Kiwis, Cows, and Canadian singers…
A little bit of recent history first…
As the dust settles over the sale of the Crafar Farms to Shanghai Pengxin, it may be worth looking at some aspects of how this government handled the sale, and it’s aftermath…
For starters, a time-line on the sale process,
5 October 2009: Crafar Farms placed into receivership, owing $216 million to creditors.
22 December 2010: Government blocks bid by Natural Dairy to buy the 16 Crafar farms on ‘good character’ grounds.
27 January 2011: KordaMentha accepts offer from Shanghai Pengxin International Group Ltd to buy Crafar Farms.
13 April 2011: Shanghai Pengxin lodges application with the Overseas Investment Office (OIO) to buy the Crafar farms.
26 September 2011: Crafar farms receiver KordaMentha rejects a conditional NZ$171.5 million offer for 16 central North Island dairy farms from a group led by controversial former merchant banker Michael Fay.
27 January 2012: Government ministers approve Shanghai Pengxin’s application to purchase 16 Crafar farms.
The first matter that arises is the length of time from Shanghai Pengxin’s initial application (13 April 2011), to consent being issued by relevant Ministers: over nine months.
(Strangely, 13 April 2011 was a Sunday. Is it usual for government offices to be open in the weekend?)
The OIO (Overseas Investment Office) sets time limits for itself to process application,
Estimated decision times
There is no statutory timeframe within which an application for consent must be decided. However applications generally fall into one of three categories according to complexity with category 3 being the most complex. These categories provide a guide for how long it may take for a decision to be made:
- Category 1 applications, where the OIO aims to make decisions within 30 working days from the date of registration. Examples include: (a) applications for consent to purchase significant business assets,
(b) “sensitive land” decisions delegated to the OIO by Ministers that don’t fall into the categories below,
(c) variations to existing consents.
- Category 2 applications where the OIO aims to make decisions within 50 working days from the date of registration. Examples include: (a) “sensitive land” applications for consent requiring Ministerial consideration e.g. the purchase non-urban land greater than five hectares in size, where it includes or adjoins other sensitive land, such as conservation land, reserves etc
(b) applications for exemptions,
(c) applications where the overseas person is intending to reside in New Zealand indefinitely.
- Category 3 applications, where the OIO aims to make decisions within 70 working days from the date of the registration. Examples include: (a) applications to acquire an interest in fishing quota,
(b) applications that involve special land being land that includes foreshore or the bed of a river or lake,
(c) where the applicant intends to establish a purchasing programme such as a series of land acquisitions in a specific area for a specific project,
(d) applications in respect of which a third party submission has been received by the Ministers or the OIO,
(e) applications where the Ministers or the OIO have decided that consultation with third parties is appropriate in considering whether or not to grant consent.
Note that these targets apply to high quality, well prepared and analysed applications, and excludes the time where the OIO is waiting for the applicant to provide further information and the time for Ministers to consider and make decisions on relevant applications.
Even if the Crafar farm sale had been considered as a “Category 3″ application – there is considerable difference between 70 working days (deadline around 17 June 2011) - and nine months.
A cynic might suggest that Ministerial approval was delayed because of last years’ election. There is considerable public opposition to farm land sales to non-New Zealanders and this would have had a profound impact on National’s electoral support.
I would go so far as to say that National would have lost another couple of percentage points (minimum) in Party Votes – and therefore lost the election itself.
It is therefore National’s “good luck” that the decision to approve the sale to Shanghai Pengxin came two months after the General Election.
A lot of Racist Angst or Righteous Anger?
The first media reports that Ministerial consent had been granted for the Shanghai Pengxin appeared around 11am on the morning of January 27.
At 11.23am, Interest.co.nz published a web story, headed, “Govt Ministers rubber stamp Overseas Investment Office approval of Shanghai Pengxin’s Crafar farms bid” .
At 11.28am, TVNZ’s website reports, “Turning down Crafar sale ‘unlawful’ – Key” .
Ten minutes later, and Scoop.co.nz, reported, “Sale of Crafar farms to Pengxin is approved”.
At 2.22pm, TVNZ’s story appeared, “Fay group fights Crafar farms sale to Chinese”.
And this appeared on TV3′s website at 4.02pm, “Parties slam Crafar farm sale to Chinese”.
There were other stories on this issue – but these carried the gist was what the media was reporting. It was undoubtedly the lead story of the day.
Media reporting on this issue was prominent and widely discussed. The nationality of the purchasers was mentioned – but mostly only in passing.
Criticism, of which there was plenty, rested on two major points,
- Loss of profits overseas,
- Loss of sovereignty, and the dominance of our FTA with China over local decision-making.
Both are critical issues that have a real bearing on our country’s future.
With regards to Point #1 – profits lost overseas – Green Party Agriculture spokesperson Steffan Browning said,
“As food prices rise globally, selling off our productive land − such as the Crafar farms − to overseas bidders is economic folly. Foreign ownership of the Crafar farms means that the profits will flow overseas, adding further to our current account deficit. In the 12 months to September 2011, $15.2 billion flowed out of NZ to overseas owners of NZ companies and debt.” – Source
This is an issue of considerable weight, considering that New Zealand’s credit rating was downgraded last year by two credit-ratings agencies.
Anything that increases the outflow of profits from New Zealand worsens our current account.
The question then becomes – why allow it to happen if we can avoid it? Especially since we will end up paying for offshore investors’ profits, by way of increased interest rates. Our current account deficit matters – especially when it impacts on businesses and home owners via the interest they pay on their loans.
With regards to Point #2. John Key stated,
“And had they turned it down on the basis simply of being Chinese on their desk it would have been not only be unlawful but unacceptable.” – Source
And in the NZ Herald,
“Mr Key also pointed to the Free Trade Agreement with China negotiated by the former Labour Government that contained a clause known as the Most Favoured Nation status.
