Federated Farmers wants to know what the ‘substantial and identifiable benefit’ is to approve the sale of the major and iconic sheep, beef and dairy station to overseas interests

Federated Farmers wants to know what the ‘substantial and identifiable benefit’ is to approve the sale of the major and iconic sheep, beef and dairy station to overseas interests

Content supplied by Federated Farmers

While Federated Farmers supports positive overseas investment into New Zealand’s farming system, it is concerned the potential sale of Lochinver Station to Shanghai Pengxin Group Co. Limited, may not provide sufficient benefit to New Zealand.

“Since there is no requirement to publicly notify applications to the Overseas Investment Office, Federated Farmers is frankly uneasy about the potential sale of Lochinver Station to Shanghai Pengxin,” says Dr William Rolleston, Federated Farmers President.

“New Zealand absolutely needs foreign investment but it has to be of benefit to the local and national economy. 

“That is why a ‘substantial and identifiable benefit’ test was incorporated into the overseas investment decision tree, further bolstered in 2012 by a High Court decision adding a "with and without” counterfactual test. 

“This was to ensure any investment, such as the one being proposed, has benefit over and above just making a farm work better.  Since Lochinver Station is highly regarded in farming circles there must be something very special and we are keen to know what that is.

“Given the location of these farms to Shanghai Pengxin’s other landholdings, it will increase speculation that vertical integration by way of processing could be on the cards.

“In December 2010, the Government tightened the rules around foreign ownership by way of an “economic interests” factor in the Overseas Investment Office’s consideration.  This allows ministers to consider whether New Zealand’s economic interests are adequately “safeguarded and promoted” in the case of land aggregation or vertical integration.

“Considering Lochinver Station on its own is three times the land aggregation trigger level, let alone when added to the former CraFarms, this will be a test of the OIO’s rules.

“Yet this proposed sale and the commentary around it, again highlights the need for research into what the extent of overseas investment in our farmland is. 

“Last year, Federated Farmers wrote to Ministers requesting research into the extent of overseas investment in farmland. We understand Ministers were concerned at the potential cost, but the economic price of getting foreign investment rules wrong outweighs this.

“Our counterparts at the National Farmers’ Federation are already several steps ahead of us, with the Abbott Government working on a Farm Register.

“The reality is that here, no one knows how much of our farmland or housing is foreign owned.  To base critical economic policy decisions around a hunch is unacceptable.

“We also hope the OIO will be able to share what the ‘substantial and identifiable benefit’ to New Zealand is with the proposed overseas sale of Lochinver Station,” Dr Rolleston concluded.

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.


"Dakang Pasture Farming said that through this acquisition, the company will form a milk self-sufficiency, to get rid of dependence on third-party supply for the company to build a line from "pasture to table" a complete industrial chain closed loop."
See Henry Tull's full translation of an article on the Craig, Peters slam Lochinver sale to Pengxin.

Well done, Federated Farmers. Finally. 

From memory the "substantial and economic benefit test" in relation to the Crafar purchase was either, not assessed, or, simply waved through by the OIO first time around
The improvements and additional expenditure and protections were ony required after the Michael Fay Consortium challenged the approval in the court which in turn decided it didn't meet the economic benefit test and referred it back to the OIO
So where are the challengers this time around?
Who will it be?. Will it be Federated Farmers?. Words will not be enough. Watch this space.
Make a diary note to check the elections substantial "donor list" when it comes out

Fed Farmers expressing concern about this is the perfect "out" for this govt. Dollars to doughnuts it now gets turned down, but the real reason will be that they have realised this is just too much of a hot potato.
Then they'll be all, "there, there, see, we fixed it, move along now, nothing to see here", and the sheeples will coo and purr and roll over, and then the foreigners will keep on buying farms, only now it will be harder to find out what is going on, till it's done.

“New Zealand absolutely needs foreign investment but it has to be of benefit to the local and national economy.
Sure does - how else to fund the never ending compounding trail of current account deficits - what can we offer other than high risk $NZ bank deposits?

Perhaps Bernard could commission somebody to take a look at all the predictions about the dreadful things that were going to happen if foreigners were allowed to buy the Crafar farms, and report on which of them have actually come to pass?

Trading productive land for record levels of imported vehicles and foreign junkets on top of  foregone  future export receipts on said land seems a little short sighted.

