Chinese investor challenges NZ to stop treating foreign investors as 'privileged'; Calls for OIO to be revamped; Experts question whether Govt has public support to make changes

Chinese investor challenges NZ to stop treating foreign investors as 'privileged'; Calls for OIO to be revamped; Experts question whether Govt has public support to make changes

By Jenée Tibshraeny

The ethos underpinning the Overseas Investment Act (OIA) is being challenged by the Chinese firm whose bid to buy the Lochinver sheep, beef and dairy support station was denied by the Government in September.

Pengxin International director, Terry Lee, voiced his frustration over the way New Zealand treated foreign investors as ‘privileged’, rather than as being the bearers of new opportunities, at the China Business Summit in Auckland yesterday.

He said this mentality prevented investment from taking place, so called for greater “clarity, consistency and speed” in the way authorities considered applications from foreign investors.

It took 14 months for authorities to decide to reject Shanghai Pengxin's Pure 100 Farm Ltd bid to acquire the Lochinver station for $88 million.

Government ministers ruled the benefits to New Zealand weren't substantial and identifiable, despite the Overseas Investment Office (OIO) approving the sale of the 13,800 ha farm near Taupo.

Pure 100 Farm Ltd has since sought a judicial review on the decision.

While it was last week announced that locally owned Rimanui Farms bought the Lochinver Station, Lee said, “Before the settlement, there is still an opportunity for Pengxin, and I think we may have a potential back-up offer for that property”.

He told the audience at the summit, the judicial review was intended to clarify the way the OIA should be implemented, benefiting all investors, not just Pengxin.

Lee criticised the analysis done for the OIO on the counter-factual bidder, pointing out no other New Zealand bidder had emerged with dairy conversion plans, and the analysis had used out of date milk price figures.

With Pengxin already having been through three court cases to acquire the Crafar Farms, and the Lochinver application breaking the record for taking the longest to process, Lee said it appeared authorities applied special conditions to Pengxin.

He said it had to be made clear how long applications would take to be processed, and the OIO’s resources needed to be beefed up.

Lee said Australia was ahead of New Zealand in this regard, welcoming foreign investors, rather than treating them as privileged.  

He said its authorities have 30 days to consider applications, with difficult applications getting an extra three months. The OIO in New Zealand however has a 70 day target, but no deadline put on complex cases.

Furthermore, in Australia foreign investors can lodge applications to authorities before signing a sales and purchase agreement. They also only have to discuss their broad intentions for a property.

In New Zealand however, they have to go through the OIO process after signing a sales and purchase agreement and developing a detailed business plan.

How viable is an OIA law change?

A partner at DLA Piper NZ and the chair of the NZ China Trade Association Martin Thomson told those at the summit:

“The Govt is aware of the need to speed up the process – the cost of uncertainty in the business environment is very expensive, particularly in an environment where we’re competing for capital from around the world.

“But I think we also face the reality… the prospect of change in the legislation is going to be difficult with the absence of political support for that.

“There is scope for greater awareness in the community about the benefits of foreign investment. Until that is realised and becomes known, the prospect of change to the legislation will be slow to occur.”

Thomson said the Government was considering getting the funds to beef up the OIO by charging applicants more. He maintained in most cases investors would be prepared to pay more for a more certain process.

However Bell Gully consultant and former Attorney-General, Paul East, said the law wasn’t going to change.

“New Zealand is apprehensive about any overseas investment – particularly Chinese investment,” he said.

“The OIO is going to need a larger injection of money to bring it up to speed, but it won’t change its policies.”

Also speaking at the summit, Prime Minister John Key said, "The problem we have is: if you want to change the Overseas Investment Act, which a lot of people will do, to have more clarity, show me where I'm going to get the numbers from, because only ACT will support us. United Future certainly won't. The Maori Party won't. Labour definitely won't. New Zealand First absolutely won't and the Greens absolutely won't.”

See more on Key’s speech here.

Are New Zealanders racist?

Speaking more broadly about New Zealanders’ attitudes towards immigration and investment, independent economist, Shamubeel Eaqub said New Zealand was “simply racist”.

He said we can’t expect to benefit from the tourism and trade China provides, disregarding migration and investment.

He said the edge New Zealand has in terms of engaging with China won’t last forever, as other countries like Australia are competing for a piece of the pie.

New Zealand China Council chair and former Deputy Prime Minister, Don McKinnon, pointed out building a relationship with China was a work-in-progress.

“We can’t afford to have another Crafar farm debacle, which was a host of hostility and there was no counter argument. It was all anti, anti, anti,” he said.

