Home > The Body Politic > How to sabotage the asset sales…

How to sabotage the asset sales…

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Something I blogged on 25 June 2012, and now more appropriate than ever…

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On last weekends’ (23/24 June 2012) “The Nation“,  the issue of asset sales was discussed with   NZ First leader, Winston Peters; Green Party MP, Gareth Hughes; and Labour MP, Clayton Cosgrove,

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Source

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Whilst all three parties are staunchly opposed to state asset sales, NZ First leader, Winston Peters went one step further,  promising that his Party would buy back the assets.

Gareth Hughes and Clayton Cosgrove were luke-warm on the idea, quite rightly stating that there were simply too many variables involved in committing to a buy-back two and a half years out from the next election. (And Peters never followed through on his election pledge in 1996 to buy back NZ Forestry – “to hand back the envelope”, as he put it –  after National had privatised it.) There was simply no way of knowing what state National would leave the economy.

Considering National’s tragically incompetant economic mismanagement thus far, the outlook for New Zealand is not good. We can look forward to more of the usual,

  • More migration to Australia
  • More low growth
  • More high unemployment
  • More deficits
  • More skewed taxation/investment policies
  • Still more deficits
  • More cuts to state services
  • And did I mention more deficits?

By 2014, National will have frittered away most (if not all) of the proceeds from the sale of Meridian, Genesis, Mighty River Power, Solid Energy, and Air New Zealand.

In such an environment, it is difficult to sound plausible when promising to buy back multi-billion dollar corporations.

Not to be thwarted, Peters replied to a question by Rachel Smalley, stating adamantly,

The market needs to know that Winston Peters and a future government is going to take back  those assets. By that I mean pay no greater price than their first offering price. This is, if they transfer to seven or eight people, it doesn’t matter, we’ll pay the first price or less.

Bold words.

It remains to be seen if Peters will carry out that threat – especially if a number of his shareholders are retired Kiwi superannuitants?

When further questioned by Rachel Smalley, Peters offered specific  ideas how a buy-back might be funded,

Why can’t we borrow from the super fund, for example? And pay that back over time?  And why can’t we borrow from Kiwisaver  for example, and pay that back over time…”

The answer is that governments are sovereign and can make whatever laws they deem fit. That includes buying back assets at market value; at original sale price; or simple expropriation without  compensation. (The latter would probably be unacceptable to 99% of New Zealanders and would play havoc with our economy.)

Peters is correct; funding per se is not an issue. In fact, money could be borrowed from any number of sources, including overseas lenders. The gains from all five SOEs – especially the power companies – would outweigh the cost of any borrowings.

Eg,

  1. Cost of borrowing from overseas: 2% interest
  2. Returns from SOEs: 17%
  3. Profit to NZ: 15%

We make on the deal.

The question is, can an incoming Labour-Green-NZ First-Mana government accomplish such a plan?

Should such a  radical policy be presented to the public at an election, the National Party would go into Warp Drive with a mass  panic-attack.

But it’s not National that would be panicked.

It would be National going hard-out to panic the public.

National’s scare-campaign would promise the voters economic collapse;  investors deserting the country; a crashed share-market; cows drying up; a plague of locusts; the Waikato River turning to blood; hordes of zombie-dead rising up…

And as we all know, most low-information voters are highly susceptible to such fear-campaigns. The result would be predictable:

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But let’s try that again…

A more plausible scenario would have the leadership of Labour, NZ First, the Greens, and Mana, meeting at a secluded retreat for a high-level,  cross-party strategy conference.

At the conclusion of said conference, the Leaders emerge, with an “understanding”, of recognising each others’ differing policies,

  1. Winston Peters presents a plan to the public, promoting NZF policy to buy-back  the five SOEs. As per his  original proposals, all shares will be repurchased at original offer-price.
  2. The  Mana Party  buy-in  to NZ First’s plan and pledge their support.
  3. Labour and the Greens release the joint-Party declaration stating that  whilst they do not pledge support to NZ First/Mana’s proposal – neither do they discount it. At this point, say Labour and the Greens, all options are on the table.

That scenario creates considerable  uncertainty and anxiety  in the minds of potential share-purchasers. Whilst they know that they will be recompensed in any buy-back scheme – they are effectively stymied in on-selling the shares for gain. Because no new investor  in their right mind would want to buy  shares that (a) probably no one else will want to buy and (b) once the buy-back begins, they would lose out.

