Posts Tagged ‘crony capitalism’

Three Questions to Key, Williamson, Coleman, et al…

22 April 2012 7 comments



National released this media statement on yesterday, when they announced their intention to proceed with the sale of the Crafar farms to Shanghai Pengxin,


Ministers approve Crafar farms bid


Friday, 20 April 2012, 11:22 am
Press Release: New Zealand Government

Hon Maurice Williamson
Minister for Land Information

Hon Dr Jonathan Coleman
Associate Minister of Finance

20 April 2012
Media Statement

Ministers approve Crafar farms bid

Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman have approved the new recommendation of the Overseas Investment Office (OIO) to grant consent to Milk New Zealand Holding Limited to acquire the 16 Crafar farms

“New Zealand has a transparent set of laws and regulations around overseas investment,” Mr Williamson says.

“Those rules recognise the benefits that appropriate overseas investment can bring, while providing a range of safeguards to protect New Zealanders’ interests. They are applied evenly to all applications, regardless of where they are from.

“We have sought to apply the law in accordance with the provisions of the Overseas Investment Act and the guidance of the High Court.

“We have carefully considered the OIO’s new recommendation. The OIO sought advice from Crown Law and independent legal advice from David Goddard QC. The Ministers also sought advice and clarification from Mr Goddard.

“We are satisfied that on even the most conservative approach this application meets the criteria set out in the Act and is consistent with the High Court’s judgment.”

Dr Coleman said the consent came with stringent conditions.

“These 27 conditions have been imposed to ensure Milk New Zealand’s investment delivers substantial and identifiable benefits to New Zealand,” Dr Coleman says.

The conditions require Milk New Zealand to invest $16 million into the farms and to protect and enhance heritage sites

“The combined effect of the benefits being delivered to New Zealand as a result of this transaction is substantial.”

A copy of the OIO’s new recommendation is at:

A copy of the OIO’s decision summary is at:




Jonathan Coleman says that, ” The combined effect of the benefits being delivered to New Zealand as a result of this transaction is substantial. 

Maurice Williamson sez, ” Those rules recognise the benefits that appropriate overseas investment can bring…

And Our Dear Leader, John Key, smiles, waves, and said,

Ministers could have overturned that decision, but there were no reasons to do so. The OIO correctly interpreted the legislation, and had they turned it down simply on the basis of being Chinese, it would not only be unlawful but unacceptable and would have been overturned in the courts.” – Source

The questions I have for John Key, Maurice Williamson, Jonathan Coleman, et al in  National are;

  1. What possible benefit is there to  New Zealand when the Crafar farms owe a massive $216 million to predominantly Dutch and Australian  banks; the sale to Shanghai Pengxin is for $210 million; and the purchasers intend to invest only an addition $14 million in the 16 farms – $875,000 per farm? The proceeds for the sale of the Crafar farms will not stay in New Zealand – they will flow back to Australia.
  2. How can the sale of a revenue-earning asset (eg, farms) to overseas investors be ‘beneficial’ to New Zealand when the profits from those assets will flow overseas, to offshore bank accounts. Profits will  not be spent nor further re-invested in this country.
  3. Considering that New Zealand is a world leader in dairy production, what does Shanghai Pengxin – a company specialising in property development (the sixth largest in China; Appendix 5, para 42) and not dairying – have to offer us that the alternative New Zealand consortium, led by Michael Fay, and other local dairy farmers could not? Is this, effectively a vote of No Confidence in local farmers?

Several politicians have made several comments that the new Chinese owners will bring ‘new skills and innovation’ to our dairying industry.

This blogger finds that rather hard to believe. All of a sudden, New Zealanders are incapable of developing their own farms?

But perhaps the issues we should be most concerned out is a loss of revenue from those farms, as profits are repatriated overseas.

Michael Fay estimates we could lose $15 million per annum once the farms are producing milk for export,

Sir Michael says at the forecast payout of $6.35 a share, the new owners would earn $30 million a year, half of which will go to state-owned enterprise Landcorp for farming the land.

“This transaction with Shanghai Pengxin is a very, very bad investment for New Zealand. It doesn’t stack up on any economic basis,” said Sir Michael.

“It’s hard to see that half of it going overseas constitutes an economic benefit to this country. It’s a cost, it’s hard to define it as an investment”. ” – Source

And Bernard Hickey wrote about our loss of income as we sold more and more assets into overseas ownership, steadily worsening our current account deficit,

For decades we have spent more than we earned as a nation and funded the difference by borrowing foreign money through our banks, or directly in the form of companies borrowing offshore or the government borrowing from foreign funds and banks. If we couldn’t borrow the money, we would sell assets, be it companies, land or state assets.

We’ve been kidding ourselves for decades that, like the L’Oreal ad, we were worth it. We have run chronically high current account deficits for most of the last 30 years. We believed, and have been encouraged by our leaders, bankers, and asset buyers, that New Zealand could afford it and we deserved it.

