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RR RUEHNZ
DE RUEHWL #0070/01 0700311
ZNR UUUUU ZZH
R 110311Z MAR 09
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 5793
INFO RUEHNZ/AMCONSUL AUCKLAND 1934
RUEHBY/AMEMBASSY CANBERRA 5473
RUEHDN/AMCONSUL SYDNEY 0813
RUCPDOC/USDOC WASHDC 0287
RUEATRS/DEPT OF TREASURY WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCPCIM/CIMS NTDB WASHDC
RUEHRC/USDA FAS WASHDC 0401
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC

UNCLAS SECTION 01 OF 07 WELLINGTON 000070 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/ANP, EEB/IFD/OIA, STATE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: EFIN EINV ELAB ETRD KTDB OPIC USTR NZ
SUBJECT: 2009 INVESTMENT CLIMATE STATE FOR NEW ZEALAND 
 
REF: 08 STATE 119784 
 
¶1. Following is Post's resubmission of the 2009 Investment Climate 
Statement (ICS) for New Zealand.  As of end of January 2009, Post 
submitted ICS as part of the 2009 Country Commercial Guide per 
reftel. 
 
¶2. Begin text of ICS submission: 
 
2009 Investment Climate Statement - New Zealand 
 
Openness to Foreign Investment 
------------------------------ 
 
Foreign direct investment in New Zealand is generally welcomed and 
encouraged without discrimination. 
 
The New Zealand Government's Overseas Investment Office (OIO) 
screens foreign investments that exceed NZD100 million and represent 
25 percent or more of the equity in a New Zealand enterprise. 
Government approval also is required for purchases of land larger 
than 5 hectares (12.35 acres) and land in certain sensitive or 
protected areas.  Any application to purchase land must satisfy the 
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 planned economic development.  That proposal would 
have to be approved and generally made a condition of consent. 
Overseas purchasers also must demonstrate the necessary experience 
to manage the investment. 
 
The OIO monitors foreign investments after approval.  Investors must 
report regularly on their compliance with the terms of the consent. 
If foreign investors are found to have included deceptive statements 
on approval applications, the High Court can order the disposal of 
their New Zealand holdings. 
 
In practice, the government's approval requirements have not been an 
obstacle for U.S. investors.  Very few applicants have been denied 
(only 46, versus 1,555 granted, from 2000- 2007).  Those denied, for 
the most part, intended to purchase land for farming purposes, 
residential subdivision, or accommodation. 
 
For the 2008 calendar year 146 applications by foreign investors 
were submitted to the New Zealand Overseas Investment Organization 
(OIO) of which 130 were approved worth approximately US$10 billion. 
Investors from the United States submitted 56 applications in 2008 
and all were approved and of that amount 22 involved gaining a 
controlling a shareholding of 51 percent or greater in extant New 
Zealand enterprises.  In 2008, the largest investment managed by the 
OIO was the acquisition of Vector Wellington Electricity Network 
Limited for USD427 million by Cheung Kong Infrastructure Holdings 
Limited and Hong Kong Electric Holdings Limited. 
 
Very few government-owned enterprises remain to be privatized.  The 
government has not discriminated against foreign buyers, but has 
placed limitations on foreign ownership of Air New Zealand and 
Telecom New Zealand. 
 
The New Zealand government offers virtually no incentives for 
foreign investment, except for a tax rebate for large-scale film and 
television projects produced in the country.  Stable, low inflation 
and a relatively-open economy are viewed as the strongest incentives 
for investment. 
 
There is no capital gains tax.  New Zealand has agreements banning 
double taxation with 29 countries, including the United States.  The 
corporate tax rate is 33 percent for all companies, domestic and 
foreign.  The personal tax rate for most foreign investors (from the 
combined effects of New Zealand's nonresident withholding tax and 
company tax) is also 33 percent and the maximum personal tax rate is 
39 percent. 
 
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 
 
WELLINGTON 00000070  002 OF 007 
 
 
greater transparency and predictability. 
 
The OIO operates a comprehensive Internet website 
(www.oio.linz.govt.nz) that explains New Zealand investment policy 
and walks potential investors through the application process. 
 
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.investnewzealand.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. 
 
Expropriation and Compensation 
------------------------------ 
 
Expropriation has not been an issue in New Zealand, and there are no 
outstanding cases. 
 
Dispute Settlement 
------------------ 
 
Investment disputes are extremely rare, and there have been no major 
disputes in recent years.  The mechanism for handling disputes is 
the judicial system.  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.  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. 
 
Performance Requirements and Incentives 
--------------------------------------- 
 
There are no performance requirements or incentives associated with 
foreign investment, although the government may require foreign 
buyers of land to report periodically on their compliance with the 
terms of the government's consent to their purchase. 
 
