The only reason that makes any sense for giving a Saudi sheep breeder an $11 million farm is because we thought it might buy us a Free Trade Agreement with his country. It's a good thing that we're not a corrupt nation, isn't it?

Let's start off by giving the National Government a bit of a lifeline on the whole "Sheep-to-Sand" saga. Bacause by post's end I'll be using it to hang the Government's handling of the matter.

National came into office in 2008 after Labour had pulled the plug on live sheep for slaughter exports. Labour had done so after those exports resulted in thousands of sheep dying en route to their final destinations, causing the New Zealand public (read, voters) to get very upset.

National was at least predisposed to restarting the trade - after all, it represents lots of good export dollars going begging! There's been allegations that it was expressly promising farmers prior to the election that  it would do so, but I haven't found an on-line source I'm comfortable with quoting to confirm that. Whatever was the case, by 2010 National realised that public opinion was so strongly against the live sheep for slaughter practice that they made Labour's temporary ban on it permanent.

The combined effect of Labour and National's actions (let's be charitable here) pissed off one Sheik Hamood Al Khalaf - a Saudi businessman who'd invested big in NZ farms with the aim of raising sheep to bring over to Saudi Arabia for halal slaughter. Our "no export" policy badly impacted those investments. So he kicked up a fuss.

One of the ways he fussed was by letting New Zealand officials know that he was using his influence with Saudi Arabian Government Ministers to mess with New Zealand's chances of getting a free trade deal in the Arabian Gulf region. Let's assume that he had such influence - here's an Australian news report of him travelling around with the Saudi Agriculture Minister. And let's also assume that getting a FTA with the Gulf states would be a desirable thing for NZ as a whole. What follows then?

Well, we know what New Zealand did. It gave Sheik Al Khalaf a whole bunch of money - some $11 million - to build and run a new "agri-hub" in the Saudi Arabian desert, complete with New Zealand sheep flown over to stock it. We paid for it, but the facility was his. Now, here's the critical question. Why did we do such a thing?

There's been a whole lot of shifting stories on that. One rationale is that we did it to compensate Sheik Al Khalaf, in order to avoid a more costly requirement to pay him damages for how he was treated.

That looks to be patent nonsense. According to Richard Harman, based on a whole lot of official papers dumped out this week, at the time the issue was being dealt with Murray McCully was desperate to avoid the payments being called "compensation" for anything. Because if this happened, then Minister McCully would have to show that there actually was a loss for which the Government was responsible that merited compensation being paid. And I'm willing to bet that had the Government's lawyers got anywhere near Sheik Al Khalaf's claim they'd have advised that it was pretty much without legal merit. 

Furthermore, the Government's actions in happily flinging $11 million to Shiek Al Khalaf to "compensate" him for not being able to send his sheep overseas on death ships stands in marked contradiction to how it approaches other individuals or groups who claim that they've been unlawfully treated. Why was a mere threat of maybe bringing unspecified legal action in the future enough to cause the Government to fold on this issue without getting any legal advice on it, when it fought the Problem Gambling Foundation all the way through the High Court? Or the family caregivers for disabled folks all the way through the Court of Appeal (and then beyond)? Or ... fill in your favourite example of Government legal intransigence here.

Alternatively, the Government has argued that building the "agri-hub" for Sheik Al Khalif is simply a  win-win situation in that our "investment" will produce tangible export benefits down the line. 

Problem with that explanation is that no-one outside of Ministers' offices who looked a this deal thought it made the least bit of economic sense at all. And really, have a think about it. We're building a sheep-breeding facility in the middle of the desert, to be owned by a major Saudi sheep breeder, that we then hope he'll happily let other middle-eastern sheep breeders come and have a look around in order to see how well it works (and so buy one from New Zealand in turn).

I only hope that Murray McCully, et al, don't get many emails like the following turning up in their inboxes:

I am pleased to inform you that a business opportunity awaits in Northern Nunavut. If you will promptly provide me with a New Zealand made wood stove, to be put in place at your expense, I will promise to let other people into my house to see the marvellous heat that New Zealand wood stoves will provide.*

Please note this promise is not legally binding, but you can trust me.

