The Crafar farms sale is a canny deal with undoubted benefits for New Zealand. So why the fuss? Because each sale of productive land offshore raises questions about our future economically and as Kiwis

Anyone at all surprised by the sale of the 16 Crafar Farms to Shanghai Pengxin? Thought not. It was utterly predictable for two reasons – 1) that company offered far and away the most money and 2) the company offers export opportunities into China at a juncture in history New Zealand when we stand or fall on our ability to sell protein to that country.

Confirmation of the controversial sale was announced today by the Overseas Investment Office and approving government ministers, with associate finance minister Jonathan Coleman saying, "We are satisfied that [The Shanghai Pengxin or SPGL subsidiary] Milk New Zealand's application for consent meets the criteria set out in the [Overseas Investment] Act."

Looking at the OIO decision, it's interesting to note that the deal literally ticks nearly all the boxes; the only fail is its ability to bring new skills and technology to New Zealand. That's hardly surprising, given our farmers are as good as any in the world.

What we lack is capital and contacts, and while business interests had to be satisfied with the cash on offer, it was these that will have made the difference when the nitty-gritty of the politics was hammered out.

There will be much huffing and puffing about Chinese expansionism, xenophobia, national interests and the like, and the some dog whistle racism, but the government's approval is undoubtedly based on good business, legal and diplomatic reasons. They're made pretty clear in the OIO decision, even if they are somewhat buried in the text.

If you'll excuse the size of this extract from the decision, I think it neatly sums up the main considerations going through the minds of government ministers:

"The Chinese Government recently confirmed that it saw New Zealand as an attractive place for investment and was encouraging Chinese companies to invest in strategic assets such as dairy farms. If this Application is refused without convincing reasoning linked to non-compliance with the Act or the Regulations (which we submit is not the case), that decision will be widely reported both domestically and internationally and will be likely to send a negative message about New Zealand's attitude towards Chinese investment and about whether the commitments made in the New Zealand-China FTA are being honoured.

This would seem specifically relevant given the recent consents given, on similar grounds, to the acquisition of dairy farms in Southland by Swiss and German interests. Given the recent approvals of similar investments by majority owned Swiss and German consortiums, refusal could be interpreted as a tacit anti-Chinese bias. It is noted also that Fonterra is actively increasing its existing investment in dairy farming operations in China.

SPGL is a credible and well respected business in China with strong business acumen and ability. The Chinese Government is viewing the Applicant’s proposed acquisition of the farms with interest and the acquisition presents an interesting opportunity for Chinese business to develop a model farming skill set in New Zealand with a view to taking such knowledge and applying expertise and farming practices in a China-wide context. SPGL is also planning to export safe and high quality New Zealand dairy consumer products to China to satisfy the huge demand. This activity is entirely consistent with agriculture policies between the two countries."

In brief, that means:

  1. we want to stay on-side with China (and its bankers) and send the signal to investors that we're open for business;
  2. our biggest company, Fonterra, is ok with this deal (given the special clause stopping SPGL from setting up its own processing plants in competition with Fonterra);
  3. and SPGL can open doors in China to millions of consumers and their growing wallets.

Case closed.

To ram home the foreign affairs element of this deal, the OIO adds quite openly:

"The transaction will also confirm New Zealand’s compliance with the New Zealand-China FTA and therefore enhance New Zealand’s strategic interests."

In other words, business with China is the be-all and end-all, especially until the US gives us an FTA. So the government's insistence that the China FTA didn't influence the decision is stark nonsense.

The OIO writes it's also excited by the fact SPGL has "very strong contacts with the supermarket industry" in China, will create two new NZ brands (Nature Pure and Pure 100) and is promising to spend $100m over the next five years promoting New Zealand dairy in Asia.

If the commitments are honoured, it all has to "benefit New Zealand" economically.

What of the OIO's point about "tacit anti-Chinese bias", you ask? This sale deserves to be a major news story because of the large amount of land lost to offshore ownership in one go. But let's be honest, the fact the sale is going to China has ratcheted up the concern and public debate.

Some of that concern is reasonable – we can't buy land there, China is in the process of buying vast natural resources around the world, and such purchases are made in its national interests, which aren't necessarily ours. But some of the concern is out-and-out racism.

