The Crafar Farms sale has become a flashpoint for public concern over foreign ownership. As politicians figure out how to repsond, how can we keep the land without closing the door to business and trade?

The Overseas Investment Office's recommendation on the Crafar Farms sale is sitting on the desks of Maurice Williamson and Jonathan Coleman, ticking away like that cliched old time bomb.

What should the government do? Should it approve Shanghai Pengxin's $200 million offer for the 16 farms? Of course it should; and it will. As the law stands, it's right and proper. Sure, Justice Forrie Miller's ruling may have raised the bar, forcing foreign investors to offer more benefits to New Zealand than previously. But nothing he said should be sufficient to scupper the deal.

So now the government has to announce that decision in the knowledge it will be met with hostility by voters, just at the time that voters are already meeting plans for partial state asset sales - even a bit of land in Devonport - with hostility. It also has to balance the diplomatic delicacy of a visit by China's fourth-ranked leader Jia Qinglin in a couple of weeks.

It's going to be awkward, to say the least.

But this is a done deal. Shanghai Pengxin have acted in good faith; you could even argue their offer is generous. Certainly Michael Fay's low-ball offer and attempt to play the race card for his own personal gain makes it look more-than-decent by comparison.

To change the rules on the hop would damage our reputation in Asia, a point Kiwi investment fund manager David Mahon made on Q+A:

New Zealand is under some scrutiny... not just in China, but throughout Asia with our major trading partners and these sizeable economies – India, Indonesia – would look upon this as being New Zealand as a narrow country after all, that New Zealand actually is racist in terms of its view of who it would like to be its business partners, which I think would be a sad misreading of New Zealand..."

So the question then becomes, what next? The Crafar Farms represent just .006% of our farmland, but two percent has been sold offshore in the past decade and interest is only growing.

The public mood is strong on this, and I don't think it's for the budging. Whether it's xenophobia, a proud love of the land or some latent business instinct, the vast bulk of New Zealanders think selling the land that underpins our prosperity is just daft.

So it's time to think about the creative solutions. The Greens have a simple answer - no sales to non-New Zealanders. That's one place to draw the line; presumably the land already in foreign hands would be exempt and slowly sold back into New Zealand hands if and when.

But are there other options? Different countries take a different approach to not only farmland, but residential property as well.

Australia is quite tight on residential land, but when it comes to farmland has a pretty open door - only farm sales over $244 million trigger a mere investigation by the Foreign Investment Review Board. But other countries have stricter lines. In Alberta, Canada, non-residents are limited to two plots of agricultural or recreational land not exceeding a total of 20 acres. Elsewhere in Canada, Manitoba prevents non-residents from owning more than 40 acres of farmland and requires that they move to the province within two years of purchasing the land.

Last year Argentina passed a new law restricting overseas buyers to 1,000 hectares in key areas of the country. It also sets a limit of 15% of total land being owned by foreigners. And that's a country with a heck of a lot more land than us.

Perhaps that offers a model for New Zealand to follow - a limit in either percentage terms in the total number of hectares that can be sold.

Undoubtedly, if other countries continue down the same track as Argentina, the pressure will grow on politicians here to act. Why? Because investors and governments in China and the Middle East, so eager to secure their food and resource supplies, won't stop their land grab.

So, if other countries tighten their ownership rules, demand for land here is likely to increase and drive the price upwards. Great for selling farmers in the short-term, but of little benefit for the country long-term and with a distinct downside.

Mahon also had an idea, which he raised on Q+A. What about leasehold?

There are solutions. Perhaps there could be a trust that acquires agricultural land from anybody. So farmers can sell, in a real sense, get value for their land, and then foreign buyers coming in acquire land through that trust. And that trust could base sales on the fact that all land purchased in New Zealand was leasehold.

Obviously private farmers can keep doing their thing, but if and when they want to sell, the government could bid and, should it win, build up a land bank to be leased to offshore investors. We all own the land, but we still attract foreign capital.

Might be too state-controlled for some, but the public feedback to Mahon's proposal was instant and favourable. People were writing and texting in saying leasehold was a great idea.

So perhaps there's a middle-ground between the rubber-stamping the Overseas Investment Office currently engages in and the complete ban the Greens and New Zealand First support. What do you think?

Comments (19)

by Stephen on April 08, 2012
Stephen

I remember renting in London on the balance of 999 year leases, an option here?

by Freddy on April 08, 2012
Freddy

Sorry, i don't care who it is or what asset it maybe but when something, anything, is leased it is never kept/maintained or even loved, if you like, to the same degree as an asset owned....end of debate!  

by Graeme Edgeler on April 08, 2012
Graeme Edgeler

two percent has been sold offshore in the past decade and interest is only growing.

Are you sure that this statistic isn't based on the area of land subject to OIO approvals (which includes land sold by one foreigner to another, and land sold multiple times, and doesn't account for the net effect of land sold back to a New Zealander)?

by Tim Watkin on April 08, 2012
Tim Watkin

Yep, pretty sure based on several sources. Here's one Graeme, from RNZ. And from a combination of Farmers' Weekly and the OIO I can tell you that around 170,000 hectares of NZ's 14.7 million hectares of farmland was sold in the past six years – that's about 1.2%. So the 2% figure from RNZ over the decade seems plausible.

