The Crafar dilemma
February 17th, 2012 at 1:31 pm by David FarrarIn my Herald column I look at the court judgement. First the political aspect:
On the political front the decision is as popular with the Government as a colonoscopy. It might turn out to be good for you in the long term, but it is making life very uncomfortable for now.
For the Opposition, it was like an early visit from the Easter Bunny, just as their chocolate supply was running out. The questioning in the first week of Parliament this year on the issue amounted to little as Ministers ran the line that they were merely applying the law, and that there were no lawful reasons to decline the application by Shanghai Pengxin.
And the economic aspect:
Putting aside the practicality aspects, it is hard to argue with the logic of the learned judge, that any benefit should be measured against a domestic buyer, rather than against the status quo. By measuring against the status quo, it is almost inevitable that net benefits will be found as new buyers always will have investment plans greater than the seller.
I conclude the the days of the OIO saying yes to most applications may be in the past.
Tags: Crafar, David Farrar on Politics, foreign investment, NZ Herald, OIO
February 17th, 2012 at 1:52 pm
It is a tough one. I don’t have a problem with it being tough but this whole issue has made the country look foolish and xenophobic. Labor has been all over it like a pig in shit yet they are so vague on what they would do about it. I am starting to dislike Shearer more and more by the day. He seems completely gutless and I suspect he will have a hell of a time down the line explaining Labor’s official stance on issues.
You gotta feel for the Chinese bid. They must be fuming with how this whole thing has worked out.
Vote:February 17th, 2012 at 2:02 pm
I would like to know how much this ‘bidding’ process is costing all parties involved because there is the real tragedy, yet another de-facto overhead cost to doing business in NZ.
Vote:Instead of completeing a purchase arrangement, we now have a whole bunch of parasites inserting themselves into the process, acting as supposed arbiters on the moral goodness of a purchase and extracting nice fees.
February 17th, 2012 at 2:22 pm
“For the Opposition, it was like an early visit from the Easter Bunny, just as their chocolate supply was running out. ”
Love it – framing the opposition as sugar addicted children who believe in fairy tales.
Vote:February 17th, 2012 at 2:23 pm
How can you compare an offer from a foreign investor of $210 million to that of Fay @ $170 and suggest with a straight face that Fay’s offer is better for the country.
Put aside the $40million difference in offer and look at Fay’s track record. Whats to stop him them selling off the farms one by one to a foreign buyer? I shake my head thinking that if Fay wins and gets his way, he’ll just sell the farms one at a time to Milk NZ anyway for the $210 million, and walk away with a cool $40mil!
Vote:February 17th, 2012 at 2:28 pm
Just a few days ago lefties were telling us that NZ had the most business-friendly commercial environment in the world, and therefore there was no need for Stephen Joyce to want to remove roadblocks to progress. Now we have a fairly simple business deal that has been in approval mode for a year now; is subject to legal review initiated by a competitor who wants to pick up a bargain by removing the highest bidder; and which has attracted every Green, NZ First, and Labour anti-Chinese bigot like flies to shit. Other countries go out of their way to attract foreign investment. Australian and US states actually have bidding wars to attract foreign investment. But this makes NZ look like a bunch of inbred hillbillies who don’t want to engage with the world, seem determined to make normal commercial activity as difficult as possible, and who are petrified by Asian people. Surely even places like Alabama aren’t as backward and racist as the NZ of Shearer, Peters, and Norman?
Vote:February 17th, 2012 at 2:38 pm
Putting aside the practicality aspects, it is hard to argue with the logic of the learned judge, that any benefit should be measured against a domestic buyer, rather than against the status quo. By measuring against the status quo, it is almost inevitable that net benefits will be found as new buyers always will have investment plans greater than the seller.
Sorry DPF, I just do not buy that argument. The Crafars for example had woefully under invested according to many accounts. The Chinese had committed to ensuring compliance with best practice, yet many NZ farmers still do not do this, look at the state of our waterways. Furthermore using the judge’s logic, the OIO now has to consider what a hypothetical NZ purchaser might do. Yet there are a range of NZ purchasers, so does the OIO now have to postulate a number of different scenarios.? Why should it be assumed anyway that a NZ purchaser would make any significant capital investment? To what notional investment level should NZ purchasers all be assumed to aspire to? Who mandates such levels?