Eg; Peter buys 1,000 shares at original offer price of $2 per share. Cost to Peter: $2,000.

Peter then on-sells shares to Paul at $2.50 per share.  Cost to Paul: $2,500. Profit to Peter: $500.

Paul then cannot on-sell his shares – no one else is buying. Once elected, a new centre-left government implements a buy back of shares at original offer-price @ $2 per share. Price paid to Paul: $2,000. Loss to Paul: $500.

Such a strategy is high-stakes politics at it’s riskiest.   Even if Labour and the Greens do not commit to a specific buy-back plan, and “left their options open” –  would the public wear it?

The certainty in any such grand strategy is that the asset sale would be effectively sabotaged. No individual or corporate buyer would want to become involved in this kind of uncertainty.

Of less certainty is how the public would perceive  a situation (even if Labour and the Greens remained staunchly adamant that they were not committed to any buy-back plan) of political Parties engaging in such a deliberate  scheme of de-stabilisation of a current government’s policies.

The asset sales programme would most likely fail, for sure.

But at what cost? Labour and the centre-left losing the next election?

We may well end up winning the war to save our SOEs – but end up a casualty of the battle.

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Related Blog posts

Peter Dunne says

Campaign: Flood the Beehive!

Additional

Asset sales remain unpopular for NZers

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= fs =

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  1. Akldnut
    25 June 2012 at 9:31 pm

    Why don’t they all agree that they will purchase all non government owned shares for a rounded down to the nearest .50c each at initial sale, irrespective of the price they are at the current time of the buy back. ie. $1.85 each at the initial sale = $1.50 buyback.

  2. Jena
    25 June 2012 at 9:33 pm

    There will be no casulties except National, Maori Party and some-one called Peter Dunn, United something. NZ First will carry the can and I predict, for its strong stand to save these assets for current and future NZ’ers will win the day. It is time for Leadership, not sell-out, it is time for NZ’ers to place their stake in the ground and proclaim what is our is not for sale and in essence, to say to other nations, we will reciprocate rights where yours match ours. No more, no less.

  3. Jena
    25 June 2012 at 9:57 pm

    2800 public submissions agains asset sales; 9 in favour. The National Government doesn’t even recognise the traditional democratic Select Committee process of public submissions. This Government has taken NZ to a new depth of contempt for democratic processes and must be taught the lesson that they represent us; no one rules over us.

  4. noel f
    25 June 2012 at 10:25 pm

    Irrespective of what people think about Winston or his motives, signalling now in unequivocal terms is a great option, so good on him.
    Re getting the money – as I have mentioned elsewhere – it’s easy – print the stuff like the Fed does in the USA. None of it is real and it would not have an inflationary effect because it would go straight back offshore – like 25%+ of the revenue Fonterra generates.
    Imagine $3b a year staying in NZ because Kiwibank had the mortgages over all of the farms. That is easy to do too – if we tell the banksters to go take a hike! Again, no inflationary pressure – just swapping paper – and the interest could go into pumping up the capital base for NZ formers instead of flogging off the shares etc to offshore investors.
    Note that the Nats could fund Fonterra tomorrow if they wanted NZ farmers to control their future – but they don’t – that’s why Fonterra members have voted 2/3 in favour of splitting shares and dividends.
    It sucks… it REALLY sucks. Even less prifut will stay in NZ while we have to spend more and more public money cleaning up cow shit!

    • lightawake
      26 June 2012 at 3:12 am

      true! on a slight tangent, but i just saw this the other day..

  5. Taura
    25 June 2012 at 10:47 pm

    Spot on Frank. The nats will go into dirty pool mode and do what they do best. Throw excrement and lies. We really need to find ways to stop them NOW. Drag them into court and force them into a corner. Red tape, injunctions, breach of treaty claims, everything and anything that can be related to their crimes. Bury the bastards under so much legality, they can’t breathe, or concentrate on anything but sheer survival.

  6. 25 June 2012 at 11:55 pm

    @ Taura – Am liking very much how you think, mate.

    • Janya L
      26 June 2012 at 11:43 am

      There are many ways to delay and make sure the assets sales don’t go ahead. Potential investors just need to know what can go wrong and the shares will not be cheap enough to sell. Winstons buy back is the first of many little factors that will make the shares unsellable.

