2010 Investment Climate Statement - New Zealand
Foreign investment in New Zealand is generally welcomed and encouraged without discrimination. With minimal corruption, New Zealand has an open, transparent economy, where businesses and investors can generally make commercial transactions with ease. With few exceptions, foreigners may invest in any sector of the economy, and there are generally no limits on foreign ownership or control. New Zealand has a rapidly expanding network of bilateral investment treaties and free trade agreements with investment components to facilitate increased investment. New Zealand also has a well-developed legal framework and regulatory system, and the judicial system upholds the sanctity of contracts. There are no restrictions on the inflow or outflow of capital, and expropriation is not an issue. Investment disputes are rare, and there are no government-mandated performance requirements or incentives associated with foreign investment. Private entities generally have the right to freely establish business enterprises, and property rights (both real property and intellectual property) are generally well-protected. New Zealand has a sound financial system, but it is undertaking a review of its financial system to shore up investor confidence in the wake of the global financial crisis. The country has a highly-educated labor force, but unemployment remains an issue. Both inbound and outbound investment continues to increase. In international indices with investment related aspects, New Zealand consistently receives high scores.
Measure Year Index/Ranking
TI Corruption Index 2009 9.4 / 1
Heritage Economic Freedom 2009 82.1 / 4
World Bank Doing Business 2009 -- / 2
New Zealand screens foreign investment that falls within certain criteria. Under the auspices of the Overseas Investment Act 2005, New Zealand’s Overseas Investment Office (OIO) screens foreign investments that would result in the acquisition of 25 percent or more ownership of, or a controlling interest in “significant business assets” (significant business assets are defined as assets valued at more than NZD100 million). Government approval also is required for purchases of land larger than 5 hectares (12.35 acres), land in certain sensitive or protected areas, or fishing quota. If the land or fishing quota to be purchased is owned by a company or other entity, approval will be required if the investor will be acquiring a 25 percent or more equity or control interest.
For those investments that require screening, the investor must demonstrate the necessary business experience and acumen to manage the investment, demonstrate financial commitment to the investment, be of good character, and not be a person who would be ineligible for a permit under New Zealand immigration law. Any application to purchase land must also satisfy a “benefit to New Zealand” test, unless the investor intends to live in New Zealand indefinitely. For land purchases, foreigners who do not intend to live in New Zealand indefinitely must provide a management proposal covering any historic, heritage, conservation, or public access matters and any planned economic development. That proposal would generally be made a condition of consent.
In 2008, the Government of New Zealand made a change to the Overseas Investment Act of 2008, which allows ministers to consider control of “strategic infrastructure assets” when determining if an investment in “sensitive” land will provide a benefit to New Zealand. This change does not affect the scope of investments that require screening; however, it does expand the number of factors that must be considered during the screening process.
The OIO operates a comprehensive Internet website (http://www.linz.govt.nz), which explains New Zealand investment policy and walks potential investors through the application process.
The OIO also monitors foreign investments after approval. All consents are granted with reporting conditions, which are generally standard in nature. Investors must report regularly on their compliance with the terms of the consent. It is an offense to intentionally or recklessly make false or misleading statements, or any material omission, in any information provided to the OIO. If the High Court is satisfied that an offense has been committed, the High Court can order the disposal of the investor’s New Zealand holdings.
In practice, the government's approval requirements have not been an obstacle for U.S. investors. Very few applicants are denied (only 22, versus 905 granted, from 2004 - 2009). Those denied, for the most part, intended to purchase land in sensitive areas or for farming purposes, residential subdivision, or accommodation. For the 2009 calendar year, 188 applications by foreign investors were submitted to the OIO, of which 158 were approved. There were no applications disapproved, and 30 applications are still under consideration. Investors from the United States had a beneficial interest in 48 of the 158 approved applications.
The Government of New Zealand does not discriminate against foreign buyers, but has placed separate limitations on foreign ownership of Air New Zealand and Telecom Corporation of New Zealand. The constitution of Telecom Corporation of New Zealand Limited (Telecom) provides that no person shall have a relevant interest in 10 percent or more of the voting shares without the consent of the Minister of Finance and the Telecom Board, and no person who is not a New Zealand national shall have a relevant interest in more than 49.9 percent of the total voting shares without the written approval of the Minister of Finance.
