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Allan Barber wonders how rural exports could grow to meet official targets if Labour backs the Greens anti-foreigner investment policies. Your view?

Posted in Rural News

By Allan Barber

The Greens’ private members bill restricting, in other words banning, all sales of farm land of more than 5 hectares to an overseas investor was defeated last week by two votes.

Under a Labour/Green coalition, ably assisted by NZ First and the Maori Party, the terrifying thought is this piece of xenophobic ignorance would be passed into law.

There’s a more than remote possibility of a change of Government in 2014, so this, or some variation of it, could become Government policy and would easily gain a majority in the house.

Back in March David Shearer put up his first private member’s bill on the same issue which sought to ensure substantial extra jobs and exports from foreign investment. There were some embarrassing omissions, but the intent was clear, if not as draconian as Russel Norman’s bill.

It’s the nature of politics for opposition parties to vote against the government of the day, but it is a concern to see Labour tucking in behind the Greens, when the party’s original position was nothing like as jingoistic.

There’s a world of difference between demanding added value and jobs from an investment, as in Shearer’s private member’s bill, and a total ban on foreign ownership.

I sincerely hope Labour as presumably the lead party in any future coalition would dictate the policy and not allow itself to be wagged by the Greens’ tail.

The progress report Building Export Growth released last week says nothing significantly different from 2007’s Export Year issued by the two responsible Ministers at that time, Phil Goff and Pete Hodgson. Essentially both state a goal of increasing New Zealand’s exports to 40% of GDP from 30% where it has obstinately sat for 30 years.

Labour’s new position in support of the Greens’ xenophobic attempt suggests the party has moved light years away from its position of five years ago.

Without overseas investment and shackled by our high debt level, New Zealand cannot possibly aspire to the optimistic export goals of successive Governments from both sides of the political divide.

Federated Farmers must of necessity be careful when taking a policy stand because it represents, and depends on subscriptions from, farmers who will clearly hold differing views on the benefits of overseas investment in land and agricultural assets. However Bruce Wills tells me Feds are generally in favour of foreign investment because of our high level of indebtedness, but with some caution with respect to acquisition of large holdings by foreign corporates.

In fact he says our overseas investment criteria, toughened recently to satisfy Justice Miller’s Court of Appeal ruling on the Crafar farms deal, are the fifth strictest in the OECD.

He compares New Zealand’s position with that of Australia which has a more open overseas investment policy, while Australian farmers only have a third of the debt.

New Zealand farms can carry a higher proportion of debt than their neighbours across the Tasman because our benign climate provides a bigger safety margin, although even this is less certain given the apparent increase in frequency of flooding and earthquake activity.

Interestingly the question of foreign investment conditions is now coming under closer scrutiny in Australia, where the Liberal and National Coalition have put out a policy discussion paper ‘Foreign Investment in Agricultural Land and Agribusiness.’ This paper states upfront the Coalition’s support for foreign investment in Australian assets and its belief ‘heavy-handed restrictions on inward foreign investment could negatively affect debt and equity markets or potentially cause restrictions on Australia’s outward foreign investments.’ However the paper notes the sale of Australian land and agribusinesses are treated no differently from any other business at present.

The Australian opposition takes the view there should be some tightening up of the rules applying to the sale of land and agribusiness assets, but this position is still diametrically different from the one proposed by the Greens and, judging by the recent vote, Labour as well.

Federated Farmers’ Wills points to the likely $1 billion cost impost on our agricultural sector if Labour and the Greens get the chance to implement some of their key policies, specifically ETS and capital gains, not to mention preventing foreign investors from buying farm land. This would have the effect of reducing profits and as a result increasing debt levels in the agricultural sector.

In 2011 dairy, meat and wool, and horticulture accounted for 43% of export goods or 34% of goods and services. This suggests New Zealand can’t afford any reduction in their relative contribution to the economy, whether or not any progress is made towards the Government’s target.

Changes of the kind presented to Parliament last week would present a massive head wind.