Last year a German firm got approval to buy 3300 hectares in Southland. Remember the public debate about that deal? No, me neither.

Did anyone complain when Harvard bought our biggest forest? Or when Britons bought up 22,000 hectares of farmland over the past two years?

Let's not forget that 14.7 million hectares of New Zealand is farmed, so the Crafar's 8000 hectares represent a tiny proportion.

Then comes the clincher – while the farms are owned by SPGL, the management company will be 50% owned by the New Zealand government via Landcorp. It is state capitalism of a sort, with the government a partner in running the farms alongside a private foreign investor. Landcorp, for its efforts, will get a partner for its exports into China.

Labour leader David Shearer in opposing the sale said this week:

"If there is going to be foreign ownership then we have to make sure New Zealanders have a real interest in it and get real value from it. Now I don't think that this sale here gives us any return."

The details of this deal make that a hard argument to sustain; there are clearly significant returns to New Zealand. It's hard to imagine how, under current law, New Zealand could have done better out of this deal. The original New Zealand bidders couldn't have offered the strategic links into Asia and, I'm sorry, I simply refuse to take seriously a Michael Fay-led anything as a champion of retaining New Zealand assets in local ownership. Fay cheated and betrayed his homeland for massive personal profit in the 1980s, selling key strategic assets offshore for knockdown prices. The deals he did weren't nearly as good for New Zealand as this one, so he has simply no credibility on the subject.

Having said all that, why am I still uneasy about this sale? Because ownership matters. The owner is boss, keeps the profits, controls the asset. One sale on its own isn't the end of the world, but added together we've sold 170,000ha of farm land in the six years from July 2005 to May 2011, according to this very good piece in Farmers Weekly.

That rises to two percent of our farmland in the past decade, according to RNZ.

If we keep that up over the next century, that's 20 percent gone.

As John Key famously said, "Looking four, five, 10 years into the future, I'd hate to see New Zealanders as tenants in their own country, and that is a risk, I think, if we sell out our entire productive base, so that's something the Government will have to consider."

So what's been considered? Nothing as far as we know. And we don't know much. We don't even know how much farmland is in foreign hands already; records weren't kept before 2002 and no-one's made the effort to do an historical inventory. How about it Maurice Williamson? Perhaps its worth someone at Land Information spending a few weeks on that task? Or is it a job for the OIO?

And then we can get on with the proper debate, in which we ask 'what about the long-term, what's in our national interests generations hence? Where do we draw the line? And what laws should we pass to ensure we remain owners rather than tenants?

Is increased access to Asia in our interests if we don't control the profits? Is this the right kind of joint venture? And more fundamentally, who are we as New Zealanders if not owners of these few islands?

Politicians need to be answering those questions if they want to earn respect on this issue.

Comments (28)

by Chris de Lisle on January 27, 2012
Chris de Lisle

Watching this story on the news last week, my flatmate said- "I don't see why we allow non-resdents to buy New Zealand land." At first I was opposed, because I was in an argumentative mood. But now I'm on the fence.

Now, you and the OIO make a good case for why this deal should go through, especially when other such deals are going through all the time. But, frankly, I'm just as bothered that Harvard is buying up our forests and that the Swiss & Germans are buying up Otago.

Also, why do we sell our land outright rather than just selling leases or fixed term usage rights? The rights aren't entirely reciprocal, here; Chinese businesses can buy our land, but, as you allude, it is fundamentally impossible for NZ businesses to buy Chinese land; they don't allow private land tenure.

by Peter Martin on January 27, 2012
Peter Martin

So Dotcom can't buy the Crisco house and land because of hurdles...yet the Chinese Govt...er Shanghai Pengxin, has a 'few boxes to tick'?

by animalspirit on January 27, 2012
animalspirit

And what is this going to do to farm prices?   May as well just sell the McKenzie Country too for the liquid gold, while the PM is pours out the new sad story about the NZ economy - while wasting police time on his bizarre teapot case.   Funnier still, a government department is going to "run" these expensive properties while government spending on public servants is being slashed.   Nuts.

by Tim Watkin on January 27, 2012
Tim Watkin

Peter, it is literally ticking boxes, but it is quite a few if you read the decision, and it is law.