If they do, then we're going to be handing out freebie NZ "demonstration stoves" to lots and lots of Inuit families in the near future. Because ... well ... it makes just as much sense as giving a Saudi sheep breeder a farm.

So, to steal from Sherlock Holmes, "once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth." And what remains is the claim that the New Zealand Government gave Sheik Al Khalaf an $11 million gift in order to stop his fussing and smooth the way for a FTA with Saudi Arabia and the rest of the Gulf States.

Alright then. So what? We got the guy off our backs. And FTAs are good things for the country. What's the big deal?

The big deal is that this looks very, very, very much like the sort of corrupt business dealing that New Zealand likes to present itself as being at the forefront of international efforts to prevent. Have a look at what our Ministry of Justice sternly tells the New Zealand business community:

New Zealand is committed to fighting bribery and corruption, both at home and abroad. While New Zealand consistently ranks among the least corrupt nations in the world – often topping the table on Transparency International’s corruption perceptions index – this does not mean New Zealand businesses can afford to be complacent in this area.

Well, with Sheik Al Khalaf, we basically paid him $11 million to stop opposing a trade arrangement that was very much in our (New Zealand's) commercial interest. How is this any different in principle to a New Zealand export company paying a Chinese customs official to let its milk powder off the dock and to the retailer? Or a New Zealand construction company paying the head contractor on a project in Iraq a backhander to give it the contract to pour concrete?

In fact, had Sheik Al Khalaf been an official in the Saudi Government, then our "farm-for-not-opposing" deal would very likely be in breach of both the OECD and UN Conventions against corruption of public officials. The fact that he was exercising influence on such officials, rather than being one himself, technically takes him outside the scope of those instruments. But really ... that's just a technical lawyer's point. The principle is the same - we paid off someone in order to try and influence trade negotiations on our favour. 

Now, maybe we just shrug and say that this is just the way the world works. But if it is, could we as a country stop trying to pretend that we're any better than the rest of the nations out there? Perhaps a bit less sanctimonious boasting about how we have "a strong reputation for being free and intolerant of corruption and bribery", while "also [being] widely recognised for [our] commitment to supporting international efforts to combat such behaviour and offences in all their forms" is in order?

 And the next time a New Zealand company complains bitterly that it is disadvantaged because of the corruption that taints foreign markets, let's all look at our Government and ask: "what exactly are you doing about that?" 

Comments (4)

by Tim Watkin on August 08, 2015
Tim Watkin

Well, I won't bother with my own post.

My own questions have been around the supposed legal advice. Murray McCully said it was MFAT's legal advice so he couldn't release it, it was up to MFAT. I OIAed it and in those 900 pages released this week, no-one has been able to find MFAT legal advice.

But today on The Nation Heather du Plessis Allan, who broke the story, said there is legal advice and it came from Clayton Kimpton. See her talk about this from 3:10 here). A quick google shows Kimpton left Kensington Swan to take up a position with MFAT based in Dubai in 2012.

So it'd be good to see that advice.

by Andrew Geddis on August 08, 2015
Andrew Geddis

So it'd be good to see that advice.

I agree! Unfortunately, I suspect hell will freeze over first.

My own first impression, not researched view is that Al Khalaf would have a pretty weak legal case. The export restrictions were put in place out of genuine animal welfare concerns, which are (I have no doubt) a valid ground for imposing regulations to stop it. And while those regulations may have cost Mr Khalaf money - even a lot of money - that's something that happens all the time. Just ask Matt Bowden!

by Katharine Moody on August 09, 2015
Katharine Moody

An excellent summary here of how both perspectives (for and against the government's actions) have been treated by the media;

http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11493647

Most interesting that Matthew Hooton calls the PM "impotent" and Fran O'Sullivan agrees that Key/Cabinet was out maneuvered by McCully, the "Dark Prince".

 

by Tim Watkin on August 10, 2015
Tim Watkin

Katharine, you'd think that McCully is safe because cabinet signed off on the deal knowing all the advice against. To condemn McCully would be to condemn cabinet and the PM himself, which ain't gonna happen. But it is staggering to think that cabinet saw all the critical advice and still backed it. I would love to know how that/those meeting(s) played out and if anyone really questioned the deal.

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