sign up log in
Want to go ad-free? Find out how, here.

David Atkinson explores how to look at foreign direct investment opportunities & sees in 'pragmatic nationalism' a model that avoids extremes and protects benefits

David Atkinson explores how to look at foreign direct investment opportunities & sees in 'pragmatic nationalism' a model that avoids extremes and protects benefits
<a href="">Image sourced from</a>

By David Atkinson*

Heading home last week to my family in rural southern Shaanxi, China on the long distance train, with plenty of time to do nothing in particular, I started to reflect on the recent issue of foreign direct investment (FDI) in New Zealand.

This has been a hot topic for discussion recently on, particularly with the prospective sale of Lochinver Station to Shanghai Pengxin.

That led me to mull over a concept called pragmatic nationalism (Hill, 2012).

Pragmatic nationalism sits somewhere between the extremes of economic isolationism (the Marxist ‘radical view’) and free market philosophy.

Exactly where can be difficult to determine.

Pragmatic nationalism is essentially the view that FDI’s benefits to a country must outweigh the costs.

Considering the benefits & costs

How benefits and costs are considered is subject to varying views.

For example, some may consider economic and financial components in terms of balance of payments, such as income for the host country via taxes, wages paid to local workers, or raw materials purchased by companies operating within its territory, versus expenses such as any infrastructure paid for by the public purse (access roads, power lines, sewer systems, etc.), tax concessions, and so forth.

Others look at the cost/benefit ratio in terms of social issues, such as migrant versus local workers employed by the FDI company, and costs and benefits associated with these workers. Related to this, the integration or segregation of migrant workers can have strong effects on surrounding communities, especially if there is resentment from local people about not getting jobs. It can also be harder for local people to create business relationships with FDI companies if they are not staffed by local managers.

On the other hand, migrant workers can stimulate cultural diversity in a local society in ways that can be potentially beneficial - this depends partly on whether migrant workers have the opportunity or desire to integrate socially.

Finally, yet another view considers the cost/benefit ratio in terms of ecological impacts on the region.

One of the problems with a pragmatic nationalist approach is that it can, like most moderate approaches, be challenged or even subverted by more radical approaches.

On the one hand, pragmatic nationalism can become so watered-down by advocates of free market ideology that the real cost-benefit ratio gets out of balance. This can happen when supporters of FDI focus only on short-term economic benefit.

The sale value of a profit-making or break-even asset is an example of this, and ignores both long-term loss of potential income, and loss to the host country for an unknown period of time of a potentially productive asset. The produce from the asset is sometimes lost too, if this is exported to the FDI company’s home market and not offered for sale locally.

Social issues, such as intercultural tension between migrant workers and locals, or migrant worker accident/healthcare costs paid for by the host country’s government, can also unbalance the cost/benefit ratio, especially when considered long-term.

Additionally, companies may renege on or only partially fulfil promises of local investment and development.

On the other hand, FDI with a good cost/benefit ratio can also be unnecessarily rejected by those advocating economic isolationism in the name of pragmatic nationalism. For example, FDI that brings with it genuine support of local communities, construction of beneficial infrastructure, long-term commitment, clean-up of existing problem areas, and adoption of improved technology, ideas, or methods can bring benefits to host countries’ economies and societies which may be discounted by those with isolationist economic views.

Lochinver sale doesn't pass the test

In either case, arguments between holders of these viewpoints are frequently passionate; pragmatic nationalists may be find themselves in the middle.

Labelling those opposed to particular FDI cases as racists or xenophobes is a tactic that is often used in debates.

On the other hand, supporters of particular FDI cases may be labelled as traitors, sell-outs, or lackeys of economic imperialists.

Arguments of this sort are not helpful in coolly analysing what the cost/benefit ratio of a particular FDI case may be, irrespective of any real xenophobic, xenophilic, or cosmopolitan views held by commentators.

Nevertheless, human emotions, biases, and beliefs necessarily have a strong influence when analysing a cost/benefit ratio.

My own view is that the Lochinver sale does not pass the pragmatic nationalism test, for the following reasons.

Yes, there is the benefit of the $70 million sale price, assuming that most of it will end up being spent in the local economy (which is not guaranteed). The Overseas Investment Office will require Shanghai Pengxin to meet certain terms and conditions to attempt to ensure a suitable cost/benefit ratio for New Zealand socially, environmentally, and financially, as discussed above.

But, looking longer-term, a productive asset will have been sold, from an asset class that is core to New Zealand’s export economy - agricultural production.

Moreover, this type of sale helps to provide a resources, knowledge, and production base for companies which are competing with New Zealand’s agricultural producers, and which may well overtake them more quickly in the future.

