Additional Investment for Development Purposes
Additional investment for development purposes is a factor under section 17(2)(a)(v) of the Act. The “additional investment” must occur after the initial purchase, in other words, the purchase price of the initial asset is not “additional investment” for development purposes.
“Development purposes” means that the additional investment should have the effect of increasing the productive capacity of the asset purchased or an asset that is yet to be purchased.
The additional investment must be “introduced into New Zealand” in the form of:
- further foreign direct investment, including any retained earnings that form part of the foreign direct investment component of the balance of payments statistics compiled by Statistics New Zealand, and
- any borrowings by the applicant that increase the foreign claim on New Zealand assets.
The OIO accepts the following matters as additional investment for development purposes:
- capital fertiliser (where the capital component is that amount spent greater than 10% of the average amount spent for a farm in that area)
- fencing (new or significantly more than usual repairs and maintenance)
- purchase of stock to lift stock capacity (not maintain existing stock levels)
- new yards/woolsheds etc (not repairs and maintenance)
- provision of new water supplies/irrigation
- new roading/services
- building a new factory/purchase of a new plant
- establishing new environmental initiatives (for example fencing off native bush, establishing/restoring wetlands), and
- establishing a forest (but not ongoing silviculture maintenance).
The OIO does not usually accept as additional investment for development purposes the following:
- building a dwelling house for personal use
- usual farm maintenance/expenditure
- amenity plantings, and
- the freeing up of the vendor's capital, unless there is a direct tangible link to the overseas investment being considered and the further additional development by the vendor (i.e. the vendor may be selling part of an asset to provide funds to expand another asset). However the other significant investment factor in Regulation 28(d) may apply - “whether granting the application for consent will, or is likely to, result in the owner of the relevant land undertaking other significant investment in New Zealand”.
Report
The OIO requires a report detailing the extent to which the overseas investment will, or is likely to, result in the introduction into New Zealand of additional investment for development purposes.
The report should detail:
- the amount of investment capital to be introduced
- the development into which the investment will be directed
- the timeframe by and over which the investment will be made
- any uncertainties or contingencies relating to achievement of the benefits under this factor, and
- what benefit will accrue to New Zealand (or any part of it) or group of New Zealanders as a result of the additional investment.
