Shock horror – more Chinese foreign investment

March 17th, 2015 at 2:00 pm by David Farrar

The Herald reports:

Dairy giant Fonterra will purchase an 18.8 per cent stake in Chinese infant formula maker Beingmate Baby & Child, slightly less than the 20 per cent shareholding it was aiming for.

The company has this afternoon confirmed the completion of a partial tender for the shares, which was submitted to the Shenzhen Stock Exchange on February 12.

Fonterra will purchase 192.4 million Beingmate shares at 18 yuan a piece for 3.5 billion yuan ($754.3 million), excluding transaction fees.

A good reminder that foreign investment runs both ways. Those who wish to restrict or stop foreign investment into NZ, would see NZ companies like Fonterra shut off from the world unable to invest overseas. Free trade and investment benefits traders, investors and recipients of investment. Long may they occur.

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A huge gift to NZ

March 10th, 2015 at 1:00 pm by David Farrar

One News reports:

A philanthropist’s “extraordinary generosity” has seen New Zealand’s largest-ever private land protection announced today.

Music producer Robert ‘Mutt’ Lange of Soho Property has gifted 53,000 hectares of land in central Otago through a partnership with the Queen Elizabeth II National Trust.

Incredibly generous.

Robert “Mutt” Lange is Shania Twain’s former husband.

The four open space covenants cover land on Motatapu, Mount Soho, Glencoe and Coronet Peak Stations, bordered by the Shotover River and the Cardrona Valley.

The agreement permanently protects the natural values and human history of the landscape, but also allows for public access with 21 tracks and trails.

One of those awful foreigners.

Some people advocate banning any foreign purchase of land. Do you think a NZer would gift 53,000 hectares to the public?

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NZ Herald on economy

January 2nd, 2015 at 3:00 pm by David Farrar

The Herald editorial:

The dawn of a new year invites the mind to entertain endless possibilities, especially in a country so lucky. New Zealand enters 2015 with its dollar nearly as valuable as that of the signature “lucky country” next door. Three days ago Infratil and the New Zealand Superannuation Fund bought an Australian retirement village company for $670 million taking advantage of the rising kiwi. One swallow does not signal a summer of investment that would reverse the direction of transtasman ownership but it is another step of confidence.

When people rail against foreign investment, it is worth bearing in mind, that as our economy does well, it will be NZ companies investing overseas, and if we try and restrict foreign investment in NZ, then we risk being blocked ourselves.

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Workers paid more in foreign owned firms

November 20th, 2014 at 12:00 pm by David Farrar

Another Treasury working paper finds:

Comparison of earnings patterns across foreign and domestically-owned firms shows a clear difference in average individual earnings. Workers in foreign-owned firms earn, on average, around 14 percent more than those in domestically-owned firms. This gap is primarily due to compositional differences, with observable worker and firm characteristics jointly explaining around 80 percent of the raw earnings gap, leaving a residual gap of between 2.7 and 3.5 percent for starting and ending wages respectively.

Workers who move into foreign-owned firms gain around a four percentage point higher wage increase than those moving between domestically-owned firms, of which around half appears to be due to differences in firm characteristics (eg, moves to larger firms and more highly paid regions or industries). Controlling for firm composition, a two percentage point premium remains. Finally, workers experience slightly higher wage growth during their tenure at a foreign-owned firm, which may reflect stronger human capital accumulation.

So he left stands for higher wages, yet they also oppose foreign investment. Do you see the contradiction.

And in case you argue the wage gap is because foreign owned firms are larger:

The foreign-ownership wage premium also varies across firms. It is highest in smaller firms, and in industries that tend to serve the domestic market, suggesting that foreign owners bring knowledge or networks that are of value to such firms and their employees.

So can we stop the fear campaign against foreign investment?

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A former foreigner who farms here speaks up

August 28th, 2014 at 7:00 am by David Farrar

Anders Crofoot writes in the NZ Herald:

When it comes to the foreign ownership of farmland, my family has a unique perspective.

