Rob Hosking: Is foreign ownership bad?

Is there any proof?  Rob Hosking writes

Perhaps it is part of the global protectionist push, of the kind which drove Brexit in the United Kingdom and the election of Donald Trump in the United States. But it seems another attempt in New Zealand to inflate the foreign ownership bogey is underway.

This week the Campaign Against Foreign Control of Aotearoa produced figures showing a rise in the number of foreigners owning shares in New Zealand firms. It’s up to 47 percent of shares, from 37 percent year before.

The peak was 2002, when it reached 60 percent.

It’s never quite clear why this is a bad thing, whenever the issue is raised. The casual onlooker is supposed to infer that such investment in New Zealand is bad, in and of itself.

True, New Zealand has an unusually high level of offshore ownership of firms, although what skews this is the Australian ownership of most of New Zealand’s banks.

But would “we” – and people who talk about this issue in such terms always talk about “we” and “our” as if local firms have some sort of collective ownership even when they are owned by private shareholders – actually gain anything out of the colossal effort required to place those banks in the ownership of New Zealand firms?

Even if such a question would be answered, there needs to be a clear statement of what the problem or harm is in the first place, and that case has not been made out.

The Campaign Against Foreign Control of Aotearoa spokesman Bill Rosenberg is quoted as saying that New Zealand loses a lot more than it gains out of foreign investment but the claim isn’t backed up, at least in this week’s effort, by any actual evidence.

And, looking at the most recent balance of payments financial account data, it isn’t even clear that in a broader perspective there is any great increase in foreign ownership underway.

Exactly.  This is a politically-driven and media-amplified issue that isn’t a real problem at all.  What they do not provide is the balancing argument:  that New Zealand companies own assets overseas, and that our own investments are made overseas as well.

The New Zealand Superannuation Fund invests the majority of its funds not in New Zealand, but overseas.

Why?

The main reason is risk management, the other is a need to generate strong returns.

If you are prepared to proclaim the success of the ‘Cullen Fund’ and its investment performance, you have to be prepared to ask what it is doing that makes it so successful.

And a big reason is it spreads the risk of its investments around the globe.

Most investment vehicles do this in some form or other, certainly the larger ones do and certainly the more successful ones do.

If you have a KiwiSaver plan, it does the same unless you have one that specifically invests locally.

And if you are seeing that as a good thing, you cannot then complain if other people overseas invest here.

Particularly if that investment here reflects what is a strong underlying economy compared to the rest of the world.

It’s the Chinky-sounding names problem that isn’t.  It’s the Rich Prick Americans that are stopping us from going to the beach.  And it’s the nasty Chinese buying up all our farms.

Except it isn’t.  All of that is political scaremongering and not backed by any fact.

 

– RNZ

 


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