Invest New Zealand Bill

We begin with the Invest New Zealand Bill. When we were last considering the bill, we were debating Part 1.

Thank you, Mr Chair—thank you for the call. I just want to remind the committee where we’d gotten to yesterday evening. We were starting to work our way through the bill clause by clause, given that this was a bill that was introduced under urgency. So we went through the first and the second readings pronto; hasn’t been to a select committee. So there’s a fair amount to discuss in this committee stage of the bill. In particular, at this stage, we were working on clause 3, the purpose part of the bill, and asking, I guess, really the questions that relate to the broader policy around the bill in lieu of having had a select committee process. So we’ve had a couple of calls on it and a response from the Minister of State for Trade and Investment, and I guess that’s where we’ll carry on with tonight, working through the purpose of this bill.

Now, I had asked the Minister why it was we were reintroducing this policy—the policy originally, of course; way, way back in the early 2000s, there was Investment New Zealand, which was disbanded in 2003. I was querying the institutional memory and what officials might be able to tell us about the disbanding of Investment 2003 and why this particular policy was being revived. So I’m hoping the Minister will have an answer for that. In particular, she said, of course, that she had been an employee of New Zealand Trade and Enterprise herself, which is great that she brings that experience to the role. I know that the Minister in the chair is some years younger than me, so she must’ve been a very young employee at that time. I suspect that perhaps if she’d been around there in 2003—I’m guessing she possibly wasn’t then, so we are relying on some of the institutional memory, which I hope her officials have been able to brief her on overnight.

However, what I do want to focus on in terms of the purpose of establishing Invest New Zealand is something that the Minister said—perhaps one of the other Ministers at the time—in terms of justifying this. The Minister drew on a comparison with Invest in Ireland—so I do want to investigate that—and said that there’s good precedent for this type of entity overseas. Now, this was during one of the first or the second reading debates, or maybe it was one of the members of the Government side. So I do just want to dig into that comparison a little, and in particular I would like to hear from the Minister how Invest in Ireland operates—obviously not in detail; that’s not something she’s going to be telling us, but, you know, we’re a similarly sized country and we have a similar economy in some ways, certainly an economy with a large agricultural basis.

But there are some very significant differences between New Zealand and Ireland as well. Amongst other things, Ireland has a very low corporate tax rate, I think of about 12 percent, so it has that kind of difference. And, of course, unlike New Zealand, Ireland is parked right beside a market of, I think, about 300 million people and it’s a member of the European Union, so it’s quite separate, obviously, from the United Kingdom. It has an entirely different sort of framework within which it is operating, so I want to know what lessons we can draw from the Invest in Ireland experience that are actually relevant to us, given that New Zealand is down the bottom of the world. It’s a long way to our nearest trading partners; even our closest trading partner, Australia, is still a three-hour flight away. Some of the Pacific Islands, of course, are about that distance as well. So we have some quite significant differences as well. So I’d like to understand how Invest New Zealand is going to—why that comparison with Invest in Ireland was justified.

So that’s a particular thing I’d like to consider under the purpose of the setting up of Invest New Zealand. In particular, I want to know—I guess Invest New Zealand will do what it does, but is the intention, then, to support attracting investment with other forms of Government intervention in the market? Is this a sort of an indication that we are going to look at, you know, changing that corporate tax rate and so on? So a little bit of an insight into the overall purpose, and, again, that comparison with Invest in Ireland would be very helpful.

I had to leap to my feet because they’re very good questions from the member the Hon Dr Deborah Russell. Yes, it is true: we have extensively looked at the model in Ireland and, indeed, Singapore. Like those nations—small, advanced economies—New Zealand is also an island nation. The Prime Minister himself actually, as the Leader of the Opposition, visited Ireland and has taken a real interest in that particular model.

These two particular countries that I’ve mentioned offer, as I think the member has acknowledged, some significant financial incentives. There are attractive tax rates for companies, but the Irish model particularly—the Industrial Development Agency, or, as we call it, IDA—does offer a really strong example of what an effective investment promotion agency can achieve. So what we’ve done for the New Zealand situation is try to apply those lessons learnt and that institutional knowledge that has been developed over there in the European setting—and acknowledging that, happily for Ireland, they do sit on the cusp of the European Union; equally happily for Singapore, it sits with the Goliath that is North Asia above and around it.

But it’s really important to take these lessons from international jurisdictions because we want to apply best practice here in New Zealand. The question was raised last night about why the need for urgency. As I mentioned last night, we want to get this agency up and running as soon as possible. You know, time is of the essence. So our view is very much that if we can translate international best practice to a model here in New Zealand, that is a really strong foundation for this agency to grow from.

Thank you, Mr Chair. Thank you to the Minister for her response, but I think one of the things that was highlighted yesterday at the end of her contribution was where she—I like the fact that she was talking about virtue signalling certain opportunities that this bill may present, but I think there are a couple of things from our questions that haven’t been responded to. One of them being—and this was a question from the previous speaker, the Hon Dr Deborah Russell—what is the difference between this manifestation of Invest New Zealand and the previous version? That is something that we have not heard the Minister respond to.

