Quality farmland is a finite commodity and why the OIO needs to see if there are real and tangible benefits for New Zealand from farmland sales to foreigners: Rolleston

Quality farmland is a finite commodity and why the OIO needs to see if there are real and tangible benefits for New Zealand from farmland sales to foreigners: Rolleston
Lilybank Station is an example of a foreign-owned farm purchased by New Zealand buyer. It's not all one-way, which is why we need a national register of farmland.

By William Rolleston*

The Election has suddenly sparked into life.

It was not a policy, a pratfall or a stunt, but Shanghai Pengxin Group’s Overseas Investment Office (OIO) application to buy Lochinver Station. 

While Federated Farmers has taken the principled position of trying to learn what the ‘substantial and identifiable benefit’ to New Zealand is of this proposed sale, others have gone off the proverbial deep end.

National has been far too dismissive of concerns being raised in some quarters.

Labour has gone to the opposite end by announcing they’d block the sale, along with the Greens.

Meanwhile, NZ First will go further and stop all foreign sales of New Zealand farmland. That seems to be the position of Colin Craig, who stepped into Mr Peters shoes by breaking this story.

What everyone seems to have forgotten is process.

Our overseas investment rules are meant to operate on fair play under the guise of the OIO. Instead, it has turned into an election political circus. The coverage of which, has gone global, given the media who have contacted me.

Whatever we say or do it must not be seen as New Zealand closing itself to the world.

New Zealanders invest in other countries so it would not be in our interests to spark a backlash.

New Zealand has done extremely well from a principled negotiation of free trade agreements, like the China free trade agreement. We have to be careful not to kill the egg that laid the golden goose.

Yet this is not carte blanche as we need to understand what the substantial and identifiable benefit to New Zealand of Lochinver’s sale, over and above what a New Zealander could do in buying this station. 

There could be economic opportunities for New Zealand businesses, like winning direct consumer reach into an overseas market.  In other cases, it could be opening up a property to the public or significant investment into one that has become rundown.  A great example of this being music producer Robert "Mutt" Lange's 53,000 hectare gift to the Queen Elizabeth II National Trust. 

There must be a payback because foreign investment is a two-way street.

Federated Farmers is not saying the sale should not go ahead but this is a test for OIO rules tightened in 2010. An “economic interests” factor allows ministers to consider whether New Zealand’s economic interests are adequately “safeguarded and promoted” in the case of land aggregation or vertical integration.

Land aggregation is where land is assembled into a strategic parcel.

The trigger level is ten times what the average farm size is and Lochinver’s proposed sale breaches that trigger point by a factor of three.  This is why the OIO needs to have a good look at the proposed sale to see if there are real and tangible benefits that come to New Zealand from its sale.  Quality farmland is, after all, a finite commodity.

There is also that vertical integration test because a search of Shanghai Pengxin’s media releases shows interest in processing.  Shanghai Pengxin, in its purchase of the CraFarms, undertook not to build processing unless it was 50 percent owned by a New Zealand entity.  Yet owning the supermarkets, logistics, processing through to farms is vertical integration.  This risk greatly reduces the value to New Zealand since the half of what local dairy farmers get paid is spent locally in their community.

To Federated Farmers we need to get a collective idea as to what the real picture of foreign investment is.

We have proposed a national register of foreign investment to discover what the real extent is.

What we know is that many of the sales notified to the OIO do not actually go through.  If you like, the OIO is a flowmeter and not a stocktake but there is good quality information to start the ball rolling, dating back to 1998. 

Another thing we need to realise is that a big proportion of overseas buyers migrate here to live and farm.

Take my Vice-President, Anders Crofoot and his family, who hail from upstate New York. Given New Zealand’s farm system is the world’s-best we attract the best farmers from around the globe.  It would be catastrophic to shut the gate to them.

We also need to realise that not only do companies come back into New Zealand ownership, but sheep stations too, like Lillybank in South Canterbury.

If individual farms are sold it does not mean they are gone forever, but where there is land aggregation, that potentially becomes a different story.

Federated Farmers is not in anyway opposed to overseas investment in our farmland but Lochinver is potentially a question of land aggregation.  We must take land aggregation and vertical integration seriously as we have a finite amount of land.

We must also do what is best for New Zealand and ill conceived tit-for-tat policies based on weak statistics or emotion do us no good.  This is why we need a national register of farmland for as land aggregation increases, so must the level of scrutiny.

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Dr William Rolleston is the new President of Federated Farmers. This article was first published in the Manawatu Standard. It is here with permission.

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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Keep this up and I might just pay a sub to FF, it will take quite a bit more though.

Yep there are always those who are happy to accept the free ride of benefits that are due to Feds.  Bet you are also happy to accept help/feed etc organised by them in times of droughts and floods too.  Why pay a sub when you get the advantages of their assistance and lobbying for free.  

The argument about "much needed capital" grates with me because I ask myself how we got to a situation where farmers can't raise the capital to develop a farm, and I smell a crime scene.