--------------------------------------------

Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he runs a boutique B&B with his wife. You can contact him by email at allan@barberstrategic.co.nz or read his blog here »

This article first appeared in Farmers Weekly, and is used here with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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53 Comments

This is a foolish

This is a foolish comment.
 
It's nothing to do with politics (just as I keep pointing out here that it's nothing to do with emotion).
 
Why don't folk like Barber address the big picture? Firstly by defining whether we're talking of volume, or wealth (he mixes them). We will no doubt export more - there are 7 unsustainable billion folk on a planet which can support 1-2 billion long-term, and we are relative unpopulated.
 
The problem comes when you demand to be paid. Virtual money (and I 'earn' it myself)  is about to vanish. The only wealth we will recognise is that which is underwriteable. By goods/services actually being produced/offered.
 
There's a cap to that - they take work, therefore need energy, and the only straw in the paddock worth clutching at is efficiencies.
 
Food is an essential, so maybe the payment will go stronger/longer in that field () but what will the payment buy?
 
Beyond peak oil (we crossed over last year, back to coal being our major global energy-source; a backward step) we are looking at peak wealth, so 'growing exports to get wealthier' is a waste of effort. As is dodging the real cost of your pollution/impact (dodging the ETS is immature, no more no less. If you're responsible, then cop it).
 
But my guess is that BigAg is in trouble, and that desperate Govts will triage/ration to ensure the mob gets fed. Along with Convention Centres and Stadiums (panem et circenses anyone?)
 
Time we grew up, beyond the level of denial and lobbying.
 
 

Probably not an idiot. Just

Probably not an idiot. Just clouded since birth in style and thought. There are a lot like that around - I'd put Bill English in the same category.
 
But you're right about the need for these folk to move on. Leadership in stable times, becomes advocacy for the status-quo. Not surprising, they feel they're 'winning' in the current paradigm - why change it, that's just rolling the dice. So every time change is either needed, or overtakes society anyway, the current leadership can be guaranteed to be inappropriate.
 
Few ever make the morph.

Bit light here Allan - for a

Bit light here Allan - for a start the Aussies have a capital gains tax, so indebtness in Oz is directly related to the ability of their land to sustain income, rather than gaming on potential capital gains.  And voices I'm hearing from the land of Oz are grumbling at the huge expanses of land being sucked up by overseas domiciled buyers...
As for overseas investment in our land, I'll support anything which keeps our assets in NZ'ers hands!  I'd rather see Joe Bloggs from down the road growing wealthy farming NZ land than anyone else. Of course the pressure from wealthy overseas investors doesn't help affordability here in NZ...
 

Waiting Waiting Waiting

Waiting
Waiting
Waiting  
ah!
Without overseas investment and shackled by our high debt level, New Zealand cannot possibly aspire to the optimistic export goals of successive Governments from both sides of the political divide.
 
..
.
so the old man got sucked into a Nigerian scam and now we have to sell the farm?

I think I'm missing something

I think I'm missing something here. Can someone please explain to me how foreigners buying farms will increase rural exports?
If rural exports didn't increase significantly in the last decade with all that money poured into the sector from banks, then how is it going to do it with foreign purchasers? All I can see here is that in the last decade, farm values were removed from their fundamentals of how much can the land produce, to being based on people armed with debt out-bidding each other. Now that the last ones on the ponzi scheme are starting to go broke (because they paid too much for what the farms can actually produce), we are starting to look for another way out. Further debt is out of the question, so we're looking to foreigners instead of taking the hit, and letting the industry become sustainable again. Oh and having a sense of community and letting the next generation have a go, just like the previous generation did for the current one.

It's not just about buying

It's not just about buying farmland, but about unnecessarily restricting overseas ownership of New Zealand assets. If we can't afford to own or buy them because of our tendency to put our money (borrowed normally) into non productive assets, we shouldn't try to restrict ownership by others who are better able to invest.
 

So you are happy with a

So you are happy with a foreign owned corporate model for Rural New Zealand. Thats going to great for rural communities and young farmers. Great for the rest of the country when profits get repatriated, what the hell they may as well bring their own labor with them.
 I dont consider myself a Xenophope just trying to look forward a bit.