  7. Taura
    26 June 2012 at 12:42 am

    They love the disunity we live under at the moment. It’s their oxygen. We all need to unite and stand as one, for once in our lives. This is not Maori/ Pakeha as john would have us believe, that’s just a convenient excuse for him to keep us on our knees. While we eye each other, he and his elite globalist cronies undermine everything our people and country stand for: Strength, courage, ingenuity and that guts that comes from growing up in a country that had the balls to tell America to PISS OFF!!! Jenny is right. No one rules over us. And we all need to realise that the people hold the true power, not this rich little pissant and his masters. One people.

    • SpaceMonkey
      26 June 2012 at 11:44 am

      I agree completely with Winston Peters on this issue, and while Labour, Greens, Mana and NZ First should be able to put the wind up any potential investors… we need to keep an eye on the TPPA.

      The “49% with no more than 10% in any one’s hands” threshold only applies to voting shares. Any number of non-voting shares can be sold to any party – domestic or foreign. This came out when National “consulted” with iwi over the asset sales and it is the backdoor that the private hedge funds will use to gain substantial control. It will also dilute the value of the voting shares.

      (Incidentally, this looks to me to be the same model that the dairy farmers have signed up to with Fonterra. I can foresee a Fonterra that is largely foreign-owned within the next 5 years and with diminishing annual returns to farmers – but that’s another subject!)

      The TPPA, when signed, is likely to contain a clause that enables foreign corporations to sue the Government over any actions undertaken by the Government that might affect the corporations’ profits. This is already in effect in the NAFTA agreement and at least two US corporations have availed themselves of this clause to sue the Canadian Government.

      In effect, the TPPA is the foreign corporations insurance policy against future Governments and it makes the TPPA the single biggest threat to New Zealand’s sovereignty. It is reprehensible for the Government to be negotiating something of this magnitude and importance behind closed doors. Could it be that Labour and Greens are already aware of this, hence their circumspection on the asset issue?

  8. 26 June 2012 at 10:49 am

    Why not haul out the Commerce Commission, or even ‘unbundle’ the part-privatised power co’s?

    • 26 June 2012 at 10:54 am

      PS. It’d be one way to drive down the costs of buying back the power co’s without looking Mugabe-ist. Especially if privately-held power co’s can be made to look like pre-unbundling Telecom with power lines.

  9. 26 June 2012 at 12:23 pm

    Somebody needs to kidnap Peter Dunne for a few hours and National won’t have the numbers to pass the Asset Robbery Bill

  10. Priss
    26 June 2012 at 12:38 pm

    Peter Petterson :

    Somebody needs to kidnap Peter Dunne for a few hours and National won’t have the numbers to pass the Asset Robbery Bill

    Invite him to a “knees up” with plenty of booze.By the time he wakes up, and with a massive hang-over, he won’t even know which way to vote! LOL!!

  11. noel f
    26 June 2012 at 1:31 pm

    I compiled this over the weekend: http://www.1k.co.nz/nz/parliament-contacts.htm

    Parliamentary Contacts

    http://www.1k.co.nz

    • Akldnut
      26 June 2012 at 10:49 pm

      Noel you have at least 1 incorrect on that list.
      Kaikoura Hon Annette King Ms King Annette National

  12. noel f
    26 June 2012 at 1:32 pm

    And this: http://www.1k.co.nz/nz/electorate-contacts.htm

    National Party Electorate Contacts

    http://www.1k.co.nz

  13. noel f
  14. 26 June 2012 at 1:39 pm

    Well done, Noel!

  15. samwise
    28 June 2012 at 10:16 am

    I like Peters idea of buying back the assets. We can finance it by raising taxes on everyone earning over $100k, a capital gain tax, land tax for all properties over $1m . The rich are the ones to benefit from tax cuts and asset sales so they should be the ones to pay.

    • Greg0s
      9 March 2013 at 9:54 pm

      the tax we need to do this is financial transactions tax make it tiny like 0.01% but it would replace GST and more 😀

      • 9 March 2013 at 10:18 pm

        Indeed, Greg. It was the same policy advocated by The Alliance in the 1990s…

  16. ALH84001
    30 June 2012 at 5:48 pm

    That that’s what I call a cunning plan!

  17. Storm
    5 July 2012 at 10:39 am

    Shame we have to ‘buy back’ our own land which was immorally taken in the first place, like stealing someone’s car and telling them if they want it back, they’ll have to buy it back to prevent robberies being committed in it. Ahhh democracy, how I love thy ways (sarcasm).

