Ministers need to fully understand Overseas Investment law before making further decisions on Shanghai Pengxin's Crafar bid, Key says

Ministers need to fully understand Overseas Investment law before making further decisions on Shanghai Pengxin's Crafar bid, Key says

By Alex Tarrant

The government is in a "terrible position" in the Crafar farms saga, and Prime Minister John Key is uncomfortable about Ministers making further decisions on Shanghai Pengxin's application to buy the 16 farms before they fully understand overseas investment rules which appear to have been tightened by a court ruling.

The High Court ruled earlier this month that the Overseas Investment Office did not apply overseas investment rules properly when processing Pengxin's bid for the farms. It made the OIO set aside its approval and reconsider its decision with different rules concerning the economic benefits Pengxin proposed to bring to New Zealand through its purchase.

The government is currently seeking advice from Crown Law on the ruling, which acts as law until the government revises legislation in Parliament, or it is reviewed in the Court of Appeal or Supreme Court. Key was asked if this meant uncertainty about the law might remain for a number of years until these avenues have been taken. "It may or may not," Key replied.

A local group of investors led by merchant banker Michael Fay has already taken part of the High Court's latest ruling to the Court of Appeal.

Speaking to media at his post-Cabinet press conference in Wellington Monday afternoon, Key said the government was keen to make sure that the Overseas Investment Office fully understood the judgement from Justice Miller of the High Court.

"It’s critically important that not only do they...understand the new interpretation of that law, but that the Ministers that are asked to approve or decline that application fully understand the law," Key said.

"Until that position is clarified, I think it would be extremely dangerous for any party – the Ministers, or the OIO – to move forward,” he said.

The two Ministers responsible are Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman.

It was possible the government would seek a declaratory judgement of what the High Court decision actually meant in terms of how the law should be applied, but the government had still not received advice on that.

'Terrible position'

"I’m not making a case that the ruling is wrong or right, I’m just simply saying the critical factor now is understanding it," Key said.

"Until I’m in a position, and everyone’s in a position to understand that, I think that leaves the government in a terrible position, because Ministers ultimately could be judicially reviewed again, and nobody wants to be in that position,” he said.

There were still two more avenues for appeal in the courts for the Pengxin decision, the Court of Appeal and the Supreme Court, which could mean uncertainty for some time yet.

"Certainly from the Ministers' point of view, I'd be very uncomfortable with them making a decision, because they have sole responsibility, unless they fully understand the law."

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Oh, dear
How sad.
Never mind.

The Crafar saga is reminding me of this old cartoon for some reason.
Drat, Drat & Double Drat.

So far I identified Dick Dastardly as the tax payer
Muttley the dog as bank managers
and  the pigeons as John Key and his buddies.

We have become a joke, with bureaucrats and the Big State taking the Luddite mercantilist line of populist economic gurus, such as this site, and making sure that foreign investors who want to put their hard earned savings to work in our economy won't want any part of investment here (if they have any sense). We now have significant regime uncertainty making it unwise for prudent overseas investors to invest here, so borrowers better get used to higher interest rates.
There's a great quote from Frank Knight on Cafe Hayek, about that other populist destroyer of prosperity, freedom, and now whole economies, Maynard Keynes:
I regard Mr. Keynes’ neo-mercantilist position in economics in general, and with respect to money and monetary theory in particular, as essentially taking the side of the man-in-the-street, against the effort of the economic thinker and analyst to get beyond and to dispel the short-sighted views and prejudices of the former….  His work and influence seem to me supremely “anti-intellectual,” in the only meaning of intellectual life which is worthy of approval or support.

Excellent result!
Convenient for Key as it gets him off the hook of what has become a disasterous policy misjudgement. When in a hole he has at least had the sense to stop digging. Hopefully it has also stymied much else the Overseas Investment box tickers would have given away. We are going to need every real NZ asset we have in the next few years, and productive land is at the top of that list.
Now lets see if he can be stymied with the SOE selloff as well. Lets hope so.

They said, "Great antenna, crap compass." He'll probably be quite relieved, on that basis.