Animalspirit, this land is a drop in the ocean of the Mackenzie basin and a single example of many thousands of hectares that have been sold over the years – why are you so concerned now and about this government. National is fairly pointing out that Labour when last in government were big sellers of farmland to foreigners, so this isn't a party-specific issue. And isn't it better to have NZers – and taxpayers at that – running the farms? I don't know of any other farm sales to foreigners that gives us that sort of input, so isn't that better than most?

Yes, iyou'd expect it to inflate farm prices. While many current farmers will be happy with that, it's a bugger for the up and comers and that's a real problem to be thought through.

But high land prices could also be a protection of sorts from overseas investors, as it may encourage them to buy productive land in South America or Africa rather than here.

 

by Ian MacKay on January 28, 2012
Ian MacKay

Who created the boxes  to tick? The Government of the day.

How about a box which says that only those who have been holders of NZpassports for 10 years or more, can purchase land greater than 10 hectares?

How about a box that allows non-NZers to lease land and develop it in the National interest?

How about a box that recognises the pathway for keen young people to labour on dairy farms, share milk then one day own their own farm at affordable prices?

by Susie Brown on January 28, 2012
Susie Brown

I am against the sale of NZ land to non-residents in general, but have a particular concern about the sale of land to Chinese interests for several reasons. Firstly, China has been an empire builder in 'acquiring' Taiwan, Tibet and the land of the Uiger people. When anyone suggests that these areas are entitled to independence the Chinese reaction is not thoughtful and reflective, but an almost visceral anger at the suggestion. We saw this in N.Z. when a spokeswoman for the Uigers was on a speaking tour here. Chinese studying in here protested very vehemently and noisily at the presence of a 'terrorist' on a speaking tour. No evidence of her terrorism was  offered, just the insistence that if the government in China had said it, it was enough. China is currently a colonial power and tolerates no criticism of its hold on said regions. Minority, indigenous languages in China are seen as inferior, shameful even.

Secondly, China now has 24 million young men who will not be able to find a wife at home due to the gender imbalance. Some will be able to import a wife but the balance will face a bleak future. Add to that the apparent total dependence on the govt. line with no current culture of political criticism and it would be all to easy to create an atmosphere of 'righteous war.' Wars are one way to soak up all that excess manhood.

Thirdly, the 'discovery' about ten years ago of an ancient map of the Jeung He (spelling?) expedition which purported to show New Zealand before the voyages of Tasman and Cook. Hmm... How convenient. Might come in handy if our laws on minimum wages and non-discrimination in hiring were to prove troublesome. (Many Chinese who have chosen to live here believe much of our human-rights legislation is naive.) 

I state again that I am against the sale of land to all non-residents, but cannot dispel my nagging worries about the sale of the Crafar farms. Never should have been sold as a job lot anyway. Door slammed in the face of the farming generation just staring out.  

by Chris de Lisle on January 28, 2012
Chris de Lisle

@ Susie Brown: The People's Republic doesn't control Taiwan. It and its predeccessor states have controlled Tibet for around three hundred years, and the Uyghur region of Xinjiang for two thousand two hundred. The treatment of the ethnic minorities in these regions is abysmal, but they are longterm holdings and hardly indicate a Chinese trend towards being an aggressively expansionist power (Quite the opposite- the PRC has dropped claims on Mongolia, the Koreas, Vietnam and most of its claims on Russian territory). We ourselves, hold several territories in the Pacific and popular opinion does not react positively to the idea, say, of Tuhoe independence. 

Zheng He and ancient maps, such as the Shanhai Yudi Quanhai have been consistently used by the Chinese propaganda machine to build a narrative of historical regional engagement, in contrast to the traditional narrative of haughty isolation. They have not used them to advance claims on distant territories.

