By Allan Barber
The sale of 16 assorted, somewhat rundown dairy farms to the Chinese buyer, Shanghai Pengxin, looks as though it can finally go ahead, although there is still talk of an appeal by the group headed by Sir Michael Fay.
It is hard to see on what basis an appeal could be successful, because the OIO tightened its criteria for recommending the Chinese bid which was already required to jump through more hoops than any previous application for foreign ownership.
The Ministers were satisfied by the OIO’s changes and would clearly have taken great care not to land the Government in any more embarrassment over the issue.
Assuming it all goes through now, this particular saga will quickly fade into the background, to be superseded in the mind of the media and public by the next attempt, imagined or real, to sell New Zealand’s sovereignty to the highest bidder.
This morning on National Radio Bruce Wills, President of Federated Farmers, made the valid point that the Crafar farms represent a drop in the bucket, as does dairy farm land as a whole with 13,000 hectares sold to foreign bidders since 2002 compared with 1.78 million hectares of forestry.
70% of our forestry land is now owned offshore, encouraged by the ETS scheme, although ownership of land in general tends to fluctuate between domestic and overseas investors, rather than being cast in stone for ever.
Wills also pointed to the growth of lifestyle blocks on the outskirts of our cities as an equally large threat to pastoral farming as the sale of farmland to overseas buyers. In fact this may be an even bigger threat, since land converted to lifestyle will never return to productive, large scale agricultural land.
The Crafar farms saga has inspired a lot of hot air, particularly from leaders of opposition political parties who sense an issue with which to pillory the Government. David Shearer is trying desperately to sound authoritative on a subject which he hopes will gain him some traction as Labour leader, even though his party when in government was quite happy with the overseas investment climate. Winston Peters is at least consistent in his opposition to sale of land to non New Zealanders, while the Greens were always unlikely to agree with it.
Russel Norman seems to believe the strength of the New Zealand dollar is entirely the fault of the Government and Reserve Bank without taking into account the impact of the American and European economies, while Peters and others ignore the enormous amount of overseas borrowing New Zealanders have done over the last 20 or more years.
The reason Crafar farms got into trouble in the first place was borrowing too much from the banks for expansion and then not being able to service the loans, hence the fact the farms haven’t been maintained as well as they should have been.
The loudest complaint about this particular sale has been that it is unfair on local buyers who can’t afford to buy the farms at the price Shanghai Pengxin has agreed and as a result all future sales will face the same threat. This is patently a load of nonsense, because New Zealand investors, whether private or corporate, will continue to buy good farm land which will generate a commercial return.
As an example there is an opportunity for all New Zealanders to invest capital in dairy farms through AgInvest’s MyFarm which has 43 syndicates managing 14,000 hectares of dairy farms milking 32,000 cows. It will also be a lot better managed than the Crafar farms have been, although Landcorp may be able to lift performance with Chinese investment of $16 million.
The whole question of overseas investment in this country needs rational debate about acceptable forms of investment instead of attempts to force the development of policy on the wing. After all overseas investment has been a crucial feature of our economy since Europeans arrived in the early 19th century. Without it New Zealand would still be a peasant economy, not an economy clinging slightly tenuously to first world status.
There have been suggestions that land should be leased not sold as a means of ensuring we retain our birthright, which may logical, but this will require very careful analysis to arrive at a workable solution. If landowners wish to sell, they will not be thrilled to find out that they have a choice - either sell to New Zealand residents or lease to an overseas investor without being able to withdraw their capital. A further requirement that offshore investors must also invest in value added production, while reasonable in theory, would also be difficult to apply in practice.
A review of the Overseas Investment Act appears to be required despite the rules being tightened by the current Government. However a review must not be dictated by politics, but would need to be carried out by a politically neutral body or commission set up solely for the purpose.
Although it is an issue that has occupied an enormous amount of time and debate, I am not convinced a change is necessary. Unless New Zealand gets its offshore borrowing under control by generating more wealth internally, overseas investment will remain an essential component of our economy.
Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he run a boutique B&B with his wife. You can contact him by email at email@example.com or through his blog at http://allan.barber.wordpress.com.