Published in Insights, The New Zealand Initiative’s newsletter, 29 June 2012
One day I will write a book about countries and their irrational fears. The English are convinced they are running out of land – when less than 10 per cent of the country is developed. The Australians believe they don’t have enough water – never mind Sydney receives twice the annual rainfall of Paris. The Germans constantly worry about inflation – even though they have enjoyed six decades of relative price stability.
To this book project, I will now add a New Zealand chapter about the kiwi fear of foreign capital.
This week, Prime Minister John Key caused great consternation when he said shares of the soon to be part-privatised power companies may end up in the portfolios of foreign investors. This truism was enough to agitate the media and the opposition. But why?
It is commonplace for companies listed on a stock exchange to be owned by investors from around the globe. For example, 53 per cent of the British telecom giant Vodafone is owned by non-British investors, and 72 per cent of the quintessential German carmaker Daimler belongs to non-Germans. So what?
It is odd that foreigners buying shares in energy companies excites kiwis so much. How many countries have a similarly emotional relationship with their utilities? Mind you, utilities seldom are iconic or sentimental brands like Vodafone or Daimler.
New Zealanders, on the other hand, treat Mighty River Power, Genesis, Solid Energy, and Meridian almost as if they were part of the family. Selling them, the outrage implies, is akin to giving up your child for adoption, only made worse by the fact that the step-parents might be foreigners.
Ironically, more than half the savings in Kiwisaver are invested abroad. So if foreign ownership is of such concern to New Zealanders, they should at least not be hypocritical about it – they should sell all the shares they own in foreign companies. Kiwis buying foreign shares while not allowing foreigners to buy NZ companies smacks of moral hypocrisy.
As it turns out, even military dictatorships are less concerned about foreign investment than New Zealand. Last week, Burma announced it will allow up to 100 per cent foreign ownership of firms operating in the country. Burmese President Thein Sein said his government would seek to attract more foreign capital with a competitive investment policy.
International investors will take note. Burma, a poorly governed nation with an abysmal human rights record, now appears more welcoming to foreign investors than free, prosperous and democratic New Zealand.
Maybe it’s because the Burmese want to become more like us. But do we really want to become more like the old Burma?