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New Zealand: Country and Foreign Investment

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New Zealand Geography

New Zealand is a remote island country in the south-western Pacific, situated about 2,000 km south-east of Australia across the Tasman Sea. Its closest neighbours to the north are New Caledonia, Fiji and Tonga, with Antarctica to the south.

The country comprises two main islands – the North and South islands – and a number of small islands. New Zealand also includes the Cook Islands and Niue (self-governing but in free association); the island group of Tokelau; and the Ross Dependency (New Zealand's territorial claim in Antarctica).

The country’s total area is 268,000 sq km, a little larger than the United Kingdom. About two-thirds of the land is economically useful, the remainder being mountainous.

The climate throughout the country is mild and temperate, mainly maritime, with temperatures rarely falling below 0°C.

The capital city is Wellington, located on the North Island.

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New Zealand History, Population, Language and Culture

Due to its geographical isolation, it is one of the most recently settled major countries. James Cook did not reach New Zealand until 1769, and the British government did not claim sovereignty until 1840.

The number of European settlers increased thereafter, causing conflict with the indigenous population, the Maori. The conflict caused by European settlement and their acquisition of land from the Maori remains controversial.

In 1907, the United Kingdom granted New Zealand “dominion” status within the British Empire. Exactly when full independence was achieved from the United Kingdom is argued among historians; however, New Zealand became an independent British Commonwealth realm following the recognition of Queen Elizabeth II as head of state.

New Zealand’s population is around 4.25m, with over 85% now living in urban areas, of which the main areas are on North Island – Auckland, the main industrial complex; Hamilton; and Wellington. Christchurch, the second largest industrial area, and Dunedin are on South Island.

By the late 1850s settlers outnumbered Maori, and 70% of New Zealand's population is now of European descent. Although the overwhelming majority of immigrants were of British extraction, other Europeans came as well. The Maori are still the largest minority at almost 8%, but Asians and non-Maori Pacific islanders are also significant minority groups, especially in urban areas.

The most commonly spoken language is English, but Maori also remains an official language.

Around 53% of New Zealanders profess to be Christian, but there is no state religion.

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New Zealand Government

New Zealand is a parliamentary democracy and a British Commonwealth realm, formalising its independence in 1947.

Its Constitution consists of a series of legal documents, including certain acts of the United Kingdom and New Zealand parliaments, as well as The Constitution Act 1986, which is the principal formal charter.

The chief of state is the British Monarch, represented by the Governor-General.

The New Zealand parliament has only one chamber, the House of Representatives, with 120 members (increased to 122 in the 2008 elections). Elections are held every three years under a form of proportional representation.

The party with majority support in the House of Representatives forms the government and its leader becomes Prime Minister.

Politics has recently been a contest between the Labour Party and the National Party, with significant minor parties, include the Maori and Green Parties. The National Party has been in power since the November 2008 election, with John Key as Prime Minister.

The legal system is based on English common law, with special land legislation and land courts for the Maori.

The highest court is the Supreme Court of New Zealand, established by the Supreme Court Act 2003, which also abolished the option to appeal to the Privy Council in London. New Zealand's legal system also includes the Court of Appeal and the High Court. The judiciary are appointed by the Governor-General.

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New Zealand Economy and Currency

In the 1890s, refrigerated shipping allowed New Zealand to base its economy on the export of meat and dairy products to the United Kingdom. However, Britain's membership of the then-European Economic Community in 1973 drastically reduced access for New Zealand’s exporters to their previous largest market.

This and the oil shocks of the 1970s led to significant economic and social changes during the 1980s. Although still dependent on free trade agreements for its agricultural exports, New Zealand has diversified its farm economy and expanded its manufacturing base, achieved partly by large-scale government intervention.

Agriculture now represents only 4.5% of gross domestic product (GDP), with the economy being dominated by services at almost 70% of GDP, and manufacturing at some 26%. Tourism has become an important part of the country’s economy, with most of the country’s visitors originating from Australia, Japan, the United States, and the United Kingdom.

GDP has reached USD116.5bn (2009 estimate), and per capita GDP averages USD27,700. GDP growth was 3.2% in 2007, but the economy fell into recession and contracted for five consecutive quarters in 2008-09. Growth was flat in 2008 and was estimated to have contracted by 1.3% in 2009.

The economy pulled out of recession late in 2009, but growth has been slow. Key trade sectors remain vulnerable to weak foreign demand. Its trade is now mainly with Australia, the European Union (particularly Germany), the United States, China and Singapore.

The government is making efforts to develop New Zealand’s oil and natural gas reserves, so as to boost both the country’s exports and its tax revenues.

Its currency is the New Zealand dollar (NZD), known informally as the “kiwi dollar”.

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New Zealand Entry and Residence

Since World War II, New Zealand has generally had an annual excess of arrivals over departures. Although in the past most immigrants came from the United Kingdom and other parts of Europe, more recently they have been surpassed by Pacific islanders and Asians. T proportion of the population born overseas is 23%, one of the highest rates in the world.

New Zealand’s immigration policy is relatively open. Under a points system, prospective immigrants are ranked according to required criteria. The majority are approved under the skilled or business categories.

Generally, a person is resident for tax purposes in New Zealand if he or she is in New Zealand for more than 183 days (that do not have to be consecutive) in any 12-month period, or have an “enduring relationship” with New Zealand. With regard to an enduring relationship, a person who has a “permanent place of abode” in New Zealand (covering all social, physical, economic or personal ties and links with New Zealand) is tax resident.

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New Zealand Business Environment

New Zealand’s telecommunications industry has undergone numerous reforms. The state-run Telecom Corporation of New Zealand was privatized in 1990 and industry deregulation began in 1989. The creation of numerous telecommunication companies and the influx of foreign investments resulted in great technological improvements. Combined fixed and mobile-cellular telephone subscribership exceeds 150 per 100 persons. There are over 3m Internet users in the country.

In spite of the rugged nature of the country, most of the inhabited areas of New Zealand are readily accessible. The road system is good and, though the difficult country makes for slow journeys, the distances involved are seldom great.

The difficult terrain has greatly encouraged air travel in New Zealand; most provincial towns have airports, and all major urban centres are linked by air service. There are international air terminals at Auckland, Christchurch and Wellington.

The major ports are to be found at the main cities of Auckland and Wellington.

After the boom years from 2001, property prices fell by almost 5% in 2008. However, with low interest rates and a large government stimulus to counteract the global recession, prices began to recover in 2009. Prices in the cities are now rising fastest. The lack of a capital gains tax has also encouraged both residential and commercial property investment in New Zealand, although the government appears now to be moving towards introducing a land tax.

The government has removed controls over banking and finance, and the country’s capital market has become highly competitive. The government is looking at making the country a hub for investment fund administration in the region.

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New Zealand Investment Incentives

There are no general company tax breaks for companies investing in New Zealand; the government has believed that low corporate income tax rates, no capital gains tax and a stable, low inflation economy constitute the best incentives.

In the context of the global economic recession, an R&D tax credit applied for the 2008-09 income year, but was then repealed.

Non-tax incentives are available for investments in selected sectors, such as venture capital and film production, provided directly by the government in the form of financial support.

Anyone filming a large budget movie production in New Zealand may be eligible for assistance under the Large Budget Screen Production Grant Scheme. This scheme does not include tax incentives as such, although any grants that are made are exempt from income tax.

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