China stands to lose a lot in a war- it has no overseas forward bases, while the Americans have secure bases in Japan, South Korea, Taiwan and moveable bases in the form of aircraft carriers and nuclear submarines. The Chinese have only one unarmed aircraft carrier, a refit of an outdated Russian model. The Americans have 20. War is one way of soaking up excess manpower and building economies- we are especially conscious of this in the west due to the positive effects of WWII, especially on the American economy. I would argue that the Chinese experience of war has been very different- the Chinese Civil War and Sino-Japanese Wars effectively wrecked the country and the Korean War did not lead to increased national prestige. By contrast economic and industrial expansion has. I think they're much more likely to soak their excess manpower up in more factory compounds. 

It's very easy to turn the actions of foreign powers into a narrative of threat. For instance, America has a history of aggressive expansion and intervention in the Pacific (Hawaii, American Samoa, Philippines, Micronesia, Korean and Vietnam Wars), a particular history of subordinating NZ interests to its own national security (e.g. their reaction to our nuclear-free policy in the 80s), its popular culture is actively  infiltrating our own, its universities are buying our forests, and they have recently been interfering in our labour laws (the Hobbit Industrial dispute). Yet we don't constuct this narrative. Of course, it is artificial- these events are not closely related, NZ was not really the focus of any of them and America's goals and motivations have been changing constantly over the last fifty years. But if that is true of America, why wouldn't it be true of China too?

Finally, I think in real terms, New Zealand is exceptionally minor to the Chinese. Destroying our labour laws, or occupying our territory (!) would net them very limited profit. Our real value to them is in demonstrating to more valuable Western nations (e.g Australia and America) that close economic ties with China can be mutually beneficial; they have a vested interest in offering us good deals and keeping us happy. In this regard, I suspect that the backlash against the Crafar farms deal is a loss for them.

In short, I think that the picture of a particular Chinese threat is artificial and unwarrented. We should be thinking about how we interact with foreign business in general, as Tim suggested in his post.

by Phil Tate on January 28, 2012
Phil Tate

Agree.

Indiscriminate land sales on what are primarily commercial grounds should provide us with pause for thought, and leaves me personally uncomfortable.  The next few decades are going to be extremely challenging globally and I detect a level of naivety (or political expediency) in our current approach to what is the ultimate strategic asset.

There is an unfortunate whiff of racism associated with the Crafar debate and the earlier examples of German, British and Swiss sales underscore this. Land purchases by the Swiss are particularly ironic given their very tight regulation of foreign ownership through the Lex Koller legislation (http://tiny.tw/9Ut).

The buyer's country of origin is irrelevant. The primary guide to our actions should be the safeguarding of our self-determination (sovereignty) and the means to effect social development for NZ citizens. Under current legislation this ability is being steadily eroded.

It's immaterial whether the current foreign holdings position are 2 or 20%. A constructive debate's needed before it reaches a level when the conversation is effectively closed.

Advocates point to the deal as an international vote of confidence in our farming capability. Whilst this may indeed be true today, it could also prove a short-lived advantage given the immense capital challenge facing young people keen to acquire a farm. Many are already tenants in their own land.

Kiwibank, born of a desire to repatriate banking ownership, is now widely regarded as a success across the political spectrum. It's hard to see the agricultural equivalent that we may yet search for in years to come.

by animalspirit on January 28, 2012
animalspirit

Naive and nuts.   Now Mr Crafar says he is left with nothing and had funds to buy back  the farms!   Land and property price/speculation  are the root cause of the ongoing financial crisis and this sale is a symptom of it.   Despite Fran O'Sullivan's assertions in this morning's Weekend Herald, it has been amply demonstrated that there is no such thing as "economic rationalism" .... economic benefits from dirty dairying will never cover the true economic and social costs of selling this land at such an exorbitant price.  See Colin James thoughtful article at www.odt.co.nz on "Inequalities can no longer be justified" particularly his quote from Martin Wolf of the Financial Times.

by Tim Watkin on January 29, 2012
Tim Watkin

Excellent thread, really interesting stuff. Susie, I think a lot of people have your sorts of concersn, but Chris's reply is excellent. Much better than I could have offered, but beautifully makes the point that it comes down to how you look at it – if you start neutrally without any cultural or historical bias, you can constrcruct a narrative that makes the US look much more imperial and aggressive than China. (And the Zheng He maps and any suggestion he made it to NZ should be ignored. Complete toss).