“The New Zealand public has become more adjusted to what’s going. Despite the decision on the Lochinver farm, there wasn’t anywhere near the same level of antagonism.

“We still have a streak of antagonism against housing in Auckland and I thought the comments of some senior politicians were quite bad. It’s a case where political leaders have got to be more careful in their comments on these issues, because they do reverberate very, very widely.

“China has moved far closer to Western thinking, than Western thinking has moved towards China. Because they have had to interact with the whole world, which is very much dominated by Western civilisation, and we just haven’t had to move that far. We do have to move a little bit.”

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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16
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Headline could read: Pot calls kettle black....... Can someone explain to me how it is absolutely imperative to own land in this country in order to run a successful business?
The answer, of course, is that it is not. Bazillions of successful businesses lease the facility they require. If they cry that they cannot then profit from buying and selling the property itself I have no sympathy. That creates no "substantial and identifiable" good for locals.

Of course they will pay lip service to get their mitts on it, then contrive to downgrade their contribution.

How about we see a figure put on it and make use of the land conditional on performance, not just a sales pitch?

For example "substantial and identifiable" could be quantified as 10% of the purchase price per annum in tangible benefits paid out to the local economy as wages/contracts to NZ citizens or dollars spent in businesses within a prescribed area. In this case 8.8m dollars worth of elligible spending each year paid upfront as an annual bond, rolled over if demonstrated, balance diminished and topped up if there is a shortfall.

Otherwise, as I have suggested before, set up an agency to hold the title for land and lease it to them for the purchase price. The lease can be secure, with conditions which require ongoing "substantial and identifiable" benefits to be demonstrated.

This is the essence of what OIO should be about.
Yes, hold the title of any investment made and after a suitable period ,evaluate how the promised benefit has been achieved. Penalise any deficiency by either extending the holding of title or forcing the sale within a specified period.

Should a New Zealander proposing to buy a farm also be made subject to the same conditions?

I see the point, that locals could be no better than anyone else, could export the profits, speculate, land bank or damage the land. But for the most part worldwide it is accepted that, while you may mismanage your own things, you should not hand things over to others to mismanage if you see the risk is there for that to occur. History shows the results of countless interactions around the world, NZ included, where resources have been tapped, land acquired and benefits shipped offshore leaving locals exploited, duped and disenfranchised or their land turned into a useless polluted moonscape. Putting measures in place to prevent this simply would be prudent.

To draw an analogy, consider the process and paperwork required to adopt a child compared to the simplicity of producing your own accidentally.

MdM stretch a bit......Should a NZ'er be able to buy a farm in China? The rights have to occur on both sides....

Are New Zealanders and Pengxin International the same thing?

What if the NZer in question lives in New York (with no intention of ever returning)? Does that make any difference?

Put another way, there are - of course - "foreigners" who are more focused on contributing to the prosperity of NZ than some Kiwis. How do we take that into account?

Well some do share details (rather than prosperity). To see in the mind of an active OS buyer look no further..

https://www.chathamhouse.org/sites/files/chathamhouse/home/chatham/publi...

see page 40 and the actual example of the funds purchase of
a typical New Zealand dairy farm (pasture based) situated in the Culverden district of North Canterbury...

Q1: would the NZ Bank loan be non recourse?
Q1a: would OIO know that the development/expansion activities (a main reason for approval - non?) funded by bank and not investor.
Q1b: what's the bit they bring, that isn't already here - given the investing is based on using/emulating local farmers.
Q1c: why is OIO approval given when more than half the expected investor/ownership returns are forecast to be capital gains (p26)?
http://www.legislation.govt.nz/act/public/2005/0082/latest/DLM358028.htm...

Q2: would the Fonterra supplier 50 cents loan apply?

and the analysis (page 26) seems show they think Australian dairy farming more profitable (basis 2014) - forward looking.

supplementary comment regarding the thinking and actions of OS buyers..

Fonterra boss Theo Spierings wasn't mincing his words this week when asked about rival Synlait Milk's moves to sell cut-price infant formula in China.

In partnership with Chinese firm New Hope Nutritional Foods, Synlait's strategy is to eliminate the middle men and sell baby milk online for much less than what consumers in that country usually pay for imported brands.

"Those developments are absolutely the wrong developments," Spierings told the China Business Summit on Monday.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1154...

Q: knock, knock:
Whos there
OIO
OIO where?

Prices weakened this week and in Europe there is no 'recovery' in sight

Global Dairy Market Rally Runs Out of Steam
http://blog.usdec.org/usdairyexporter/global-dairy-market-rally-runs-out...