Well, as I say above let us have some facts:  whether the land is any less productive, and how much export receipts have been foregone and by whom, as a result of a previous sale.  Perhaps it would even be possible to find out whether the money that was paid in that particular case, was indeed spent on imported vehicles and foreign junkets.

Good luck with that - but the glaring history of spending more than we earn offshore on foreign imports is collectively evident in the current account statistics.

How exactly does that relate to whether or not foreigners should be allowed to buy land in New Zealand?

It especially relates to corporations buying up land and buying up large amounts of it, and as for other foreigners, how much land selling out of NZ is enough, then.  I say we have sold enough it is not a level playing field for NZers and it needs to be sorted and I believe it will be. 
The free marketeers have had a long enough go at it

The main issue I have with foreign ownership is that the playing field is not level as the;

  • NZ Government negotiates tax treaties with other Countries......well I would quite like the right  to negotiate a tax treaty of my own! 
  • Lack of Income tax  returned to NZ from foreign investors.
  • If Offshore investors are good for NZ then surely the offshore investors should be contributing the same in income tax as when the investment is locally owned.


The Crafar farms as I said at the time, were just the start. Are you familiar with the term "Vertical Integration" because if you aren't, I suggest you make yourself so, then get back to us with what avantage that would be to NZ once we are cut out of the market

Like I said, let us have some facts.  What advantages were accruing to New Zealand when the Crafar farms were owned by a New Zealander, that are not accruing to New Zealand now?

Watch that space, you are easily duped it would seem

Which space exactly?  What indicator of damage to New Zealand interests should I be looking for?

Again, familiarize yourself with the term vertical integration and let me know how you think THAT advantages NZ.
AND fyi this is about sovereignty, this is an emotive issue. People die for their country in wars it will always have an emotional aspect, and that is just as important as dollars
End of, it IS going to change whether you like it or not

I know what vertical integration is.  How do you think it disadvantages New Zealand?
Why should any deal deliver "advantage" to anybody who is not directly involved in it?  Do you think I should be prevented from - for example - selling my car, on the basis that the only people who will gain any benefit from the deal are myself and the person who buys my car? 
Yes, this is an emotive issue.  Don't you think the discussion would be helped with the injection of some rationality and facts?

Vertical integration will not be getting done to advantage NZ!!
Okay how far down the OECD rankings has NZ slipped during the free market years then. That'll do me for facts.
Sorry but it is going to change

How is the free market responsible for decline in NZ's OECD rankings?
The free market is meant to allow unregulated supply and demand.....Is it not internal regulation that external people do not have that is the issue? Example Income tax treaty advantages.
There are no rules or reulations that stop you from buying NZ farm land or any other property/assets personally or with others.

Perhaps the shrill reactions should be compared with the 1960s and 1970s when very similar 'fears' were expressed about the Japanese 'invasion'. Then in the 1980s and 1990s it was the Korean and Taiwanese 'threats'. Now it is a fear of China. And when that turns out to be as hollow as the previous ones, it will no doubt be India that is lined up for what is now turning out to be a regular and sorry series of angst.
Perhaps one of these will turn out to be an actual conspiracy to make us 'tenants on our own land', but I doubt it. The shrillness never seems as loud when it is the Aussies, Americans or especially the British who do the buying.
But MdM is right. We have had enough of these warnings from those who worry about foreign ownership to look back and work out how we have been shafted. But I don't see any of the other 'invaders' having made anything but a generally positive contribution (overall). We don't seem worse off at all - although it is hard to compare because we did not have a time when the counter-factual was in place (except perhaps in the late Muldoon years when foreigners interest in NZ all but dried up).

The plan by Shanghai Penqxin and Hunan Dakang is to cut NZ out of the market. They have said as much themselves. That is enough for me. 
It will change, the will of the people will change it

And yet we have hardly dented the $billions of aussie bank profits disappearing across the ditch.

Hopefully, Winston's got a plan for that as well :-)!

So the Chinese think they can supply themselves with product more cheaply that is not a bad thing.......it would be bad for NZ to not try and compete.