That meant Chinese investment in New Zealand could not be treated differently to any other country.” – Source
So if it is true that China (or any other nation for that matter) has a “Most Favoured Nation” status, and that they are able to compete with local New Zealanders for land, businesses, contracts, etc, then I think we have a problem.
For one thing, it seemingly makes Parliament and elections an irrelevancy if we cannot restrict purchases of our assets to New Zealanders only..
Secondly, no New Zealander can hope to compete with rich overseas investors, should they have a mind to bid for an asset. Michael Fay is one of New Zealand’s richest men – and his consortium was outbid by Shanghai Pengxin by (reportedly) $30 million.
But most importantly, FTA’s are not democratic institutions. No New Zealander voter for it. Very few had a hand in agreeing to it. Yet our FTA with China appears to take pre-eminence over Parliament?
That is a dangerous position for New Zealand to be in. Especially when we possess natural resources that other nations may covet. Our naivete may yet be our down fall.
Up until 7pm on Friday, the debate had been framed – for the most part – in economic and nationalistic terms.
Then, Maurice Williamson (Minister for Land Information/ Overseas Investment Office) and Cedric Allan (spokesman for Shanghai Pengxin) were both interviewed on TV1′s “Close Up“, that night,
Williamson succeeded in re-framing the debate over the Crafar deal. From economic and national sovereignty, he turned it into a race-based debate.
“…New Zealanders were happy for Shania Twain to own 23,000 hectares or whatever.” – Williamson, 6.04
Actually, that’s just not true. Minister Williamson has either forgotten, or is fibbing,
“When the Americans, a huge number of Americans, were buying it [land], not mutter. Not a murmur. Not a whisper from all of your opponants out there. But as soon as the word ‘Chinese’ was mentioned, we were opposed to it. And I have to say that is bordering more on racism than it is on xenophobia.” – Williamson, 6.11
The charge is repeated by agri-journalist, Richard Rennie,
“We’re talking tens of thousands of hectares bought by the Italians, the Germans, even the Brits and Americans. And yet we haven’t heard a murmur from anyone in New Zealand about that.” – Source
Again, none of it is true,
“… I didn’t hear this level of protest when huge tracts of land was being sold under the Labour government… ” – Williamson, 6.30
Then Williamson contradicted his 6.04 statement,
“Well of course the public don’t like any of our land being sold to foreigners and I understand that...” – Williamson, 8.56
Maurice Williamson had been well-prepped by his media advisors. Instead of being drawn into a debate over economics, he had succeeded in reframing the issue as one of racism. And most liberal minded New Zealanders would think twice before uttering a criticism that might be construed as racist. (Those in our society who are already racist wouldn’t care a hoot and would probably vote ACT or National anyway. They are not Williamson’s intended audience.)
This is where the racism/xenophobia meme started: Friday evening, on “Close Up“, by Maurice Williamson.
Even when we finally got to the nub of the truth, about China’s actual long-term goals, the real point by now had been lost amidst Williamson’s echoing cries of ‘racism!’.
For the record, Shanghai Pengxin representative, Cedric Allan said,
“China is looking for energy, it’s looking for water, it’s looking primarily for food…” – 7.22, Allan
Of course it is. And the OIO decision had nicely set in concrete China’s very long-term goals of securing food-supplies for the future,
…Milk New Zealand must use reasonable endeavours to assist Landcorp to extend its business to, and market its products, in China” – Source
“Pengxin announced in April 2011 after launching its bid for the farms that it planned to increase milk production from the Crafar farms by 10% and wanted to capture a bigger share of the Chinese market with branded, dairy-based consumer products. It said it planned to spend more than NZ$200 million to buy and upgrade the farms. It then planned to invest a further NZ$100 million on marketing cheeses, ice creams and baby formula for the Chinese market.” – Ibid
Is there anything wrong with increasing dairy exports to China?
Normally, no. Fonterra has been developing and building our exports to the Chinese market for the past decade. With revenues of nearly $20 billion in 2010, it is one of our major industries and export earner.
But, as mentioned before, any export-revenue to China by Shanghai Pengxin-owned farms will not come to New Zealand. They will end up in offshore bank accounts, and will be of little benefit to New Zealanders. In fact, most of the profits will vanish off-shore just as the dairy products will.
And topped off with some rich irony.
The Right have been leading the charge to support the Shanghai Pengxin deal, and accusing detractors of naked racism…
Meanwhile, the Left has countered with (credible) concerns about loss of export income…
The Right are not usually renowned for sympathatic understanding of racism against ethnic groups. They are usually more relaxed with “trashing the treaty”, mixed with a bit of Maori bashing, as their usual ‘sporting activity’. After all, the right wing party ACT was adamant that Maori were not going to get tangata whenua-based seats on the Auckland Super Council.
The Left, on the other hand are not usually in a position where they find themselves arguing on behalf of economic benefits; current accounts; export earnings; and sound commercial practices. What next – Socialist International on the Board of Goldman Sachs? (Actually, they might not do a half-bad job, to be honest… )
But the final verdict?
Lies with the voting public.
Somehow, I doubt if the public are terribly reassured by Key’s pronouncement on this matter,
“If we saw a significant buy-up of New Zealand farms, then the Government’s response would likely be to further toughen the regulations or the Overseas Investment Act, but at this point, we’re not really seeing that.” – Source
When John Campbell asked Dear Leader what constituted “a significant buy-up of New Zealand farms” (7.47) – Key was left floundering. He couldn’t name a figure. He could only waffle about vague trends. However, by the time a “trend” is established, how much of a mess will we have created for ourselves?
How much is too much?
And will our elected representatives have the wit to know when to say, “No more”?
The OIO Decision
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