New Zealand is extraordinarily lucky. It suffers only low levels of corruption. But are we too complacent? Consider what corruption is. If you live in a corrupt country it will likely have a suspect police force, it will almost certainly have a judicial system that is not independent of the government, and it will have politicians who are not properly constrained by a constitution, written or unwritten. The politicians will act with few constraints. Often they see political office as a way to garner financial wealth for themselves. If anything inappropriate occurs in that corrupt country it is almost certainly the case that people in the know will be reluctant to talk about it. They fear the corrupt police and the powerful politicians and prefer not to say anything about the inappropriate activity, lest they suffer retribution in some form.
If someone lives in a corrupt country they will naturally consider how best to protect themself. If something goes wrong, there is no point in going to the police, no point in suing to protect your rights, no point in finding some law to protect your position. So how do individuals respond? They seek to ingratiate themselves with people in power (usually by paying them money) and hope the powerful person will protect them if and when this is ever needed.
That is what corruption is in its simplest form – buying favours and future protection from powerful people because there is no other form of effective protection available in that society.
Yes, corruption can be more direct and insidious: having to pay money to such powerful people in order to be granted a necessary licence to carry on business. Corruption such as that is better described as bribery but it is not dissimilar to protection money. If I don’t pay the money I know my application for a licence will be turned down and there is no independent legal system to protect me and give me the licence. So I have no choice, I have to work through the powerful people in society to get the approval I need – and I have to pay their price.
The sad truth about corruption is that a huge proportion of the world’s population know no other system. Their societies have been corrupt for the whole of their lifetimes. They cannot conceive of their institutions changing to throw off their corruption, so they live with corruption as part of life. Corruption such as I describe is prevalent in much of Asia; in the Pacific; and in southern and eastern Europe.
New Zealand is not like that, but we should not be complacent- especially having regard to changes we have made in the way we select immigrants.
NZ’S POINTS SYSTEM OF IMMIGRATION
Until the 1970s, New Zealand drew immigrants mainly from the UK and to a lesser extent from Europe and North America: countries with generally low levels of corruption. If those immigrants struck a problem in New Zealand they went to the police, they sued in court or they attempted to resolve their problem in similar ways to born and bred New Zealanders.
Then the country moved to a system of selecting immigrants by awarding points for skills or funds they brought to New Zealand, and other objective factors. Get enough points and you obtained entry. The country you grew up in was not one of the factors that counted towards the points you scored.
With the adoption of the points system New Zealand began drawing immigrants from all over the world, including countries where corruption is endemic. The 2018 Census of the New Zealand’s population included 707,598 Asians (15.05% of the population) and significant numbers of people from the Pacific, and from southern and eastern Europe. There are now a significant number of New Zealanders who have grown up through their formative years knowing only corruption as a normal part of life.
It is probable these new citizens, will bring their ingrained views of corruption with them. That is not to criticise them, it is inevitable. Few people are sufficiently adaptable that they are able to overcome the influence of their upbringing entirely. Italian immigrants took the Mafia with them to USA. Immigrants to NZ who have grown up in countries where tax evasion is widespread, are likely to follow similar approaches to paying tax when they arrive in NZ. And people growing up knowing nothing but a corrupt society, are likely to continue to hold those same views as to how you behave, when they move to live in NZ society.
WHERE IMMIGRATION MEETS POLITICS
Individual immigration applications are generally decided by designated departmental officials applying objective and consistent criteria. But the ultimate decision in particular cases can be made by the Minister of Immigration, an elected politician of the governing party.
All NZ political parties rely on private donations to help fund their election campaigns. When prospective immigrants are bringing personal wealth into the country and need to appeal to the Minister of Immigration for any reason the potential for corruption is obvious. Donations to parties or their election campaign funds are always welcome. New Zealand news media have reported many well known cases that raised serious concern. Can we be totally confident that NZ citizenship or residency has always been granted purely on objective grounds, free of financial factors? I suggest not.
POLITICAL DONATIONS TO TRY AND BUY INFLUENCE
This is the area which particularly concerns me in this chapter. My concern is certainly not limited to political donations from recent immigrants. But lets start with these.
A very wealthy German internet entrepreneur, Kim Dotcom, was facing copyright issues in the US when he was granted a permit to come and live in New Zealand. Soon after he arrived he donated $50,000 towards a mayoral election campaign.
Chinese associated with Zhang Yikun and the Chao Shan association made donations to political parties of $100,000 in 2017 and $100,000 in 2018. Charges have been laid in relation to this second donation, which was allegedly split into amounts less than $15,000 and not returned correctly.
Interests associated with Zhang Yikun also donated $2.1m after the Christchurch mosque attack and to another mayoral campaign. Online media has pictures of Zhang Yikun taken with a number of senior New Zealand politicians. He was awarded the NZ Order of Merit in 2018.
Oravida, a company which (according to its website) has headquarters in Shanghai, is an exporter to China of New Zealand products. The business is reported to have made a political donation of $65,000.
In 2012 Donghua Liu, a substantial political donor (via a company) was granted New Zealand citizenship against the advice of officials and allegedly after lobbying from a cabinet minister. In 2013, Donghua Liu was charged with domestic violence. A cabinet minister rang a senior police officer and discussed the incident. The minister later resigned from Cabinet over the call.
Then there are New Zealanders who have grown up in this country, who also can make large political donations, with or without an expectation of political favours in return. A number of these large political donations can come from corporates and vested interests. I am not suggesting making large political donations in the hope of future favours, will actually work in New Zealand. In many cases, it won’t. But can I say with confidence large political donations will NEVER buy you political favours in New Zealand? No I cannot. And with a more diverse population now, a good number of whom have grown up with corruption as a way of life, the testing of the boundaries as to when political favours can be bought, is likely to become more challenging.