Also, in terms of my numerous questions around the regulatory impact statement to start with, particularly whether the Minister is able to elucidate the committee on what the feedback and response from the Ministry of Foreign Affairs and Trade (MFAT) was. Because the regulatory impact statement stated that advice was sought or consultation was sought, but they haven’t heard back yet. So what was the feedback from MFAT, particularly in relation to what they would consider? I also mentioned some of the other ministries, but I think the Minister touched on that yesterday, so we won’t go into that.

I want to pick up on two things that the Minister said, and I think one of the things, when we’re looking at comparing to international best practice, which I completely understand—but one of the things we also need to consider is the context and the fact that when we’re looking at investment, that is a complex process that involves different parts and there are certain geopolitical reasons why something could have been done in a particular way.

So, for example, the Minister mentioned Ireland. I know that the Hon Dr Deborah Russell has mentioned certain aspects of Ireland in terms of lower corporate tax rate in terms of a difference in corporate tax rate, but we also need to consider that Ireland has 33 percent in terms of capital gains tax, which we already do not have here in Aotearoa New Zealand. The other thing is that while it’s true that Ireland is next to 300 million people with a much broader economy, we also mustn’t forget the unique geopolitical situation that Ireland find themselves in right now, which is their neighbour has exited from the EU, leaving them being the only country in the British Isles area being of the EU, therefore being a particularly lucrative avenue for people to invest in, particularly for people from the EU. So that we can’t forget.

I think Singapore—the example that the Minister gave—is also really interesting because one of the things we see Singapore does, in order to boost its own investment, is it has a debt of 173 percent, which is massively higher than what we see in Aotearoa New Zealand. Because they understand the need that when we’re looking at drawing foreign investors, one of the reassuring factors is that we must have a stable and long-term-thinking domestic market for something like that. So I really want to kind of get a better idea of—the Minister has already mentioned some of the parts—but how does the Minister reconcile some of these other aspects of the two examples the Minister gave that this is drawn from?

My last question to the Minister is around something that the Minister said yesterday: that investors won’t invest until there is an independent agency. I want to pick up on that—on why investors are waiting. What is potentially the difference in the policy setting that Invest New Zealand is going to make that fundamentally is different from what New Zealand Trade and Enterprise is doing currently and other agencies that are the one-stop-shop are doing currently that means that the Minister knows of investors currently lining up, wanting to invest, but will not do so until a promotion agency is up and running? That, for me, is an interesting question that I would really like to hear the Minister’s response to.

So a couple of questions for the Minister, just to recap. Number one is what was the feedback from MFAT? Number two is just to unpack a little bit more in terms of comparative studies with Ireland and Singapore, in light of other geopolitical factors and also other taxation factors. Lastly, what is the policy change that we’re going to be looking at with Invest New Zealand that means that people are not going to invest right now without that agency?

The time has come for me to leave the Chair for the meal break. The committee will resume at 7.30 p.m.

Sitting suspended from 5.58 p.m. to 7.30 p.m.

Members, the House is in committee for consideration of the Invest New Zealand Bill, the Rates Rebate Amendment Bill, and the Employment Relations (Pay Deductions for Partial Strikes) Amendment Bill. We begin with the Invest New Zealand Bill. When we were last considering this bill, we were debating Part 1, clauses 3 to 6, “Preliminary provisions”, and Schedule 1. The question is again that Part 1 stand part.

Thank you, Madam Chair. In terms of the decision to create this new entity, I wanted to speak about the missing option. Looking at the regulatory impact statement (RIS), on page 11, there are four options that are set out that were considered by the Minister. None of those options, so far as I can see, although I’d be very happy to be corrected, look at both retaining the current option of New Zealand Trade and Enterprise (NZTE) more or less in its current form, injecting some additional funding into the entity to increase the scope of its work and, if necessary, making statutory amendments to that Act to enable it to do anything that isn’t currently contained in the purpose of that Act. It looks to me like the other options consider—so the status quo is option one. Option two is “Improvements to existing institutional arrangements”, but you’ll see that option doesn’t include an increased cost to the Government, so clearly there hasn’t been a proposed increased investment there. Option three is to “Focus only on general business settings to improve attractiveness of New Zealand as an investment destination” and there are some additional costs there, but it looks like there is a focus on the function there as opposed to looking at new functions the entity might be able to carry out. And option four is the creation of the new entity, which is where this bill has taken us.

So I’m just wondering why that wasn’t considered as one of the four options, especially considering the nature of current work that is ongoing at NZTE. I understand that the entity was incubated within NZTE, and on the website itself it reads that Invest New Zealand is managed by the New Zealand Trade and Enterprise investment team; that the team is focused on building a vibrant investment market that fuels a high-wage, low-emission economy; that it has a dual role to help investors discover high-value investment opportunities within Aotearoa and connect New Zealand businesses with the knowledge and networks they need to raise capital and fund international growth.