So we compete for smaller an smaller margins and need to squish more and more cows onto less and less land, eating more and more PKE destroying more and more rainforest, so that there can be still great amounts of money, if not profit, coming from the businesses, needing there to be more and more people buying the product to keep the whole system going, when the world needs to be looking at being far more sustainable, first and foremost, in terms of human population.
We ARE mad

while you are in full stride you better go and have a close read of this stuff from Henry_Tull and Stephen_Hulme - it's getting worse - you want confirmation of what you have been saying? - here it is

I read the one the other day that was translated and confirmed that they are indeed looking to control from paddock to plate.
On the link you give here, I tried it the other day, and as soon as I saw it was in Mandarin (I assume) just closed it again. I opened it again today and scrolled through just in case there was something I could understand an lo and behold a list of properties, the first 16 I assume are the Crafar farms then further down there are a further 10? 
I wish someone would translate this lot and put it up.
I find it quite staggering that people are okay with this huge corporation using our own country to compete with us. Just beggars belief really

If you bring the page up in Google, then, from the menu bar (search --> images --> maps --> etc) go across to "more" and from the drop-down menu select translate

Okay will try later, now on new grand-baby alert!! 

Good description of the "control" dimensions and the implications for Fonterra are explained here between Bernard Hickey and Marcus Lush

As long as NZ's legal system does not favour foreigners over locals, what difference does it make for a land being owned, farmed and developed by locals or foreigners?
Just a question. Rational discussions are welcome. Emotional rants should be minimised please.

Follow this link
Once there scroll down to Henry Tulls comment which is a translation of some material from Hunan Dakang. Take particular note of the bit about vertical integration where the stated plan is obtain the land, build the factories control the whole process from paddock to plate in order to do away with the third party, the third party of course, is NZ
Get back to me about that, ok. 
Sorry, but this going to stop!!

In what way is New Zealand a "third party" in the various activities of owning land, farming it, sending the produce to a factory, processing it, selling the end product?   And what advantage does New Zealand gain from it when these activities are carried out by New Zealand owned companies, that it will not gain if these activities were carried out by Chinese owned companies?

Possible NZ domestic profit retention and the benefits thereof  versus profit repatriation to the source of foreign ownership and financing.

Landcorp as sharemilkers get up to 50% of the gross income off the Shanghai Pengxin farms, so it all doesn't go off shore.

That's alright then! I was afraid that half the profits were going to go overseas!
Oh wait...

CO, and the costs of the herd? Show me the profit.

1. Capital gains.
2. The same as residential mortgages. When an overseas buyer results in a local mortgage or loan being retired it contracts the money supply.

The third party context being referred to I believe is Miraka, who they have a MoU with for their milk, and not wanting to rely on NZ farmers to supply them if they build a processing factory.  
Of course lets not forget that wonderful piece of legislation DIRA which state that unless a processor has it's own farmer supply of 35million litres after 3 years then Fonterra has to supply the competing processor with up to 50m litres of milk for so long as they want it.
You want competition for Fonterra - well you have got what you wanted.

CO, and thats it.
The issue we see is the paddock to plate supply chain that Pengxin appear aiming for (closed loop their words).
While this was what we undestood Synlait to be aiming for up to 10 years ago, when that strategy is overlayed on the OIO economic benefit to NZ in land acquisition, it is getting interesting. We also note that this next purchase does not appear driven by over lent bankers (al a Crafra/SynFarms)
This will test the policy behind the dairy reforms over the past 15 years (we still remember when it was a job to get space on the tanker back in the Alpine days).
As anaside we are not impressed by Danone in acquiring further infant facilities and its display of corporate citizenship in looking to crash through Fonterra (perhaps Danone's having approx' 40% equity gives edge to their actions) in order to further establish its other supply chain...
So, is/is not the Pengxin supply chain a threat to NZ Inc, or the Dairy Industry? If it is no threat (and scale would suggest so), how much of a benefit is it to NZ and what portion is linked to the proposed land purchases?
Supplementary Q, does the corp reorganisation need further OIO approval/confirmation?

New Zealanders consider New Zealand to be the Land of the "Fair Go"
The difference you are looking for is this
Chinese organisations can vertically expand Top-Down from China into New Zealand and buy the means of production including the land
New Zealand organisations are "not" allowed the "same" opportunity, by China, to expand vertically, Bottom-Up, into China
So, yes it does make a difference, it offends our sense of a "fair go"

So you are saying you would only stop shooting yourself in the foot, if I stop shooting myself in the foot?  That would be a "fair go", wouldn't it.