One of the problems which I didn't touch on in my post but is worth noting is that no-one knows exactly what percentage of NZ farmland is in foreign ownership. A record only started being kept in recent years and remarakably no-one's bothered to go through the country's farms one-by-one and figure it out. I thought that'd be a most useful exercise for some bureaucrat to do; vital even!

by william blake on April 09, 2012
william blake

Moral qualms from Indonesia and China that equivocation about foreign land ownership being racist? How about an ethics test on the buyer?

by glenn p on April 09, 2012
glenn p

Some questions that will highlight my ignorance on this matter, but here goes...

What are we (NZ) receiving other than money? Surely it is not knowledge or expertise? I thought that NZ was supposed to be a (the?) world leader in farming. How are the Chinese going to operate these farms any more productively than we could? If the Chinese can make a profit from farming land that they purchase for $200m, then surely we can make an even larger profit from farming the same land purchased for less than $200m. And if we can't, we need to work out why that is.

Yes, I am sure the Chinese are willing/able to pay more for the land, but public (and my) opinion is that short-term gain is a poor path to take. If I want to get emotional, I'd say it is theft from our future generations.

I really don't see any point in selling our land/resources. If we can't work out how to profit from them now, we hold on to them until a future generation works out how to do so.

On a kinda related matter, it is interesting that Fonterra owns farms in China, and China wants to own farms in NZ. The Fonterra farms in China, I understand, are battery farms, which Fonterra could not get away with operating in NZ, whereas the Chinese will be forced through law or public opinion (I'm not sure what the legal status is) to operate more humanely in NZ (than they would in their own country).

by Tim Watkin on April 09, 2012
Tim Watkin

William, there is some ethics test... Can't remember the details of it, but remember Dotcom wasn't allowed to buy the mansion he was renting?

Glenn, I wrote about the advantages in a bit more detail here. But briefly, it's a pretty good commercial deal; even Matt McCarten acknowledged that. S-P will create two new NZ dairy brands with investment in processing (I'm told, which means more value-added products when about half of what we currently export to China is milk powder), $500m in marketing over five years, links with Chinese supermarkets and so on. So they have contacts, ambitions and talents beyond the farm-gate that we don't have.

But you're point is fair. Why not do it ourselves? Cos NZ farmers are happy churning out the raw product and Fonterra hasn't invested in value-added? On the other hand, your point assumes we have skin in this sale. On one level, it's private land sold to the highest bidder. Who are we to have a view?

As for theft from future generations, the thing is that that's been going on for decades. I'm not having a pot shot at you, but don't we have to ask why is this theft when Shania Twain or James Cameron buying land was ok?

by Tim Watkin on April 09, 2012
Tim Watkin

Freddy, so better a foreign owner who looks after it than a local leasee who's less fastidious?

by Freddy on April 09, 2012
Freddy

Tim, the water is getting very muddied by all the narrow view points from all sides of the foreign ownership debate. Lets stripout the BS, SP are opportunists, their land developers which has lead to owning and operating supermarkets in China, thats their good fortune. They see the consumer value in our Pure/Natural NZ branding and can see a health margin in selling through their vertically intergrated systems, basic stuff, the land ownership is a distraction, we should be terrified of losing control of our branding. Sell SP the farms, they have a good business partner in Landcorp and their can't surely do any worse that to previous mob, but for heavens sake keep control of the manufacturing of product....thats where the real damage to NZ can be done.

by glenn p on April 09, 2012
glenn p

Thanks for the info Tim -- I look forward to reading it in a spare moment.

Regarding the theft from future generations, I have the same opinion irrespective of who the foreign owners may be (including Aussies, white South Africans, US citizens, Europeans, etc.), irrespective of whether the land is a farm or residential land, and irrespective of whether it is my home country or another country. I just think that the land and other resources of a country should be owned by the citizens of the country and kept for their future generations (again, irrespective of how good the immediate short-term gains are).

by stuart munro on April 12, 2012
stuart munro

As the law stands, it's right and proper.

The law be damned. It is against the long term national interests of NZ. Politicians swear an oath (it must be some kind of joke with them) to protect of interests. Kill the sale, and change the law. But of course, since they serve foreign interests before local ones, we can be sure they'll sell it offshore in a heartbeat - and pretend it was all ok. With the assistance of a completely tame media.

by stuart munro on April 12, 2012
stuart munro

of =our

by glenn p on April 12, 2012
glenn p

I read Tim's other article on the sale of the farms (thanks Tim) but I still don't get it.

Apparently we are going to get better access to the Chinese market and the Chinese will set up a couple of NZ brands in China, and somehow help us sell value-added milk products. So how does that work? Do all NZ farmers (i.e., Fonterra) get to sell their milk through those brands and networks? Is there a shortage in demand for our milk products such that we need the Chinese to help us offload it? I thought that the world was crying out for dairy? Why would we then struggle to sell it? As for selling value-added milk products, how do the Chinese help us? Are they giving us technology that we don't already have? Where is the value-adding taking place -- in NZ or China? Again, who in NZ gets access to this technology and opportunity?