I did hear the Minister talk about the idea of giving the entity focus and having that singular focus was valuable, but I do think the thing that we need to consider here in terms of the establishment of Crown entities is that there are many Crown entities that have multiple purposes—that don’t have a singular purpose. So whenever we’re looking at creating an entity that does have a singular purpose, then we really must have looked at the pros and cons of the options available to us. And just bearing in mind what the finance Minister was saying in her Budget address that we do need to be cautious with the money we spend, that it is tough times, that we need to make hard choices, why that option of expanding the mandate and increasing the funding was not taken; so what the logic was behind that?

Having said that, I do recall—I can’t remember which part of the RIS it was in—that the statement was made that decisions had been taken before that assessment was done. So my question would be: was there another assessment of sorts that led the Minister to believe that that was the most financially prudent option to take—option four?

So, again, there doesn’t appear to be that assessment of why the increase wasn’t the best option taken, and again, perhaps, just some commentary from the Minister on the existing functions of NZTE, which look quite extensive and look like they are not at fledgling state but are being carried out now. There currently is a global team, there’s also a Māori investment team, and there is a private capital team. So there are multiple teams that have been established and are currently running, and whether there was an assessment of the cost to shift those teams to the new entity as part of the cost assessment done as well.

I will take time to respond to this, because these questions, actually, were asked last night, but I appreciate that the member Vanushi Walters may or may not have been in the Chamber. With the question, I think the member actually contradicted herself by saying she wanted to talk about the missing option. Well, the option most certainly, most demonstrably, is sitting in there: that New Zealand Trade and Enterprise (NZTE) and a repurposing of NZTE was looked at but it was decided that the need for an autonomous stand-alone agency was necessary.

As I explained to the committee last night, it will have a singular focus of attracting inward investment and, indeed, promoting New Zealand as a desirable destination for investment. It will also be working to support foreign investors who are interested in investing in New Zealand. So it becomes a one-stop shop, so to speak, for the purpose of attracting foreign direct investment (FDI) into New Zealand. Now, that is quite different to the mandate that NZTE operates under, and again, I explained last evening that NZTE has, of course, the dual mandate. It does play multiple roles, as the member herself has articulated. It has got multiple teams. It has got hundreds and hundreds and hundreds of staff, and they are not necessarily focused on attracting inward foreign direct investment, which is the purpose of this entity. We absolutely maintain that focusing Invest New Zealand’s mandate solely on attracting inward investment will be better to set up the services that it is going to be offering.

I also just want to take a minute to answer the questions of the Hon Dr Deborah Russell about the difference between this new stand-alone entity and what, apparently, existed in the early 2000s. As Dr Russell articulated, she was young in her working career then, and she wondered what I was doing. Well, having cast my mind back, I was a ski bum working at Coronet Peak, down in Queenstown. I wasn’t at NZTE in 2003, as the member inquired. But the new agency Invest New Zealand will be a stand-alone, autonomous Crown entity, as I keep reiterating, focusing on the attraction of FDI. However, as I have been led to believe, the old Invest New Zealand, as a business unit of the then Crown agent Trade New Zealand, which then morphed into NZTE, lacked the focus on what is now a key priority for the Government, and that is attracting foreign capital in order to grow our economy.

Thank you, Madam Chair. I’m excited to see that the members on the other side are also eager to take a call around this. I’m just also waiting to hear the responses because I haven’t had engagement from the Minister of State for Trade and Investment regarding the questions I asked right before dinner as well.

I understand where the Minister’s coming from, but the problem is we’ve had no opportunity to speak to the officials as part of a select committee stage, so we do need to tease out—even though I understand the purpose and what the Minister is saying, but the broader policy questions remain unanswered. Those are what was the Ministry of Foreign Affairs and Trade’s response? I’m going to ask the Minister again because we haven’t heard the Minister respond to that.

A key proportion of this is talking about comparative countries and comparative markets. We mentioned a few times that those comparisons with Ireland and also with Singapore are complex. The Minister has not addressed the broader complexity of the question. Now, the reason we are homing in on those additional markets is because, on page four of the regulatory impact statement on balance of benefits and costs, it specifically says that it is difficult to anticipate quantitative benefits. So there is no data that suggests that this is going to work on the basis of the purpose statement in clause 3 and that it is going to achieve the outcome that the Minister says.

The evidence relied upon the international comparators. These are the international comparators that are, as suggested, Singapore and Ireland. But, like I said, what I’m wanting to hear from the Minister regarding those two particular countries is the complexity of, number one, the geopolitical situation in Europe with Brexit and how Ireland is situated. We do not have the same kind of attractiveness because we don’t have a neighbouring country who has left Brexit or has left—let’s say the Association of Southeast Asian Nations (ASEAN) has decided to open up this entire market of Asia or Southeast Asia to us, to give an example. Another example is, let’s say the ASEAN - Australia - New Zealand free-trade agreement. In that particular case—like, if Australia exited from that, we might see something like this that potentially simulates that tangible benefit we see in the situation in Ireland right now. Singapore: again, they’re a different situation. They are heavily invested in domestic markets. Again, we’re not quite seeing the comparison there. So if the Minister wouldn’t mind explaining how these two countries came about in terms of the comparative nature of this particular policy.