Before my wife, Emily, and I moved our family thousands of miles from upstate New York to the Wairarapa, we did research. A great deal of it. We’d narrowed our choices to English-speaking Canada, Australia and of course, New Zealand. Since moving Downunder, we’ve learned that being a “good bastard” is a compliment. Maybe Winston Churchill was right when he said “Britain and America are two nations divided by a common language”.

While Emily was the farmer, I was an investment analyst. Together, we learned about the country, its political stability, history, economy, agricultural system, climate and the rural property market. Of course, being “foreign investors”, we checked out whether we’d be welcomed or not.

They decided to invest here.

Being in Federated Farmers a few years later, I came across one farmer who made Winston Peters look like a weak-kneed liberal. Proving the debate is seemingly two-thirds heart and one-third brain, I later learned that he’d bought a farm in Australia but he still opposed foreign investment, albeit slightly sheepishly.

Bit like the former deputy leader of NZ First who used to decry immigrants in his thick English accent!

Deciding on a country is one thing, but it’s quite another to get the ideal farm. We were very fortunate to convince Castlepoint’s board that New York Yankees were fit custodians for their iconic Wairarapa station. That was 1998 and we’ve never looked back.

Kiwis are the most hospitable people with an unerring knack of convincing you to take on more responsibilities. I was one of two non-New Zealand-born farmers on the Federated Farmers board. I’m also on the board of Grow Wellington and, to keep my feet firmly on the ground, I’m Castlepoint’s fire chief. Emily is similarly involved and our children are now working in New Zealand.

Politicians are quick to say that families like us are their “ideal” business migrants. The message is that “people like us” will continue to be welcomed, whichever party wins on September 20. Unfortunately, that nuance is lost if you’re thousands of miles away reading or watching news on-demand.

If we were researching New Zealand today, would we make the big move? Possibly not.

Those parties beating the drums against foreign investment should reflect on that.

The tone around foreign investment has hardened for the worse. To outsiders, politics and cultish popularity now seem big determinants. There’s also a nasty undercurrent which reflects poorly on us as Kiwis. Who this is putting off we’ll never know, but it is off-putting.

Farming is the most international industry we have. It’s this mix of people that makes New Zealand agriculture unique and the success it is. The Green Party opposed Shania Twain’s high-country purchase but look at what British record producer Robert “Mutt” Lange has given back: 53,000ha and a whole landscape permanently protected. The restoration and enhancement of Young Nicks Head may never have taken place had a Kiwi farmer purchased it rather than New York financier John Griffin. We’re even near-neighbours of James Cameron — that’s in a rural sense because we’re over an hour away by car.

Politics must come out of the “foreign investment” debate because it can so easily spiral into the gutter. Rules are important and we Kiwis accept that with sport, why not overseas investment?

And we have rules – that any investment must produce benefits for NZ. But various parties want blankets bans, because it gives them a soundbite for the election.A

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Garner on Xenophobia

August 11th, 2014 at 11:00 am by David Farrar

Duncan Garner writes at the Dom Post:

So suddenly we’re all against selling off farms to foreigners. Well, it’s not really just foreigners, is it. Let’s be honest – we’re worried about the Chinese buying our farms. They’re not like us. There you go, I said it. Clearly many are thinking it. Cue Opposition politicians lining up to scratch our collective itch. Nationalism? Racism? Xenophobia? All of the above? The reality is we’ve been hocking off our farms to overseas buyers for years and no-one seemed too fussed. Australians, Germans, Russians, the Swiss and the Americans – no worries.

You expect it from NZ First, but not from Labour.

The debate has flared up over Lochinver Station, near Taupo. A reputable Chinese company wants to buy it for $70 million. They bought Crafar Farms and, from all reports, have improved it. They promise to upgrade Lochinver and keep the 20 Kiwi staff on. The sellers, the Stevenson family, want to take the money and reinvest it in their other business interests, such as quarries, and create about 8000 jobs over time. Surely we support that – don’t we? Labour has effectively pledged to stop the sale if it gets into government. Let’s pause and consider the hypocrisy: Labour’s position is a massive change of heart.  And Winston Peters, who was in government too from 2005-2008  must have been asleep at the wheel. Labour allowed Poronui Station to be sold in 2007 – that’s the farm next door to Lochinver Station. Labour Cabinet minister David Parker even asked a question of himself in Parliament about that sale – trumpeting the benefits of foreign investment.

