How do we deal with foreign ownership of NZ land? David Mahon suggests allowing Kiwis to sell to a trust, which would on-sell it leasehold to foreigners

How do we deal with foreign ownership of NZ land? David Mahon suggests allowing Kiwis to sell to a trust, which would on-sell it leasehold to foreigners

New Zealand needs to quickly decide on a way to deal with foreign purchases of farmland, which could include setting up a trust for Kiwis to sell land to, from which foreigners would buy that land on a leasehold basis, a China-based New Zealand businessman says.

David Mahon, managing director of Mahon China Investment Management, told TVOne's Q&A programme that New Zealand risked having its reputation tarnished by the absurdities of the Crafar farms sale to Chinese buyer Shanghai Pengxin. There needed to be a debate here on how the sale of sensitive land in New Zealand was handled, Mahon said.

After Pengxin's application for the 16 farms spent nine months in front of the Overseas Investment Office, eventual approval from the OIO in February was overturned by the High Court in March after a challenge from a New Zealand consortium, which wants to purchase the farms itself for a considerably lower price than Pengxin.

Having been told to reconsider Pengxin's application with a tighter set of economic benefit criteria, the Overseas Investment Office last week sent Government Ministers responsible for the OIO, Maurice Williamson and Jonathan Coleman, its revised decision. Williamson and Coleman are currently in the process of receiving outside legal advice on whether the OIO's decision met the law as stated in the Overseas Investment Act.

However, the New Zealand consortium - led by controversial former investment banker Michael Fay - still has other avenues of legal appeal open to it, should the OIO's revised decision be the same as its original, meaning the process could end up spending years in front of the courts. Last month RadioLive reported 41 applications from foreigners to buy over 16,000 hectares of sensitive land were in limbo at the OIO due to it having to revise its Crafar decision.

NZ appears racist

In an interview aired on Sunday, Mahon said the Crafar farms saga risked tarnishing New Zealand's reputation, and that an urgent debate was needed on how land sales would be dealt with. Without such a debate, the absurdities seen during the Crafar sale, such as the court cases, would likely rise again and again.

"Certainly this would be something that not just in China, but throughout Asia with our major trading partners and these sizeable economies – India, Indonesia – would look upon this as being New Zealand as a narrow country after all - that New Zealand actually is racist in terms of its view of who it would like to be its business partners," Mahon said.

That would be a sad misreading of attitudes in New Zealand, he said.

"I think that this particular Crafar deal has triggered some unfortunate debate in lesser media, and I think it has become politically useful to some in New Zealand, given the fact that we have a very dynamic democracy. And so, in a sense, the real issues, I think, have been lost. But if this [sale] doesn’t go through, New Zealand will have a lot of repairing to do across Asia and certainly in China," Mahon said.

China wanted resources – whether they were fibre, timber, wool or protein.

"In the case of the Crafar farm deal, it’s a search for protein. The Chinese aren’t looking to buy land and to own land around the world; they’re looking to secure the resources that their own narrow agriculture base doesn’t supply them. And given the fact that Chinese are urbanising in such great numbers, and the demand for food is increasing, there is an urgency for the Chinese to secure good lines of supply," Mahon said.

Sort it out

New Zealand needed to sort out where it stood on selling anything to Chinese interests.

"In essence, the confusion is what is agricultural land in New Zealand? How can it be sold to anybody? The situation in China is there is a rule in terms of acquiring land. It can only be leased or rented by Chinese or foreigners. We’re all on exactly the same base. So there’s no discrimination if a foreigner comes and wishes to acquire agricultural land in China through lease," Mahon said.

"So what New Zealand, I think, is challenged to do in this situation is to move away from the narrow argument about, ‘This is a Chinese bidder for a New Zealand asset,’ but come up quite quickly with something that is comprehensive in terms of how we deal with transferring title in some form in terms of agricultural land. And it’s that bigger argument we need to get engaged in," he said.

That debate needed to be had, otherwise there would be piecemeal debates and court cases in situations like the Crafar farms sale where it seemed plainly absurd.

"If you look at the Crafar deal, already these farms have been owned by Australian banks. Effectively you’re transferring Westpac debt, largely, into Chinese equity. So the land was already lost to New Zealand by the time the company went into receivership. So, in a way, it’s a rather spurious argument on this particular asset," Mahon said.