TIME TO STRENGTHEN OUR CORRUPTION LAWS
Our high immigration numbers in recent years, drawn from right around the world, and especially from Asia, is occasion to review the settings on our laws regulating political donations. There also has to be concern whether vested interests within New Zealand, unrelated to immigration, can occasionally buy political influence. This potential for buying influence is especially important if the Covid economic aftermath creates circumstances which could drive major change in the structure of the economy. Many vested interests can be expected to resist change. If they can use political donations as a way to increase their political leverage, they will assuredly do so. If we are setting the country up for major change, we need to try to minimise the opportunities for change to be derailed. So it is time for the law on political donations in this country to be significantly revised.
Politicians have intentionally kept the rules around disclosure of political donations murky. National is currently in the spotlight over a donation in the Botany electorate. NZ First is being questioned about how it handled and declared large donations. In December, 2019, an amendment to the Electoral Act was passed under urgency (which avoided a select committee review and prevented the public having a say). Foreign donations in excess of $50 were prohibited. But the definition of an ‘Overseas Person’ in s.207 of the amendment does not include a company incorporated in New Zealand. So a foreign national need only form a New Zealand company and funnel their donation through it, to circumvent the new prohibition.
There is an elaborate and much wider definition of ‘Overseas Person’ in s.7 of the Overseas Investment Act (the legislation monitoring foreign investment into New Zealand). It would have been very easy to adopt that definition, and comprehensively identify prohibited foreign donors, when amending the Electoral Act. The politicians did not do so. Accidental oversight? Or a loophole left by politicians through which future donations from foreigners can be funnelled?
POLITICAL SELF REGULATION NEEDS TO CHANGE
Should we be happy that politicians can self-regulate political donations? Is New Zealand taking adequate measures to avoid the ‘buying of influence’? Fifty years ago it was the norm for professions to self-regulate. If there was a problem involving a doctor, the Medical Council dealt with it; if the problem involved the police, the police dealt with it. Attitudes have now changed. Self-regulation is no longer considered sufficiently robust. The problems politicians have in regulating their campaign finance highlights the weaknesses inherent in self-regulation.
WHAT SHOULD BE DONE ABOUT CORRUPTION?
- Treat it more seriously. Pass some special anti-corruption legislation, which includes a number of definitions of dealings that are prohibited.
- Set up an Anti-Corruption Commission, appointed independently of politicians, chaired by a High Court Judge and charged with enforcing the new legislation. Give it investigation staff and enforcement powers so they can prosecute if appropriate. There is no reason to limit its jurisdiction to political corruption. Whether its Auckland Council roading contracts, AA clerks issuing driving licences in return for money or Immigration officers giving approvals for their extended family, the new body should have jurisdiction over all.
- The effect of a new dedicated body would be two-fold. First, it would telegraph that the country is attaching more importance to anti-corruption measures than in the past (which in itself is important). Secondly, it would create a body with a single focus, which would hopefully be more effective than leaving corruption issues in the hands of the general police.
- Give the Corruption Commission power to call for amending legislation to cover any new areas of potential corruption it sees developing (such as employing a politician’s family member to curry favour with the politician. These are difficult situations to regulate and it is likely the Corruption Commission would need flexibility to address indirect ways of buying influence).
- Limit political donations to permit them to be made only by individuals – no donations from companies, trusts or other entities. Put a relatively low limit (say $10,000 per person per annum) on the amount any person can give.
- Make it illegal for anybody to give donations directly to a candidate, or to a party, or to a foundation associated with a political party. (Foundations have been used by parties to try and avoid disclosing the names of their donors.) Instead require all political donations in excess of $50 to be paid to the Corruption Commission. When making a donation through the commission, the donor would nominate the party or candidate they want it to go to. Each month the commission could then aggregate the donations it received for each candidate and each party and pay them on – without disclosing who had made them.
- Additional steps could even be taken by the commission (such as breaking up a large donation for a single candidate and paying it on over several instalments) to screen the identity and size of donations. A method such as this, involving paying through an intermediary, would hopefully ensure politicians would never be able to find out definitively who had or had not donated to their campaign or party.
- And donors making donations for a less than purely altruistic motive would always have in the backs of their minds the fact that the Corruption Commission had full records of what they had paid.
- The Corruption Commission should regularly audit the records of political parties and political campaigns to ensure only funds funnelled through the commission, and direct government assistance, were being used.
Yes, this would significantly curtail political donations. The level of state funding of politicians and parties would need to be increased. The object of these proposals is not to reduce the amount of funding political parties have available for their campaigns and operations. The object rather is to ensure the funding politicians need for their activities does not come with strings attached, and that vested interests cannot buy influence and protect their entrenched positions.
Yes, this system would create more red tape for politicians and their parties (not that the productive sector would lose any sleep to see the burden going the other way for a change). The inconvenience would surely be a small price to pay for a new Corruption Commission that could genuinely help New Zealand retain its reputation as a country of little corruption, and even reduce it further.
The overriding benefit from these changes would be that New Zealand would be seen to take a firm stand against corruption. It would emphasise to our new immigrants they need to change the behaviour they grew up with and considered normal in their home countries, as they transition to a new life in NZ. Most importantly, it would help limit the power of vested interests, to oppose change in the New Zealand economy and society, such as I propose in this book.
Covid – Catalyst for Change 