They are such hypocrites.

In the last term of the Labour-NZ First government, an average of 762 square kilometres of land was sold every year. The amount sold in the past five years under National has been about 390sq km a year. The Campaign Against Foreign Control of Aotearoa estimates about 8 per cent of our best farmland is in foreign hands. Should we have banned film director James Cameron from buying his farms in the Wairarapa? He’s about to make Avatar 2, 3 and 4 in New Zealand and that will create hundreds, if not thousands, of jobs. Should he have been told to bugger off? Labour leader David Cunliffe is even suggesting that Australians be banned from owning big farms here too. He’s taking ‘‘advice’’ over it – which is code for he’s making up policy on the hoof.

What’s new. And for outright racism, here’s Winston:

“As they say in Beijing, two Wongs don’t make a right.”

Winston defends the joke on the basis he heard it Beijing. But jokes are all about context. When you make the joke in the context of spreading fear and phobia about Chinese, then it is not funny, but nasty.

Jamie Whyte points out:

David Cunliffe’s suggestion that Australians be banned from owning big farms invites retaliation from Australia. 500,000 Kiwis currently live in Australia and many own land there or would like to.

Last year, Cunliffe told Australian government ministers and business leaders to give Kiwis “a fair go.”

Cunliffe said it is unfair that New Zealanders in Australia are treated differently from Australians in Australia. Yet he seeks to be Prime Minister on a promise to treat Australians differently from New Zealanders.

The inevitable retaliation would have a delicious irony, with Russell Norman’s support for the policy losing him his right to buy land in his home country. But that joy will be far outweighed by the terrible losses to New Zealanders.

The freedom to move back and forth across the Tasman, and to buy and sell property in both countries, is a great advantage to New Zealanders. The government should guard it jealousy. It should not be put at risk for the cheap political purposes of a desperate politician.

Land sales are regulated. Anything over a certain size must meet a national interest test. You can debate whether the test should be altered, but those parties advocating an outright ban are trying to reintroduce Fortress New Zealand from the 1970s.

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Only 2% foreign owned

August 8th, 2014 at 11:00 am by David Farrar

The Herald reports:

Prime Minister John Key made an assurance no more than 2 per cent of New Zealand’s farmland was foreign-owned as controversy continues over the sale of Lochinver Station near Taupo to Chinese company Shanghai Pengxin.

Labour and New Zealand First say they’ll block the sale of the 13,800ha property if they are in a position to do so after next month’s election, in response to strong public concerns over foreign ownership of farmland.

Mr Key and his Government have downplayed the scale of the issue and say they would act if there was evidence of a “run” on New Zealand farms by foreigners.

Yesterday, Mr Key said the Overseas Investment Office (OIO) told him in writing they believed “the amount of rural land that’s owned by foreigners is 1 to 2 per cent”.

An issue the media have not touched on much is that these proposed bans are illegal. We have the CER agreement with Australia, and under that can not ban Australians from owning property in New Zealand.

So Labour and NZ First’s policy would have us in breach of our oldest and most important trading agreement.


Another evil foreign land owner

August 7th, 2014 at 7:00 am by David Farrar

The ODT reports:

More than 50,000ha of high country between Lake Wanaka and Queenstown will be protected in the largest conservation undertaking on private land in New Zealand’s history. 

In an agreement between the Queen Elizabeth II National Trust and a company linked with millionaire record producer Robert ”Mutt” Lange, most of Motatapu, Mount Soho, Glencoe and Coronet Peak stations will be placed under protective covenants, effectively New Zealand’s first national park in private hands.

I expect Labour to condemn this as a privatisation or something equally stupid.

The four stations, which are leased in perpetuity by Soho Properties Ltd, cover 53,000ha of land – equal in size to the combined areas of Paparoa and Abel Tasman national parks.

Now that’s a reasonable size.

Soho Properties lawyer Willy Sussman said he had been ”at pains” to explain to Mr Lange the magnitude of what he was agreeing to.