Andrewj - couldn't have said

Andrewj - couldn't have said it better. People forget about the repatriation of profits side of the coin. Also the growing number of government taxation agreements between countries where the business can select a country to pay their taxation in.  A corporate can set up under a company structure in one of the countries NZ has a tax agreement arrangement with and then that country has an agreement with their country they can get around taxation as well.
No benefit in profits or taxation! World population increases requiring more food production and we are selling off the silver of private enterprise. Seems like some people can't determine between a private assets value to the countries economy and a public liability.
 
I'm certainly not a xenophobe - just being realistic.
 
 
 
 

Tax,  yet you try and do that

Tax,  yet you try and do that with your UK pension say and the IRD slams you.....great....
If its any comfort I expect that such things will pass with the passing of globalisation....it will be kiwi's on the land, owning it and producing off it.
regards
 

steven, please, please don't

steven, please, please don't tell me you get a UK pension too

Aha ha ha de haaaaaaaaaaaa !

Aha ha ha de haaaaaaaaaaaa ! ...... good one . I betcha he does ......
 
( note to the Count : " Be Kind to steven Day " is over ........ today I can join the rest of the gang @ interest.co.nz and let rip , OK ! )

but why can foreigners do so

but why can foreigners do so much better?
I mean they can afford to pay more, well Ok, but I cant see how they can afford not to make a decent rate of return....
regards

to answer that question you

to answer that question you would need to unravel the inter-relationships (using china merely as an example) between companies, individuals, provincial local bodies, and sovereign funds, and government state backing, then once you knew that you could begin to hazard a guess, but I would suggest (again in the case of china) immediate profits are not the main focus, but long term goals, of learning, acquiring intellectual property, know-how, security of food supply, testing the waters, in which case current price and or profits are not even a remote consideration, it's a case of whatever it takes. The fact that the prices they pay interfere with and upset the local economy, so what they might ask.

Try listening to BBC Newshour

Try listening to BBC Newshour with Julian Marshall
 
http://www.bbc.co.uk/podcasts/series/newshour
The future of space travel podcast Sunday 26 Aug 2012
at the 40 minutes 30 seconds mark through to 45 minutes
I think this is the link to the actual podcast
http://downloads.bbc.co.uk/podcasts/worldservice/newshour/newshour_20120826-2152a.mp3
 

Okay so I haven't missed

Okay so I haven't missed anything? There is no secret way that foreign ownership will increase rural exports?
To put your statement the other way around, if we have indebted ourselves too much on our productive assets (farms) to spend on non-productive assets (brand new holdens), then we shouldn't just sell up to foreigners who have the capital to repay the bank debt that the farmer has racked up.
ps I would hardly call the debt-fuelled property boom normal borrowing. I challenge you to find a farmer that is currently being forced to sell the farm, to explain how when he originally made the purchase, he valued his farm as a going concern based on the potential production of the farm, rather than just based on what the coastal section next door was selling for.
 

Yes, what you missed was that

Yes, what you missed was that you called it 'ownership' and Barber called it 'investment'.
 
He's not alone in the spin, but it infers that we here will somehow get 'richer' as a result of the 'investment'.
 
Nothing could be further from the truth. It's too late when the pigs are walking on two legs, and it was too late for Ken Sarowiri, the only difference being that his country was further down the 'overseas influence via crooked politics' than ours is.

That's because Mr Barber

That's because Mr Barber knows that although ownership is an investment not all investment is ownership.

New Zealand farms can carry a

New Zealand farms can carry a higher proportion of debt than their neighbours across the Tasman because our benign climate provides a bigger safety margin, although even this is less certain given the apparent increase in frequency of flooding and earthquake activity.
 
No.
AB, not an AB performance

You and your 10 year

You and your 10 year horizons
 
What if their horizons are 30 years plus.

What ? .....  30 years to win

What ? .....  30 years to win the Webb-Ellis trophy , again  ...... fecking hell , Henry !