Set up a trust, make land leasehold?

But the fact that the Crafar case had generated so much debate in New Zealand showed there was a need for New Zealand to look at the issue.

"There are solutions. Perhaps there could be a trust that acquires agricultural land from anybody. So farmers can sell, in a real sense, get value for their land, and then foreign buyers coming in acquire land through that trust," Mahon said.

"And that trust could base sales on the fact that all land purchased in New Zealand was leasehold."

"But if we’re going to actually bring in a rule for foreign investors in a globalised market, in a market upon which New Zealand is crucially dependent, we need to have a rule that applies to everybody. And New Zealand is dependent upon China, it is dependent upon its future markets in India and Indonesia," Mahon said.

"Asia is New Zealand’s future, and we need to understand that, and we need very strong political messages to that effect so New Zealanders understand the detail and not just the snippets they pick up in newspapers or hear in the very nuanced debates where, in many cases, those engaged have deep agendas."

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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Having leased land sounds like a good idea.
The real question is what the people who are engaging in
"very nuanced debates" with their  "deep agendas."
might think, what they might do and how much power they think they have.
 
 

Limitted duration leases are the vehicle used by the smarter banana republics.  But who wants to be a banana republic of any flavour.  Holding onto our own land and accruing the full benefits for our own citizens and tax payers is the only smart course of action.

"Limitted duration leases are the vehicle used by the smarter banana republics. "
China is probably  bigger economically than the USA right now.
 
The IMF predicts that the Chinese economy will surpass the U.S. by 2016.
We believe the world highly underestimates Chinese economic power and that the Chinese economy is actually already much larger than the U.S. economy. The U.S. has a $15 Trillion GDP where as China’s GDP just passed $7.5 Trillion in 2011. This would mean according to standard GDP calculations that the U.S. economy is twice as large as China’s. Yet, China produces 10 times the amount of steel that the U.S. produces. China produced 20 million cars in 2011 with a market heading toward 35 million per annum. In 2011, the U.S. sold 12 million vehicles but only actually produced 7 million vehicles domestically. Virtually everything an American buys is made in China. The Chinese computer, cell phones, and luxury goods markets are now multiples of the size of the U.S.
http://www.financialsense.com/contributors/dan-collins/2012/01/19/the-world-continues-preparations-for-the-end-of-the-global-dollar-based-ecosystem
 
China is important to NZ and what China thinks about NZ is important.
Maybe its time to think outside the box when it comes to leasing, rather than doing what we have always done.

When they own all our farm land it will be irrelevant what they think about us.

They don't own the land if its leased to them

If the value of farms was based on ROI and not a capital gains then there would be lots of local lads lining up to buy them. The debate about foreign ownership is about the banks and always has been. China has alot of US $, it wants to diversify but its never going to be in the interest of the country as a whole to sell to offshore owners, just the benefit of a few. If I want to farm in Brazil and I going and live there and give it a go I dont think Brazilians would worry. If on the otherhand I wanted to purchase land their, contiue to live here and see what I can make out of Brazil then they should be pissed. Large corporates and countries buying land in foreign countries is abad idea for the countries involved and always will be.
 There is a move to large holdings and corporate ownership driven by banking, we need to deal with the bankers as you would with an ordinary criminal.

Yes lease land, place contracural stipulations around performance, improvement and local employment.
Monitor on a regular basis to ensure standards are being kept.
What ever we do DON'T sell the land keep, well never get it back, it is of concern for those who live in NZ and our future generations, not some anonymus remote foriegn owner. 

I'm thinking before the debate on Foreign ownership of land can take place to have any enduring benifit to the citizens of that country, the charter under which the OIO operates needs revision, the persons involved in administering OIO recommendations need to be beyond suspicion of corruption of conflict of interest.
 The very constitution itself would need to reflect more clarity of opinion before such matters of sensitivity to New Zealanders could be ratified as acceptable practice.

I think leased land is a great idea, and haven't really seen any arguements againest it. 
Other countries arte far tougher with their land ownership, and theirs isn't in clean green nz, which makes the land more valuable for that premium market.

Produce is shipped for value-add processing elsewhere; our processors lose economies of scale; our value-add capability is erroded.