To keep on going with additional questions, one of the things that has been addressed in the regulatory impact statement, I’m really interested whether this is established terminology—other people, the Hon Damien O’Connor may know this much better than I do—around the term the “liability of foreignness”. This idea is that you want to be able to basically make it more attractive by equalling the playing field between domestic and international markets, which I understand. Has the Minister heard from domestic markets that this is not going to generate potentially any competitive behaviours or do it in a way that is harder for domestic businesses and domestic investors to invest locally because they don’t have that market advantage? Because apparently the whole point of this is that foreigners should be able to be on an equal footing with domestic investors.

Which then brings us to the question I asked the Minister in terms of what the Minister mentioned yesterday—which I’m still waiting for a response on. The Minister mentioned investors won’t invest until there is an independent agency; that’s kind of paraphrasing what the Minister said yesterday. Does that mean there are already current investors that are holding out? If this is just to attract foreign investors, why do investors need to hold out for this agency? I’m just not quite clear on the link between what the Minister said yesterday and the purpose of this particular bill.

Sorry, Madam Chair, I will respond to the member, because I intended to prior to the dinner break, but the previous Chair decided to ring the bells. Look, I want to clarify to the member: we’re not copying the exact model that has been adopted by the Singapore or indeed the Irish Governments. My comments were very clear prior to the dinner break that we are taking best-in-class, best practice, and we are applying that to the New Zealand environment. But as I say, there are wonderful, wonderful attributes to both of those models. But equally, New Zealand stands in a class of its own in terms of its attractiveness to foreign capital and foreign investors. We have a small, advanced economy. We are a stable democracy. We have an incredibly strong network of international relations. We have strong institutional settings. We have labour market flexibility, albeit now that we have a change of Government. We do have responsive regulatory settings. We have all sorts of unique, attractive propositions that foreign investors are really, really interested in.

And again, I’d like to correct the member: I did not say that foreign investors are “waiting” and “holding off” for the stand-up of this particular agency. I said that this agency is tasked with rolling out the red carpet to these kinds of investors so that we can make it as streamlined as possible. Actually, I would remind the member of the roadshow that was held up in Auckland, the investor summit. I mean, that had billions and billions of dollars of foreign capital in the room who came to New Zealand for the specific purpose of looking for business opportunities and investments. So I would just like to reiterate to the member that standing up an organisation like Invest New Zealand will only streamline that and make it easier for them.

Thank you, Madam Chair. I want to draw the committee’s attention to Schedule 1, which is to be debated under Part 1 of this bill, and it’s got some fairly significant provisions in it around the establishment of Invest New Zealand. I don’t want to go through some of them in detail myself. There’s some quite significant ones around the transfer of New Zealand Trade and Enterprise (NZTE) employees to Invest New Zealand, but I know my colleague Helen White, who has particular expertise in this area, wants to understand some of the detail of that. I do want to look at even just the transfers of functions that are sitting in Schedule 1 and how that is to be achieved. Part of it is the consequence of transfers of functions. Some functions are clearly getting transferred from NZTE to Invest New Zealand. I just have a general question. The first was why that needed to be accomplished by means of law. There must be something around the structures there that meant that with Crown entities—if you could just clarify why we had to go through writing this out in law instead of just a written agreement between the new agency and the old and things like that. Why did it have to be specified in quite some detail?

Then it goes from transferring of functions to also transfers of property and how the employees get transferred across, which I’ll leave to Helen to discuss. But in terms of the transfers of functions, I just wondered why that couldn’t be achieved by a Minister’s directive or a Minister’s engagement with the boards of the relevant entities, setting out who was to deal with which matters. And those transfers—I presume that’s some of what’s going on, but why the need to have legislation in place to do that?

In Schedule 1, Part 1—it’s actually only got one part, but that’s fine—clause 2(2) of that schedule, “New Zealand property identified by NZTE”. I’m curious about that because clearly a whole lot of property could just be transferred by a sale and purchase agreement. Again, I’m not quite sure why we need to go through having a clause in the legislation when it could have just been achieved by a few invoices flying back and forth. Something like that could have been done, so, again, why the legislation? But also I’d like to know what is contemplated by that word “property”. Are we talking desks and chairs? Are we talking trademarks? What are we talking about when it comes to that sort of property? It seems quite a thing to transfer property from one entity to another, so I would like to understand what kind of property is being transferred from NZTE to the new Invest New Zealand. Now, clearly it relates to the functions of the two entities, but, please, if the Minister could clarify what kinds of property we are talking about there.