The term ‘vertical integration’ has been used by several commentators on this website, and is one of the key reasons why I consider that the sale is not ultimately advantageous to NZ Inc. Vertical integration allows a company to sidestep opportunities for value-adding by New Zealand organisations, which means minimal income for New Zealand from such a company, apart from tax, some consumables, and perhaps intra-national transport charges. In sum, the long-term benefits of this sale are unclear.

I take the old-fashioned view that ownership of production, whether by government or by citizens, is key to a country’s self-determination, particularly when dealing with resources as fundamental as food.

The sale to FDI companies of this class of core productive asset has a cost-benefit ratio that needs to be very carefully analysed, and not just in financial terms or over the short term.

If such analysis leads to rejection of a sale, this does not need to indicate xenophobia - it can also indicate pragmatic nationalism.



Hill, C.W.L. (2012). International Business: Competing in the global marketplace (9th ed.). New York, NY, etc.: McGraw-Hill.

Hill’s chapter summary on FDI here:


* David Atkinson is a commenter on this website, using the alias JetLiner.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


" that is core to New Zealand’s export economy" - agricultural production

So is tourism not core to New Zealand export economy - must be so its no to the sale of tourism related assets as well !!!!

and what else is core...............................................................................


Any asset that generates foreign exchange credits to fund our seemingly insatiable need to import sharply depreciating items beyond all our attempts to collectively afford them in the past. 


Not sure I understand your post, but yes sale of tourism ASSETS (e.g., the mudpools in Rotorua) is unlikely to be a good idea. Doen't mean we shouldn't have an active tourism sector!


There are quite a few hotels,motels vehicle hire companies .......


Of course....why would you sell the Milford Track, Tongariro Nat park and so on.   Lochinvar sale is just as rediculous as idea.   

Package toursim is another disaster....stay in foreign owned motels, eat in foreign owned restaurants, sit in a bus all day...and then head home.  Where's the benfit to NZ in that.


Whether a FDI is beneficial or not to NZ  socially, environmentally, and financially is subject to discretion.


But, my question is that why FDI from a Chinese company attracts much more disproportionate amount of attentions, and criticisms than FDIs from USA, AUS, Germany and other countries, which jointly hold 96% of total foreign owned farm land.


I've seen plenty ppl arguing that selling productive assets to foreigners is bad. But why is it only bad when an asset is sold to a Chinese company? Almost none raised his eyebrow when a NZ dairy farm was sold to a fund from Harvard Uni.


The only logic conclusion that I can draw from David's article is that

1.  Only selling a productive asset to ONLY Chinese companies will damage New Zealand’s export economy - agricultural production

2.  this type of sale helps to provide a resources, knowledge, and production base for 'ONLY CHINESE' companies which are 'ACCTUALLY NOT' competing with New Zealand’s agricultural producers. Agri-businesses from USA, EU and AUS will have a period of fierce competition with NZ in Asian market in next 50 years.

3. The term ‘vertical integration’ has been used by several commentators on this website, and is one of the key reasons why David considers that the sale is not ultimately advantageous to NZ Inc. BUT, only Chinese companies will vertically integrated and vertical integration does not apply to companies from USA, AUS and Germany.


Does it sound right, though?


Just went back through 16 months of decisions and approvals by OIO

Couldnt find one by Harvard University Fund

Can you provide any further deatils?



BTW - As I was trawling through the approvals, it was noticeable that there were a lot of approvals of purchases by Chinese entities that don't make the news - one of which was for $200 million last year - didnt get any air-play at all


That approval to the Harvard Fund was an additional increase in the existing "partnership" taking their total investment to $60 million which is a lot smaller than Shanghai Pengxin's investment which is now nearing $½ billion


Why Shanghai Pengxin gets singled out I have no idea


Is this the same outfit?


Yesterday, Romanian authorities detained Dragoș Secu, director of 100%-owned Harvard timber company Scolopax, for accepting multi-million dollar bribes and luxury gifts to illegally acquire land on Harvard’s behalf. Read more


more from the pros and the cons -

Where in the World Are the Real Estate Opportunities?

not all FDI is the same.(have you ramped your CMBS team yet?)

- and the following of MNC's and their credits.



I would totally agree with you that we should not single out any particular nationality, but we would probably dissagree at the point that I would stop any further foreign ownership particulaly of land or housing from any nation.  

I would also exclude and entities that are foreign owners set up to appear as New Zealand resident


Well I suppose we dont know if this is the case ie "because its a bunch of chinese buying" as you are trying to claim.   So if say the investment was from the USA? well personally I would be just as much against it.  Have I heard/read the rational ppl in here saying we dont want chinese?  or more like we dont want any foreign buyers? For me at any rate its the latter I am noticing.





strangely enough Tourism is an interesting example of what can go wrong. My understanding is that in the days of Korean Tourists in large numbers, the tourists were sold off back in Korea and then to make the money back the tour opportates sold them again in NZ to often Korean businesses - in the end little money reamined in NZ




Why would the sale value of a profit-making enterprise "ignore the long-term loss of potential income"?  Isn't the loss of future income precisely what the seller of the asset is being compensated for in the sale price?