According to Air New Zealand’s constitution, no person who is not a New Zealand national may hold or have an interest in equity securities which confer 10 percent or more of the voting rights without the consent of the Minister of Transport. There must be a maximum of eight directors and a minimum of five directors of Air New Zealand. At least three directors must be ordinarily resident in New Zealand. The majority of the Air New Zealand Board of directors must be New Zealand citizens.
New Zealand’s main methods for taxation are the goods and services tax (GST), company tax, and income tax. GST is currently 12.5 percent. There is no capital gains tax, but some “gains”, such as the profits on the sale of patent rights, may be considered as income. New Zealand has agreements on taxation with 35 countries or territories, including the United States. An amendment to the U.S. agreement is currently being worked on. During the 2008/09 income year, the New Zealand Government reduced the corporate tax rate from 33 percent to 30 percent. The personal tax rate for most foreign investors (from the combined effects of New Zealand's nonresident withholding tax and company tax) is 33 percent and the maximum personal tax rate is 38 percent. The New Zealand Government is currently contemplating a large overhaul of the tax system, which would increase GST to no more than 15 percent and an across-the-board reduction of personal income tax.
Under legislation passed in 1995, foreign firms and investors were granted a national treatment obligation on corporate taxes and transfer-pricing rules were aligned so that New Zealand adheres to Organization for Economic Cooperation and Development (OECD) practices. Additionally, thin capitalization regulations were tightened to discourage foreign companies from using excessive debt to avoid New Zealand taxes. The rules offer foreign investors greater transparency and predictability.
Investment New Zealand, the government’s investment promotion agency, works with offshore investors to facilitate investment in New Zealand. Information about the agency and contact details for its offices in the United States can be obtained from its website: http://www.investmentnz.govt.nz/.
Conversion and Transfer Policies
There are no restrictions on the inflow or outflow of capital, and the currency is freely convertible. Full remittance of profits and capital is permitted through normal banking channels. There is no difficulty in obtaining foreign exchange.
Expropriation and Compensation
Expropriation is not an issue in New Zealand, and there are no outstanding cases.
Investment disputes are extremely rare, and there have been no major disputes in recent years involving U.S. or other foreign investors. The mechanism for handling disputes is the judicial system, which is generally open, transparent and effective in enforcing property and contractual rights. Property and contractual rights are enforced by a British-style legal system. The highest appeals court is a domestic Supreme Court, which replaced the Privy Council in London and began hearing cases July 1, 2004. New Zealand courts are independent and impartial, and the decisions of judges are subject only to the law. The courts can recognize and enforce a judgment of a foreign court if the foreign court is considered to have exercised proper jurisdiction over the defendant according to private international law rules. New Zealand has well defined and consistently applied commercial and bankruptcy laws. Arbitration is a widely-used dispute resolution mechanism inside New Zealand, and is governed by the Arbitration Act 1996, Arbitration (Foreign Agreements and Awards) Act 1982, and the Arbitration (International Investment Disputes) Act 1979.
New Zealand is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States and to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Performance Requirements and Incentives
The Government of New Zealand does not maintain any measures that are alleged to violate the Trade Related Investment Measures text in the World Trade Organization. There are no performance requirements or incentives associated with foreign investment. However, for those investments that require OIO approval and are subject to reporting requirements, investors must report regularly on their compliance with the terms of the consent.
Right to Private Ownership and Establishment
Private entities generally have the right to freely establish, acquire and dispose of business enterprises. There are a few exceptions in the treatment of domestic and foreign private entities. Government approval is required for foreign investments over NZD 100 million and investments in commercial fishing and certain land (as outlined in the “Openness to Foreign Investment” section above. In general, there has been no restriction on foreign purchasers in the privatization of assets, except for the ceilings on foreign ownership stakes in Air New Zealand and the Telecom Corporation of New Zealand. To preserve landing rights, no more than 49 percent of Air New Zealand, the national flagship carrier, can be owned by foreigners. A single foreign investor can hold a maximum of 49.9 percent of the total voting shares of Telecom New Zealand. In addition, under the Fisheries Act 1983, foreigners can only lease New Zealand fishing rights.