I can happily clarify for the member the Hon Dr Deborah Russell: intellectual property, as much as anything. Particularly, New Zealand Trade and Enterprise, like most other development agencies, holds a customer relationship management - type system—an enormous database, from memory; several hundred, if not thousands, of companies—and their very sensitive commercial information is entered into that system. Therefore, we do have to set in law rules and parameters around the safe transfer of that commercially sensitive information.

Thank you, Madam Chair. To stay with the schedule, as foreshadowed, I do want to focus on the transfer of employment. The first thing I would note is that we have a situation where in New Zealand law, usually when there is something so important going to happen to employees, there’s a consultative process. I would like to know whether that was attempted at all. It’s usually consultation at a formative stage. It sounds like we’re a little beyond that by the nature of what we’re doing here.

I’d like to know how many employees the organisation has that will be transferring and whether there will be shrinkage. It looks like there’s a contemplation for some positions to be disestablished, and I’d like to know what sort of positions are most likely to be disestablished and whether there’s a process around that going on. So it may be that it’s too sensitive to discuss because of the individuals involved, but if it isn’t, I’d like to get a handle on how big a transfer we’re looking at.

I’d also like to know, when I look at clause 2(1)(b), it talks about a transfer with all rights, liabilities, contracts, entitlements, and engagements coming across. So it looks like that comes with you, but I did wonder if those liabilities and obligations included, perhaps, a redundancy compensation situation if you didn’t want to go across. It looks like it’s a forced going across, because it negates those rights later on. Under clause 3, it says you can’t get them. So if that’s the case, how can those two things be true at the same time? So I would love to know that.

I am also interested in the issue over privacy. There’s a situation here where it says—and this is clause 2(3)(b)—that there is no interference in the situation by the transfer of information. Again, I’d ask, why are we doing this in legislation rather than by agreement with employees? This is private information and often we would simply agree with the person. Was the Privacy Commissioner asked about that part of the legislation? We tend to guard that stuff rather zealously and it doesn’t seem necessary. Was there another way of going about it? And is the Privacy Commissioner happy with that or have they even been informed of it? So those are some of the things I would like to know.

I also wondered, with regard to who is suitable and who is not—and as I’ve said, I do appreciate that there are people and their privacy has to be respected and they need to be the individual concerned. But with regard to making that kind of selection over people, is there any indication as to what the criteria will be for the selection of people in that situation?

We will often have that protected in the contracts, but it seems to me that this is being treated as a technical redundancy and it’s being moved across. So do we go back to the collective agreement in place and say that’s the criteria that applies or do those agreements even have such criteria in them?

Because we’ve left out the formative stage consultation and then the selection process consultation, I think I’m entitled to ask those questions and understand, because they’re more systemic than something that is actually all about an individual, unless they’re on an individual agreement. I understand these people were on collective agreements. Again, that would be something I’d love to know the answer to. Are they on a collective agreement on the whole or are they on individual agreements? If they are on a mixture, can I just have an idea of the proportion of people that would be on a collective and which collective that is? Thank you.

I move, That debate on this question now close.

I think we’re getting close. The Hon Damien O’Connor.

Thank you, Madam Chair. This is a serious piece of legislation. I just want to go back to clause 3—it’s the purpose of the bill—and ask a few questions of the Minister. It’s been traversed by some of my colleagues, around the role that was within New Zealand Trade and Enterprise (NZTE) and prior to that. The world has moved on since the set-up of Invest New Zealand and NZTE—and that has rolled forward and, I have to say, we have to compliment their efforts. It’s been an interesting discussion at times, as to how NZTE will conduct its role in this area. But what they did do—and if we go, indeed, to Schedule 1, it lays out there three particular areas of responsibility, but that locks in with enterprise and with trade and so the investment was for a purpose. If you come back to clause 3 here, it says it’s “to establish Invest New Zealand to promote increased overseas investment”. As I raised before, within NZTE there was a purpose to actually enhance enterprise and grow trade. So the question I have for the Minister is: the $11 million that will be taken from NZTE, will that—not disable, I’m sure—but will that restrict significantly their role and other areas of responsibilities across the globe?

The other question is that, when up and running after, I think, four years—of the $54 million that the taxpayer will be contributing to Invest New Zealand here, is that, relative to NZTE, good value for money? I know the Deputy Prime Minister has a Ministry for Regulation; he’s supposed to be running a ruler over all of these things. I would have liked to have seen in the regulatory impact statement some kind of assessment as to what the additional value is.

Then the question of, as I’ve said before, why not full cost recovery, which is really what Customs is being asked to do in other legislation. The question of the Minister is: given that the purpose of this is to just bring in overseas investment—there are amendments that are put in there; one of them from myself to put in front of overseas investment the term “sustainability”. I raised before the conditions around the investment—for what purpose? Should it be written into this legislation, and did she have advice as to whether that would provide more safeguards as to the net benefit of this new entity?