  18. JAMES D
    8 March 2013 at 11:55 pm

    Optional buy back of any shares held by NZers, compulsory reacquisition and nationalisation of any percentage owned overseas. Which, IIRC, is pretty much what’s happened in Bolivia with their (formerly) Spanish-owned companies.

    • 10 March 2013 at 10:52 pm

      Something I’ll be blogging about in future, James.

      But more important than buying back our assets – we need to find a mechanism by which we can entrench them in public ownership forever. At present, our state assets are in danger every time the middle classes have a brain spasm and vote for National… It leave us totally vulnerable to the whims of the neo-libs. 😦

      • JAMES D
        10 March 2013 at 10:56 pm

        True, but with the knowledge of one past nationalisation, how many overseas buyers would there be the second time?

        • 10 March 2013 at 11:00 pm

          Good point… If we keep re-nationalisaing, potential share-buyers may get the message and keep away…

          I’ll bear that in mind, James, when I write my piece…

  19. Hopeful
    9 March 2013 at 8:52 am

    I like it, Frank -but I cannot see the current bully boys/girls running the Labour show even thinking about entering into any sort of agreement before the election with the Greens, NZF, etc. They are just unable to think that way !

    • 9 March 2013 at 10:20 am

      You may well be right, ‘Hopeful’. Something like this would take boldness, courage, and determination that I don’t see at the moment…

  20. 9 March 2013 at 5:33 pm

    The formula’s simple: anything to provoke massive FUD among prospective buyers.

  21. 9 March 2013 at 5:44 pm

    And are there any promo videos of the Mighty River sale? Can’t find anything on YouTube yet. I’d like to do a spoof cut-up, à la WorkChoices in Australia:

    • 9 March 2013 at 10:11 pm

      Deepred – I’ve seen the Mighty River Power sale ads on TV. If anything, they’re almost like National’s smirking in-your-face against Labour, the Greens, and other opponants to asset sales. Almost like they’re sale, “we won; you lost; we’re selling your precious shit; go f**k yourself” sort of revenge.

      It’s surprising they’re not on Youtube yet…?

      But yeah, you could do a very nice spoof job on them, for sure…

      (And if only we could substitute youre spoof-version with the one on tv… “V for Vendetta” style… )

  22. Denny Weisz
    10 March 2013 at 1:18 pm

    And how about this …… Solid Energy got suckered into in Chilean investment for $250m that’s turned into a lemon ….and now the spin they’ve borrowed from the Chileans to drive up the price of Asset Sales here? The national “Drought” been declared!! ….. prices were strong in Chile at the moment, partly because drought had driven up spot prices and there was a push towards using more renewable energy.http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10870276

  23. Theodore
    26 June 2013 at 12:00 pm

    SpaceMonkey :

    I agree completely with Winston Peters on this issue, and while Labour, Greens, Mana and NZ First should be able to put the wind up any potential investors… we need to keep an eye on the TPPA.

    The “49% with no more than 10% in any one’s hands” threshold only applies to voting shares. Any number of non-voting shares can be sold to any party – domestic or foreign. This came out when National “consulted” with iwi over the asset sales and it is the backdoor that the private hedge funds will use to gain substantial control. It will also dilute the value of the voting shares.

    (Incidentally, this looks to me to be the same model that the dairy farmers have signed up to with Fonterra. I can foresee a Fonterra that is largely foreign-owned within the next 5 years and with diminishing annual returns to farmers – but that’s another subject!)

    The TPPA, when signed, is likely to contain a clause that enables foreign corporations to sue the Government over any actions undertaken by the Government that might affect the corporations’ profits. This is already in effect in the NAFTA agreement and at least two US corporations have availed themselves of this clause to sue the Canadian Government.

    In effect, the TPPA is the foreign corporations insurance policy against future Governments and it makes the TPPA the single biggest threat to New Zealand’s sovereignty. It is reprehensible for the Government to be negotiating something of this magnitude and importance behind closed doors. Could it be that Labour and Greens are already aware of this, hence their circumspection on the asset issue?

    I understand that the Australian government is not having a bar of that right-to-sue clause, Space Monkey? We should be following them, the Aussies are no fools.

    Yeah I’m wondering about that Fonterra thing as well. Got a bad feeling about it.

  1. 27 June 2012 at 1:16 am

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