Ralph, Perhaps then Mr Barber

Ralph,
Perhaps then Mr Barber would like to teach us all about what sort of investment the Labour Party and the Greens are against. Because this article seems to be talking specifically about  their bill to restrict all sales of farm land bigger than 5ha to overseas investors.
Presumably once an investor purchases a piece of land in NZ, that investor then owns the land, hence the issue being most definitely about ownership.
Again - what am I missing? Other than the continued use of the word xenophobia to sensationalise the story and get people on your side for the wrong reasons.

I heard a blog by Steve Keen

I heard a blog by Steve Keen in which he was discussing foreign investment in Australia (Australians are concerned with Chinese land acquisitions, so by Allans definition xenophobic). He didn't discount it outright, but differentiated between smart investment, in which the country accepting the investment ensures it gains significantly from it (ie generate domestic capital by becoming a capitalist partner as opposed to serf), such as what China did when USA firms invested during the eighties to take advantage of cheap labour and lax environmental standards (Foxcon), unlike Australia with GM only gaining low paid wage jobs and a cloned car (sound familiar)
 
What are we going to get out of foreign investment in land ownership that we aren't going to get from domestic? What skills and value adding to our economy does it achieve? There's smart investment and dumb investment Allan, no prizes for guessing what you represent.

For me it doesnt add up. It

For me it doesnt add up. It seems foreign investors have more money to spend which I would assume means they expect a bigger return. Say 5% on more invested means more back, its still 5%.....Dunno are kiwis greedy and want un-reasonable rate of returns? put less in but get as much out as foreign investors?  or are kiwi's better investors and dont take on such risks....Do foreigners think and expect to get effective monopiles and this charge NZers unfair rent?
 
I find it hard to believe foreigners are stupid (by and large) if nothing else you dont keep investing, if you are bad at it, you lose and bye bye.
 
So why can foreign investors do better than us?
regards

Yet the return on the money

Yet the return on the money doesnt strike me as big.....
regards

I have no problem whatsoever

I have no problem whatsoever with selling overpriced Kiwi assets to foreigners , whether it's Auckland houses , Southland dairy farms , or Telecom's Yellow-Pages .....
 
..... more the fool them for paying over the top !
 
In 5 years , perhaps 10 ..... we'll get it all back for pennies in the dollar , to what they paid .....
 
(....... and I think some comments to / about  the author - Allan Barber -  were bordering on personal abuse .... is our moderator condoning  this ? ... )

In a way I can see your

In a way I can see your point; take a low margin Crafer farm for example, a corporate owner (Pengxin) and a corporate operator (Landcorp), and associated ticket clippers. How is this going to work? What value will be generated and how will it be divided up?
It would be nice if Allan Barber could come up with some suggestion other than sell to foreigners, I mean it's only foreign banks and speculators that are going to benefit. For a man in his position abuse warrented.

I can but assume that they

I can but assume that they see the big gains as capital gains, or NZ as a place of relative safety....there must be some calculation going on.
regards

If you sell land to

If you sell land to foriegners you are keeping the price high. That is the problem. It wouldn't matter if nations with similar circumstances trade land but not by nations like China with a massive population and agriculture threatend by melting glaciers. Alan Barber is trying to argue that (somehow) all boats rise in these sort of deals, that is (presumably) the basis of his "xenophobic ignorance" claim. 
 
The Harcourts agent at the Shanghai Symposium selling $800million of "products" ( on Radio NZ) argues:
 
“We’re all New Zealanders, we all love the country so I think it’s healthy for us to have the debate and make the right decisions for our country…. but hey!…. young people coming through see it as “our planet” rather than “our country”
Harcourts Showcase more than 800 million of property in Shanghai 
his line is nations don't matter. That is also the line taken by some on the left:
 
“Both in New Zealand and globally, the best of the leftwing tradition has always rejected small-minded nationalism, xenophobia and racism. In fact, leftists of an internationalist tradition have always favoured globalization and getting rid of national borders and barriers to migration. Progressive advocates of globalization of course do not defend a handful of rich imperialist countries, including New Zealand, dominating the world’s economy, but instead advocate an integrated and radically egalitarian world economy where production is based on social need and not on private profit. ”
http://liberation.typepad.com/liberation/2012/02/guest-blog-post-john-moore-leftwing-xenophobia-in-new-zealand.html

Ah yes , but the forestry is

Ah yes , but the forestry is owned by Americans ..... they have a sustainable and growing economic system ....
 