If you go to the schedules there, the other question I have of the Minister—and it is Part 1 of Schedule 1 here, clause 1, “Interpretation”. Included are—I won’t read the whole lot; that would take too long—aspects of responsibility with NZTE that will, effectively, be removed from them. One of them is “(c) any aspect of a function that relates to investment promotion”. When we are offshore, most things are integrated. We have Immigration there, we have Customs, we have NZTE, we have the Ministry of Foreign Affairs and Trade. Most of the promotional work covers all of those areas. So the question of the Minister is: will there be a legal constraint on where NZTE can be offshore, and with whom will it be cooperating in terms of that promotion? So that’s another question. I’m sure she can come back to me on that.

The next one is, if I can go back to clause 3—and the Minister talked about, well, it says here, actually, a permissive regime. The Labour Party, in supporting internal investment or overseas investment into the country, has always said it’s a privilege, not a right. That’s why we have the Overseas Investment Office and that’s why we’ve had constraints on it, and, indeed, we believe that should remain. If the Minister is now setting up a new real estate agency that’s going to go out and just grab all the money it can, then I look forward to the New Zealand First speech on this. But also I’d like to ask of the Minister: was investor-State dispute settlement (ISDS) considered as a provision that might be changed to assist the attractiveness of New Zealand? The international dispute settlement system, which actually allows any investor to take a country to court and is something that we have, as a country, for a number of years now, since 2017—

CHAIRPERSON (Maureen Pugh): The member’s time has expired.

Hon DAMIEN O’CONNOR: Madam Chair?

CHAIRPERSON (Maureen Pugh): Hon Damien O’Connor.

Hon DAMIEN O’CONNOR: Thank you, Madam Chair. Since 2017, in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, we’ve actually said we’re committed to ISDS being omitted outside our trade agreements. In that particular trade agreement, we had a side letter. It was necessary, to be included in the agreement, but we had a side letter with partners that said that none of those countries’ investors would then be able to take the New Zealand Government to court. In many areas of international investment, it’s seen as a security for the investor. So the question I have of this Government and the ministry and the Minister herself—because we have seen some pretty crazy policies and law changes from this coalition Government. I just want to hear from her and from the coalition Government that ISDS will not be reinserted or indeed negotiated in any of these new investment provisions, because, I suspect, we would have people marching in the streets. I see that the officials are kind of nodding their heads.

But if the purpose of this change is to just bring in investment without qualifications—and in clause 3, the Government and the Minister could have included things like “sustainable investment”, “ethical investment”, because that’s what we want to see in our country, or “from ethical sources”. There are no safeguards in anything I’ve read in this piece of legislation that would mean that Invest New Zealand, as a real estate agency, can’t just go out and find the highest bidder for the best project that the Government or its Ministers might have lined up because someone says we want a whole lot of money for it.

These are serious questions at a time when, internationally, the purpose of international investment is being scrutinised very carefully, whether it be from China into Africa or China into the Pacific, or the US into the Pacific, or India, or anywhere else. We have trillions of dollars flowing around the planet, effectively. Some of it is being really well used but some of it is not, and so I think we need to have, within the purpose statement—clause 3 here—some qualifications and some safeguards, which the Minister might think of. We’re quite happy to take an Amendment Paper, if the Minister wants to put it on the Table, to actually reassure New Zealanders that this investment is actually from ethical sources, for good purposes, and not subject to ISDS provisions that would, effectively, allow those investors to take our Government to court. That is something that I think most New Zealanders see as a challenge to our sovereign rights, but in many places around the world it is seen as a basic requirement to attract overseas investment.

I look forward to the Minister’s responses to those.

Thank you, Madam Chair. I’ll answer a couple of those questions that were put to me from different members. One to the member Helen White, her questions around the transfer of staff from New Zealand Trade and Enterprise (NZTE): this has been well signalled—the establishment of Invest New Zealand—for at least a year. So staff have been very—very—aware of it. Staff from NZTE’s current investment team will be transferred into Invest New Zealand at the outset. However, future decisions around the structure of that team and their purposes and, indeed, their numbers will be up to the establishment board to decide.

Turning to the Hon Damien O’Connor’s questions: just around the funding, the $11.15 million that will be transferred from NZTE is coming only from the investment attraction budget and that is to enable investment promotion going forward, but there will be nothing taken out of the export promotion budget. He talked quite a little about investor-State dispute settlement provisions and I think as a former trade Minister he will well know that they are covered by unique and specific trade arrangements and have absolutely nothing to do with Invest New Zealand as an autonomous agency.

But I do want to reassure the House—the previous trade Minister has talked about safeguards and we absolutely agree with the necessity for those, hence this is a very broad-based establishment legislation purely being debated this evening around designing and establishing the entity’s objectives, its functions, and its operations. But, of course, there will still be the safeguards in place, the likes of the Overseas Investment Act, of which the primary purpose is to manage any risk that may arise from foreign investment, be it through this new body or previous. This legislation, here, tonight, provides for Invest New Zealand to receive information that’s necessary for the purpose of managing national security and public order risks associated with transactions by overseas persons.