”I was almost labouring the point – I asked him ‘do you understand what this means?”

”His reply was just one word – ‘absolutely’.”

As well as being a ”musical genius”, his Switzerland-based client was an unconventional and far-sighted thinker who wanted to ”make a positive difference to the world”.

If Labour and the Greens had their way, Mr Lange would never have been allowed to buy that land, and hence not able to place it in the public domain. This is a good example of how stupid their policies are.

Not all foreign investment in land is good or bad. That is why applications should be decided on a case by case basis, with the test being whether it delivers a net boost to New Zealand. Labour and Greens want to get rid of that test, and have a total ban. This story is a another good reason to stop them gaining power.

3 News reports:

The sale of Lochinver Station now hangs in the balance after an election promise from Labour Party leader David Cunliffe today.

Mr Cunliffe says if elected Labour would use powers under the law to block its sale to a Chinese company.

Lochinver Station is being sold to Shanghai Pengxin in a $70 million deal. But that now depends on the result of the election.

The Overseas Investment Office (OIO) still needs to decide whether to approve it, with Government ministers signing that off. Mr Cunliffe has already made his decision: Labour would block it.

“He’s effectively in a dangerous position here, pre-judging the decision, and that could be reviewed by the courts,” says Prime Minister John Key.

“Absolutely the Government would almost certainly be open to legal action if they pre-judge the decision made by the OIO without knowing facts.”

This is beyond pathethic. Labour know nothing at all about the proposal, and how many jobs it may create, or extra export income for NZ. The only thing they know is that the buyer is a Chinese company, and that is enough for their xenophobic kneejerk reaction. It’s one thing to say no, after you consider a case on its merits. But Labour are pandering to blatant racism.


This is the evil foreign investment the left are against

August 6th, 2014 at 9:00 am by David Farrar

The Herald reports:

Fisher & Paykel Appliances, the home-appliance maker acquired by China’s Haier in 2012, is seeking some 40 workers for research and development after opening a new design centre at its Auckland headquarters.

The company spent about $5.5 million on the new Auckland facility with another $1.5 million still to be invested, and is spending some $2.5 million to fit out its Dunedin R&D facility. F&P Appliances has hired 80 engineers and designers in the past 18 months. It is now one of Haier’s five global ‘centres of excellent’ for product development in the group.

Haier New Zealand Investment Holding, which holds 80 percent of F&P Appliances, invested $36.3 million on property, plant and equipment in the nine months ended Dec. 31, 2013, and $7.9 million between Aug. 29, 2012 to March 31, 2013, according financial statements lodged with the Companies Office. Its accounts show it had revenue of $777.1 million through the final nine months of 2013.

Haier New Zealand incurred research and development expenses of $17.9 million in the 2013 period, and $7.2 million in the 2012 reporting period. The other 20 percent of F&P Appliances is held by another Haier unit.

The Chinese company effectively rescued F&P Appliances in 2009 when it acquired a 20 percent stake as part of a capital raising that let the company refinance its debt. The local manufacturer got distribution into China as a result of the deal and the ability to further licence its technology.

And who was against this foreign investment which rescued F&P and has led to more jobs and more R&D? Well TVNZ reported:

The Government is coming under pressure to stop iconic Kiwi appliance maker Fisher and Paykel from falling into Chinese ownership.

Chinese company Haier last week launched a take-over bid for the company but opposition parties say it is the type of innovative company New Zealand cannot afford to lose, and is a further sign of a crisis looming in the country’s manufacturing sector.

“The Government cannot stand aside and watch New Zealand manufacturing ripped out from New Zealand ownership,” said Labour finance spokesperson David Cunliffe.

It is easy to bash foreign investment, especially when it is Chinese. Winston has done it for decades. Labour is joining in. But the reality is that overall foreign investment creates jobs, lifts income, and boosts research and development.

Presumably under Labour, they would have blocked the investment in F&P, which may have collapsed as a company, or at a minimum would not be boosting R&D – as you need investors to do that.