Protection of Property Rights
New Zealand recognizes and enforces secured interest in property, both movable and real. Most privately owned land in New Zealand is regulated by the Land Transfer Act 1952 (as amended) and the Land Transfer Regulations 2002. These provisions set forth the issuance of land titles, the registration of interest in land against land titles, guarantee of title by the State. The Register-General of Land develops standards and sets an assurance program for the land rights registration system. New Zealand’s legal system protects and facilitates acquisition and disposition of all property rights.
Regarding intellectual property rights (IPR) New Zealand generally has a strong record and is an active participant in international efforts to strengthen IPR enforcement globally. It is a party to nine World Intellectual Property Organization (WIPO) treaties and actively participates in the TRIPS Council. New Zealand is participating alongside the United States in negotiations of a multi-lateral Anti-Counterfeiting Trade Agreement (ACTA) aimed at promoting greater international cooperation in combating trademark counterfeiting and copyright piracy. New Zealand will host Round 8 of the ACTA negotiations in April 2010. New Zealand Government agencies, including the New Zealand Agency for International Development (NZAID), Ministry for Economic Development (MED) and the Intellectual Property Office of New Zealand (IPONZ) assist developing countries in the Asia-Pacific region with implementation of their obligations under the TRIPS Agreement through technical assistance and capacity building programs.
The principle legislation governing copyright protection in New Zealand is The Copyright Act of 1994. Under the legislation, copyright protection is granted for the author's lifetime plus 50 years from the calendar year in which the author died, for literary, dramatic, musical, and artistic works; and for 50 years from the calendar year in which they were made, for sound recordings and films. In April 2008, New Zealand passed the Copyright (New Technologies) Amendment Act, which is aimed at bringing the original copyright law up to date with digital technology. Among other things, the amendment required that internet service providers (ISPs) have a policy in place to address termination for repeat offenders. The industry attempted to form a voluntary code to address how this would be accomplished; however, agreement between rights holders and ISPs was never reached. As a result, the Government intervened to establish a more prescriptive legislation.
On February 23, 2010, Commerce Minister Simon Power introduced the Copyright (Infringing File Sharing) Amendment, repealing Section 92A of the Copyright Act. The bill puts in place a three-notice regime intended to deter illegal file sharing. Copyright owners who can provide evidence of infringement will be able to request that ISPs notify alleged infringers to stop infringing activity. The account holder may receive up to three warnings that infringement has occurred. Should the alleged infringer continue, the bill enables copyright owners to seek the suspension of the internet accounts through the district court for up to six months. Account holders can challenge the notices. The draft legislation is expected to be passed in late July or early August and go into effect on October 1, 2010. Copyright holders are encouraged by this legislation and hope it will alleviate increasing internet piracy rates in New Zealand arising from illicit peer-to-peer file sharing.
Trademarks in New Zealand are protected under the Trade Marks Act of 2002, which entered into force in 2003. The legislation has been amended several times, and the most recent proposed amendment is the Trade Marks (International Treaties and Enforcement) Amendment Bill, which was introduced to Parliament in September 2008. The proposed legislation has had its first hearing and was reported out from the Select Committee in September 2009. It is expected the amendment will become legislation in 2010. The amendment will give the Ministry of Economic Development (MED) the legal authority to investigate and prosecute criminal offences for counterfeiting trademarks and infringing copyrights. In addition, the legislation will provide New Zealand Customs the authority to prosecute importers of counterfeits and seize pirated goods under their control.
New Zealand meets the minimum requirements of the TRIPS Agreement, providing patent protection for 20 years from the date of filing. The New Zealand Government grants both product and process patents. Patents are protected under the Patents Act 1953, last amended in 1999. A new bill was introduced to Parliament on 9 July 2008, to replace the 1953 Act. To date, the bill has not yet been passed and has been referred to the Commerce Committee for consideration. Passage of the legislation is expected in 2010.
Under the proposed legislation, the patent term will remain at twenty years, and criteria for granting a patent will become stricter. An absolute novelty standard will be introduced as well as a requirement that requires all applications be examined for "obviousness" and utility. The legislation will also remove the 1953 Act provision for pre-grant opposition and will introduce a "re-examination" provision which can be invoked at any time after acceptance of an application, a provision potentially of concern, as it differs from international practice. Re-examination will be limited to issues of novelty and inventive step based on documentary prior art. The 1953 Act post-grant opposition provisions will be expanded, making it possible to invoke post-grant opposition at any time during the patent term. The legislation also provides for the establishment of a Maori Advisory Committee to advise the Commissioner of Patents where patent applications involve traditional knowledge and indigenous plants and animals. In addition, the legislation includes provisions that will reform the regulatory environment for patent lawyers. Pharmaceutical companies have expressed concern that the bill does not bring patent term restoration in line with international best practices.