Tēnā koe, Madam Chair, thank you very much. It’s my first call in this committee stage of the debate, and I just wanted to refer to the fact that this bill has not gone through a select committee process. We went through the first and second reading under urgency, so it would make sense that we’d be able to ask broader questions during the committee stages. That was certainly our intention. And so I wanted to refer to the regulatory impact statement, because the Minister previously was referring to the funding transfer from New Zealand Trade and Enterprise, but I also wanted to raise the substantial reprioritisation that came from Callaghan Innovation. I think that that is inseparable from the Invest New Zealand Bill.

The purpose, in clause 3, is about: “to establish Invest New Zealand to promote increased overseas investment into New Zealand”. According to the regulatory impact statement, one of the supposed problems is to enable more foreign direct investment so that it can enable New Zealand economic growth. But at the same time, this is coming—substantially—at the expense of Callaghan Innovation, which was, you know, one of the single largest employers of scientists in New Zealand, was one of the drivers of local, domestic innovation helping local businesses. So I just think these two issues are very difficult to separate, because while this bill that we’re debating is about establishing a new agency and that agency is going to be one of many one-stop shops for this Government to direct foreign investment into New Zealand, it’s also coming at the expense of our own investment in research and development, and providing assistance to local domestic businesses to, you know, find ways to be more productive. So I’m wondering if the Minister can tell us anything about that aspect of it.

So this is on page 15 of the regulatory impact statement, in paragraph 45: “The establishment of Invest NZ is being undertaken through the Budget 2025 process. Costs are to be fiscally neutral due to reprioritisation from existing funding. [This is] expected to come from: a. Callaghan Innovation: just under $49 million per annum from 2026/27, and out years.” So I guess, Madam Chair, during the committee stages of the debate hopefully we’d be able to ask about some of these policy questions, because on page 14 of the regulatory impact statement, where it talks about costs and benefits, there’s virtually no monetised benefits from Invest New Zealand. It says there’s low evidence, and then on the non-monetised benefits it’s high, but the evidence is only medium.

Can the Minister give us any information about how the relative benefits of an agency that is just about trying to provide another shopfront to attract foreign investors compares with—you know, was there any research or anything presented to Ministers about Callaghan Innovation and the benefits of that? How many of the people employed by Callaghan Innovation are likely to be able to find relevant jobs in Invest New Zealand? Probably none. I mean, like, within the vision of the organisation, is there any expectation that there would be scientists working in Invest New Zealand, or is it just going to be people who are investment managers? I mean, what’s—yeah, I’m just interested in how the Government thinks that scientists are going to be employed in New Zealand. Do you think that scientists are contributing to New Zealand’s economy and productivity? Do you think that there’s a role for Government to invest in science research and development? Or do you think that’s uniquely for the private sector and it’s the Government’s role to create Invest New Zealand, in clause 3, whose sole purpose seems to be trying to find bidders overseas who can purchase or invest in New Zealand. And then, you know, potentially own the profits that come out of that investment and have a large stake in taking that—actually, kind of sucking productivity out of New Zealand, the way that we currently have with the big foreign-owned banks and other sectors that actually don’t contribute to productivity in New Zealand, but do extract a lot of profit.

CHAIRPERSON (Maureen Pugh): The member’s time has expired.

Thank you, Madam Chair. I just want to respond to the Green Party member’s questions around Callaghan Innovation. It has been well signalled by this Government, with the announcement of our science sector reforms, that Callaghan had reached the end of its life—the end of its purpose, really—and so it’s quite exciting that there is the opportunity to reprioritise this money into Invest New Zealand. I would hasten to add that the Minister of Finance has been very, very clear with this Government that new innovations will be funded by reprioritisation at this time. So it’s an incredible opportunity that the Government is able to set up Invest New Zealand, which may well end up having a role to play in attracting multinationals, enterprises, R & D—those who have the capacity and capability to conduct more R & D here in New Zealand—which, of course, would benefit the broader science sector and, indeed, the wider economy.

Thank you, Madam Chair. This is my first opportunity to take a call at committee stage, so I’m grateful for that. I’m hoping that it won’t be my last, because I do have a number of questions and, in fact, a number of amendments that I’ve taken the time to go through and prepare in respect of the Invest New Zealand Bill.

Now, I think it’s probably important to—or, in fact, not probably; it is important to think about the context or the backdrop with which we’re moving towards the establishment of Invest New Zealand, which is in a backdrop of a number of cuts in this Budget to our innovation, science, and technology sector. There’s been widespread concern, which I’m sure the Minister in the chair, Nicola Grigg, has seen, about those cuts and about the significant change in direction that that signals, which raises some questions, addressed in my amendments, around the issues of governance and around how a new entity tasked with shepherding funds from offshore into research development, into innovation in New Zealand—how the governance structure here can give us in the Chamber tonight but also, more importantly, or at least as importantly, the science, innovation, and technology sector and, in fact, all New Zealanders, the confidence that they deserve to have that decision makers establishing a new entity, and new legislation to do just that, have given requisite thought to a governance structure that will provide a level of certainty around the safety of money being invested into New Zealand.