Both sellers and buyers gain when a farm is sold

August 5th, 2014 at 11:00 am by David Farrar

The xenophobes are in full cry against the sale of Lochinver Station, because the buyers are a Chinese company. Never do we hear a peep against Harvard University buying farms.

You would think these farms are owned by the Government. They are not. They are owned by a private company, selling to another private company.  Labour, NZ First and the Conservatives would all ban the current owner from being able to sell to the highest bidder. Now let us look at what that means, as reported by Stuff:

Lochinver Station’s current owner, the Stevenson Group, said farming was no longer part of its core business and proceeds from the sale would be used to kick-start its South Drury industrial development.

Stevenson Group chief executive Mark Franklin said the South Drury project could employ up to 8000 people.

So the current owner does not want to invest in the farm land. They want to sell the farm land so they can invest in south Drury – a project that could employ 8,000 people. This is what Labour, NZ First and Conservatives are battling against. They would have you forget the farms have a current owner who should be able to get the best price for the farms, so they can invest that money elsewhere in the NZ economy.

Gary Romano, the Auckland-based chief executive of Pengxin International, said the furore over the sale, which is conditional on Overseas Investment Office (OIO) approval, was surprising.

‘‘Clearly I’m disappointed. Here’s a piece of land, it’s a nice piece of land, but it is underdeveloped. We’ll sit on our credentials with what we’ve done on the other farms,’’ he said.

Pengxin bought 16 farms, covering about 8000 hectares, in the collapsed Crafar group in 2012 for $200m.

The central North Island Lochinver Station comprises 13,800 hectares, but Romano said of that only 9500 hectares were currently viable farmland and Pengxin would look to improve grass pastures.

Romano said Pengxin were prepared to make a ‘‘very significant investment’’ in the property to improve its environmental, community and productivity profile.

Unwilling to quantify how much Pengxin was planning to spend on Lochinver, Romano said its application to the OIO included plans to fence and undertake planting on streams leading to Pouarua Lake and eradicate wild pines and gorse.

Constructing a publicly-available underpass on the Taupo-Napier highway, and committing to keep employing all 20 staff working the property was also Pengxin’s intention, Romano said.

And you have the new owner, if approved, wanting to invest in the farmland, to make it more productive. This will result in more tax being paid in NZ.

This is how private business works. The buyer sees greater value in the asset than the seller, so they do a deal where both win. The buyer gets the asset they want, to invest in, and the seller gets cash to invest in other assets. The net winner is New Zealand – and that is the test the Overseas Investment Office is legislated to apply.

Labour, Conservatives and NZ First (Greens are against also, but they seem to be against all farms regardless of who owns them) would have a policy where the current owner is banned from selling to whom they would like – regardless of the net benefit to New Zealand. That’s stupid. Sales should be decided on a case by case basis, with criteria being net benefit to New Zealand.

Incidentally the average amount of land sold to foreign buyers in the last five years has been 390 square kms a year. In the last term of the Labour/NZ First Government an average of 762 square kms a year was sold.

Also note that it is not just one way investment. Fonterra owns* half a dozen farms in China. They have around 15,000 cows, employ 500 staff, and produce 150 million litres of milk a year – with the profit all flowing back to NZ. If you start to get racist and demand China can’t invest in NZ, then logically China should ban NZ investment in China.

* – Fonterra does not own the land, but has a long-term lease for the land. This is because *no-one* in China owns land – it is all the property of the Chinese Government. But Fonterra is able to purchase use of the land in much the same way a Chinese company can.

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Joyce attacks Labour xenophobia

August 2nd, 2014 at 2:04 pm by David Farrar

The Herald reports:

Economic Development Minister Steven Joyce has accused Labour of “xenophobia” in their opposition of the potential sale of Lochinver Station to the Chinese company that bought the Crafar Farms.

Mr Joyce and Grant Robertson, economic development spokesman for Labour, appeared on TV3’s The Nation this morning and discussed the sale.

Mr Robertson said under Labour the sale would not go ahead.

“Our criteria would definitely mean that a sale like this would be highly unlikely.”

Mr Joyce said the opposition were “electioneering” in relation to the issue.