But for all Chris's wisdom, I think Susie has a point about China's human rights record; they are worth greater scepticism because of that. So I disagree with Phil – country of origin does matter. I'd be more concerned of sales to North Koreans than with Norwegians, for example.

But in principle you're right Phil, the debate needs to come back to how we buy and sell the land in these small islands. I'd love to know the various ways other countries do it.

Maori have been banging on about soveriegnty for a long time, often ignored by pakeha. But it is something we need to talk about more.

Animalspirit, Crafar has said all sorts of things, much of which has been discounted by the receivers. Remember the state his animals were in? They sure didn't have much spirit left!

And Susie, you talk about the farming generation starting out. Do they have a right to buy a farm, though? I can only start a business if I can afford the start-up costs. Or is it too high a price to pay that amongst locals only the wealthy and children of farmers can afford to farm? Where's the opportunity for the talented and hard-working?

 

 

by Susie Brown on January 29, 2012
Susie Brown

Thanks for the thoughtful responses to my comments. Voicing concerns about China's agenda does not mean I'm starry-eyed about America's agenda. Having protested against N.Z.'s involvement in America's war in Vietnam in the 60s, I have no illusions about American foreign policy over the decades.

I wrote the comments because, in ten years of teaching Chinese students in N.Z.'s secondary schools I've been impressed by the size of the gap between the public line and what the young Chinese believe.

Taiwanese students want to maintain independence, mainland students state that Taiwan is part of  China and will be reclaimed one day and western maps will be 'corrected.' However, parents from both countries seem genuinely concerned that their sons are at risk if war breaks out.  My home-stay students (from both China and Taiwan)have had real difficulty with our level of human rights. Adolescents are very easy to read, and if their comments reflect their communities of origin, we are all in for some interesting times.

A capital P for Pakeha, please Tim. Sovereignty is the issue and we do need to talk about it more. When I wrote about the next generation of farmers I was thinking about anyone starting in business. Starting small and building up is possible and the usual path. No-one has a 'right' to buy a farm or warehouse etc. I must have missed something, because I don't know why the farms could not have been sold separately. 

by stuart munro on January 30, 2012
stuart munro

Fraid I can't agree Tim. As Ian says the choice of boxes left out a few important ones.

I never supported the sale of NZ assets, and the post-sale performance of our economy tends to suggest that they were only an economic miracle for the scoundrels brokering the sales: notably Prebble and some dodgy Auckland bankers.

Compliance with the Overseas Investment Act is hardly reassuring, and as for the Chinese race Card! Most New Zealanders oppose such sales. Our pseudo-representatives know this, and refuse to discuss them. This sale only saw daylight because the first buyer was undercapitalised. Most of the opposition to Crafar would have been just as happy to oppose German or US sales.

Our treacherous governments take great pains to keep such transactions from the public. They do this because the sales are economically indefensible. Were we a healthy democracy the government would be obliged to demonstrate unequivocal longterm benefits to New Zealand. As it is the OIO provides a figleaf of deniability comparable to the higher salaries commission, and no more healthy.  Like yourself, most of the media subscribes to the amiable fiction of benign foreign investment. It must be an article of faith because the evidence is not encouraging.

The best this deal can be is value neutral. There will be no technology or acumen transfer to New Zealand's advantage - rather the reverse. If the new owners are less than saints then it will simply be one more erosion of NZ's wealth and independence.

And where does it end? It doesn't. That's part of the problem.

by Paul Comrie-Thomson on January 30, 2012
Paul Comrie-Thomson

An interesting post. Thanks Tim. And great subsequent comments to consider too.

My two cents, for what it's worth:

New Zealand seems to be in a position where business and the Government are, and have been for a while, (rightly) orienting perspective to our immediate neighbourhood (Asia). However, by and large the media remains largely committed to a Euro/America-centric orientation.

If you remember back to the 2010 clashes between 'Red-Shirt' protestors and Government forces in Thailand. This was the same weekend as the plane crash that killed Polish President Lech Kaczynski and his wife alongside several senior Polish politicians. 12 hours after the chaos in Thailand had erupted, the Kaczynski story was painted all over each of the main New Zealand news websites, but there was no mention at all of what was happening in Thailand. Furthermore, this was despite the fact that Google News indicated that 6000 media outlets elsewhere in the world were covering the story. Surely, we have far stronger people-to-people links with Thailand (tourism, international students etc), and economic ties (our 10th largest bilateral trading partner, and 14th largest export market), than we do with Poland.