But in our bones we knew we couldn’t, and it’s great to see Justice Miller at the High Court now tell us in this decision it has to stop, even if the government can’t or won’t do it. His ruling that any foreign buyer has to prove a bigger benefit to the nation than a local buyer sets a very high threshold.

It effectively says that any buyer has to invest an awful lot more, create a lot more jobs and pledge to reinvest dividends here, otherwise there is an inevitable drain on the nation.

In the last decade we have reached the limit of how much we could borrow and sell. For any chronic overspender, there is a point where they can’t borrow any more because they can’t afford the interest payments and they don’t have anything left to sell. Just before that moment comes, they accelerate their asset sales and borrowing to pay the interest on the previously borrowed money and to pay the dividends on the previously sold assets…

… The government itself has been the heaviest borrower through the bond markets. It doesn’t matter who we have borrowed it off, but again China is the biggest creditor through its sovereign wealth fund. Our state owned enterprises have also been borrowing heavily overseas and the government is about to start selling the jewels in the crown, at least some of which will go offshore.

The irony is that this frenzy of last minute borrowing and asset selling accelerates the process of making our economy unsustainable, because it pushes up our economy currency and hampers our ability to export our way out of this mess.

Just in case you question the logic, here’s the chart showing how New Zealand’s Gross National Income per capita, which is what we get to keep after we have paid the interest and the dividends, has been falling since 2003.”




Quite simply, the more we borrow from overseas; the more income-generating assets we sell to overseas investors – the more money we end up losing on every deal. The profits that used to stay in NZ to be re-invested, are now flowing out to other countries; other peoples’ bank accounts. Leaving us poorer and poorer year after year.

Selling farms after selling most of our profitable State Owned Enterprises will make things worse.

It’s also hard to see how any potential New Zealand purchaser can compete with the incredible wealth and access to funds, that nations such as China possess. Indeed, the Overseas Investment commission made this very point in Appendix 5, para 19/a when it stated,

“… 19. The purchase price for the farms is NZD $[redacted] m, plus payment for the stock, estimated to be NZD $[redacted] m. The Applicant is willing to pay this price because:

a) it has access to relatively low cost capital;”

We are in dire straights when an offshore investor can outbid a New Zealander because they have access to cheap funds to which we do not.

This is not a level playing field. The deck is now stacked firmly against us.

The deal with Shanghai Pengxin calls for further investments,

  • The Applicant must invest the higher of NZD $14m or the value agreed between the Applicant and Landcorp in
    clause 4.4 of the draft Property Management Agreement (see attachment “1”) on investment for development
    purposes on the Investment.” (ref Appendix 1, para 6)
  • The Applicant must establish an on-farm training facility for dairy farm workers in accordance with clause 5(c) of the draft Property Management Agreement (see attachment “1”). The Applicant must contribute a minimum of NZD $[redacted] m towards the capital cost of establishing this facility. (ref Appendix 1, para 7) We don’t know the value of this “training facility – the OIO has blanked out that information.)
  • The Applicant must give two scholarships of not less than NZD $5,000 each year to students of the on-farm training facility. The first two scholarships are to be awarded by 31 December 2013.” (ref Appendix 1, para 8)

Aside from some walking tracks and other contractual obligations (which we recently discovered are not followed up by anyone from the Overseas Investment Commission – so we cannot be certain that the OIO’s Conditions of Consent are followed through by Shanghai Pengxin, nor any other foreign investor) – what does New Zealand gain, financially, from this deal?

Let’s re-cap:

  1. Sale price of $210 million – goes to foreign-owned banks in Australia and Netherlands. Benefit to NZ: nil
  2. Profits from export of milk from the 16 Crafar Farms – mostly remitted to China. Benefit to NZ: nil/negative ($15 million p.a. loss in overseas income)
  3. Additional investment required in farms – $14 million*. Benefit to NZ: nil. $14 million gain – wiped out after one year of profits ($15 million) remitted back to Shanghai Pengxin, in China
  4. Scholarships for two students, @ $5,000 per-person. Benefit to NZ: $10,000 p.a.

And that, folks, seems to be it: $10,000 per year.

In return, the new foreign owner gets,

  • $15 million p.a. in profits
  • 15 million Fonterra shares
  • dairy products exported to China (along with profits made)

Now, unless this blogger’s arithmetic is seriously out-of-kilter, it’s hard to see how Jonathan Coleman’s comment holds true that,

The combined effect of the benefits being delivered to New Zealand as a result of this transaction is substantial. 

What, precisely, are those ‘benefits’?!?  Because none are apparent to this blogger.

Some further matters that warrant comment:

Point 1.

Mr Key says that,

Ministers could have overturned that decision, but there were no reasons to do so. The OIO correctly interpreted the legislation, and had they turned it down simply on the basis of being Chinese, it would not only be unlawful but unacceptable and would have been overturned in the courts.” – Source

Let’s deal with that straight away.

It’s bullshit.