Additionally, I thought that a worrying aspect of the deal was China's expressed wish to learn our dairying technology so that they could take it back home. Cripes!

by Tim Watkin on April 12, 2012
Tim Watkin

Stuart, what's more damaging to NZ long-term? Selling thse 16 farms or ignoring our own rule of law? And enduring the damage to our reputation, both business and political. Change the law, sure, but we cannot illegally kill this sale and retain our mana.

Glenn, as far as I understand these 16 farms plus presumably others not under contract to Fonterra mow or in the future can sell to S-P for these brands. But not all NZ farmers are Fonterra.

There's no shortage of demand for our milk products and it's not a matter of us struggling to sell products, but which products we're selling – much of what we sell is milk powder, not procssed products. So there is arguably a shortage of value-added products and maybe it'd be good if we developed more in this country. Then the Chinese get them into the right places, right shops, with the right branding. That's the point of teaming with companies in export markets - local expertise.

by glenn p on April 13, 2012
glenn p

Glenn, as far as I understand these 16 farms plus presumably others not under contract to Fonterra mow or in the future can sell to S-P for these brands.


So NZ farms can sell to S-P and S-P sets up brands, marketing and networks in China, but how is it that those benefits are for us if it is S-P using the brands, marketing and networks to sell what is now their product (whether bought from the Crafar farms or other farms)? That is, the brands, marketing and networks are surely for the benefit of S-P. Once we sell product to S-P, it isn't ours anymore. Likewise, if S-P can add value to NZ dairy products, but that value isn't being added in NZ, then S-P are just adding value to their own products. We don't benefit from the added value.

So, S-P are saying that they can do all these great things with NZ milk in China, but from what I have read and (mis?)understood so far, the only benefit to us is that it will make S-P a more successful company and hence they will buy more from us.That seems a weak argument to me, especially if we have no trouble selling our goods in the first place.

 

by DeepRed on April 15, 2012
DeepRed

What about a "use it or lose it" clause? It would also discourage speculative land-banking.

by Thomas H on April 20, 2012
Thomas H

New Zealand needs a new model all right regarding the sale of Agricultural Land to foreigners and I suggest that they look at Minnesota, which ranks No 5 in Agricutural production in the US, and at 12 million hectares of agricultural land is not far behind NZ in acres in production.  Furthermore it has more than doubled its agri  sales to China which now stand at nearly NZ $2 billion dollars.

Minnesota not only does not allow foreign ownership of farm land it doesn't allow corporations to own farmland either-unless the corporation is tied to long time family held farms.

Every country has a core advantage that it must use to make its way in the world.  In 1972  New Zealand lost its way and fell on hard times in the Agri Sector when the UK abandoned  NZ and joined the Common Market. It took a long while to sort itself out and find whole new markets but Agriculture came back stronger than ever-so why now at a point in time when the world will be beating its way to our shores for product should NZ sell out and more land  and loose any amount of God given advantage that New Zealand is blessed with. 

I understand that foreign ownership of agricultural land has not been an issue in the past-but the results of the 2008 economic meltdown have given the average citizen a wake up call and make them realise that a country's economy can sink in a hurry.  But then they look around and say to themselves what is the most bouyant sector we have-and the answer to that is one every Kiwi knows from the time they are 5 years old.  So yes it is time to get a lot more protective of what we have that earns NZ its place in the world.

I wish someone in the mass media in NZ would do the research and find out that those opposing the Crafar Farm sales are not in the main Xenophobic. Instead they believe that its time to change  poor economic policy and what has until now been an oversight. 

Time to be more like the "Bread Basket of the US" whose States have taken a very protective stance towards their family farms.

Read the Minnesota law regarding "Alien Farmers in Minnesota 1851-2004: http://www.house.leg.state.mn.us/hrd/pubs/alnfarm.pdf

 

by John72 on April 30, 2012
John72

No one has explained why an economy that developed these assetts now needs to sell them. Surely we are only being told part of the story. If we were able to develop this country in the past, why can we not do it now. Is some one expecting too much from this life and this country? We keep replacing and updating items, instead of just repairing or "doing without". There has to be a limit to the standard of living our country can afford. Money does not grow on trees, part of maturing is learnig to BUDGET. Only spend what you can afford. Every generation has to learn by experience. When we look at the income of the top 5-10%, they are like spoilt children. None of them NEED the money. Do any of our Politicians  or CEO's etc. care about the next generation? Are any of them humble?   Comparing their actions with other countries is not valid. They never mention the problems that the others have.

by danniel on March 31, 2014
danniel

Foreign ownership? That is a tricky business. I tend to support the idea although I realize it can also come with a price for the locals. I support the idea because I am thinking about the progress possibilities. We should give this a chance. I read some articles about people interested to find Kansas City commercial real estate with huntmidwest.com, they were revelatory to me as I also aspire to be able to buy a property for business.

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