Rob leased land can also  act as a portal to full sale of land....an appeasement period if you like ...you collect the rent while they dirty up the property  untill you don't really want it back ..and their already here anyway soooooooo...
A bit oversimplified but I hope you get the drift.
 When interested parties come back to you with a more digestable proposition , they are usually saying nice doggy untill a big stick is available.
 We are being suckered again .
 I say review the constitution and show me where the sale of  is ratified.

"leased land can also  act as a portal to full sale of land"
If it was against the law to sell land to foreigners then this couldn't happen

As I said Kiwi the big stick is the hidden driver of diplomacy.
 Laws are made.... laws are repealed...laws are revised...do you suggest the law is above  corruption by interested parties...?
If you do you need not look far to see where revision of the law has been to the detriment of  the affected.
 The constitution or Treaty itself would need clarification...to allow  the progress of foreign land ownership.

Yes, I guess laws can always be changed, but I doubt China would want to change Leasing laws as its what they have in their Country.
 
Also, I don't have the link  now, but I remember seeing somewhere that China had suggested Leasing before with respect to the Crafar farms, but at that time the NZ side didn't take them up on it.

I would be thinking  the word ...usurp...Kiwi...in the softest possible way.
 The projected demographics for say 2025 to 2030 would open a whole new range of possibilities for those on the ground...so to speak.
 You will forgive my cryptic approach...but I'm not comfortable with the term xenophobe...hell i'm not even sure I am one...I have a number of  freinds from the mainland...you may be surprised to learn they don't want the sale either.   

Sorry to intrude on a private conversation christoff, I'm trying to follow your "thinking" here .. but you lost me ..

Yes iconolast I was afraid that would become the case.....but now you have posted I cannot withdraw the comment.....
 Much in the same way the people of this nation were usurped and inevitabley were marginalised demographically...so too will those who see themselves as NZ's collectively  at this given point in time.
 I base that outrageous comment only on historical evidence to suggest it be so.
 disclaimer..!! it is not my intention to offend anyone here based on their ethnicity...more correctly to point out a corrupt sytem pandering to their dollars rather than their sense.
 i am quite happy to state I wouldn't trust Maurice Williamson as far as I could throw him....a typical example of a self serving muppet.

Is this what you're talking about? - theyre coming
http://www.abc.net.au/news/2012-04-10/chinese-asylum-seekers-on-voyage-to-nz/3940316?WT.svl=news2
 
And it's not by invitation, And it's not WITH money
 
It's a huge problem here
http://www.abc.net.au/unleashed/3939790.html?WT.svl=theDrum

Tip of  a glacial melt Iconolast......remember the old addage...chances of anything coming from Mars a million to one.....but still they come.
The situation is happening on many borders thoughout the world right now ...much of it by polarization of ethnicities based on religious or political beliefs......but we have a policy Australia does not share...we have needs Australia does not share.......we have some new people arriving Australia did not want and instructed them to keep moving toward N.Z.
Are we soft ...corrupt...both.

Auckland’s main ethnic groups 2006:

European and Other 60%
Asian 17%
Pacific Peoples 13%
Maori 10%
Source: Statistics New Zealand

Auckland’s main ethnic groups 2021 (projections):

European and Other 48%
Asian 25%
Pacific Peoples 16%
Maori 11%
Note: These are based on individual
group projections so percentages will not necessarily add to 100 or relate to the
projected total population.
Source: Statistics New Zealand
 

I've just heard Aussie Malcom(Former Minister in National Government) talk about this on the radio. He thinks its a media stunt.

Could well be Kiwi.....but if sanctioned in Australia...it is a stunt in extremely bad taste...and likely to cause  diplomatic offence/incident.
 However a boatload of dirt farmers grape pickers bird shooters is hardly cause to become alarmed about .......it's just the pecedent set if we accept them....may be a little more alarming.
 So what does Aussie do these days.....still facillitating smooth immigration is he...bless him always looking out for others.

A stunt? you have no idea how big it is, and getting bigger
http://www.youtube.com/watch?v=DMxD1oUYXW0

Whew iconolast.!!...............O.K. Aussie M.....was trying to play it down a bit untill he can pick their pockets or fund them through legal aid..... such a caring sharing man that Mr .Malcom.  

Alex ...if this is truly about benifit to N.Z....why then would we not be looking to assist a N.Z. farming consortium to redevelop the farms  as an investment in the biggest growth industry in futures N.Z.
Because it's about bought and paid for detent'....with some good xtra cash thrown in.
 This is about as shortsighted thinking  as you will see......
Let's grow N.Z.'s future together.................yeah right.