...... the PRC is heading towards the China Wall , big time ....... the autocratic top-down central planning approach will come unstuck for them , eventually ......they can only copy & mass produce off cheap labour for so long .....
 
And we'll get the farm back .... if will want it ...

Ah yes , but the forestry is

Ah yes , but the forestry is owned by Americans ..... they have a sustainable and growing economic system ....
 
are you serious about the sustainable part?? What i see here is two different paradigms, which might explain the difference in views between yourself, Alan Barber and others?

Yes GBH, they'll just walk

Yes GBH, they'll just walk away from the farm, or more likely we will have so much domestic capital that we'll pay what it takes....just need a little breathing space for now, and have faith in yours and Allans ability.

christov would say he's the

christov would say he's the man with the microphone.

@GBH Yeah - just like

@GBH
Yeah - just like KiwiRail -sold it at pennies in the dollar and bought it back at dollars in the dollar.
 
And the latest shambles - NZ Post buys out Gareth Morgan's GMI Kiwisaver provider.
 
NZ Post's accounts show a carrying value of goodwill assigned to GMI of NZ$44 million

 I was referring to private

 I was referring to private transactions .....
 
....... there's no accounting for the lunacy of politicians , such as Michael Cullen calling Kiwi-Rail a " premium asset " ; or Phil Goff buying 10 times as many light armourered vehicles as the NZ Army wanted , and not checking first if that particular model fitted into a Hercules for air transport ( they don't ! ) .....

Military purchasing is a mess

Military purchasing is a mess in many countries around the world. I would not have put all of the blame for the LAVs on Phils shoulders myself. My preference anyway was for Bongo Vans and Nissan Navaras. Blend in with the locals as much as possible. No fixed patrols, convoys etc.
 

Prices have moved rapidly. In

Prices have moved rapidly. In onehunga it’s tough to find a standalone place under $500k. This is one of the few. http://www.realestate.co.nz/1844968
The thing is that suburbs like this are trendy and considering aucklands attraction as an international city still good value. Olive trees, fruit trees, a harbor view and a safe quiet area… Most people in first world countries would say that’s a good deal.. Prices aren’t bad when you put our lifestyle into the mix.

Please stop. Auckland is at

Please stop. Auckland is at the end of the line internationally, it is miles away from anywhere. And anyway,you are trying to measure the value of one thing using something that has no fixed value itself. It is simply irrational to do so. Our dollars today are not the dollars they were. Maybe our houses have not moved in value at all, it could just be that the value of our money has dropped. You could use a measure of multiples of income to purchase- and on that basis then our houses have gone up substantially in price perhaps cuased by a perfect storm of banking, land holder and local authority interests. But please note that many people in first world countries are financially under water so 500k may not be such a good bet for them afterall.

One thing is for sure, Alan

One thing is for sure, Alan Barbers "xenophobic ignorance" claim is a gross oversimplification.
AB: It's not just about buying farmland, but about unnecessarily restricting overseas ownership of New Zealand assets.
AB: The Greens’ private members bill restricting, in other words banning, all sales of farm land of more than 5 hectares to an overseas investor was defeated last week by two votes.
Under a Labour/Green coalition, ably assisted by NZ First and the Maori Party, the terrifying thought is this piece of xenophobic ignorance would be passed into law.
 
so subject = farmland.
...
As for the bad people who splashed out with too much debt and deserve to be punished, debt in the housing market was blamed on government policies by the independant and expert Savings Working Group. Is the government objective or is it swayed by groups with money (eg the Property Council?).
 
SWG Report:
The Government’s role

Clearly, there are serious questions to be asked about New Zealand’s economic policy and how we got into this mess. Why was it not better designed and managed, and more focussed, coordinated and strategic? Did the electorate simply get what it voted for, without realising what was really happening, or have New Zealanders not been well served over the years?