One reason companies are reluctant to expand vertically up into China
Here is the case of Stern Hu an Australian national, working for RIO TINTO, a RIO executive, who was temporarily posted to China to facilitate negotiations with China State which was proposing a Joint Venture with RIO
When the talks broke down, the RIO executive was accused of accepting bribes (funny that) and jailed for 10 years

MdM....perhaps you should enlighten some readers a little more......you are challenging people from their comfort zones of their beliefs. This is a good thing by the way !!
The system that we currently have doesn't fully operate with the Individuals Rights fully encompassed, not here in NZ or anywhere else......it is a disjointed mechanism with rules for some here and rules for others there......If the system were addressed and the rules the same for everyone then perhaps none of us would be having any of these conversations!!
Maybe there would be a ceasefire if we had a level playing field!!

Well from my point of view I think locals should be favoured and indeed like a few countries do, prevent foreigners from owning land (plus a few other strategic things like electrical generation).
This is especially aimed at overseas; corporations, private equity funds, pension funds etc.

But locals are favoured.  They don't have to clear their proposed purchases with the Overseas Investment Office and they don't have to prove that their purchases will bring a clear benefit to New Zealand.
All youse folks arguing that would-be Chinese investors should be treated in New Zealand just the same as NZ investors are treated in China.  Do you also think that American investors should be treate the same way as NZ investors are in the US, British investors the same as NZ investors in Britain, Croatian investors the same as NZ investors in Croatia, etc, or is it just China that you'd want to apply that to?

So, point 1:
It is not fair that Chinese govt does allow foreigners (neither for its own citizens) to purchase its land whereas NZ's OIA allows such activity but with strict rules around it.
What is the solution? Put a rule in OIA says if the country that the foreigner is from does not allow any purchase of that country land, then the foreigner will not be allowed to buy any NZ land.
Point 2:
Chinese company will use the land as a starting point its closed vertically supply chain, though farm land and processing plants will always be in NZ and local ppl will be employed.
There is an identical fear from both sides.
Chinese company coming to NZ to build processing plants are VERY afraid of not being supplied by NZ farmers. I’ve talked to ppl from Meng Niu and San Yuan that is their biggest concern, and the primary driver to secure supply at this initial stage.
Now the fear emerges from NZ side -- Chinese processing plants will not use NZ farmers' supply. 
I think the market will sort it out. If I were a farmer, I supply whoever's term favours me the most. If I were the processer, I'd use whoever's milk with the best quality and most reliable supply.

I thought the Govn owns the land and the only option is to lease it? (could well have changed?)  Of course there are also un-written rules and local rules as opposed to central govn rules.
In any event we can chose the rule we want, simple. We dont have to be fair to foreigners, we can be biased to NZers all we want, that is up to us.

And I think a number of people commenting on this article are forgetting what the headline of it says.

... seems to be a vote of confidence in us , if the Shanghai Penguins want to set up a business arm here in NZ ...
And whilst they're tinkering around with " sunset industries " , as David Lange so eloquently called farming , we can focus on our amazing successes in tech software and medical research ...
... I predict a bright future for our lovely land , girt-by-sea , once we get past our obession with houses and milk ...

Haha GBH......was it not Lange who later declared that that "sunset industry" was the one which unfairly bore the brunt of the 1980's reforms......they irony is Labour wanted farming to disappear over the horizon never to show itself again....food and sunshine two of the several essentials to human life......if the Pollies and the bureaucrats galloped off to the horizon never to return no-one would miss them........
I will never ever forget the people or the Politicians who caused so much harm and destruction to NZ during the 1980's.......

Interesting you say the reforms caused so much harm and destruction. Do you realise that none of the reforms have been repealed by either party? Removal of subsidies, GST public and private sector reforms etc. I for one don't want to back to Muldoons Polish Shipyard economy. 

Skeeter....I was not advocating a return to the pre -1980's system.
I was merely pointing out how the Politicians of the day thought agriculture was a sunset industry.......they didn't seem to comprehend the benefits that agriculture gave to NZ.....a very short-sighted attitude.......Labour followed a path that was very destructive and at any time they could have moderated slightly to lesson the impacts........
Life is too damn short to be living within the confines of Politicians and bureaucrats attitudes and beliefs !!!!!
If you watched TV1 news last night you might have seen the nurse complaining about working hard and not getting enough of a pay increase......it went along the lines of I work really hard and put my all into my job and this is all we get.......really..........that attitude has always been present within NZ.......do these public servants ever consider that before they can get paid using tax payers dollars that some business has had to work very hard first to generate the income which pays employees and the taxes to the Government in the first place..........
Where is the intelligence of the reporters asking the questions? Your Polish shipyard economy is still operating......it is run by the media!!!!