Smoko: Foreign ownership- put on the spot down on the farm

The great inequality debate was given impetus internationally last week by revelations of astounding bonuses still being awarded to top bankers in the United Kingdom; and pointed relevance in this country by the row over the salary rise of Christchurch chief executive Tony Marryatt, and the noisy ousting, particularly in Auckland, of the protesters of the Occupy movement.

Running a good close second in the "issues of our times" stake, and not entirely unrelated, is that of foreign ownership of land and strategic assets. And this one has possibly even greater resonance with many because of the central place "land" occupies in the Kiwi psyche; and because of the relatively recent history ofstate-owned asset sales.

The sale of the Crafar farms to the Chinese company Shanghai Pengxin, with a bid thought to be about $200 million recommended by the Overseas Investment Office and approved by the Government, has raised something of a furore.

At a family wedding at the weekend, wonderful event it was, and sitting next to a person with a lifetime on the farming side of the dairy industry, I was put on the spot. What did I think of the Crafar farm deal?

I'm probably like many people who are instinctively opposed to the sale of productive land - and other assets - to foreign interests, but there are one or two troubling contradictions and complications in this case.

The amount of farmland to be sold to the Chinese on this occasion is actually dwarfed by that sold to other foreign owners in the past few years. In 2010, Harvard University's global investment fund bought the Big Sky Dairy Farm, near Patearoa, in the Maniototo for more than $28 million, adding to an already substantial New Zealand agricultural land portfolio.

German investment management company the Aquila Group spent about $100 million buying eight dairy farms in Southland during 2010-11. Swiss, British, Australian and other American buyers have also acquired substantial similar holdings.

Additionally, the stringent conditions placed on the Crafar farms sale by the OIO - which its report makes clear have been met - probably make it more beneficial to the country than most other sales. In addition to the advantageous price, there are considerations of inward investment, redevelopment, employment, the environment, and partnership with state-owned enterprise Landcorp, which should lead to greater access to and integration with the Chinese domestic market.

Conversely, New Zealand interests have been busily investing in agricultural land and assets in other countries, including some in South America. And New Zealand's free-trade agreement with China doubtless accounts for Fonterra's increasing access to, and presence in, the farming, processing and marketing sectors of dairy products in that vast market.

Politically, this is sticky for the Government, but when you drill down it is not a simple matter.

Labour leader David Shearer has described it as a "massive kick in the guts" for New Zealanders, and the party's new finance spokesman, David Parker, persuasively rejects the notion there was an obligation to sell to the Chinese under the FTA.

Technically, that may indeed be the case, but for this Government to be seen to be going out of its way to override the present laws on ownership to deny the Chinese investment opportunities afforded other countries could be said to be both short-sighted and detrimental to the country's economic prospects - however uncomfortable the prospect of such sales are.

Perhaps, as has been suggested, the laws on foreign ownership as they stand need to be looked at again.

The partial sale of state electricity assets is more clear-cut. Quite aside from issues pertaining to incompatibility with the Treaty of Waitangi in mooted legislative changes, a prospect that may at an early stage destabilise National's agreement with the Maori Party, authoritative reports indicate there is likely to be little or no efficiency advantages to partial privatisation of the state generators. Further, many predict accelerated rises in electricity prices as a result; and there is no mechanism for preventing the long-term acquisition of up to almost half of the respective companies by foreign interests.

Energy policy is an essential ingredient of national infrastructure strategy. To be selling even partial control of this into a market that has repeatedly shown a tendency to concentrate ownership in the hands of either foreign interests, or the privileged few, with little regard for anything other than the maximisation of private profit, is reckless. The less charitable might even describe it as bordering on economic vandalism.

 - Simon Cunliffe is deputy editor (news) at the Otago Daily Times.

 

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