In 2002, when American millionaire, John Griffin purchased historically-significant Young Nick’s Head on the East Coast,  there was considerable anger and opposition from many locals, and throughout New Zealand.  Such was opposition that a hikoi to Parliament ended up with 200 people protesting on the grounds,

Around noon on Monday 5 August a group of about 200 protestors arrived at parliament grounds, Wellington. Many of them had been on the hikoi (march) from Young Nick’s Head, Gisborne, which left 11 days earlier. Most of the hikoi participants were from the Ngai Tamanuhiri iwi, who were dispossessed of the land around Young Nick’s Head in the 19th century.

The protest group asked to see finance minister Michael Cullen, who is to decide on Friday 9 August whether to allow the sale of Young Nick’s Head to the US millionaire John Griffen. Mr Cullen was not available, nor the prime minister Helen Clark. The Speaker of the House, Jonathan Hunt, told the protestors they could not stay on the grounds overnight, and were not to erect any tent or other structure. (The precedent was the tent embassy in parliament grounds after the Hikoi of Hope in 1999, which maintained a presence for four months before being broken up with arrests).   ” – Source

When Shania Twain purchased 25,000 hectares off South Island high-country near Wanaka, in 2004, there was considerable anger and resentment,

”  The contentious issue of foreign ownership of New Zealand land is flaring again following a government decision to allow Canadian singer Shania Twain to buy nearly 25,000 hectares (62,000 acres) of picturesque mountain farmland.

Foreign ownership of New Zealand land stirs high passions among the nation’s usually phlegmatic citizens.

Farmers in this primarily agricultural country argue wealthy offshore investors are pushing land prices far beyond their potential worth as productive property, while other New Zealanders argue their birthright is being sold to the highest bidder…

… Anti-foreign ownership groups estimate that between 6 and 7 percent of commercially viable New Zealand land is now owned by offshore interests.” – Source

New Zealanders have always opposed land sales. Ever since Pakeha colonisers came to this country and said to Maori, “Have we got a deal for you!!”, there has always been a scepticism toward the sale of land to foreigners. That feeling exists regardless of nationality, ethnicity, skin colour, etc.

In fact, John Campbell took Key to task on this very issue when the Prime Minister tried to play the “racism card” on his show, on 20 April,


John Campbell Prime Minister interview Crafar Farms Sky City Casino



KEY:  “… let’s say you just want to say ‘no’ because they’re Chinese-”

CAMPBELL:  ” I don’t think anyone- Wait a second. I think that’s underhanded and disingenuous. I don’t think anyone is saying ‘no’ [because they’re Chinese]. I think people are talking about 8,000 hectares of prime dairy country and it’s foreign ownership not Chinese ownership.”

Despite Campbell making that point succinctly, Key carried on with the same theme – as no doubt he had been instructed by his media advisors, to stick to a couple of core-points.

It suits John Key – as it did with Maurice Williamson – to attempt to paint opposition to the Crafar Farm sales to Shanghai Pengxin as “racism” or “xenophobia”.

No one likes to be called racist (except for for right wing extremists – but they’re deranged anyway), and to have that accusation thrown at the public is National’s shameful attempt to portray opposition to the Crafar sale as ‘irrational’.

Somewhere up on the Ninth Floor of the Beehive; in the Prime Minister’s department; John Key’s media advisors are busily spinning this line to deflect criticism from their Boss.

These paid merchants of mendacity are clever buggers; university educated – and taxpayer funded. We pay to have them teach politicians how to spin bullshit to us.

Not a nice thought, is it?

Whether Key’s spin doctors and media advisors  will be successful re-defining the debate is another matter entirely. They have their work cut out for them, going by polling by Fairfax and NZ Herald,




Good luck in trying to dismiss two-thirds or three quarters of the public on this issue, Mr Key. As they say in business; the customer is always right.

Point 2.

Ministers could have overturned that decision, but there were no reasons to do so. The OIO correctly interpreted the legislation, and had they turned it down simply on the basis of being Chinese, it would not only be unlawful but unacceptable and would have been overturned in the courts.” – John Key, 27 January 2012

This is the second line that Key’s spin-doctors have advised him and other Ministers to push: that the law allows these sales to proceed and MPs hands are tied.

Except… when it suits John Key, he is more than willing to trade off the law for other considerations,




In return for a new $350 million convention centre, John Key simply has to change the gambling laws.

Just as John Key changed employment laws in October 2010, to suit Warner Bros, in the making of “The Hobbit” movies,




Funny ole world, in’it?

John Key sticks to the “letter of the law” like a fly to dog poo.  But when it suits him and his cronies, he can be… flexible.

What you are witnessing, my fellow New Zealanders, is what is colloquially known as “Crony Capitalism“.

Is this really how we want our country to be governed?


* Note: the original OIO condition of a once-only $14 million investment has been increased with the latest OIO review, to $16 million. This blogger replies with a “whoopty-bloody-doo“; it makes little difference in the long term.





The OIO Decision:  Decision required under the Overseas Investment Act 2005: Milk New Zealand
Holding Limited


No checks on foreign buyers of Kiwi land

NZ to lose ‘millions a year’ from Crafar sale



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