“When did [Labour] go out and oppose the purchase of James Cameron’s land?”

“A little xenophobia from the Labour Party to start the day,” he said.

Cameron is becoming a resident, but you rarely hear Labour attack Harvard University for land purchases, Shania Twain, Australians or Canadians. But if it is Chinese, then they have lots to say.

Mr Joyce said the Lochinver Station was a “ridiculously small amount of land” in the North Island to sell off.

The Lochinver sheep and beef farm site is valued at $70 million and covers 13,800ha.

That’s 138 square kms. Around 0.05% of NZ. At this rate China will own all our land in the year 3,956. Panic, panic, everyone.

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How many foreign buyers are there?

July 29th, 2013 at 1:00 pm by David Farrar

Tony Alexander in May 2013 looked at this issue. He found the following from sales data:

From these numbers we can derive the proportion of all house sales in NZ which go to buyers from offshore
who have no intention of shifting here – including half of the “Don’t Know” responses.

  • Australia 0.4% 
  • China 0.6% 
  • Europe excl. UK 0.4% 
  • India 0.4% 
  • Other Asia 0.5% 
  • South Africa 0.3% 
  • United Kingdom 0.3% 
  • United States 0.4% 
  • Other 0.4% 
  • All 3.6%

So if you exclude Australia, Labour’s policy may reduce the number of buyers by 3.2%.

However also of note is 4.5% of sellers were based overseas.

Now remember this is based on actual sales data. Alexander summarises:

This is interesting because taking the many sampling uncertainties into account the proportion comes close to the proportion of sales we estimate are to people offshore who do not intend shifting to New Zealand – some 3.6%. The implication? There could be close to zero net transfer of NZ home ownership occurring to offshore investors.

I’d tempted to call the policy a snake oil solution.  The data suggests it may have no impact at all on prices.


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Labour’s proposed ban on foreigners buying houses

July 29th, 2013 at 5:19 am by David Farrar

The Herald reports:

Housing Minister Nick Smith said it was a sign of how desperate Labour and Mr Shearer had become.

“The oldest trick in the political book, whether it be over crime or unemployment or affordable housing, is always to blame the foreigners.

“There’s no evidence that overseas buyers are having any discernible affect over house prices.”

It was an “unprincipled” policy because it exempted Australia, Dr Smith said.

“They are the largest group of non-resident home buyers.”

Property commentator Olly Newland said the policy would not work.

Australians would be exempted from the scheme, because of a reciprocal arrangement where New Zealanders were able to buy properties there.

Mr Newland said that made the policy “a bit of a nonsense” because Australians bought the highest number of properties here of all foreign buyers.

“Secondly, of course, any overseas buyer would very quickly find somebody else to buy a house for them here in their name and hold it in trust for them.

“There are a thousand ways to get around it if they want to come here,” he said.

“It sounds good but in practice it just won’t work.”

Sounds attractive to some, but likely to make almost no difference. Increasing the supply of land for housing is what will make the largest difference to house prices.

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KPMG on foreign investment

June 21st, 2013 at 2:00 pm by David Farrar

KPMG report:

Ask your average Kiwi which country is currently dominating foreign investment into New Zealand, and their answer would probably be China.

But the reality shows quite a different picture, according to research undertaken by KPMG NZ.

KPMG has analysed trends in foreign direct investment through a review of the Overseas Investment Office (OIO) approvals over the period July 2010 to December 2012.

This research showed that Asia accounted for only 16% of gross foreign direct investment over the last two years. Australia remains our main single source of capital, at 46%. Combined, North America, Europe and Australia accounted for approximately 70% of investment.

And of the 16% which is Asian:

Among Asian countries, Japan (53%) was a bigger investor in New Zealand than China and Hong Kong (33%). Significant acquisitions made by Japan in the last two years included beverage companies Independent Liquor and Charlie’s.

So China is one third of 18% which is 6%.

The full report states:

The growth of Asia represents a great opportunity for NZ. However, in an economic sense kiwi’s need to realise that Asia is more important to NZ than NZ is to Asia. Given that Asia’s consumer market is about 3.8 billion people and NZ’s is about 4.4million, it is easy to see why.