The obvious question, not asked. Where does the money come from to buy the land from the vendor so that it goes into a NZ trust...ohhhh the government....yeah good idea, we have so much to throw around.

well Belle...no we don't do we...but then we see fit to throw it at other wefare projects that seem to produce little benifit in the way of creating..............'
'.A Brighter Future '

"Where does the money come from to buy the land from the vendor"
Maybe the Crafar loans that Crafar had with the Bank just get transferred to the trust.
Instead of Crafar owing the money to the bank the Trust owes money to the Bank.

I can see the rorts that would happen. Neighbour says to neighbour......yeah the govt trust bought me out....hahaha suckers paid me twice as much as what its worth coz I found an overseas MATE to put in an offer.......

Rorts Belle...? the very people entrusted with the bonafide sale of said farms specialise in rorts.........isn't what your calling a rort the a prime example of free market corruption becoming the norm.
 it's a sick world Belle...rort away my good woman rort away.

"I found an overseas MATE to put in an offer......."
This can't happen with Leasing. Overseas MATEs can't buy land, they can only lease it from a Trust

So how do you put a value on the land?

We have lost Christov. Labour was asleep at the wheel in the early 2000's. We are now slaves to the Aussie banks. We had it all. We borrowed it away.

indeed Belle indeed.

Kiwi,  you are proposing that the recievership transfers the Crafar debts  to a govt trust. So how are these losses valued? An offer has been made by the chinese.... it probably doesnt cover all the loans, or the creditors.... does the trust pay all these out.... Its an easy thing to suggest but when you try and put into practise...umm.....Why should the nz tax payer bail out the banks....exactly why????? Why should we bail out the creditors to Crafars.....It was common knowledge they were under stress financially.... it was a risk to deal with them.... lots of small businesses got burnt, but is it nz tax payer that fronts up, and why? 

Kiwi,  you are proposing that the recievership transfers the Crafar debts  to a govt trust. So how are these losses valued? An offer has been made by the chinese.... it probably doesnt cover all the loans, or the creditors.... does the trust pay all these out.... Its an easy thing to suggest but when you try and put into practise...umm.....Why should the nz tax payer bail out the banks....exactly why????? Why should we bail out the creditors to Crafars.....It was common knowledge they were under stress financially.... it was a risk to deal with them.... lots of small businesses got burnt, but is it nz tax payer that fronts up, and why? 

" it probably doesnt cover all the loans"
The Receivers/Banks would take the loss. 
The land stays in NZ hands. The Chinese pay rent to the trust.

Maybe the trust does not have to be backed by the NZ Government.
If the trust can't pay off its debts then it gets put into receivership, the trusts assets get sold again by the banks to another NZ Trust or New Zealander, with the Banks taking the potential loss.

You havent answered the question Kiwi. How do you value the Crafar farms in dollar terms. Who do you put in charge of saying how much it is worth?

A NZ trust will bid for the Crafar lands, along with other New Zealanders. The highest bid wins. That is how the farms are valued. No overseas investors are involved

Actually thinking about this. The potential overseas leesor would have a potential lease  arrangement with their NZ trust. The NZ trust would then buy the farms.
There could be more than one NZ trust bidding for the farms. The Government wouldn't be involved.  

and you Belle have demonstrated perfectly the shortcomings of the so called "Free Market" because the term "finite value" does not exist.
 The market will always argue it is "worth" what someone will pay for it......as it's strategic value may well exceed it's productive value...and so would need to be measured by means of an applied use theory...in relation to other farming interests productive use of land.
"worth"....such a subjective word with so many many permutations to the reasoning behind the conclusion.
 Why don't we ask an Argentinian it's approximate value.....or a holstein rep or a ......but never never never a land agent.

I cant remember too much on exactly how it goes, but it is something like this. Market value is the agreement between a willing buyer and a willing seller. I think there are some parameters around that but cant remember what they are. The Banks are the owners now of Crafar Farms I dont see them as being willing sellers to a  govt  trust. It would be a battle royal...one I would enjoy seeing...with the hope the banks took  a no 1 trim. But then our leader..... thought he was tough, changed my mind over the last 3 1/2 years. South Canterbury Finance showed he and his crew are pathetic.