Granted, the Kaczynski incident was freakish, but I do think this gets to the nub of the problem. Until, the big media outlets start to orient their focus toward Asia to a far higher degree, the general public will be ignorant of 'our own backyard', leading to the kind of xenaphobic reaction we've seen here.

by Gareth Ward on January 30, 2012
Gareth Ward

Excellent post Tim, thanks.  Given the conditions and nature of the deal, this has to be one of the better foreign farm investments we've seen (direct involvement of a state agency in the higher-value end of the chain, limits to their ability to control that chain, high capital investment...).  But the fact it's raised such concerns shows how we need to get the overall process and intent right. 

by animalspirit on January 30, 2012
animalspirit

I studied with mainland chinese in Sydney (MBA) and they are smart.  Travelling around Europe looking at budget tourism 2007-08 I was surprised at how many businesses were run by Chinese esp Portugal and Rome (even the Pizza place on a main road.   Chinese students these days take out all the prizes for excellence in science etc and classical music especially in Australian immigrants.   So my worry about the economics is not about cleverness and adaptability but about the distortion in pricing structures making farm land out of reach for young farmers etc.  Can't imagine this sort of sale even being a starter in the UK!   Crafer farms should have been sold in lots. Let's hope the South Canterbury sale is not a bulk offer as well!  

by Frank Macskasy on January 30, 2012
Frank Macskasy

Maurice Williamson is talking out through the top of his head when he claims that no one objected to the sale of land to Shania Twain or Young Nicks Head to American millionaire, John Griffin.

There was, indeed, considerable opposition:

http://tvnz.co.nz/view/news_national_story_skin/117876

http://articles.cnn.com/2004-09-16/world/newzealand.property_1_public-ac...

 

I suspect that, having lost the economic argument, John Key and his cronies are resorting to Plan B: label critics as "racist" or "xenophobic". I doubt New Zealanders will take kindly to these epithets being thrown at them for their legitamate concerns.

Little wonder Key is making noises about "reviewing" laws regarding farm sales. (Which will come to nothing, of course.)

It's also interesting that Key & Co have insisted that, under the FTA with China, we cannot refuse land sales to them.

Really?

If our sovereignty has been sacrificed on the Alter of Free Tade agreements, then it occurs to me that Parliament is irrelevant; elections are a pointless exercise; and John Key is merely an economic manager of Sub-Branch New Zealand Inc.

It may be time to review these FTAs and what they mean for our economic independence. when we have lost the ability to say "no" to Americans, Germans, Chinese, Swiss, or Uncle Tom Cobbly - then we have lost our nationhood.

by william blake on January 30, 2012
william blake

Is xenophobia a Chinese word?

by Frank Macskasy on January 30, 2012
Frank Macskasy

Another point to ponder...

John Key has propmised us, hand-on-heart, that Kiwi "mum & dad" investors wouild get first option to buy shares in four SOEs, soon to be partially-privatised.

But if our FTA with China means that they must be allowed to bid on anything for sale in this country - how can Key prevent them from denying equal rights to bid, along-side "mum & dad" investors?

 

by jack on January 31, 2012
jack

"As John Key famously said, "Looking four, five, 10 years into the future, I'd hate to see New Zealanders as tenants in their own country, and that is a risk, I think, if we sell out our entire productive base, so that's something the Government will have to consider."

This is John Key's mark. He will say something like the above quote to sooth people, particularly during an election year.  Then, unexpectedly he'll turn around and do what he said he was implying what he wouldn't do.  This happens everytime with Key.  I am not looking forward to the TPPA results because New Zealand's interests will be compromised again.  TIm, I agree with your last statements.  I feel uneasy because where are the profits going to? Offshore? How much is this going to cost New Zealand vs the benefits.  This has not been discussed.  Bill English even admitted to saying that New Zealand gets poorer when business is good because profits go offshore.  We'll be slaves in our own country.

by Keith Stewart on January 31, 2012
Keith Stewart

I am still struggling to see what the economic benefit is to New Zealand in allowing a Chinese company to pay off an Australia bank debt and gain ownership of productive New Zealand farmland. I will put aside the specious claim that Crafar Farms represents a tiny proportion of New Zealand's arable land, as an equivalent purchase of Chinese land by Landcorp would amount to 585,000 hectares. I don't for a second imagine the Chinese permitting such a transaction.

