Magazine article New Zealand Management

When Policies Don't Mesh

Magazine article New Zealand Management

When Policies Don't Mesh

Article excerpt

Government policies can have a big impact on the business sector and thereby on growth. Two such policies--infrastructure and immigration--appear to be at odds.

Infrastructure is a key issue for business. A healthy economy requires well-maintained roads, railway track, ports, airports, power plant and cabling--the physical assets that make it possible to travel, communicate and do business.

With a history of under-investment in roading and power assets in particular, there's an urgent need for more expenditure.

And immigration is rising in importance as skill shortages bite and more New Zealanders head for jobs overseas. Employers want more skilled, English-speaking immigrants.

But a recent government policy seems destined to bring sub-optimal outcomes in both these areas. In June, the Government announced changes to the Investor Category immigration rules, specifying that investment by prospective immigrants could only be directed into government accounts, to be used to fund infrastructure improvements.

The rule changes included dropping the investor age limit from 85 to 54, doubling the amount of investment required to $2 million and requiring the money to be invested with the Government.

The stated rationale was to ensure investors were genuine. The money invested would be used by the Government to fund increased infrastructure spending.

The changes meant that private investment would no longer be allowed and the only return the investors would receive on their $2 million would be the rate of inflation.

Business NZ said at the time that this would make New Zealand a significantly less attractive investment option and slash the number of potential investors.

Unfortunately for New Zealand, this has been confirmed by figures released by the Department of Labour.

When we first made our concerns known in June, New Zealand was attracting around 30 business investor migrants a month. Since the changes came into force in July, New Zealand has accepted just two.

It is not hard to understand why investors are staying away in droves.

Potential investors are required to have high levels of business skills and experience yet they are forced to passively invest their money with the Government. The Treasury, in its usual understated way, describes this as "counter-intuitive". …

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