N.Z. firms expect too much out of C.E.R.’

Press, 25 June 1983, Page 13

N.Z. firms expect too much out of C.E.R.’

By NZPA steif correspondent Canberra New Zealand companies are expecting too much c>ui of closer economic relations over investment in Australia, according to Australian Treasury officials. They believed that too much emotion had been injected into the issue across the Tasman, that expectations were too high about what the treaty did, and they emphasised that investment in Australia was not yet covered by the treaty. The Australian Treasury believes that its present foreign investment policy is more than adequate to cover the expected needs of C.E.R., and officials said that changing its non-dis-criminatory stance could have repercussions with other countries. They also expressed fears that any special provisions for New Zealand could result in foreign companies using New Zealand-based firms to get around Australian regulations. The Foreign Investment Review Board deals with 1200 to 1300 applications for investment in or take-overs of Australian businesses each year. Only 4 per cent are rejected. From when the board was set up by the Fraser Government in April, 1976, until March 31 this year, there have been 380 proposals from New Zealand. Twelve were withdrawn and only three were turned

down — a rejection rate of less than 1 per cent Since the new Labour Government was elected three months ago, and in the wake of C.E.R., there have been 14 applications from New Zealand, of which 11 were approved, one was withdrawn and two turned down. The Treasury officials regarded that as very reasonable. The board was the result of a comprehensive review of Australia’s piecemeal foreign investment provisions, undertaken at the behest of the Whitlam Government and completed in 1975. The next year, the new Fraser Government accepted most of the proposals with a few changes - the most significant being the board. It is again under review. The board itself does not make decisions about the investment proposals. It investigates them and makes a report with recommendations to the Treasurer. “Fundamentally our policy is non-discriminatory, and if we discriminate in favour of New Zealand, other countries will have a cause for argument,” said one official. “We have other economic and treaty obligations to consider, and discrimination puts at risk the basis of our whole foreign investment policy — it takes away our independence. We do not see that the present policy cannot accommodate any

moves under C.E.R.” The officials said that one problem with giving New Zealand preferential treatment would be in deciding what could be classed as a New Zealand company. The danger existed of foreign firms with controlling or majority interests in a New Zealand company being able to use preference to get round Australian investment laws. They are defensive about their policy, which they believed was being administered flexibly and did not need changing to cope with closer economic relations. The situation could be different under a customs or economic union, “but that is a medium-term to longterm question, and is also a question for New Zealanders to decide whether they really want to become part of Australia. We are dealing with here and now,” said an official. There is an impression or feeling in some quarters of the Treasury that New Zealanders and New Zealand business in particular believed that C.E.R. would give them a special deal on investment in Australia. “I think there has been a terrible misunderstanding in New Zealand about C.E.R. It looms larger in the New Zealand businessman’s mind than in the Australian’s,” said the official. “There has been a lot of emotion generated, but it is not matched by what is in place. The substance of

C.E.R. does not back up that expectation. “We are not downgrading C.E.R., but keeping it in perspective. It is the start — not the end.’’ The Treasury officials believed that the foreign investment policies of both countries reflected their political considerations, economic circumstances dand the perceptions of their needs. “Even if we had the same perceptions on foreign investment, our economic circumstances are different,” said an official. “Australia is concerned about too much foreign capital inflow and its attendant problems, while New Zealand probably does not have enough. Australia has more scope to pick and choose foreign investment. “That is not downgrading New Zealand — New Zealand’s policy is a function of New Zealand’s perceptions and needs. But it is reasonable that we have different foreign investment controls.” The Australian Treasury does not regard its rules as unnecessarily restrictive, and its officials believe that they have a foreign investment policy to be proud of. “By any measure we would like to see any other country stand up against us. The bottom line is that we are capital importers and we need foreign investment, but that does not mean we have to lie down and let them charge in.”