As for the the argument that we need Chinese partners to secure access to the Chinese market, we already have them. As is the Chinese method, Fonterra must have Chinese partners to operate there. Giving this company ownership of New Zealand farms delivers nothing we don't already have.

So, we get no money from the sale, and no more export access than we already have. As China is a net importer of dairy, and the world doesn't have a future excess of dairy, opportunity to sell into China is hardly an economic issue for us, even if Fonterra were not successfully operating there.

Again, where are the economic advantages in this deal? For us, it seems we have none, but for the Chinese every purchase of arable land goes towards them addressing their strategic weakness, to wit, 10% of the world's arable land, 20% of the world's population.

And the problem in this deal can be found in our own lamentable economic history. There were 4 legs to the agriculture machine that drove New Zealand's export economy in the past - horticulture, wool, meat and dairy. Horticulture was initially the winner, but as it was owned by Maori it was soon marginalised. Wool was next, and the structure was simple - owned overseas, traded as raw material to finishing producers in foreign countries. Next, with refrigeration, came meat. Again, owned overseas and traded as raw material to finishing producers in foreign countries. Dairy, which made and sold butter and cheese, was the only major land based industry that finished products in New Zealand. It was also the only one where the farms and the factories were owned locally.

So in the simplest of terms, compare dairy, meat and wool and see where lack of local control delivers our economic power. In particular consider the collapse of cheap meat exports to the United Kingdom. For years New Zealand's option was to subsidize farming and transport, but ultimately a Government came along that was no longer prepared to support low retail meat prices for Brits. But the cost in the collapse of our largest manufacturing industry, meat processing, the wholesale loss of jobs and subsequent ravaging of sound provincial communities throughout the country continues to cripple us.

Horticulture, too, has some examples. Take the "investment" in New Zealand wine of French liquor corporation, Pernod-Ricard. Like the Crafar deal the same arguments have been made for investment in New Zealand land and direct connection with subtantive international markets to facilitate the successful export of more NZ wine.

But like the Crafar deal the initial investment is not made here, it goes to an offshore owner, in that case British liquor corporation, Allied Domecq. And six years after the deal, our third largest winegrowing region has been abandoned at a loss to Pernod- Ricard of NZ$100 million, and to the Gisborne economy of at least NZ$10 million annually. Major brands such as Montana and Lindauer, our largest single export wine, have been dumped and sparkling wine exports are languishing.

Pernod-Ricard is now run out of Sydney, and New Zealand's emblematic wine, Marlborough Sauvignon Blanc, created by Montana, is suffering as its image is being devalued, not least by Pernod-Ricard as it meets the demands of its shareholders for more profits from Scotch whisky and French champagne. New Zealand wine simply doen't rate any longer with corporate strategic planners in Paris.

As an aside, in the area of forestry we should never forget that it was an Australian company that chopped down most of the kauri forests that were our largest national asset in 1918. Like the Japanese, sustainable forestry is something you do at home. Off shore you keep on milling until the last tree is gone. Unemployment, shattered landscapes and destroyed community is no longer you problem when the trees are gone, and the miller is at home.

In summary, the Crafar deal seems to me more like a continuation of our pathetic history of selling ourselves short in the naive belief that big buck foreigners will improve our lot. Evidence is, they don't. The only overseas investment that has ever paid off for New Zealand was in loans from banks to build infrastructure like railways and dams. That is unlikely to ever happen again.

My greatest concern, however, is that this Government's activities vis a vis dairy seem predicated on the free market ideology that success depends on share and commodity trading, not in farming and production. The last National administration was being led by the Business Round Table into finding a share market model for the co-operative dairy industry, and now as farms are being sold to a Chinese investor, regulations are being framed to make more milk available to processors outside the co-op at a price that delivers no return to either farmers or their company.