Right to Private Ownership and Establishment 
-------------------------------------------- 
 
There are no restrictions on the right to establish, own, and 
operate business enterprises.  Government approval is required, 
however, for foreign investments over NZD100 million where a 
foreigner proposes to take 25 percent or more of a business and 
investments in commercial fishing and certain land purchases.  The 
government limits investments in Air New Zealand and Telecom New 
Zealand. 
 
Aside from the government equity holdings established at the time of 
formation, state owned enterprises (SOEs) are provided no special 
advantages in their competition with private entities.  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 Telecom 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 is a member of the World Intellectual Property 
Organization, the Paris Convention for the Protection of Industrial 
Property, the Berne Convention, and the Universal Copyright 
Convention.  It fulfilled its Trade-Related aspects of Intellectual 
Property (TRIPS) Agreement obligations in most respects with the 
passage of the Copyright Act 1994, Layout Designs Act 1994, 1994 
amendments to the Patents Act 1953, the Trade Marks Amendment Act 
 
WELLINGTON 00000070  003 OF 007 
 
 
1953, and the Plant Variety Rights Act 1987.  Amendments made to 
existing intellectual property statutes came into effect January 1, 
¶1995.  The Trade Marks Act 2002 created new criminal offenses for 
counterfeiting trademarks and increased the penalties for pirating 
copyright goods. 
 
The Patents Bill was introduced to the House of Representatives for 
its first reading on July 9, 2008. The Patents Bill, which is 
intended to replace the Patents Act 1953, will bring New Zealand's 
patent law into closer conformity with international standards.  One 
such development is the international trend for countries to 
strengthen intellectual property protection through patent term 
restoration.  The Patents Bill specifically excludes diagnostic, 
therapeutic, and surgical methods from patentability. Plant 
varieties will also be excluded.  The Patents Bill will now proceed 
through the legislative process and is expected to be sent to Select 
Committee for review in late 2009. 
 
In April 2008, Parliament passed the Copyright Amendment Bill.  The 
Bill amends the Copyright Act 1994 to address the emergence of 
technologies such as the Internet.  It seeks to maintain the 
existing balance between the interests of the owners and those of 
the users of copyrighted works.  It also seeks to create a more 
technology-neutral framework for the Copyright Act.  The Bill will 
update New Zealand's copyright laws to try to ensure that New 
Zealand's intellectual property rights system remains current and 
contemporary.  The international standards for protection of 
copyrightable material are currently set by the WIPO Internet 
Treaties (the WIPO Copyright Treaty and the WIPO Performances and 
Phonograms Treaty) of which New Zealand is not a signatory. 
 
In May 1998, the Copyright Act and the Medicines Act was amended to 
remove a prohibition on parallel importing.  This amendment allows 
importation of legitimate goods into New Zealand without the 
permission of the holder of the intellectual property rights. 
Enacted by the government to expand discounted prices for consumers, 
it also has resulted in an increase in "gray market" goods entering 
New Zealand.  Manufacturers have expressed concern that parallel 
imports will result in damage to their reputation due to imports of 
dated products, products not suitable for New Zealand conditions, 
and after-market servicing problems.  In addition, parallel 
importing limits returns to the holders of intellectual property by 
not allowing control over market targeting, such as timing of 
releases.  In October 2003, the government enacted a ban on the 
parallel importation of films, videos and DVDs for the initial nine 
months after a film's international release. 
 
Transparency of Regulatory System 
--------------------------------- 
 
Under the Commerce Act 1986, the Commerce Commission administers 
restrictive trade practices.  In general, price fixing and 
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 
prohibited.  Advice should be obtained on the application of the Act 
before the establishment of exclusive distribution, selling, and 
franchising arrangements in New Zealand. 
 
Reforms adopted since 1984 have included deregulation as a primary 
objective.  The most salient examples are the financial and 
telecommunications sectors, although the effort has been broad 
based. 
 
To ensure competition in "natural monopolies," such as 
telecommunications and electricity, the government has considered 
increased oversight.  Motivated largely by the power industry's 
 
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failure to provide adequate electricity reserve capacity, the 
government set up an Electricity Commission on March 1, 2004.  The 
Commission supervises the electricity industry. Under the 1997 WTO 
Basic Telecommunications Services Agreement, New Zealand has been 
committed to the maintenance of an open, competitive environment in 
the telecommunications sector.  Key reforms of the sector, through 
legislation enacted in December 2001, included appointment of a 
commissioner responsible for resolving commercial disputes.  The 
Minister of Communications on August 9, 2005, announced changes to 
the act aimed at improving the monitoring and enforcement of 
agreements involving regulated services which entered into force on 
December 18, 2006. 
 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
Since the removal of financial-sector controls in the mid-1980s, 
money market activity has grown rapidly, particularly foreign 
exchange trading and the secondary market in government securities. 
A range of financial instruments, including forward contracts, 
options and exchange rate futures, and the use of hedging devices to 
reduce interest rate and exchange rate risks have been introduced. 
The New Zealand banking system consists of 16 registered banks and 
more than 90 percent of their combined assets are owned by foreign 
banks (Australian banks account for 85 percent of the total).  There 
are only two New Zealand-owned banking institutions, the Kiwibank 
and the Taranaki Savings Bank (TSB).  Access to the credit system is 
unrestricted. 
 