Kiwi, that sounds sensible. But, in practicality.... then what, the govt trust owns a farm or two, or more....did they bid, with the backing of chinese leasehold  money....and if they did....then they could probably pay more than your average Mr joe farmer....Back where we start....Mr average joe farmer crowded out of nz land by easy chinese money. 

"The Banks are the owners now of Crafar Farms I dont see them as being willing sellers to a  govt  trust."
The Banks wouldn't worry who they sold the farms to, as long as they got the highest offer.
 

The Chinese outright purchase is the highest offer.....I would imagine they will be haranguing the govt hard out to make sure it goes through.

"I would imagine they will be haranguing the govt hard out to make sure it goes through."
The Chinese wouldn't have to go through the OIO because the land is not being sold to an overseas owner.
The land is owned by the NZ trust. It would be just like renting a house, rather than buying it. 

Banks are always co-owners until the mortgage is paid in full. The whole o/s saga would not have become as profound as it has if the farms were  to have been sold in smaller bundles. What it has done is to generate greater awareness of the finite land resource that NZ is by the nature of being islands. What the sea giveth, the sea will take away one day...
 

Overseas buyers are underwriting nz rural  property values.....That is the issue here. Leasehold or outright sale, I dont see the difference. 

"underwriting nz rural  property values" 
" Leasehold or outright sale, I dont see the difference. "
This could well be the case. 
Is this a good thing or a bad thing? I don't  know.

depends which side of the fence you are on.

The National Trust in the UK is, I believe , ithe countries biggest owner of farm . I don't how it works in terms buying the land , valuations etc. But it leases out all the land to "tenant" farmers. Andrew J --do you know how it works?

I didnt know they were the biggest owners, I think mostly they inherited large buildings that the original families could no longer afford to maintain. Ive had friends who have lived in these estates and been paid to help maintain them.
 
We're a UK conservation charity, protecting historic places and green spaces, and opening them up for ever, for everyone. Find out more about us.
 
I find the land issue in the UK confusing, my wifes family have some land but its leased out forever to a local farmer who pays a peppercorn rent.
d We have Landcorp and DOC.  I think farmers have been more inventive here due to the ownership of land - fee simple

Andrew --I must have the wrong name. It was just something I read a few months back. I think there was something about "inheritance"  --people leaving it or selling to the organisation. I'll have to try to find the article I was reading or do a Google.

No you are right, National trust owns 630,000 acres, but its number 2, the biggest is th Forestry,
1. The Forestry Commission
2,571,270 acres
Owned by the Government-which wants to privatise it-on behalf of the public, Britain's largest land manager leases 208,895 acres of the 2.5 million acres in its care. Created in 1919, the Forestry Com-mission looks after 1.4 billion trees and has helped to expand Britain's woodlands by an area more than three times the size of Greater London in the past 20 years.
http://www.countrylife.co.uk/countryside/article/506868/Who-owns-Britain...

Its generally accepted that there is scope for NZ involvement in the massive changes going on in China beyond commodity trade?, and to do this engagement with China has to be figured out. Its how this beyond commodity connection is made.
 
So far we have had Fonterra and SanLu:
http://www.stuff.co.nz/business/710852/Fonterras-melamine-response-too-late
http://tvnz.co.nz/politics-news/sanlu-sentences-spark-debate-here-2451152
and Synlait with Bright:
http://www.dairyexporter.co.nz/article/35394.html
http://www.odt.co.nz/news/business/141146/synlait-ltd-investors-set-vent...
and Open Country - Talleys and Olam
http://www.stuff.co.nz/business/industries/financial-results/6416233/Ope...
http://www.sharechat.co.nz/article/6429c583/talley-s-olam-commit-40-3-ml...
 
The trick seems to be doing it without loss of life, goverance or dollars. I don't think the NZ based trust idea that Mahon is punting is really the fix. Its more a debt for equity swap that needs be arranged for the banks (especially if next years price is less that $6) that will breath life into the property market (it was a boom, some pay too much in a boom).
I get that China wants to bed down supply chains, I don't see how that then means Fonterra increases the price it obtains for international sales (volume possibly but not price - and the volume thing is going to happen anyway), or that farm gate milk price rises.
 

If you think of it in terms of empire, we're voluntarily setting up nz as the business end of a wealth pump that goes straight to china. The Warehouse is bad enough...