farm, the utopian farm, is still in existence and owned by the Aitken family; they still remember Stuart Nash fondly. Now, what is the test under the new proposed arrangements? So let’s assume that Aitken farm—beautiful trees all grown up now; a foreigner wants to come and buy it, and it’s over a thousand hectares. So what are the new rules? How will the new tests be executed? And the sense is, is there a requirement for a counterfactual? Is there a requirement to set out what the benefits are of converting that utopian farm now into a pine forest? What are the new arrangements? And also, I’d quite like to understand about the capability of the Overseas Investment Office, but I’m going to leave that for my next question.

I’ve actually already addressed that issue on a number of occasions. The member is incorrect that the changes that we made in 2018 made it easier to invest in forestry. It didn’t—it closed a big loophole in respect of forest registration rights that otherwise was an avoidance pathway that made a nonsense of the controls of investment via freehold and leasehold interests. In respect of the test to be applied, the general “benefit to New Zealand” test—I’ve explained that in detail as to how that applies and I’m not going to do it again.

💬 Andrew Bayly: Can you give us an example of the counterfactual?

In respect of whether there’s a counterfactual test: no, there isn’t. The test is applied compared to the current state of the land.

I move, That the question be now put.

I call Tim van de Molen, but I am now looking for new debating points, and I’m getting a sense of some repetition, so let’s hear you.

Absolutely—absolutely. There’s plenty of beautiful farmland around the country so reiterating some of that is bound to happen but I do just want to come to the point the Minister was touching on around—

CHAIRPERSON (Hon Jacqui Dean): Order! Was the member just reflecting on my ruling?

Not at all, Madam Chair. I would never do such a thing.

CHAIRPERSON (Hon Jacqui Dean): The member will withdraw and apologise.

I withdraw and apologise.

CHAIRPERSON (Hon Jacqui Dean): Tim van de Molen.

Thank you, Madam Chair. The land classification that Mr Bayly was touching on hadn’t been addressed by the Minister in terms of what happens now that we have the separate requirement for farmland to forestry versus farmland to farmland, or rather the continuation of that requirement, and the 2018 legislation did make it significantly different for someone wanting to come into New Zealand and invest in forestry. That pathway was much easier and it was for someone wanting to come into New Zealand and invest in agricultural land.

At a time now where we have significant global concerns around food security, food supply issues driven in large part off the war in Ukraine—you know, we’re looking at our productive capacity here, which we can still ramp up significantly if we are investing in the right manner, enabling that investment to then generate greater productivity. That comes to the comment that the forestry Minister made as well around looking at the Aitken farm, I think it was, where they had been able to increase productivity from the land even though they had taken out some pockets of it—the less productive areas, I think you said, under 3½ stock units per hectare—and planted those pockets, and the overall productivity remained the same or potentially increased. Look, we have a fantastic track record of doing that in New Zealand in general. If you think now we have about 26 million sheep in the New Zealand flock. That dropped from a peak of 70 million, and yet we are producing more value from that 26 million sheep flock than we were from 70 million.

So we have a fantastic track record of innovation in the food and fibre sector in New Zealand and I’m interested in the concern I raised before that he hasn’t touched on yet around the impact of the split. They’re still favouring the forestry investor because if you have two investors coming in, two foreign investors, one’s wanting to acquire a farm for agricultural purposes to generate food production, someone else wants to buy the same farm for putting into forestry. Yet they’re coming in both as overseas investors—investors with a different playing field—and that to me seems patently unfair. We are screwing the scrum and it is to the detriment of food production in New Zealand and I’d like to hear what consideration he’s given to that point.

Madam Chair, just before I do that, officials have just told me that in answer to Mr Bayly’s question, when I said we don’t have the counterfactual test, and then I said that the test is compared with the current state of the land, the test is compared with the current state of the land but that’s what the counterfactual test is.

💬 Andrew Bayly: Thank you for correcting it.

Thank you. In respect of the last point the member’s made, we disagree with that. We don’t think we should be applying the stringent test that applies to farmland to forestry land. If the member wants to do that he’ll be backing the Greens’ amendment, which the Labour Party is opposing but which I understand his party is too.

Thank you. This is my final question to the Minister: how confident is he that Land Information New Zealand can record and have recorded all trees in the right place; and, going forward, if this industry grows, how confident is he that they will be able to keep those records so we can all be informed?