The Securities Commission, under the Securities Act 1978 and 
amendments, regulates the issuance of securities.  The Act requires 
lists for public offerings of new securities and prescribes the 
information that must be disclosed.  An amendment in 1988 provides 
civil remedies for loss or damages resulting from insider trading. 
The Securities Markets and Institutions Bill gave the Securities 
Commission additional powers to increase its effectiveness in 
monitoring and enforcement, including laws against insider trading. 
Stocks in a number of New Zealand listed firms are also traded in 
Australia and in the United States. 
 
A takeovers code that took effect July 1, 2001, requires any person 
who tenders an offer for a publicly traded company of 20 percent to 
make that same offer to all shareholders. 
 
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.  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. 
 
Small, publicly held companies not listed on the New Zealand Stock 
Exchange (NZX) may include in their constitution measures to 
restrict hostile takeovers by outside interests, domestic, or 
foreign.  However, NZSE rules prohibit such "poison pill" measures 
by its listed companies. 
 
Foreign-owned or controlled companies are not excluded from 
participation in domestic industry standards setting organizations. 
 
Political Violence 
------------------ 
 
New Zealand is a stable western democracy. 
 
Corruption 
---------- 
 
New Zealand is renowned for its efforts to ensure a transparent, 
competitive, and corruption-free government procurement system.  It 
is government policy to give local producers a fair chance to 
compete, but departments are responsible for limiting costs and 
seeking the best value for the money.  Stiff penalties against 
 
WELLINGTON 00000070  005 OF 007 
 
 
bribery of government officials as well as those accepting bribes 
are strictly enforced. New Zealand ranked number one with a score of 
9.3 (e.g. U.S. ranked 18 with score of 7.3) in Transparency 
International's 2008 "Corruption Perceptions Index", which looks at 
perceptions of public sector corruption in 180 countries and 
territories.  The highest possible score (i.e. least corrupt) is 
ten.  This is the third year New Zealand was ranked least corrupt. 
 
New Zealand has ratified the OECD Anti-Bribery Convention.  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. 
 
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.  Website: 
http://mfat.govt.nz/Foreign-Relations/Austral ia/1-CER 
 
A Free Trade Agreement between New Zealand and China (NZ-China FTA) 
was signed on April 7, 2008 in Beijing: Details on MFAT website at: 
http://www.mfat.govt.nz/Trade-and-Economic- 
Relations/Trade-Agreements/China 
 
New Zealand concluded a Free Trade Agreements with Singapore in 
¶2001.  Details on MFAT website at: 
http://www.mfat.govt.nz/Trade-and-Economic- 
Relations/Trade-Agreements/Singapore.  With Thailand in 2005, see 
www.mfat.govt.nz/Trade-and-Economic- 
Relations/0--Trade-archive/0--Trade-agreement s/ Thailand. 
 
New Zealand has a four-way FTA with Brunei, Chile, and Singapore. 
(known as P4).  In 2008, the United States, Australia, and Peru 
agreed to join the P4.  The group has been dubbed the TPP. 
 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
As an OECD member country and developed nation-state, New Zealand is 
not eligible for OPIC programs.  New Zealand does not intend to 
become a member of the Multilateral Investment Guarantee Agency. 
The New Zealand government does not provide a comparable program 
like OPIC to its investors.  It has a small export credit program 
that has so far not attracted great commercial interest. 
 
Labor 
----- 
 
The overall unemployment rate increased to 4.5 percent by last 
quarter 2008.  There were 2,191,000 persons employed in the 
workforce (out of a population of 4.28 million) yielding a labor 
force participation rate of 68.3 percent.  The demand for labor has 
been strong, and shortages of skilled labor remain a problem 
throughout the economy.  Several factors have caused the shortages, 
including lower wages compared to those in Australia, (where any New 
Zealander can legally work), lack of training, and falling 
immigration numbers. Labor shortages are especially pronounced in 
the construction industry. 
 