The reality, when you invest money into New Zealand and when it’s not coming from within, and we know from the context of the cuts that it—the suggestion here is that the money is being tipped in from somewhere else, which means that the return from that investment tips out. So it doesn’t stay here, which should be a concern to everybody. The amendments, and the specific amendments that I have put in for this bill, really look at the suggested board structure and some of the numbers in the legislation around suggested numbers of board members, which I think are alarmingly low and small and really raise the question of who those people would be and the potential that so few people would have so much influence over—

CHAIRPERSON (Maureen Pugh): Look, I’m sorry to interrupt the member, but I think you’re speaking to Part 2. The board structure is Part 2.

REUBEN DAVIDSON: Oh, have I gotten ahead of myself?

CHAIRPERSON (Maureen Pugh): Well, you’ve gotten ahead of the committee. [Interruption] The member’s still on his feet.

REUBEN DAVIDSON: Sorry—it is in Part 1, sorry: “Board means the board of Invest New Zealand” under Part 1, clause 4, “Interpretation”.

CHAIRPERSON (Maureen Pugh): Yes, but the structure is in Part 2, that you’re speaking to.

REUBEN DAVIDSON: OK, so—sorry, Madam Chair; I’ll reframe my question so that it fits. So, really, I guess the question for the Minister is: what is the purpose of that board? How is it going to be appointed? How is it going to function? That would be the gist of the question at this point.

I do hope to have further opportunity to take further calls to really dig more deeply into some of those questions that come up in future parts of the bill as well, because I think those concerns are very real and very widely held around the governance structure. So I do hope to get to that once these earlier questions have been answered. Thank you.

I will answer that, just to close it out. I cannot for the life of me think why that member believes seven board members to be suboptimal, to even be small. It’s actually quite a rigorous construction, we believe, and, indeed, we consider it to be an optimal arrangement for this type of organisation and, indeed, the complexity of the job that they will be set up to achieve.

Before I take the next call, I’d just like to alert people to the fact that we seem to be running a bit dry on—

Hon Dr Deborah Russell: We are dry.

CHAIRPERSON (Maureen Pugh): Yes, exactly—Dr Russell.

I want to clarify something that the Minister said in response to one of her previous questions, and it’s quite a critical one. It goes, again, to the overall purpose that we’ve been discussing and the decision of the Government to set up Invest New Zealand. I hadn’t intended to take another call, but I just thought this didn’t quite seem right. When the Minister was responding to my colleague Helen White about the transfer of employees and how well they had known about it, what the processes were, and so on, the phrase the Minister used—I think she talked about it pretty well; she gave us some pretty good explanations about how those employees are being looked after, so that’s not the issue, but it’s a timeline issue. The Minister said at that stage that this has been known about for at least a year and had been well signalled. The trouble with that is that that just doesn’t seem quite right to me, because if we go to page 6 of the regulatory impact statement and look at “Diagnosing the policy problem”, there’s various sort of discussions about productivity and investment in this, that, and the other. But then in paragraph five of the regulatory impact statement, it says that “The recent Science System Advisory Group (SSAG) report commissioned by the Government made clear that our underinvestment in research funding is a core [issue]”, and then it goes on through the Science System Advisory Group’s recommendations, which were: “21. Establish a National Innovation Advisory Committee (NIAC) and two agencies: Innovation New Zealand (INZ) and Enterprise New Zealand (ENZ).”

So this INZ has become, I think, Invest New Zealand rather than Innovation New Zealand—it’s hard to know—but in terms of when this was all characterised, the Science System Advisory Group reported on 23 January this year. Going down to paragraph seven there: “Invest New Zealand has also been announced as a key initiative in the Government’s economic strategy Going for Growth.” And it was in the quarter one action plan for this year, 1 January to, goodness, it says 32 March 2025. So congratulations to the Government for finding a whole new day in the year. But the point is that that timeline of at least a year just doesn’t quite stack up. I wonder if the Minister could just give us a timeline. I take her point that they were trying to keep the employees really well informed and well looked after. I just can’t quite make those timelines stack up.

I will clarify for the member the Hon Dr Deborah Russell—I should have been clearer in my commentary. When I mentioned it had been signalled for at least a year, I should have referred to the fact that it was a National Party campaign pledge. Indeed, this specific announcement was made about six months ago.

I move, That debate on this question now close.

The question is that the Hon Damien O’Connor’s tabled amendment to clause 3 inserting the word “beneficial” be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendments to clause 3 deleting the word “and” and inserting “and accountability measures” be agreed to

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 4 deleting the words “unless the context otherwise requires” be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 4 inserting a new definition of “Minister” be agreed to.