The Overseas Investment Act records only deal with approvals or disapprovals of applications to buy land that is covered by the regime and monitoring of conditions if conditions are imposed. For example, if someone sought to acquire a farm that was mainly forestry land but had some high-value agricultural land, and they said, “We’re going to subdivide it and sell off the highly productive horticultural land.”, they’d monitor against that. But they don’t do that, in general, for all land in respect of the overall vision that was described by the Minister of Forestry, the Hon Stuart Nash, and it is good that we’ve got a Minister who has a vision for the sector. That’s actually achieved through not just the overseas investment rules but it’s partly rules that lie in district plans and through the emissions trading scheme, as well as in overseas investment settings.

Thank you, Madam Chair. I move, That the question be now put.

Thank you very much, Madam Chair. Minister, I was interested in your comments earlier where you said that land is special. And it’s certainly something that I think most people who work and live on the land in New Zealand would agree with. In particular, those who are producing food certainly think it’s special and it’s their communities—and certainly in my electorate of Southland, it’s something I hear regularly. It is the benefit of a community, of people who grow things on their land, and the schools, the children, all the various businesses who provide services to the farmer and make the local economy work.

I’m interested in why you’ve chosen the benefits of New Zealand test relying on seven different factors. And if you are able to step us through why those seven different factors will be better than the farmland benefit test, which I note was another alternative that the Government looked at but said that in its view the farmland benefit test is more complex than the “benefit to New Zealand” test, which this legislation is changing to. If land is special and farmland is obviously providing food and is special, why not use that test rather than the seven benefits to New Zealand assessment test?

I have been through this a number of times and I’m not allowed to mention whether members have been in—

💬 Andrew Bayly: Well not really; not tonight.

Well, I’ll actually read out exactly what I read last time so that there can be no ambiguity, because it’s the same words I’m reading from: there are three reasons why the general “benefit to New Zealand” test balances these objectives. First, the most stringent farmland benefit test would discourage the productive investment needed to support the sustainable growth of the production forestry sector. Additionally, the risks to productive learning could be managed under the general “benefit to New Zealand” test because an investor must demonstrate benefits in proportion to the sensitivity of land. “Proportionality” in this sense means that overseas investment in our most sensitive land must demonstrate a higher degree of benefit than land that is not so sensitive. The assessment of the sensitivity of the land goes beyond its economic productivity and includes land of high conservation value, for example.

Finally, the farmland benefit test captures a broad range of land, including that which is unproductive or unsuitable for agriculture or horticulture. In these cases, it can impose a disproportionate burden on some investment. The Act already recognises this by providing for exemptions from it. The bill provides that forestry conversions should be a fourth exemption to the farmland benefit test.

Thank you. I just want to acknowledge my colleague Damien Smith who raised the issue of the Overseas Investment Office (OIO), and I alluded to that I was going to ask some more questions on that earlier.

So we are supporting this bill, and we’ve made that clear, obviously because it is a slight tightening up on the regime. We do welcome foreign ownership or foreign investment into our forests but we want to make sure that these new rules do work. So can the Minister just provide some certainty to the committee and certainty to the people who will be listening as to the role of the OIO?

Obviously, this is a more stringent requirement, so they require specialist skills. So not only the ability for OIO to process these applications in a timely manner, to do it on a fair basis, and also in terms of the point that Damien Smith raised, was the issue around monitoring once the arrangements have been agreed, the capability of the OIO to do that, and, certainly, that it will do that, because there have been some claims that the OIO have been less than robust in following up and monitoring investments. I’m not talking in the forestry industry particularly, but on other foreign investments. So what certainty can the Minister provide to the committee and also to the people looking to potentially invest in New Zealand that they will be dealt with in a speedy, timely, and appropriate manner?

I’m confident that the committee can be assured that that will be the case. We actually have changed the fee regime. There’s cost recovery on this to enable those jobs to be done properly. We’ve also taken out some of the unnecessary minutiae of detail that used to have to be provided by applicants, so that it is somewhat streamlined and more efficient while still meeting the policy objective.

I move, That the question be now put.

Motion agreed to.

Members, the question is that the Hon Eugenie Sage’s amendments to Part 1 set out on Supplementary Order Paper 219 be agreed to.