Im still trying to get to the bottom of the 53,000 acres put in QEII covenant by Shania Twains ex.
 My information is sketchy, but here goes, These are the Stations they own, Motatapu, Mount Soho, Glencoe and Coronet Peak stations.
 
They can be found in the Tenure review process here,  http://www.linz.govt.nz/crown-property/pastoral-land-tenure-review/statu...
 
 I would think like most  High country this is crown lease in perpetuity or long term.
 QEII is an interesting organisation found here,
 
http://www.openspace.org.nz/Site/About_covenanting/
 Then it gets more interesting, it was sold to the public as a gift to NZ but QEII don't do that.
 The land according to them is,

Private property rights
Private property rights are not jeopardised by a covenant - the landowner retains ownership and management of the land. Visitor access is available only with the landowner's prior permission.
 
 Can still be sold
 
Buying covenanted land? Read this pamphlet if you are considering buying land that has a QEII covenant registered on the title.
 Here is a list of covenants for sale
 
http://www.openspace.org.nz/Site/Managing_your_covenant/Properties/defau...
 
 I forgot to add, the NZ government set aside $40 million extra to help buy sensitive land out of long term leases
 
http://www.stuff.co.nz/the-press/news/8774240/Row-over-40m-to-plough-int...
 
 

Yes, private property rights. You just go ahead and do what you want to do.
http://www.stuff.co.nz/environment/9435785/Cameron-opens-lake-to-climate-change-scientists
 

Aj none of the stations are under tenure review.  Frankly I see the QEII covenants better than handing it to DoC and getting freehold land in return.  DoC is cash strapped and can't take care of what it has at the moment.  http://www.odt.co.nz/news/queenstown-lakes/312082/extensive-gift-access
 
We put a QEII covenant on our land, and yes we still can sell the farm, but any future owners can't legally cut down the native bush nor drain the wetlands. Every 2 years or so they come round and check that we are taking care of the covenanted area as per our legal document.   We looked at putting a DoC covenant on (they were very keen) but decided on QEII for a number of reasons including they are apolitical and their folks have their feet on the ground, not heads in the air.

What do you view as the biggest election campaign issue?
The economy is important but the economy can be doing well and the people can be doing terribly.
Sales of lands to foreigners is an issue of whether the citizens have a stake in the land or the Act party position that no third party has an interest. Broadly there is an economic value to being a member of a nation (as there is to being a member of a family).

Yes, I agree with you jh. Foreign investment causes the property market to boom, and they call this economic growth? While the average wage earner gets poorer as food and rental prices rise and the chances of buying your own home dwindles.

Marx had it right. In that he identified the ultimate benefit always flowed to the owner. And you don't have to be a 'Marxist' to agree.
We need to get rid of the kneejerk reaction (chinese this year - In 5 years we could be panicked about Russion Mafia -who knows) And farm by farm decisions by politicians is not useful.
‘substantial and identifiable benefit’ to New Zealand lies in ownership by our citizens. Land should only be owned by New Zealand Citizens.
If you want to come here and own land. Be a citizen.
And don't forget the magnificent economic and social contribution to New Zealand made over the past 100 years, by the family owned farm system. A treasure (toanga?) that should be guarded fiercely.

The danger is not that a particular class is unfit to govern. Every class is unfit to govern.

Lord Acton (1834 - 1902)

I think the root of Anglo-Saxon civilization is, among other things, property right on land.
 
Should a individual have a right to sell his/her land? -- Yes!
Can a nation impose rules that prevent a individual from selling his/her land to foreigners? -- Yes!
 
My question:
Would any economic outcomes be different to a host country between selling or leasing land to foreigners?
If yes? What then?
If no? Why not just leasing?
 
 

Excellent question, why not just lease? Buying gains more control. Do we want foreigners controling large areas of our farmland? I watched  Nigel Latta's tv program last night about the alcohol industry. It talked about how large multi-nationals own our breweries and how governments are afraid to tighten alcohol laws because of fears of being sued by large multi-nationals. Do we really want powerful foreign companies taking control over our farmland?

Leasing gives the leaser little or no stake in the long-term value of a property, so they are less incentivised to make sure that it maintains its value - its productive capacity, in the case of farmland- than they would be if they owned it.
 
 

Leasing is very common in NZ farming. Lease contracts are signed with annual requirements for fertiliser and fencing and stipulating what the land can and can't be used for. If the chinese don't like it, too bad.
 This is what i don't get. Why are we trying to help a chinese govt owned company? Aren't we trying to do what's best for nz?
 I heard John Key, say six months ago that we don't want to sell too much land to foreigners. Now they are saying lets's wait and see with lochinvar. It's pretty obvious to me that they will allow the sale, if they win the election, or else they may have sped up the decision. This to me shows how confident Key is about winning the election. And also shows what the agenda will be if they win.