Transparency of Regulatory System
New Zealand’s regulatory, legal and accounting system are generally transparent and consistent with international norms. Proposed laws and regulations are regularly published in draft form for public comment via the internet, and law makers generally make every effort to give public submissions due consideration. While some standards are set through legislation or regulation, the vast majority of standards are developed through Standards New Zealand, the country’s leading standards setting body. Standards New Zealand is a Crown entity, but it operates autonomously and is self-funded. When setting standards, they rely on expert committee consensus, public input and widespread consultation with affected parties, both foreign and domestic. The majority of standards are set in coordination with Australia.
There are a number of laws and policies that govern New Zealand’s competition policy. The key competition law statute in New Zealand is the Commerce Act 1986, which covers both restrictive trade practices and the competition aspects of M&A transactions. It also sets forth regulation of industries and sectors with certain natural monopolies, such as electricity, airports, and telecom. The Commerce Act 1986 is overseen and enforced by New Zealand’s Commerce Commission. In general, any contracts, arrangements, or understandings that have the purpose or effect of substantially lessening competition in a market are prohibited, unless authorized by the Commerce Commission. Before granting such authorization, the commission must be satisfied that the public benefit would outweigh the reduction of competition.
The Commerce Commission can block a merger or takeover that would result in the new company gaining a dominant position in the market. The use of a dominant market position to lessen or prevent various specified types of competition is contrary to the Act's provisions. However, the enforcement of any right under any copyright, patent, protected plant variety, registered design, or trademark does not necessarily constitute abuses of a dominant position.
Suppliers' use of resale price maintenance, in which suppliers of goods set and enforce sale prices to be charged by re-sellers, is also prohibited. Advice should be obtained on the application of the Act before the establishment of exclusive distribution, selling, and franchising arrangements in New Zealand.
To ensure competition in "natural monopolies," such as telecommunications and electricity, the government has increased oversight. Under the 1997 WTO Basic Telecommunications Services Agreement, New Zealand committed to the maintenance of an open, competitive environment in the telecommunications sector. Key reforms of the sector, through legislation enacted in December 2001 and December 2006, included the appointment of a commissioner responsible for resolving commercial disputes, the introduction of regulated services (including local loop and bitstream unbundling), the strengthening of the monitoring and enforcement arrangements for regulated services, and the operational separation of Telecom New Zealand.
One law that draws consistent criticism as a barrier to investment (from both foreign and domestic investors) is the Resource Management Act 1991. The Act regulates access to natural and physical resources such as land and water. Critics contend that the resource management process mandated by the law is unpredictable, protracted and subject to undue influence from competitors and lobby groups. There have been several well publicized cases in which it was alleged that companies have used the objections submission process under the law to stifle competition. Investors have also raised concerns that the law is unequally applied between jurisdictions because of the lack of implementing guidelines. To address some of these concerns, the Resource Management (Simplifying and Streamlining) Amendment Act was passed in 2009.
Efficient Capital Markets and Portfolio Investment
New Zealand generally has a sound and well-regulated financial system. It has a strong infrastructure of statutory law, policy, contracts, codes of conduct, corporate governance, and dispute resolution that support financial activity and allow it to thrive. The banking system, mostly dominated by foreign banks, is world class in electronic banking and is rapidly moving New Zealand into a “cashless” society. New Zealand also has a full range of other financial institutions, including a securities exchange, investment firms and trusts, insurance firms and other non-bank lenders. Non-bank finance institutions experienced difficulties during the financial crisis due to risky lending practices, and the Government of New Zealand is undertaking legal changes to bring them into the regulatory framework.
New Zealand banks are regulated by the Reserve Bank of New Zealand (RBNZ) under the Reserve Bank of New Zealand Act 1989. The RBNZ is statutorily independent and is responsible for conducting monetary policy and maintaining a sound and efficient financial system. The New Zealand banking system consists of 19 registered banks and more than 90 percent of their combined assets are owned by foreign banks, mostly Australian. None of the New Zealand-owned banks have overseas branches. There is no requirement in New Zealand for financial institutions to be registered to provide banking services, but an institution must be registered to call itself a bank. For a list of registered banks in New Zealand and their credit ratings, see the Reserve Bank of New Zealand’s website: http://www.rbnz.govt.nz/nzbanks/0091622.html.