I really don't give a toss where people live and what they do.....what I do care about is WHO is contributing to the NZ tax system via income taxes and as we all know you pay income taxes where you reside.....so I cannot agree Bozeman that "foreigner" overseas investors are more focused on contributing to the prosperity of NZ than other resident NZ'ers who are paying their fair share to our bloated bureaucratic system.....

NZ based SME's have to take up the slack each and every time another overseas buyer obtains property/business interests here.......so in effect NZ SME's are subsidising someone or something in the income tax country where the foreign investors reside.....and maybe that is where the word "privilege" came into the headline!!

13
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It is easy to pull the racism card in this arguement. With the Crafar farms i was concerned that what was publicised as the supposed benefits of Shanghai Pengxin buying the frams were no more than what any other kiwi farmer would do. What Kiwis are concerned with is cashed up foreigners, irrespective of origin, throwing tons of cash around at a level we cannot compete with, to price land, and properties out of reach for locals, with no sustained ongoing benefit to the country either through jobs or revenue. What the MPs did in denying approval was answer the call of ordinary Kiwis and looked more critically at teh deal. something that i suspect the OIO is not doing very well at.

11
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Yeah, Shamubeel Eaqub did spout some drivel, your nationality is not your race, so shaming us on that is just wrong. Then goes on to the old, "do as I say not as I do" thing with migration and investment to finish with some FOMO scaremongering, ie: if you don't sell it to them they will buy it from the aussies....
Not really worth listening to...........

The Shanghai man doesn't understand the meaning of "privileged". If foreign investors were "privileged" wouldn't that mean they get extra privileges not fewer!!!

Surely if you can afford $88m, then you can afford an English speaking PR person to proof your press releases??

As for Equaab, his statements are both racist and offensive. How dare he call New Zealand (the country and by inference its people) racist simply because NZ as a collective does not support his economic ideology.

It is like saying NZ is prejudiced against poor people because it is not a communist country; or that NZ is evil because it is capitalist...these are just opinions based on one ideology.

If Equaab wants to stoop so low and resort to emotive language (the R-bomb) to promote a (what I consider is an incorrect) economic ideology, I suggest that interest.co.nz should not publish his commentaries.

I note that Equaab's outlandish comments about housing also make his viewpoint look questionable.

Well said CJ. And this letter from Peking is a bit rich, coming from a pack of communist tyrants who hold power over more than a billion people by violence - try buying a farm there, tho it would be an oddbird that would want to.

Are you saying Fonterra is an oddbird? How could you.

Very Good RC. My regards, EP

Fonterra do not own the land for their farms in china, they are not allowed to buy only lease

10
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Ownership of New Zealand land and productive assets should be reserved to ownership by Citizens of this country.

So who are the new purchasers of Lochinvar ??? I think we can understand it's a trust given the front names are a couple of accountants. But who are the beneficial owners? Or is the 'deal' just some sort of smoke and mirrors to hold the property for Pengxin.

The previous Rimanui Farms shareholder was Peter Spencer.

Thanks Gareth. There is a story I believe inthe Rimanui ownership. Could be dodgy. And interesting even if it is some Kiwis taking on a very high very cold huge property

Is that the Stoney Batter tissue family?

10
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There are some things that cannot be "bought" for money. Food producing assets ie. Productive clean land and water. Losing control of these farms and stations is unthinkable, and would be to the detriment of ours and future generations. Why do you think the Chinese want these stations & farms & food producing assets? So they can feed their people. Their purchasing interests would continue unabated until they owned it all - as there seems no limit to the money they can raise. Some things need to remain old fashioned, kinda like the Kiwi way of life.

Why do you think the Chinese want these stations & farms & food producing assets - So they can feed their people

Exactly. They then get the benefit of cutting out New Zealanders and exporting directly back to China.

again, no secrets here...

Earlier this month [September], a "Xi Jinping San Nong Thought" seminar on rural affairs was held in Beijing in conjunction with the celebration of the 60-year anniversary of the "war to resist Japanese aggression." Xi was not there personally and the seminar had no connection to the war or the Japanese. A procession of reliable apparatchiks gave speeches explaining "Secretary Xi Jinping's" concern about agricultural and rural problems and his approach to addressing them........

"The food bowl of the Chinese people must always remain firmly in their own hands."

All of these sayings of Comrade Xi were cited at the seminar on his "thought."

http://dimsums.blogspot.com.au/2015/09/study-xi-jinpings-rural-thought.html

On a different tack. Same blog spot.

Is this a two way street, Rice into China, Money Laundering out.??

http://dimsums.blogspot.com.au/2015/11/china-grain-smuggling-routes-shif...