Leasing might be common where you are tim, but it has never been common in any of the farming areas we have lived in during the last 30years.  I spoke to a young Sth Island couple recently who were saying how hard it was for them to get their own sheep farm.  I asked about leasing but they said the returns weren't there anymore for this to be an option.  The price of a lease was going ot be the almost the same as interest on a mortgage.
 
At a gathering of Central Plateau farmers recently they were discussing the sale of Lochinvar. They couldn't understand what the fuss was about.  The general consensus was it's in a sh.thole of a location, difficult farming area and none of them would want it nor would any of them live there and raise a family.  
 
Of more concern to farmers is the sale of 'family' sized farms to the likes of MyFarm (they have a significant number in Southland) and foreign domiciled owners.  It is the sale of these farms that are making it hard for young NZ farmers, not the sale of a farm on a scale of Lochinvar.  

Selling a farm does not mean that voters loose rights to the control of the land and trying curb vertical intergration doens't mean that milk suppliers are going to look for land elsewhere. Nzer's have an opportunity to get a little back from the money spent abroad. 

A couple of things. First, could our land ownership policy reflect the policy of the purchasers host country? If we can buy land there, then they can buy land here with similar conditions. It sorts out the hypocrites.
Second, I've made this suggestion before and likely government agencies already exist. Upon successful application, the target land is bought by the crown and leased to the interested party with terms ensuring that our national interests are preserved. This allows control over issues such as denial of future access, evironmental damage and offshoreing of profits as lease payments can be adjusted to clawback lost returns.

I absolutely agree with Spinach. Why give them full ownership rights?
I have heard a rumour that the Chinese have paid $100 million for Lochinvar.

I think we are in danger o f losing the culture of farming in NZ, where kids are bought up on farms and learn farming from a young age. The best farmers i know were bought up milking the cows or dagging sheep from a young age.If farming falls out of the ownership of farmers and into the hands of international property speculators.we will lose that. Who will want to do the hard yakka in farming if their is no opportunity of the capital gains of ownership.
I was in Auckland recently and met a guy who told me i should sell the farm and buy an expensive Italian sports car. I told him where i come from you would sell the car and put a deposit on buying a farm. But are we losing this way of thinking?
 Are we now all about the money? NZ needs farming for it's steady returns which hedges against speculative recessions.
 

You can't have a good all black team without looking after grass roots rugby. Selling Lochivar to the Chinese is a kick in the guts for grass roots NZ farming.

On the farming show I recently heard a long retired All Black lamenting the effect dairy in South Canterbury was having on grass roots rugby there. He too must have been a sheep farmer. ;-) 
 
How on earth do you justify this: Selling Lochivar to the Chinese is a kick in the guts for grass roots NZ farming.  Lochinvar is in no way 'grass roots' farming.  It is a huge scaled up development that only could have happened with some very serious dollars being spent on it to get it to where it is today.
 
 

I think it is a kick in the guts, because the real value of NZ farming is not the land but it's people, farms like Lochinvar have been the training ground for future generations of NZ farmers. We need to encourage young people into farming, not sell the country to foreigners. I think we take for granted the farming culture that has existed in NZ, and like the all blacks we have no automatic rights to greatness if  we don't look after the grass roots.

I have used the argument that one of the values of Landcorp is it's training of future farmers and yet other farmers on here say it should go. With Landcorp contracted to sharemilk for Shanghai Pengxin I would expect that they would continue to employ some young New Zealanders. 
 
We do need to encourage young people in to farming but they need to have some ability to aspire to farm ownership, if that's what they want. Using dairy as an example,  If 100 farms of 200 acres are sold to offshore owners, to me that is much worse than one farm of 20,000 acres yet the 100 x 200acres farms fly well below the MSM radar and we hear hardly a peep from concerned citizens but the sale of one very large farm has people coming out swinging. I find that odd behaviour, but perhaps I shouldn't given the 'authorative' comments by some on here who have never farmed let alone lived in some of these areas.
 
I do agree with some of the sentiments you show on here regarding Ag and farming, but don't always agree with the arguments you put forward. ;-)

I think there is probably a different perspective to these issues from sheep and beef to dairy, as the dairy farmers have had some good years and paid off some debt. (which i think is great for nz farming). But once the door is  kicked opened wide to foreign land sales, don't be surprised at some point in the future dairy farmers face similar problems that the sheep and beef industry has, low profitability and farm sucession issues, and then those smaller farms you are talking about having to sell to the corporate.

If you want to know how tragic it can be losing your land, go ask a Maori. But you lot won't do that.

Maori aren't the only ones who have lost their land.  New Zealand is made up of many cultures - and there are others, other than Maori, who have also lost their land.

And these are the type of people we're selling to:
"Hager had, in 2013, helped research a Fairfax media article about the use of tax havens.
Odgers, a Hong Kong-based tax consultant, said in the email the material Hager was dealing with involved tens of thousands of rich Chinese.
"It would be a disaster if they all knew where he [Hager] lived. He may even need police protection", she wrote. "Those Chinese can be very vicious when they lose face ... Chop chop for Nicky."
NZHerald.co.nz today.