The RBNZ has no requirement to guarantee the viability of a registered bank or provide permanent deposit insurance. However, in response to the global financial crisis, the New Zealand Government announced in October 2008 that it would guarantee certain retail deposits up to NZD 1 million for two years. For investment-grade financial institutions that have substantial borrowing and lending operations in New Zealand, the Government also offered a wholesale funding guarantee facility. The New Zealand Government announced on March 10, 2010, that it will end its wholesale funding guarantee scheme for bank borrowing on April 30, 2010, but the retail deposit guarantee will continue.
Despite the global financial crisis, banks in New Zealand have done relatively well. No banks have failed, and there are relatively low levels of mortgage defaults. In addition, credit ratings of banks in New Zealand have remained virtually unchanged. The ratio of non-performing loans to total lending has only increased slightly (0.5 percentage points over the first half of 2009). This mainly affects the four major banks in New Zealand that provide roughly 90 percent of all bank lending. However, because banks in New Zealand predominantly rely on foreign funding, they are heavily exposed to foreign liquidity risk. It is estimated that approximately 45 percent of total funding comes from overseas capital markets. The global financial crisis also spurred the Government of New Zealand to review banking regulation and crack down on tax evasion by foreign-owned banks.
The Securities Commission, under the Securities Act 1978 and amendments, regulates the issuance of securities. The Act requires registration of prospectuses for public offerings of new securities and prescribes the information that must be disclosed. The Securities Markets Act 1988 provides civil remedies for loss or damages resulting from insider trading and market manipulation. Amendments in 2002 gave the Securities Commission additional powers to increase its effectiveness in monitoring and enforcement, including criminal sanctions for insider trading and market manipulation. In September 2008, New Zealand passed the Financial Advisers Act and the Financial Service Providers (Registration and Dispute Registration) Act, which also gave the Securities Commission authority to regulate the financial services industry, including market participants, intermediaries, investors and consumers.
Legal, regulatory, and accounting systems are transparent. Financial accounting standards are issued by the Accounting Standards Review Board. The Act makes the adoption of financial accounting standards mandatory for registered companies and issuers of securities, including entities listed on the New Zealand Stock Exchange (NZX). The standards generally are adopted by other entities as well. The Board's accounting standards are based largely on international accounting standards, and the use of international accounting standards will be universal. Smaller companies (except issuers of securities and overseas companies) that meet proscribed criteria face less stringent reporting requirements. Entities listed on the stock exchange are required to produce annual financial reports for shareholders together with abbreviated semi-annual reports. Stocks in a number of New Zealand listed firms are also traded in Australia and in the United States.
Small, publicly held companies not listed on the NZX may include in their constitution measures to restrict hostile takeovers by outside interests, domestic, or foreign. However, NZX rules generally prohibit such measures by its listed companies.
As a result of the global financial crisis, New Zealand has undertaken a review of its financial system to shore up investor confidence. Reforms are focused on establishing a regime to supervise financial advisors, enforcing of rules related to finance companies and the selling of financial products, and legal reforms to facilitate the raising of capital. Much of the impetus for the reforms stems from finance companies that engaged in high risk property lending through the issuance of debentures and their “mis-selling” of financial products. Many such finance companies collapsed or froze repayments. The Government of New Zealand is currently reviewing disclosure requirements under the Securities Regulations and legislative changes to the Securities Act, which may affect trustee responsibilities and supervision, supervision of funds managers, and disclosure rules for securities offerings, among other things. New Zealand is also looking to enter further mutual recognition agreements with other countries to expand its capital markets.
Competition from State Owned Enterprises
The Government of New Zealand owns a variety of commercial assets, including 17 state-owned enterprises (SOEs), eight Crown research institutes, four Crown financial institutions, five non-financial Crown companies, 76 percent of Air New Zealand Limited, and other Crown shareholdings in a shipping line and four airports. Although the SOEs are set up by the State-Owned Enterprises Act of 1986, they are regulated by the provisions of the Companies Act and are registered as public companies. Unlike Crown entities, the SOEs are structured as companies because they provide public services via market determined prices. The Crown Ownership Monitoring Unit (COMU), which is part of the New Zealand Treasury, is responsible for overseeing the SOEs and provides “shareholding” ministers with advice on the SOE performance. The board of directors of each SOE reports to two ministers, the Minister of Finance and the relevant portfolio minister.