Tribeless - the free market may work well in text books and on your libertarian blogs, but the real world is about protection of the National Interest.   All land is leasehold in China, so why don’t we make this prime Waikato Land available to Pengxin as leasehold also (after a state buy out) so then they can run their milk business….  Oh No, wait, they don’t really want to make milk, they want to own the land freehold because they are in the business of speculation.  There are two economies in this world, the real one and the speculative one that so called free market proponents like yourself love so much - you say let market forces dictate everything and get rid of state intervention.  If you leave it to Capitalists, the kids will end up down the chimneys again – the free hand of the market is dumb.
Hopefully this stalling tactic is John Key seeing the light and taking account of the correct and popular view of New Zealanders with regard to the land deal.  Hopefully he sees the light on the ill conceived sale of Mighty River Power as well.  

FatCat, on what basis did you conclude that Shanghai Pengxin is into land speculation ??
Other than rumours from Fay and Co, i don't think there is an oita od evidence that they are here to flip land for a profit....there are better fish to fry in other countries (Asia in particular) if land speculation is the objective......much less like paying $40 million more......I would call then suckers if their game is land speculation !!!
On the contrary, I would believe that Shanghai Pengxin saw a great opportunity to break Fonterra's monopoly of China's milk powder market and is willing to pay a premium of 30% over the next nearest bidder. Obviously they believe the milk powder market in China is next best to a gold mine....who's to blame them ??
Fay & Co is a trojan by Fed Farmers and Fonterra to kill any chance of a rival into the China market by another Kiwi source....foreign or local.
Who are the loser in this gambit ?? Foreigners of Local milk farmers who is looking for a alternative to Fonterra's monopoly ??  
Why do you think our milk is $2 a litre while in Aus it is $1 per litre ??
Further to this great saga of course is a very obvious fact to out Banking friends who has financed the Diary Farming sector of billions that they now have no more right to determine who they sell their foreclosed land to (no longer the highest bidder) and recover the most from their failed investment but goverment determined. (the Judiciary Is part of goverment)  
All that is required is any spoiler party to becone a "hypothetical local " buyer.
Into the future I can only see financing for Diary farms shrink....wonder if that is a good thing after all ??

Seems like this libertarian thinking is quite contradictary,
When the man on the street doesn't want to start another war (even most Americans were against the Iraq war at the outset) then their opinion counts.
But when they want to determine economic policy, then they need to be told whats good for them and follow instructions, apparantly by higher intellectuals capable of 'higher' thoughts.
Of course the intellectuals never, ever would act in their own interests ahead of the interests of those they are instructing, economically, well that is an assumption anyway.
Its also confusing that the long term thinking of the intellectuals and their free-market economics has resulted in such short term thinking. 

Have you ever thought to grab a dictionary and find out that there are different meanings for the words "investment" and "ownership". Just askin, like

Absolutely no point selling farmland to overseas buyers who would only spend the same amount as a local upgrading the farm - all it does is drive up prices which is not in the best interests of NZ farmers.
John Key has no idea how to run a business.  Anyone who thinks selling income producing assets (from energy or commodities) has no business sense at all.  Assets like AirNZ should however be dumped asap, as they consume money and are reproduceable businesses.
Clearly Key has no business sense and only leached his wealth from helpless Merrill Lynch clients.

Agree Chris, but do you really expect to see a 30M haircut in this? Watch for the bail-out, or ...

Why anyone might have thought that being an experienced FX dealer brings anything more to the table than being an experienced commision salesperson, I'll never know!

This is becoming very interesting. Crafer farms is the chinese bid but no-one is talking about the german bid for turners and Growers which also controls large amounts of NZ prime horticultural land and some valuable NZ IP. The OIO has not made a decision on this which is long overdue. Will be interesting if they decline this on the back of the crafer decision as the company appears to be in a shambles and the germans may know more about it now than when they bought and maybe relieved if it was to be declined.

Wrong, I myself have mentioned wherever I can along with my objection and aim to stir up some action on, the number of foreign owners of our rental houses.
Unfortunately, most people only comment on the information or article at hand and do not take the opportunity to expand on it.
I have regularly singled out Turners and Growers as an example of a strategic business that we should not be allowing to be in foreign hands.

Simple answer :  Shanghai Pengxin is Chinese, German bidder of T&G is.....White and European !!
Maybe i should put i an alternative bid as "hypothetical local" buyer !!

Simple answer :  Shanghai Pengxin is Chinese, German bidder of T&G is.....White and European !!
Maybe Ishould put in an alternative bid as "hypothetical local" buyer !!

Thats a great read, thanks.

Cannot wait to do more business in this progressive country of nz
hop sing former cook for the cartwrights andnow owner of the Ponderosa.