The MAI: Securing New JobsInternational Trade
The message I intend to deliver today is directed at the minority of New Zealanders who have become unduly concerned by the Alliance's recent campaign against the Multilateral Agreement on Investment, and investment from overseas more generally. It is directly relevant to the forestry industry, with this industry perhaps having a greater need for new investment than any other.
And it also has perhaps the greatest amount of New Zealand money invested overseas.
Recently, homeware chain Levene's went into receivership. Six hundred jobs were put at risk. People with gift vouchers or who had paid for goods in advance of delivery risked losing their money. Were Levene's to go out of business entirely, competition in the homeware market would be reduced.
People wanting to decorate their homes would face higher prices, lower quality, less choice, or all three.
The Dominion reported yesterday that more than 50 expressions of interest in buying the chain had been received, some from New Zealand's biggest source of overseas investment, Australia. There are some people who would argue that the Australian bidders should not be considered. They would argue that only New Zealanders should be able to invest in Levene's.
My view is different. I argue that if the Australian bidders are offering the best deal - the deal most likely to save the 600 jobs, protect existing contracts and maintain competition - they should be allowed to buy it.
That's what the debate over investment from overseas and the proposed Multilateral Agreement on Investment should be about: jobs.
New Zealand is a country built on foreign investment. Our beef industry began with British investment. Our early dairy industry benefited from the involvement of Chinese-born businessman, Chew Chong. More recently, New Zealand has benefited from investment mainly from Australia and the United States. Much of the investment has been in forestry, with forestry being the sector to receive the most Overseas Investment Commission approvals in 1996.
Property, agriculture, services and manufacturing are areas which also received significant approvals.
Despite that investment, the vast majority of New Zealand land continues to be owned by New Zealanders. Even though foreign investment has been in land-intensive industries like forestry and agriculture, between 1992 and 1996, only 1% of land was approved for sale to overseas interests by the Overseas Investment Commission. Not one square kilometre of that land has been packed off for export. Not one square centimetre has been declared a republic. I repeat: the vast majority of New Zealand land continues to be owned by New Zealanders and it always will be. The New Zealand people, through their Government, will always maintain sovereignty over the lot.
Where investment from overseas has had a greater impact is in employment.
Of every 400 employees of a foreign-owned firm, 399 are New Zealanders, and, on average, they're paid 28% more than employees of New Zealand owned companies.
In fact, it has been estimated that one in three New Zealanders owe their jobs directly or indirectly to investment from overseas. It's all very well for Mr Anderton and others to grandstand and say they don't want foreigners to be able to invest in New Zealand. They should tell us how they intend to pay for the dole payments to one third of our workforce.
What's clear, too, is that New Zealand will need significant new investment if we are to maintain the high levels of economic growth we have enjoyed through most of this decade. Forestry is the best example.
The harvest from your forests is expected to increase by 70% over the next ten years. World population growth and rising living standards are likely to increase demand for wood products by 40% by 2010. More importantly, this month's APEC Leader's Meeting in Vancouver may well endorse a package of liberalisation measures, including wood and wood products. If that is agreed, it will provide the New Zealand wood processing industry with access to currently protected markets for higher value products. All these factors imply that vast new investment in wood processing is needed, with one estimate suggesting it could be in the magnitude of between $4.5 billion and $6.5 billion. Such an investment could conceivably pave the way for the creation of 30,000 new jobs and an extra $5 billion a year in foreign exchange receipts.
But it's not just forestry. Across the economy as a whole, it has been estimated that New Zealand needs new investment of somewhere in the order of $75 billion to $100 billion over the next five years to secure economic and job growth. Telephone-number figures like that can't come from the pockets of New Zealanders alone, particularly now that New Zealanders have given a clear message - as is their right - that they don't want a bar of any compulsory savings scheme. Just as we always have done, we need to look abroad.
The stakes for New Zealanders are incredibly high. Thirteen years of economic reform have created vast numbers of new jobs. Since 1991, 227,800 new jobs have been created. Despite that, 124,000 New Zealanders, on a seasonally adjusted basis, were estimated to be unemployed in the September quarter.
That's 6.8% of our workforce, an improvement on the September 1990 quarter but still too high. What's worse, is how unemployment is shared across society.
Unemployment in New Zealand is suffered mainly by the young, by non-Europeans, and often those living outside the three main population centres. One in five Maori, aged from 20 to 24, are unemployed. That does New Zealand no credit.
We must do better.
According to BERL, if we were to achieve a net inflow of investment of 2% of GDP a year, our unemployment rate could potentially fall to just 3.3% by 2005.
That's as low as you would find it anywhere in the world, and certainly far lower than in corporatist economies like France. It would mean that thousands of New Zealanders would have found jobs who would otherwise be unemployed, among them thousands of young non-Europeans. What a tremendous goal for us to aim for as a country.
The Government is quite clear about what needs to be done to attract the sort of investment we need to achieve it. I spent two weeks last month in Asia largely promoting New Zealand as a destination for pro-jobs investment.
Contrary to the Alliance's rhetoric, Wall Street and Hong Kong billionaires are not preoccupied with exploiting the New Zealand worker and imposing social experiments on our people. They know two things about New Zealand: the football team that wears black, and that we've undertaken some interesting economic reforms. In that order. If they are interested in the CER region, their first instinct is to invest in Australia, with New Zealand - if it is considered at all - being seen as a small offshoot of that larger market.
