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Insights 44: 17 November 2017
Free Wgtn event: Welfare, work & wellbeing panel discussion with Dr Sue Bradford
Latest report: Analog Regulation, Digital World
Free Wgtn event: The Future Catch panel discussion with Hon. Stuart Nash

Comprehensive and progressive FDI liberalisation
Dr Oliver Hartwich | Executive Director |
Signing the Trans-Pacific Partnership, the new government passed its first test on the international stage. If only all policy issues could be solved by just adding the words ‘comprehensive and progressive’ to their names.

The TPP, or now the CPTPP (it just rolls off the tongue), is a major step for trade. It will help New Zealand exporters as it opens markets hitherto hard to reach. The CPTPP will create growth, jobs and opportunities.

But as we are celebrating this milestone in trade policy, it is worth reminding ourselves that agreements like the CPTPP are not enough. To thrive in the global economy, we must become more welcoming to international investors.

The good news about such a liberalisation of foreign direct investment (FDI) is that we can do it ourselves without international negotiations. The bad news is there is little political will for it.

We have had a lot of political theatre on foreign investors in the housing market. New Zealand was, until now, relatively open to foreign housing investment. But in general, we are now the most closed economy in the developed world for foreign direct investment. That is a concern because it cuts us off from international value chains.

In the OECD’s latest FDI Restrictiveness Index, New Zealand came out last. No other advanced economy is as challenging to navigate for international investors as New Zealand. Only some developing economies are worse than New Zealand.

Of all economies surveyed by the OECD, only the Philippines, Saudi Arabia, Myanmar, China, Indonesia and Jordan are more restrictive for FDI than New Zealand.

APEC host Vietnam is the world’s most impressive case study for what FDI liberalisation can achieve. In 1997, Vietnam had the most restrictive FDI regime of all 45 countries measured by the OECD. Today, it has one of the most liberal.

The results speak for themselves. Vietnam’s stock of inwards FDI rocketed from 39% to 56% of GDP over twenty years. This was a major reason why Vietnam more than doubled its real GDP per capita over this period.

Meanwhile, New Zealand’s FDI ratio fell from 45% to 39%, and we only increased per capita GDP by a feeble 33%.

We should not be content for other countries to beat us on attracting investment. If we do not liberalise our FDI regime, New Zealanders will miss out.

Perhaps we should have a comprehensive and progressive review of the Overseas Investment Act?

Social Investment and wellbeing under Labour
Dr Bryce Wilkinson | Senior Fellow |
New Zealanders do not have a welfare system we can be proud of.

Wellbeing research shows that involuntary unemployment is the pits for wellbeing. Think how sapping it would be to your sense of self worth to search fruitlessly for employment for a year or more. You could easily decide your community thinks you are worthless. Yet in June this year, over 67,000 New Zealanders had been on the Jobseekers Benefit for at least a year. What a waste of human potential.

There is also our intergenerational pipeline of disadvantage. The suffering of an abused and/or neglected child will affect adulthood. We have allowed a big problem to accumulate. Around 15% of children are coming to the attention of the authorities for these concerns before age 18. For Maori it is around 28%, for Asians around 4%.

On average, their outcomes are grim by age 21. They fare badly for education, convictions, and being on a benefit with a child. Their children are at relatively high risk of following the same path.

Anyone who cares about economic inequality should care about this self-refuelling pipeline of misery.

The New Zealand Initiative stands for a free, prosperous, fair and cohesive society. Our welfare system must to do a much better job for those struggling to get on the bottom rung of the ladder leading to fulfilling and meaningful lives.

We think nearly everyone agrees with this goal. The real debate is over means.

On 28 November The New Zealand Initiative will release a new research report. Its title is Welfare, Work and Wellbeing: From Benefits to Better Lives. Sue Bradford has written a constructive foreword. It engages with the debate about means. The New Zealand Initiative greatly appreciates her honest contribution.

The National-led government’s fiscal liability approach is one point of contention. Briefly it measures the likely future cost of welfare benefits to beneficiaries of working age in June each year. Those measures help assess progress in reducing benefit dependency sustainably. The opposing concern is that a fiscal focus could be at the expense of wellbeing.

Our report addresses these issues. It summarises the outgoing government’s initiatives. It assesses their strengths and weaknesses. It provides some international context and makes recommendations for future directions.

Current outcomes are shameful and unacceptable, particularly for Maori. Please read our report and enter the debate.

The New Zealand Initiative will be hosting an event to launch this report on 28 November. To register, please click here.

There be clowns here...
Richard Baker | Research Director |
On 3 November I wrote about the Manukau DHB’s refusal to entertain the idea of a Ronald McDonald house at Middlemore Hospital. On further enquiry this decision becomes even more risible.

It appears that the decision was an executive decision on the advice of health professionals, not a board decision. I cannot elicit any response or explanation from the DHB. This is disappointing from an institution that needs to be engaged with its community and stakeholders.
Secondly, contrary to media reports, there was never an offer to provide a Ronald McDonald house to Middlemore. The Ronald McDonald charity was surveying several tertiary pediatric institutions on unmet needs. Middlemore never responded to the survey questions. Its later public statement  was unprompted and unsubstantiated.
Let’s make four more points about Middlemore’s misguided decision to rule out any chance of a Ronald McDonald care centre.
First, the decision is regressive. Poor families in south Auckland and beyond will be most negatively affected. Hospitalised children, fearful and anxious, will be separated from hard-up parents at a time of maximum need. These are poor children, many in poverty.
Secondly, the decision is selective or at least amnesiac. About ten years  ago the charity funded two hospital care rooms at Middlemore. These are still in operation. 
Also, the charity funded two Ronald McDonald Care Mobiles, large specially equipped trucks. These provide mobile dental care in South Auckland and Northland. They continue to operate with an additional annual grant from the charity. I await the announcement they are being mothballed, the service discontinued and the grants refunded because of a clown painted above the front bumper.
Thirdly, the decision is an act of fiscal nonsense. Care facilities cost millions of dollars. Perhaps the DHB can borrow this at zero interest and use its unsullied moral righteousness as collateral. But I doubt it.
Finally, since when does a marketing opinion from health lobbyists (including the flat-earthers who compare Ronald McDonald to Pablo Escobar) persuade a responsible authority to shut down highly valued charitable services. Ronald McDonald Houses do not cause detrimental health effects. They do not cause people to rush out and buy a Big Mac combo.
What they do, is keep parents and children together in times of greatest need. There may be clowns in this story, but they don’t have red noses and floppy red shoes.
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