Wednesday, 19 August 2015

Well done, KPMG

First of all, well done KPMG for coming out with another edition of their analysis of foreign direct investment (FDI) in New Zealand, this time for 2013-14 (link to KPMG's summary here, and full pdf here). And well done again for serendipitously prompting what looks like some serious action to get better official data on what's going on.

On the data themselves, I must admit I was somewhat surprised, when I first heard the results on the radio, that Canada was the biggest single investor: I'd have expected Australia. Chances are, though, that Australia still is, there or thereabouts: as the report notes, following a sensible extension in 2011 of CER, Australian companies typically don't need to bother getting approval from our Overseas Investment office (OIO) for transactions under $477 million (and we don't need to get approval from their equivalent for anything under A$1 billion or so). That threshold was way higher than the $100 million that applied prior to March '13. So potentially there is a lot of Aussie investment in the $100 million to $477 million range that would have turned up in KPMG's analysis of 2010-12 but that won't have turned up in the 2013-14 data.

In any event, given the lumpiness of FDI deals, league tables are likely to jump around over short term time periods: over the longer haul there is some greater consistency. In the previous survey (summary here), North America, Europe and Australia accounted for some 70% of everything, and this time round they accounted for 59%, and would likely have been in the 60s somewhere if the Aussie threshold hadn't changed.

KPMG have done a fine job with the data, such as they are, though the data have their inherent shortcomings. As KPMG said, for many purposes the net data rather than the gross numbers are probably more relevant. The example KPMG give is this:


On a net basis, the numbers are considerably smaller, at around 35% of the gross numbers, though that probably won't stop the "we're becoming tenants in our own land" types from banging on about the gross numbers. The data are also approvals, not necessarily consummated transactions, and there's also the issue (perforce, given the Overseas Investment Office source of the data) that we don't know whether the stock of previous FDI has dropped as a result of later sales back to New Zealand entities. The data only covers new FDI, as approved by the OIO, and we don't know what happens to it later on.

All up, KPMG have provided a useful public service here, especially given that interest in the topic is very high: for my sins, I listen to most Parliamentary Question Times, and foreign investment is a recurrent theme (including today, re the possible foreign ownership of Landcorp farm disposals).

That said, I'm beginning to think that given the importance of these data, they should be taken over by Statistics New Zealand and developed so that some of the kinks can be ironed out. There's only basic summary info (here) provided by the OIO (none of the country-source or sector-destination data estimated by KPMG, for instance), which is not good enough: these are important facts collected on citizens' behalf by the OIO, and we deserve a better view of them. The politicians on all sides seem to be moving the same way and asking for more info, too, as this report from interest.co.nz says, but the pollies seem to be be leaving the OIO as the statistical source, and as things stand, that's just inadequate. Stats would also be well placed to deal with the confidentiality issues: it's something they handle all the time. And having these data produced to professional statistical standards would fit very well with Stats' existing compilation of our net international investment position (which you can find here).

So hats off to KPMG: a good idea well handled. And keep it up if there's no progress on industrial strength official data. But ideally I'd say it's time for Stats to run with it from here.

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