VZCZCXRO6051
PP RUEHNZ
DE RUEHWL #0444/01 1660614
ZNR UUUUU ZZH
P 150614Z JUN 07
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC PRIORITY 4359
INFO RUEHBY/AMEMBASSY CANBERRA PRIORITY 4864
RUEHNZ/AMCONSUL AUCKLAND PRIORITY 1346
RUCPDOC/USDOC WASHDC PRIORITY 0143
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 WELLINGTON 000444 
 
SIPDIS 
 
SIPDIS 
 
EAP/ANP, EB/IFD/OIA, L/CID, PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: CASC EINV KIDE PGOV OPIC NZ
SUBJECT: 2007 REPORT ON INVESTMENT DISPUTES - NEW ZEALAND 
SUBMISSION 
 
REF: SECSTATE 55422 
 
¶1. SUMMARY: Pursuant to reftel, Post has reviewed all cases 
in the past year involving investment disputes and found that 
there were no/no cases of expropriations (or other takings) 
without compensation on the part of the New Zealand 
government. In regards to disputes between a U.S. 
person/corporation and the local government affecting 
investment property disputes, Post reviewed the 98 cases 
filed with New Zealand's Overseas's Investment Office (OIO) 
between June 2006 and May 2007 and found only 2 cases in 
which a U.S. person may have been adversely affected. Both 
cases involved the purchase of land considered to be 
"environmentally sensitive" or property having a "cultural 
significance" because it bordered protected or indigenous 
territory. Overall New Zealand remains an open economy with a 
strong respect for investments and private property rights as 
reflected in international surveys. End Summary 
 
BACKGROUND ON NEW ZEALAND'S INVESTMENT CLIMATE 
--------------------------------------------- - 
 
¶2. (U) According to the Heritage Foundation's 2007 Index of 
Economic Freedom, New Zealand's overall economy is ranked at 
number 5 among the top 10 "economically free" countries. New 
Zealand's overall score is 81.6, just below the U.S., which 
scored 82, and compared to a world average of 60.6   New 
Zealand's overall Investment Freedom score was 70, 
demonstrating that New Zealand encourages foreign investment 
and barriers to investment are minimal. There are a few areas 
in which foreign ownership is restricted: Telecom New Zealand 
(the national telecommunication company), Air New Zealand 
(the national air carrier), and fishing rights (complex 
treaty arrangements with indigenous peoples preclude open 
market exchange). 
 
¶3. (U) Despite New Zealand encouraging foreign investment 
generally without discrimination, the government does screen 
certain types of foreign investment through an agency called 
the Overseas Investment Office (OIO).  Amid growing public 
concern about purchases of coastal properties by foreigners, 
the New Zealand government enacted legislation in August 2005 
that increased screening and monitoring of land purchases, 
but raised the minimum threshold for scrutiny of proposed 
business purchases.   Under the legislation, the threshold 
for screening non-land business assets has increased from 
US$37.5 million to US$75 million, where a foreigner proposes 
to take ownership or control of 25 percent or more of a 
business.  Government approval is required for purchases of 
land larger than 5 hectares (12.35 acres) and of land in 
certain sensitive or protected areas.  Any application 
involving land in any form must meet a national interest 
test.  For land purchases, foreigners who do not intend to 
live in New Zealand must provide a management proposal 
covering any historic, heritage, conservation or public 
access matters and any economic development planned.  The 
proposal must be approved and generally made a condition of 
consent.  In addition, approved investors are required to 
report regularly on their compliance with the terms of the 
consent.  Overseas persons also must demonstrate the 
necessary experience to manage the investment. Full 
remittance of profits and capital is permitted through normal 
banking channels.  (Note: The OIO, part of Land Information 
New Zealand (LINZ), took over the functions of the former 
Overseas Investment Commission (OIC) in August 2005. End note) 
 
ONLY TWO U.S.INVESTORS DENIED BY OIO IN PAST YEAR 
--------------------------------------------- ---- 
 
¶4. (U) In the past year (June '06 to May '07) OIO reviewed 98 
foreign investment applicants, three of which involved U.S. 
persons or corporations as potential investor/buyers. Of 
these only 2 application were denied. Both denials involved 
purchase of land (as opposed to business enterprises) 
intended for commercial purposes. Since its inception, the 
OIO estimates that the value of investments approved by the 
agency rose from US$10.5 billion in 2005 to US$15 billion in 
2006 (figures for 2007 are not yet available). The amount of 
land approved for sale by OIO grew from 16,000 hectares in 
2005 to 101,000 hectares in 2006. It is estimated that about 
7 percent of New Zealand land is now foreign-owned. 
Furthermore of all applications filed this past year with OIO 
by international investors the largest single approval was 
for the sale of New Zealand Bluebird, a snack business, to 
U.S. firm PepisCo for US$185 million. 
 
¶5. (U) Claimant 1 proposed to purchase 13.9 hectares of 
 
WELLINGTON 00000444  002 OF 002 
 
 
freehold at 300 Whaanga Rd, Raglan in the Waikato Region 
valued at US$613,200 from a New Zealand person. The land in 
question contained an area established in plantation pines 
and an area of native bush subject to one of New Zealand's 
conservation covenants. The proposed use for the land 
involved the establishment of a Health Spa and Conference 
Center facility, including 12 two-bed units, a restaurant, 
full-service spa, and a manager's house. The facility was to 
be designed to blend into the environment. On January 24, 
2007, OIO declined consent. The OIO stated that it &was not 
satisfied that the proposal will or is likely to result in 
substantial and identifiable benefit to New Zealand, or ... 
New Zealanders.8 There has to date been no additional legal 
action taken by U.S. claimant to dispute the OIO decision. 
 
¶6. (U) Claimant 2 proposed to purchase 8.4 hectares of 
freehold at the corner of State Highway No 6 and McMilliam 
Road Garston in the Otago Region values at US$474,189.51 from 
a U.S. person. The land is situated near the Matuara River 
known for the quality of its fishing activity. The property 
currently holds the Upper Mataura Angler,s Lodge, which the 
claimant proposed to further develop using expertise and 
contacts in both fishing and accommodation. A decision by OIO 
was rendered on March 6, 2007, which declined consent. In 
justifying their decision the OIO stated that it &was not 
satisfied that the proposal will or is likely to result in 
substantial and identifiable to New Zealand, or ... New 
Zealanders.8 There has to date been no additional legal 
action taken by U.S. claimant to dispute the decision of the 
OIO. 
 
(NOTE: Per reftel instruction the actual names of claimants 
provided separately: Claimant 1 (Andrew Johnson Smith, 
AmCit); Claimant 2 (Bernero Holdings Limited, AmCorp). 
ENDNOTE) 
 
¶7. COMMENT: While there have been occasional rumblings 
regarding foreign ownership of Kiwi lands and enterprises by 
some of the fringe political groups, notably the Greens, 
there is no threatening ground swell forming among the local 
population or government to block foreign investments. 
Sentiments sometime peak when pristine landscape is under 
consideration for commercial development especially in what 
is perceived as environmentally sensitive tracts of land. But 
the OIO's track record indicates that the majority of 
applications to purchase by U.S. citizens and corporations 
are approved. End Comment. 
 
MCCORMICK