How is the productive asset "lost to the host country"?  It's still here, isn't it?   "The host country" doesn't own the asset, a private owner does.  Yes, a foreign owner may export all of the product.  So might a New Zealand owner.  Do you think New Zealand farmers are in business out of charity to their fellow citizens?


Vertical integration allows companies to side-step opportunities for NZ companies - why would they want to do that, if the NZ companies were offering a better product at a competitive price?  And if NZ companies are not offering a better product at a competitive price, why should a foreign company, or indeed other NZ companies, be expected to deal with them? 


Why is ownership of producing assets by citizens key to self-determination?  The Government can impose exactly the same requirements on producing assets located here and owned by foreigners as it can on producing assets located here and owned by New Zealanders.     


Indeed.  Take, for example, the very gear on which we are torturing electrons:

Hardware - designed and made by Various Furriners.

OS Software:  either Microsoft (US), Linux (Scandinavian plus US but based on good ol' BSD Unix - US), Unix (US) or Apple (US).

Databases:  Microsoft (US), Oracle (US), IBM (US), open-source (lord knows who or where but if relational, all based on Codd and Date (IBM, US))

Pipes - Copper mined lord knows where, refined by lord knows whom, and fibre optic ditto

Every single component on this here site is supplied by Xenos, and paid for by making and selling Kiwi White Marching Powder.

We must clearly re-nationalise and secure our electrons for the Common good:  I look forward to the return of dog-eared 5x3 cards made from Sustainable Pines, pawed through by a myriad of minimum-wage - er - Minions, for all of our information requests.

Think of the Children....



Future repatriated profit lost from the country is a different matter from that between domestic seller and buyer. More so if taxation on that profit is avoided by unlawful excessive foreign sourced inter- group gearing of the business.


How about reframing it.....     Just think..."Land"... forget the productive asset and income side of it....    "Leasehold "arrangements have the same validity to your argument as does "freehold' arrangements.

Most Pacific Island Countries do not allow foreign ownership of "Land"... 

Common sense should tell us why this is so....

Foreigners would outbid locals ....easily... and over time ... the indigenous people would most likely become ..." tenants"... 

MdM.... would you argue that Nations like Samoa and The cook Islands should allow foreign ownership of land...????

We are talking in broad principles here.... 

Do you think things might have turned out differently in Russia...  after the fall of communism.....  if they had taken a  different approach to private ownership of natural resources....   and rather than selling to the highest bidder, distributed the assets more equitably amonst the citizens....  ????  

There is always a tension between individual vs community..... after all, our legal structure of private property rights has been paid blood...  by the people who died in Wars , fighting for our democratic freedoms....   When push come to shove... Is it not always the "community" that protects the , collective, property rights of individuals ....   

The "free Market " ..philosophy is great... does not hold all the answers..

ps... I'm not, so much, arguing for or against foreign ownership of land....   just that the debate is more far reaching than MdMs' argument....   in my view.



there is nothing to stop me setting up a company with 49% chinese firm share and me owning 51%...we then go buy a $100 million farm...


Am I completely out of date but the maximum definition of external ownership of a company used to be 24.9%?

Easy test for avoidance of a set rule would be forced sale and only to local resident ownership.

Set the test high enough and the penalty would prevent the rorts. 


Rod Oram had a look at this very issue - Sunday Star, some key points:


"Unfortunately, though, Shanghai Pengxin's purchase of Lochinver Station would be an economic negative for the country, if the government approved the deal."

"Of course the two deals make great business sense for Shanghai Pengxin. It is developing a business vertically integrated from its farms here to its supermarkets in China. It will capture all the value created along the way from farming to consumers. Integration is a profitable business model for owners of the assets. But not much of the value they create will stick to the ribs of the New Zealand economy."

"Shanghai Pengxin's products will leave the country at the lowest possible price and the lowest possible level of sophistication so it can capture the maximum profit in China. For example, Shanghai could export its milk powder at commodity prices and blend them into highly valuable infant formula in China."

"there is no evidence that foreign investors building vertically integrated farming and food businesses are delivering a substantial benefit to our economy. Worse, they are reducing our ability to build those valuable enterprises ourselves. It is time we as a country were much more confident about the upside of our primary sector. It's time to develop deals that benefit foreign investors and us."…




I wonder what part of that the neo-libs and govt do not understand