Most of New Zealand’s SOEs are concentrated in the energy and transportation sectors. Private enterprises are allowed to compete with public enterprises under the same terms and conditions with respect to markets, credit, and other business operations. For example, Contact Energy, a publicly listed company, is allowed to sell energy in direct competition with Meridian Energy Limited, which is an SOE. Under SOE Continuous Disclosure Rules, SOEs are required to continuously report on any matter that may materially affect their commercial value. For more information on New Zealand SOE disclosures, please see http://www.comu.govt.nz/soedisclosureannouncements.html.
Corporate Social Responsibility
The Government of New Zealand actively promotes corporate social responsibility (CSR), which is widely practiced throughout the country. There are a number of New Zealand NGOs that are dedicated to facilitating and strengthening CSR, including the New Zealand Business Council for Sustainable Development, the Sustainable Business Network, and the American Chamber of Commerce in New Zealand.
New Zealand is a stable western democracy.
New Zealand is renowned for its efforts to ensure a transparent, competitive, and corruption-free government procurement system. Stiff penalties against bribery of government officials as well as those accepting bribes are strictly enforced. New Zealand consistently achieves top ratings in the Transparency International’s Corruption Perception Index (CPI). In 2009, Transparency International ranked New Zealand number one in the world (out of 180 countries and territories), with a rating of 9.4. The highest possible score (i.e. least corrupt) is ten.
The legal framework for combating corruption in New Zealand consists of domestic and international legal and administrative methods. Domestically, New Zealand’s criminal offenses related to bribery are contained in the Crimes Act 1961 and the Secret Commissions Act 1910. The New Zealand Government has a strong code of conduct, The Standards of Integrity and Conduct, which applies to all State Services employees and is rigorously enforced. The New Zealand Police has its own Code of Conduct that applies to all New Zealand Police employees, and the Office of the Judicial Conduct Commissioner was established in August 2005 to deal with complaints about the conduct of judges. New Zealand’s Office of the Controller and Auditor-General and the Office of the Ombudsman take an active role in uncovering and exposing corrupt practices. The Protected Disclosures Act was enacted to protect public and private sector employees who engage in “whistleblowing”.
Internationally, New Zealand has signed and ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In October 2006, the OECD examined New Zealand for compliance with the convention. New Zealand has also signed and ratified the UN Convention Against Transnational Organized Crime. In 2003, New Zealand signed the UN Convention Against Corruption and is currently working to ratify it. New Zealand has opted not to join the GATT/WTO Government Procurement Agreement because the benefits would not justify the compliance costs amid New Zealand's totally deregulated government procurement system. Nonetheless, New Zealand supports multilateral efforts to increase transparency of government procurement regimes. New Zealand also engages with Pacific Island countries in capacity building projects to bolster transparency and anti-corruption efforts.
Bilateral Investment Agreements
New Zealand and Australia trade through a Closer Economic Relationship (CER), which is a free trade agreement eliminating all tariffs between the two countries. However, the rules of origin under the CER do not permit products to enter Australia duty free from New Zealand unless the products are of at least 50 percent New Zealand origin. Additionally, the last manufacturing process must be carried out in New Zealand. The enactment of the Free Trade Agreement between Australia and the United States on January 1, 2005 removes any tariff disadvantage to U.S. firms that choose re-export products from New Zealand to Australia. Details on the Ministry of Foreign Affairs and Trade (MFAT) website at: http://mfat.govt.nz/Foreign-Relations/Australia/1-CER.
New Zealand concluded a Closer Economic Partnership (CEP) agreement with Singapore that entered into force on January 1, 2001. Details on MFAT website at: http://www.mfat.govt.nz/Trade-and-Economic-Relations/Trade-Agreements/Singapore/index.php.