Underlining the current difficult situation, the government is spending at an unsustainable level and running large deficits (the opposite of saving). As a result, it is borrowing a hefty $300 million a week. It needs to return the Budget to a surplus of no less than 2% of GDP as soon as possible.

Looking ahead over the next 20 years or so, the government will face increasing costs from the effects of an ageing population. If the government is to keep its borrowing within a sustainable level (as it must) over this period, its options are to:  substantially increase tax revenue, reduce government spending, or increase government sector productivity and performance. The first two options are clearly unpalatable. However, modelling shows that if the government can lift its performance and increase productivity by 2% a year for five years and 1% thereafter, there would be no need to raise taxes or cut government services. The SWG strongly recommends this. 

On other government policy issues, SWG recommendations include:

 

- A much more strategic and integrated approach to policy generally.

 

- Serious consideration of the impact of the level and variability of immigration on national saving, and the impact that this might have on the living standards of New Zealanders. There are indications that our high immigration rate has pushed up government spending, house prices and business borrowing. 

 

- Improving data on household and business saving.

http://www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup/pdfs/swg-report-jan11.pdf

This and the previous governments are influenced/swayed I wonder??

Hop Sing not happy with some

Hop Sing not happy with some of these comments so i will not be leaving the confines of the Ponderosa any time soon.
me happy just to keep cooking for Ben,Hoss,Adam and Little Joe.
 

international trade without

international trade without leaving the house
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1083...
We knew there was a good trade in used tins, but this is taking it to a whole new level.
 
Kiwi exporters are fuming at Chinese infant formula makers falsely claiming their product is made in New Zealand.
Around 20 Chinese manufacturers blatantly tried to pass off their infant formula as New Zealand-made at a major Mother and Baby expo in Shanghai recently.
Companies promoted infant formula as "Made in New Zealand" and even included the Trade and Enterprise fern logo which is a registered trademark in China. One used a picture of the Prime Minister - comically mispelling his name as "Jhon Key" - next to a quote "I Love abid".
Another company photo-shopped a Shanghai factory on to a picture of Canterbury countryside.
 

Allan Barber is a commentator

Allan Barber is a commentator on agribusiness, especially the meat industry
...............
So what does the meat industry think of the "failed Vesty model" given Allan Barbers support for the sale of the Crafar Farms to a Chinese conglomerate with a chain of supermarkets?
 

All in all this post is a

All in all this post is a waste of time as it fails to clarify the real issues particularily just what economic principles he is refferring to when he talks of "economic ignorance" and how those principles affect players within NZ.

  Back to think about the

 
Back to think about the impacts of overseas investment. It is simply, like all CBAs, about two curves. One curve says, here’s what could happen over time if we do nothing. The other curve says, here’s what could happen if we allow the investment. What you want to see is Curve 2 higher than Curve 1.
Then, the complexity is thinking about the economy and all the things that affect the paths of the curves.

  • Does the investment affect the resources available? If the investor is will to increase the amount of capital on-farm, then there are more resources. This can lead to more production or higher wages.
  • Does the investment create market opportunities? New Zealand has difficulties creating the necessary foreign linkages to promote exports. We are small and far away; investing in building networks takes resources. If an investor brings the market to us, we don’t have to go to it.
  • Does it affect technology? An investor may bring to New Zealand new production technology that allows it to produce more. In the case of dairy, this may be locally true — a particular farm may be less productive — but is unlikely to be generally true. Because the country has leading technology available, there is less scope for technological spillover.

The details start to get fiddly and uncertain. Crystal balls, rabbits, and hats might be employed. But the essence of the case is actually really simple. The court has asked the OIO to make it.
http://gropingtobethlehem.wordpress.com/2012/02/16/rethinking-the-crafar-farms/
That is within the context of the OIO but there is a wider context the: they work for you context politicians are supposed to honour  ie looking after those who want to get onto a farm (NZrs not Harcourts Shanghai clients).