Overseas Investment Act to include forestry rights
Cabinet today announced that it has agreed to changes to the treatment of overseas investments in forestry rights by bringing them within the ambit of the Overseas Investment Act 2005 (Act).
Although covered by the screening process under the Act, it is intended that there will be a new streamlined approval path that will make it easier for overseas investors buying forestry rights to gain approval. Recognising the importance of overseas investment in forestry, Associate Finance Minister, Hon David Parker has said that the new streamlined approval path will also apply to investments in leasehold and freehold forestry land (which are already covered by the Act).
The requirement for overseas investors buying forestry rights to obtain approval under the Act is not intended to apply to purchases of up to 1,000 hectares of forestry rights per annum or any forestry rights which are for a period of less than three years. In addition, the counterfactual test will be removed, although any existing commitments to provide logs to domestic customers will be maintained.
It is intended that a standing consent system will be established to allow quality forestry investors to make purchases of forestry land and rights without needing to seek prior approval on each occasion.
Overseas investment is critical to the success of the New Zealand forestry industry. Without funding from overseas parties, New Zealand would not have the capital to support the size and scale of its forests, and therefore without that participation, New Zealand would have significantly less forested area.
We are pleased that the Government has taken into account feedback from ourselves and industry players as part of the consultation process in January. In particular we note that:
- as we submitted, the new streamlined approval path will apply to all forestry transactions – whether leasehold, freehold or forestry rights;
- the minimum area size has been increased from 50 hectares (as was originally provided by the Government) to 1,000 hectares;
- the standing consent proposal has been adopted, which will be very useful for quality industry players; and
- the counterfactual test has been removed for all forestry transactions.
The details of the proposal are still being finalised by Ministers before it is referred to the Select Committee. There will also be an opportunity for public consideration of the proposal. We look forward to reviewing the details of the proposed changes when available.
It is intended that the changes will be made before the Comprehensive and Progressive Agreement for the Trans Pacific Partnership (CPTPP) comes into force.
If you have any questions on these changes, please contact one of our experts