New Zealand concluded a concluded a CEP agreement with Thailand that entered into force on July 1, 2005. The FTA contains a specific chapter on investment. Details on MFAT website at: http://www.mfat.govt.nz/Trade-and-Economic-Relations/Trade-Agreements/Thailand/index.php
New Zealand concluded an FTA with China that entered into force on October 1, 2008. The FTA contains a specific chapter on investment. Details on MFAT website at: http://www.mfat.govt.nz/Trade-and-Economic-Relations/Trade-Agreements/China/index.php.
New Zealand and Malaysia signed an FTA October 26, 2009, but is yet to enter into force. The FTA contains a specific chapter on investment. Details on MFAT website at: www.mfat.govt.nz/trade-and-economic-relations/trade-agreements/Malaysia/index.php
New Zealand concluded work on an FTA with the Gulf Cooperation Council (GCC) on October 31, 2009. Details on MFAT website at: http://www.mfat.govt.nz/Trade-and-Economic-Relations/Trade-Agreements/Gulf-Cooperation-Council/index.php.
New Zealand concluded a CEP with Hong Kong, and it was announced on November 13, 2009. Officials must complete legal verification of the agreement before it can be signed. http://www.mfat.govt.nz/Trade-and-Economic-Relations/Trade-Agreements/Hong-Kong/index.php.
A Free Trade Agreement between New Zealand, Australia and the Association of South East Asian Nations (ASEAN) was signed on February 27, 2009. The FTA contains a specific chapter on investment. Details on MFAT website at: http://www.asean.fta.govt.nz
On November 14, 2009, President Obama announced that the United States will engage with the Trans-Pacific Partnership (TPP) countries. The Trans-Pacific Strategic Economic Partnership Agreement (TPP, previously known as the “P4”) between Brunei Darussalam, Chile, New Zealand and Singapore was signed in 2005. The first round of negotiations is expected to take place in March 2010. Details about the original“P4” TPP Agreement can be found on MFAT website: http://www.mfat.govt.nz/Trade-and-Economic-Relations/Trade-Agreements/Trans-Pacific/index.php
New Zealand is also currently negotiating FTAs with India and Korea.
OPIC and Other Investment Insurance Programs
As an OECD member country and developed nation, New Zealand is not eligible for OPIC programs. Although the New Zealand Government does not provide OPIC-like services to encourage New Zealand investment in developing countries, New Zealand is a member of the Multilateral Investment Guarantee Agency (MIGA). It also has an export insurance program administered under the New Zealand Export Credit Office (NZECO). NZECO provides credit guarantees to protect exporters against uncontrollable events and aims to help build the capacity of New Zealand exporters to offer long-term finance terms to international buyers.
The seasonally adjusted unemployment rate at the end of the December 2009 quarter stood at 7.3 percent (168,000 persons), an increase of 0.8 percent from the previous quarter and an increase of 2.6 percent from the previous year. This represented the eighth consecutive quarterly rise in unemployment. There were 2,152,000 persons employed in the workforce, and 1,686,000 persons not in the labor force. The labor force participation rate at the end of the December 2009 quarter was 68.1 percent, an increase of 0.1 percent from the previous quarter and a decrease of 0.9 from the previous year. Part of the recent rise in unemployment can also be attributed to the above average population growth caused by net migration inflows.
Generally, unemployment remains most acute for unskilled labor while demand for skilled labor is slowly beginning to increase. Manufacturing, retail, and service industries have the highest unemployment while employment is increasing the healthcare industry. The unemployment rate within certain parts of the population remains exceptionally high. Unemployment rates among youth (15-24), Maori and Pacific Islanders is 18.4 percent, 14.8 percent, and 14.3 percent respectively. New Zealand continues to lose many of its workers to Australia (where any New Zealander can legally work). New Zealand workers are drawn there by relatively higher wages and more plentiful job opportunities.
A number of employment statutes govern the work place in New Zealand. The most important is the Employment Relations Act (ERA) 2000, which repealed the Employment Contracts Act 1991. Other key legislation that supplement the ERA include the Employment, Equal Pay Act 1972, Health and Safety in Employment Act 1992, Holidays Act 2003, Minimum Wage Act 1983, the Parental Leave and Employment Protection Act 1987, Volunteers Employment Protection Act 1973, and Wages Protection Act. A full list of applicable laws and regulations can be found at http://www.ers.dol.govt.nz/law/statutes.html.