We need to be ahead of the game to attract their serious interest; to use their capital to create jobs for New Zealanders.
Our economic reforms do provide a platform to promote our economy as a destination for investment. Our continuing commitment to the $5 billion fiscal cap for social investment in mainly health and education is essential.
Ensuring that unions are never again able to hold our economy to ransom is essential too. The Reserve Bank Act and the 0-3% inflation contract with the Governor is critical, as is our low-rate broad-base tax system. The message that New Zealand is committed to further reform is also welcomed overseas.
The Government intends to sell assets, reform ACC, cut compliance costs, review the implementation of the Resource Management Act, and introduce competition in electricity. We are looking at further efficiencies in central Government, wit h my merger of the ministries of forestry and agriculture an example you will want to talk with me about this evening.
What's also important to job-creating investors is a degree of certainty that the rules will not be changed overnight. That is what will be delivered by the Multilateral Agreement on Investment - the treaty which has so upset Mr Anderton and his alliance of tree-huggers, Mensheviks and social creditors.
I can't claim to be overwhelmed with excitement about the MAI, as it is known.
It don't see it as a big deal in itself. It is a fairly innocuous treaty - what the diplomats call a "standstill" treaty. New Zealand will need to change no laws if we sign. It will not require us to do away with our Overseas Investment Commission and its power to require sales of land to overseas interests to be in the national interest, where the area is greater than 5 hectares, or 0.4 hectares for foreshore land. It will have no impact on the Treaty of Waitangi claims process. It won't stop the Government from being able to prefer to fund New Zealand providers of health and education services.
To me, its only provision of any great significance is its requirement that, should a country decide to pull out of the MAI, current investments would be entitled to the protection of the treaty for 15 years. That would provide New Zealand investors overseas with a greater degree of certainty, and overseas investors here with the same degree of certainty. It is true that for the first five years, countries will not be able to pull out of the treaty at all.
But after that, an Alliance Government would have to give only six months notice to our international partners. An Alliance Government could be elected in October 2005 and by April 2006 - before its first Budget - it could have banned new investment from overseas, and given notice to existing investors - and their employees - that they have 15 years to get out of the country.
Mike Moore has said the treaty stops Governments from being able to commit economic suicide. That's not quite true. It wouldn't stop Governments from committing economic suicide. They would just have to release the suicide note in advance.
These facts haven't stopped the Alliance from running one of the most dishonest campaigns against the proposed treaty that I've seen in my 13 years in parliament. We've been told that the MAI would stop the Government from being able to prevent the sale to foreigners of Takapuna Point here in Auckland.
That isn't true. We've been told it would stop the Government from being able to give preferential treatment to the Plunket Society. That isn't true.
We've been told it would stop the Government from being able to give preference to state-owned universities and hospitals. That isn't true. We've been told that it would stop the Government from being able to settle Treaty of Waitangi grievances. That isn't true. We've been told that parliament won't have a formal role in ratifying the treaty. That is true, but it is a separate issue which applies to all treaties and one which is being considered separately by the Minister of Foreign Affiars and the Foreign Affairs Select Committee.
What we haven't heard from the Alliance is any discussion of what would happen if we decline to sign the treaty. The first thing is that we'd be depriving ourselves of the security the MAI will offer to our $28 billion invested overseas. That investment is not the investment of some nebulous concept like "big business". According to its annual report, 28,175 people hold 1,000 or fewer shares in Carter Holt Harvey. Presumably, that's money they've put to one side for a house deposit, or for a trip overseas, or for their retirement, or for whatever they value. Their small savings have been invested overseas as part of Carter Holt Harvey's NZ$2.7 billion international portfolio. The MAI will help protect the investment - the savings - of those 28,175 small shareholders.
But the greater impact would be in employment. Should we choose not to sign this innocuous treaty, we would be sending the clearest signal possible to people who want to invest here - helping us create thousands of jobs - that we don't want them. We'd be telling them that we're the sort of country which would change the rules overnight without having the courtesy to give any warning to investors or their employees. We'd essentially be telling them to go to Australia.
Jim Anderton doesn't care about any of that. Jim Anderton is so committed to ideological dogma that he would prefer to see thousands of New Zealanders remain unemployed than accept the investment from overseas that we need to bring our unemployment rate down to one of the lowest in the world. His campaign is dishonest and despicable. It will not be successful, but the very fact that it is occurring will damage the interests of this country, and damage our ability to create jobs. My view of Jim Anderton and his alliance is the same as left-wing columnist Bruce Jesson writing in the most recent edition of the leftist Political Review: that the contribution of the Alliance to national politics in this country has been almost nil. I will not allow him to use this issue to scare people, win votes and destroy jobs.
Shortly, it will be announced who has been successful in bidding for Levene's.
It may well be a New Zealand firm. Good on them. On the other hand, it may be an Australian firm. It doesn't matter. The important thing is that the 600 jobs could be saved. Be assured that I will continue to promote New Zealand as a destination for overseas investment so that we can achieve the employment levels and the rising living standards that New Zealanders deserve. It's the least we can do for the 124,000 New Zealanders who remain unemployed.