The Chinese were prepared to commit to verifiable acts, which if not met, could lead, according to Maurice Williamson on ZB yesterady morning the purchase approval being rescinded. You cannot do that with a NZ purchaser.
The judge’s test is one that will lend itself to opportunistic legal muggings such as Fay’s.
In addition the Chinese are (were?) prepared to commit major funds to develop new brands and value add product for sale into Asia. Surely that should be taken into account, especially given Fonterra’s poor record in this area. Somehow I do not see Joe Bloggs NZ dairy farmer doing this.
In my view the judge’s logic was flawed and out of touch with reality.
Vote:February 17th, 2012 at 2:45 pm
“Putting aside the practicality aspects, it is hard to argue with the logic of the learned judge, that any benefit should be measured against a domestic buyer, rather than against the status quo.”
No it shouldn’t. Because the domestic buyer in this case is offering less money. This is a restraint of trade.
The other thing, there was no formal offer on the table from Fay, ie, a no bid. Also, promises about future wonderfullness are just that.. promises.. the Chinese got there “firstist with the mostis”, cash on the table and a signed set of requirements imposed by the OIO, end of story.. or rather the continuing story of the little country going downhill.
JC
Vote:February 17th, 2012 at 3:32 pm
Bogged in the minor legal fine points is where new Zealanders often are. The bigger picture is more important. I think I have more right wing perspective even than most contributors here. But the point remains. Unless we as a nation continue to own and control our productive assets we are going to be well and truly screwed.
Vote:February 17th, 2012 at 3:35 pm
“Why sell a farm to the Chinese?
Sell them the whole country” – John Key
Vote:February 17th, 2012 at 5:09 pm
DPF wrote ……”I conclude the the days of the OIO saying yes to most applications may be in the past.”……
And a bloody good thing too…..as KH commented, if we lose the assets that provide our income we are royally screwed. What is needed, however, is to accommodate the Chinese investors with a face saving offer.
Allow the Crafer sale by special Act of Parliament if necessary. Labour sanctioned the sell off of so much of NZ in their nine years of stuffing the country financially that a few more acres won’t make much difference. All further sales to be subject to the High Court decision.
Vote:February 17th, 2012 at 6:12 pm
The judge;s decision is highly theoretcial and likely to lead to much subjective analysis, opening the door for never ending challenge.
Vote:February 17th, 2012 at 6:18 pm
If we were to apply the test set out in the judge’s decision, would for example Ngai Tahu have been able to sell 18,000 hectares to a Swiss family?
Much of our wine industry could be under developed as there has been substantial foreign involvement.
Julian Robertson might not have been able to make his investments and thus NZ might not have benefited from the scholarships he has given and his munificient NZ$100 million gift of fine art to NZ.
Then of course based on the judge’s criteria James Cameron would not have been allowed to buy his farms, thus potentially causing a loss of substantial investment in the film industry, as such investment would appear to be unable to be taken into account in any benefit consideration.
This decision is stupid.
Vote:February 17th, 2012 at 7:07 pm
This decision is stupid.
oh yes.
The better question to ask is why Kord mentha are so adamant that they sell all the farms in one lot.
Vote:February 17th, 2012 at 8:31 pm
I just repeat that this has nothing to do with what private bidders might do to enhance the land (we know Milk NZ is going to create more value than Fay et al because they are willing to pay more), it is to do with the externalities; what the various bidders might do to enhance the economy of NZ.
Fay et al have much less of a chance on that criteria than do Milk NZ.
Pay attention David.
Vote:February 18th, 2012 at 7:48 am
I think the judges decision is unworkable, and will lead to more subjectivity in the assessment. But the blame for this lies not with the judge but with parliament. They are the ones who drafted the bizarre laws around this.
According to Key et al the judge interpreted the legislation in a way they did not expect. So why arent they legislating to clarify and simplify the law?
Vote:February 18th, 2012 at 10:52 pm
“”They are the ones who drafted the bizarre laws around this.”"
When they required foreign purchasers of ‘sensitive land’ to apply for consent(s) they wrapped the whole issue of foreign land purchases in subjective political context ….. sensitive = political …… controversial = xenophobic
Vote: