Hugh Radice wrote:
> I was recently at a workshop in Budapest on foreign direct investment
> in the Visegrad countries (btw, that's Hungary, Poland, Slovakia,
> Czech Rep], and to my surprise one of the papers was on "The role of
> FDI in structural change: the lessons from New Zealand's
> experience". The paper was given by David Mayes, a Brit who is now
> at the Reserve Bank of NZ (he was previously at the National
> Institute of Econ and Social Research in London, which co-sponsored
> the workshop). The paper was 100% supportive of the change to
> neo-liberalism in NZ.
No great surprise - the only surprise would be that the RBNZ was
doing this for nothing. Former Ministers in the Labour and National
Governments - Roger Douglas, Richard Prebble, Ruth Richardson and
others - have made their fortunes since defeat (or resignation) by
acting as consultants and travelling guru on such matters: a sort of
"do it yourself privatisation" road show.
>
> On FDI, the stats in the paper show net FDI - inward minus outward -
> running at NZ$2m in 1992, 4m in 1993 and 3.5m in 1994. However, even
> more striking has been the inflow of portfolio and loan capital,
> linked to privatization. Offshore ownership of NZ stocks has risen
> from 19% at 31/12/89 to 56% at 31/8/95. Total foreign debt,
> according to Mayes, "still amounts to 70-80% of GDP", the difference
> being that this is now mostly private (including 40% foreign holding
> of domestic debt in the form of NZ$-denominated government stock].
I presume thes are $b, not $m. Offshore ownership of NZ stocks are
now (1996) at 58%. All these figures relate to publicly listed
shares on the Stock Exchange. However a feature of these years is
the loss of companies from the Share Market - they are being
privatised in another sense. I looked at the 1994 top 200 non-
financial companies (ranked by turnover), which includes listed, non-
listed, and state-owned enterprises, and probably accounts for the
great majority of New Zealand's non-financial, non-agricultural
commerce. Of the 200, 45% are o/s owned, accounting for 52% of the
turnover, 66% of profits, 57% of tax paid, 61% of total assets, 55%
of shareholders funds, and 62% of the employees. ("O/s owned" is
defined by the legislative cut-off of at least 25% overseas
ownership.)
15 of the top 20 financial institutions are o/s owned, including all
but one of the main banks (community trust-owned Trustbank) which is
currently subject to a takeover bid, rumoured to be by Lloyds.
In all, state-owned enterprises, cooperatives and the like are
heavily represented in the remaining major NZ-owned companies:
privatisation (in either sense) almost always means overseas
ownership.
The figures for overseas debt sound right. It is grown several times
since 1984, and has been significantly privatised. To the
slight extent that it is reducing in absolute terms it is largely due
to our appreciating exchange rate. Relative to GDP it is falling.
>
> Anyhow, in this capitalist paradise,according to Mayes, " [FDI]
> contributes to long term economic growth, because it increases
> efficiency by encouraging local firms to become competitive, because
> it facilitates exports through the overseas linkages the investor
> possesses, because it brings an inflow of knowledge, skills and
> technology and lastly because it generates employment both in itself
> and through the forward and backward linkages through the economy".
> Elsewhere he claims that unemployment has fallen to 6%.
This is standard stuff coming from the Reserve Bank, government
Ministers, Chambers of Commerce, private bank spokespeople etc,... I
recently wrote a rejoinder to Reserve Bank Governor, Donald Brash who
had made speeches on the same lines. Legislation was passed last year
making foreign investment even easier (as if that were possible).
Other than for land sales, the only criteria are that the investor
be of good character, be putting money into the investment, and have
"business acumen", whatever that means. This caused an uproar and the
only real debate New Zealand has had on foreign investment for many
years. To the government's surprise there was considerable
opposition, and there has been a propaganda offensive since then to
reeducate us.
The key thing to note about their arguments are that they are almost
exclusively "micro". All the "good" things Mayes lists are matters
for case by case examination: an argument (at best) for sensible
foreign investment rules. What it deliberately ignores is the macro
effects, the most important of which is that our dependence on
foreign investment (which is always conditional on political
conditions) means these economic policies cannot be changed without
capital flight causing a crisis. On top of that are increasing
balance of payments problems etc.
The unemployment figure is correct - though note that it is still
higher than what it was when this whole experiment started in 1984.
>
> I asked Mayes about the effect on the distribution of income and
> wealth; he did not know, or would not say.
Perhaps the most important question. I haven't got the figures to
hand, but it is very like the US: the top 10-20% have benefited, the
rest have stagnated or lost after inflation, taxes, new user charges
etc. The greatest losers have been beneficiaries whose drastically
lower benefits will shortly be paying for election-year tax cuts. And
that ignores increasing casualisation and insecurity of jobs.
Bill
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