On April 1, 2007, the mandatory minimum increased to four weeks' 
annual leave beginning.  Paid leave also can be taken for illness, 
bereavement, or parenthood. 
 
The New Zealand Parliament passed the Employment Relations (Flexible 
Working Arrangements) Amendment Bill on November 26, 2007, which 
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 
 
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the work week into fewer days, flexi-time, staggered hours, shift 
swapping, and job sharing.  The law applies to people employed for 
six months or longer. If the benefit is initially granted, then 
employees must wait at least 12 months before they are entitled to 
make another request. 
 
Employers have grounds for refusing requests due to: 
-Inability to reorganize work among existing staff. 
-Inability to recruit additional staff. 
-Detrimental impact on quality or performance. 
-Insufficiency of work during the period the employee proposes to 
work. 
-Planned structural changes. 
-Burden of additional costs. 
-Detrimental effect on ability to meet customer demand. 
-Undermining the terms of a collective agreement. 
 
Unions have the right to organize and collectively bargain. About 21 
percent of New Zealand's wage and salary workers are union members. 
 
In 2000, the Labour-led government replaced the Employment Contracts 
Act 1991 (ECA) with the Employment Relations Act (ERA), contending 
the change was necessary to restore balance in the powers of 
employers and employees.  The ERA promotes collective bargaining, 
strengthens unions, and places strong emphasis on good faith 
bargaining.  Employment relationships are based on contracts, and 
workers may negotiate an employment contract with their employer 
individually or collectively. A 2004 revision of the ERA 
strengthened its collective bargaining and good faith provisions. 
It provides additional protection for workers in the event that 
company ownership changes.  Despite the business sector's initial 
fears about the ERA, workdays lost to strikes have declined since 
the late 1970s.  35 work stoppages occurred in the 2007, fewer than 
the 60 stoppages recorded in 2006.  Prospective entrants to the New 
Zealand market are encouraged to examine the details of the labor 
legislation.  (Information on New Zealand's employment law is 
available on the Department of Labour's website, 
http://www.ers.dol.govt.nz). 
 
Minimum wage and workplace safety regulations are incorporated under 
other laws.  An Employment Relations Authority handles disputes, and 
its decisions may be appealed in an Employment Court. 
 
Foreign Trade Zones 
------------------- 
 
New Zealand does not have any foreign trade zones or free ports. 
 
Foreign Direct Investment Statistics 
------------------------------------ 
 
In 2008, the total stock of New Zealand's investment abroad was 
NZ$121.9 billion, and the stock of foreign investment in New Zealand 
was NZ$275.7 billion.  The level of Australian direct investment 
into New Zealand has increased NZ$29.6 billion between 31 March 2003 
and 31 March 2008 while the proportion of total direct investment 
that this represents has increased from 36.3 percent to 54.5 
percent.  The US and UK are New Zealand's most significant 
investment partners in respect of portfolio investment (mostly debt 
securities).  As at 31 March 2008, these countries are the source of 
46 percent of this form of investment in New Zealand.  Australia and 
the UK are the most significant sources of foreign 'other' 
investment in New Zealand (mostly loans), together accounting for 
55.7 percent of this form of investment. 
 
A feature of this portfolio and other investment is the New Zealand 
banking sector continuing to use the US and UK as funding sources. 
New Zealand investment abroad occurs mainly in Australia, the US and 
the UK, with NZ$70 billion (57.5 percent) of total investment at 31 
March 2008 attributed to these three countries, mainly in the form 
of portfolio investment.  Australia, the US and the UK are where the 
majority of equity investment by New Zealand fund managers is 
placed. 
 
During the year ended March 2008 flows of investment into New 
Zealand were NZ$27.5 billion.  Of this, the largest contribution 
came from Australia (NZ$7.8 billion).  The UK (NZ$6.6 billion) and 
the US (NZ$6.9 billion) were also significant contributors.  The 
main form of the Australian investment into New Zealand was 'other' 
investment, reflecting an increase in borrowing by the New Zealand 
 
WELLINGTON 00000070  007 OF 007 
 
 
banking sector.  Flows of New Zealand investment abroad were NZ$12.4 
billion over the same period, with $1.3 billion of investment flows 
to the US, the main destination. 
 
US investment is concentrated in the telecommunications, forestry, 
transportation, food processing, and electronic data processing 
sectors.  Increased U.S. investments are in petroleum refining and 
distribution, financial services, information technology, and 
biotechnology. 
 
Web Resources 
------------- 
 
Commerce Commission: http://www.comcom.govt.nz 
Department of Labour: http://www.ers.dol.govt.nz 
Investment New Zealand: http://www.investmentnz.govt.nz 
The Overseas Investment Office: http://www.linz.govt.nz 
END TEXT 
 
KEEGAN