Some notable changes to New Zealand’s labor law in recent years include a 2004 revision of the ERA, which strengthens collective bargaining, good faith provisions, and dispute resolution mechanisms. It also provides additional protection for workers in the event that company ownership changes. The Employment Relations (Flexible Working Arrangements) Amendment Bill, which was passed in 2007, changes the Employment Relations Act to provide employees who care for others with the statutory right to request part-time or flexible hours. The changes are not limited to hours of work but can also include the place of work, such as working from home, compressing the work week into fewer days, flexi-time, staggered hours, shift swapping, and job sharing. In 2007, the mandatory minimum annual leave time increased to four weeks.
Labor laws are generally well enforced, and disputes are usually handled by the New Zealand Employment Relations Authority. Its decisions may be appealed in an Employment Court. The New Zealand Department of Labor is responsible for enforcement of laws governing work conditions. Unions have the right to organize and collectively bargain. The proportion of union members in the total employed labor force is roughly 17 percent. The New Zealand Council of Trade Unions is the umbrella organization for 350,000 union members in 40 affiliated unions. Work stoppages continue to decline. In the year ending in September 2009, there were 18 work stoppages, which were made up of 15 compete strikes and three partial strikes. Employment rights mandate that every employee has a written employment agreement and receive the minimum wage of at least NZD 12.50 per hour. A list of other minimum employment rights can be found at: http://www.ers.dol.govt.nz/relationships/minimum_print.html
Foreign Trade Zones/Free Trade Zones
New Zealand does not have any foreign trade zones or free ports.
Foreign Direct Investment Statistics
As of the year ending in March 2009, the total value of New Zealand’s investment abroad was NZD 126 billion, up NZD 3.8 billion from the previous year. The total value of foreign investment in New Zealand was NZD 299.6 billion, an increase of NZD 25.7 billion. As a percent of GDP, New Zealand’s investment abroad and foreign investment in New Zealand was 94 percent and 224 percent respectively. (Note: GDP for the same time period was NZD 134 billion and is expressed in 1995/96 prices.) Australia remains New Zealand’s largest investment partner; it accounts for 28 percent of total New Zealand investment abroad and 32 percent of total foreign investment in New Zealand. For direct investment, Australia accounts for NZD 12.1 billion (50 percent) of New Zealand’s direct investment abroad and NZD 46.1 billion (50 percent) of New Zealand’s incoming direct investment.
Together with Australia, the United Kingdom and the United States make up New Zealand’s three biggest investment partners. While Australia is New Zealand’s largest partner for direct investment, the United States and the United Kingdom are New Zealand’s main sources of portfolio investment (mostly debt securities). In total, the three countries represent 63 percent of New Zealand’s investment abroad and 68 percent of foreign investment in New Zealand. New Zealand fund managers continue to place a majority of equity investment in Australia, the United States and the United Kingdom.
The investment relationship with the United States remains brisk. Investment in the United States now constitutes 25 percent of New Zealand’s total investment overseas (up from 20.9 percent in 2008), and the United States is the source of 18 percent of total foreign investment in New Zealand. As of the year ending March 2009, the total value of New Zealand’s investment in the United States was NZD 31.5 billion (up NZD 5.9 billion over 2008), and the total value of U.S. investment in New Zealand was NZD 53.2 billion (up NZD 5.6 billion). However, much of the increase in the U.S. investment in New Zealand can be attributed to the increase in the value of financial derivatives, rather than increasing direct, portfolio, or other investment.
New Zealand’s direct investment in the United States was NZD 4.7 billion; U.S. direct investment in New Zealand was NZD 11.5 billion. New Zealand’s portfolio investment in the United States was NZD 12.7 billion; U.S. portfolio investment in New Zealand was NZD 28.2 billion. While New Zealand’s portfolio investment in the United States has decreased slightly for the second year, U.S. portfolio investment in New Zealand has increased rapidly. New Zealand’s “other” investment in the United States was NZD 3.7 billion; U.S. “other” investment in New Zealand was NZD 10.8 billion. “Other” investments mostly represent loans and deposits.
U.S. investment in New Zealand is concentrated in the telecommunications, forestry, transportation, food processing, and electronic data processing sectors. Increasingly U.S. investments are going into petroleum refining and distribution, financial services, information technology, and biotechnology. New Zealand primarily invests abroad in the financial and insurance industry and manufacturing.
For reference purposes, NZD 1 roughly equals USD 0.70 (March 2009).