So to hear claims that this deal is being done in the interests of an economically sound future for the whole country sounds like a sick joke, or just more of the same old woolly thinking about foreigners knowing best what is good for us.

 

by Tim Watkin on January 31, 2012
Tim Watkin

Hi Keith, it's been a while and it's great to see you pop up here. Hope you're well.

The history you cite makes some strong points I hadn't considered. The point that dairy is the one industry we "add value" to before export and is thus a big earner and a market we lead the world in, is well made. In that sense it's a model for the country and our ability as a country to maintain control of that industry is crucial if we want to remain world leaders.

I still argue this is a good deal, as far as it goes. And that not all foreign investment or ownership is bad – indeed, in a globalised world it's inevitable. Keith I don't buy your line that the deal gives us nothing we don't already have re market access. This company is offering millions in marketing spend that's new, a huge leg-up to Landcorp products and has contacts that I'm confident are better than anyone in NZ, outside Fonterra. And probably better than most of Fonterra. Just because China has the demand doesn't mean we'll get the market share – they could buy Danish or American – unless we find the right people to work with.

But the bigger picture if where we draw the line on ownership and control, which is where my mind was going by the end of my post.

by Tim Watkin on January 31, 2012
Tim Watkin

Paul, interesting example on the media. My first thought was that more partner media would have done stories on the plane crash than the riots – we're focused on Europe and the US because local media source international content from British newspapers or US and UK TV networks etc. But your point about the number of outlets covering the Thai riots undermines that point a little.

Having said that, editors would often take their lead more from the Guardian or NY Times than the South China Morning Post. It's habit. And you're right to question it given everything else that's going on around us.

 

by stuart munro on February 01, 2012
stuart munro
by william blake on January 30, 2012william blake

Is xenophobia a Chinese word?

仇外心理

by MJ on February 01, 2012
MJ

I guess other real concerns are these:

http://www.kiwipolitico.com/2011/01/a-prc-fifth-column-in-nz/

The smell around it from the first bid and the behaviour of the New Citizen Party is a tad ominous. 

We have enjoyed a benign strategic environment, but this may not be the case forever as tensions between the U.S. and China increase in the Pacific. 

 

by Tim Watkin on February 02, 2012
Tim Watkin

Except MJ, that's a highly speculitive piece. So not that ominous at all. The only facts claimed in the piece are that a few Chinese New Zealanders with political ambitions got together while in Beijing to talk about their new party (which is failing to register even a blip in the polls). Um... so what?

All the stuff about possible influence by the Chinese government is "hypothetical", ie made up.

I could write a worrying piece about the meetings held in Washington DC by Americans dabbling in NZ politics – there's even a congress committee set up by US politicians specifically to form connections (influence?) NZ politicians. Gasp. One of the men on it is also on the House Armed Services committee (military ambitions?). Heck. Then there's this joint council of NZers and Americans trying to exert pressure on policy. US-NZers have meetings in the US about this all the time! Suspicious? Consider America's military history and might. You worried (hypothetically)?

Then there's the National Party, which actually holds entire cabinet meetings in a foreign country. Now that's ominous! I mean, allowing foreign influence on our very government!

You get my point... But I agree, the Asia-Pacific region may become less benign than it has been. See my post from a couple of weeks back.

 

by Clive on February 08, 2012
Clive

"we want to stay on-side with China (and its bankers) and send the signal to investors that we're open for business; "

 

Yea, this is what we tried to do with one of our Muay Thai Camps in Thailand, but trust me it doesn't work so well.

by on May 05, 2012
Anonymous

So Dotcom can't buy the Crisco house and land because of hurdles...yet the Chinese Govt...er Shanghai Pengxin, has a 'few boxes to tick'? 

regards Peter

Webmaster of <a href="http://effektives-bauchmuskeltraining.de/">Bauchmuskeltraining</a>

by on May 05, 2012
Anonymous

So Dotcom can't buy the Crisco house and land because of hurdles...yet the Chinese Govt...er Shanghai Pengxin, has a 'few boxes to tick'? 

regards Peter Webmaster of Bauchmuskeltraining

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