Joint ventures, partnerships and other innovative arrangements with foreign investors should be considered as ways to commercialise Kiwi innovation and to gain access to overseas markets.

Some parties demonise foreign investment. They seem to view the economy as a closed shop, and promote a view that every dollar of foreign investment is somehow crowding out domestic investment. But it isn’t. Foreign investment helps the economy grow, and creates jobs and more investment opportunities locally.

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Buyers also sell

May 18th, 2013 at 10:00 am by David Farrar

The Dom Post reports:

A Large chunk of Porirua’s MegaCentre has been sold for over $30 million to Nelson-based property investor Gaire Thompson.

It is the second recent local major retail property deal where big Australian corporates have sold to local buyers.

The Xenophobes get all worked up when foreign companies buy almost anything in New Zealand. I love hearing Russel Norman rail against foreign investment in his Australian accent.

But foreign investors can’t take land and buildings with them. And as we see here, they do not just buy NZ assets – in time they often sell them also. If you ban them from buying, it means you actually reduce options for NZ buyers and sellers.


Facts and myths on foreign investment

April 29th, 2013 at 9:00 am by David Farrar

The NZ Initiative have released today a comprehensive 75 page report detailing the facts and myths around foreign investment in New Zealand.

A summary of some key findings:

  • Despite popular myth, New Zealanders actually earn more than they spend. National resident unit savings has been positive for the last 38 of the last 41 years.
  • High debt is not the fault of the private sector. While levels of private debt may be high, these stem from the legacy of historical government policies between 1974 and mid-1980s.
  • The future debt burden will depend on future internal competitiveness and the gap between New Zealand’s growth rate and the yield in the debt.
  • Despite concerns to the contrary, Asians are not taking over New Zealand.  In fact, in 2012 Australians owned 55% of foreign investment in New Zealand, while ASEAN nations owned only 3.1%.
  • Offshore investment is a two-way street. New Zealand is not a ‘takeover’ target by foreign investors. In fact, the OECD regards New Zealand’s regime for screening inwards investment as one of the most restrictive in the world; and
  • New Zealand has been heavily dependent on international capital since colonial days, and this is normal for a young, growing country.

Some facts I found interesting are:

  • Foreign investments in NZ exceeded NZ investments abroad by 4.4% of GDP in 1973 and 64% in 1989. Today it is 72%.
  • The Australian share of FDI in NZ increased from 32% in 2001 to 56% in 2012.
  • The Asian share of FDI in NZ increased from 1.9% in 2001 to 3.1% in 2012.

The report is full of facts, figures and charts. A great contribution to our economic knowledge, and hopefully will improve the level of debate on foreign investment.

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Franks on Housing

March 3rd, 2013 at 9:00 am by David Farrar

Stephen Franks blogs:

Marcus Lush recorded an interview at 5-50am this morning with me on the pros and cons of banning foreigner purchases of houses here. …

I realised that the issues could be summed up simply. Prices go up when supply can’t increase to respond to demand. There is no a shortage of building supplies, or builders. So foreign buyers’ money can only affect prices if there is a shortage of land to build on. But New Zealand is not short of land. It is short of consents to use land. And probably more important than the supply of new land, is the cost, delay and risk in trying to intensify the use of land that is already built on, nearer the centre of our cities.

We need to build both upwards and outwards. We do need to intensify, but we also need more rational urban limits.

In other words, our housing problem is the inevitable consequence of the political success of selfish middle and upper class families, working with  their stupid green children. They enforce their aesthetic preferences for the status quo (labelled as ‘heritage’) by locking newcomers out of their leafy and quaint inner suburbs. The RMA has frozen the dynamic processes of rebuilding and intensification that have created all great cities (and our own towns and cities up till 3 decades ago. The result is that poorer people must pay for more expensive housing ever further from where the work is.

To blame the resulting prices on foreign money is a nice distraction from their own culpability, for the selfish generations, and the councillors and MPs who pander to them.

Nicely put. Blaming house prices on foreigners is just blatant xenophobia.

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ODT on xenophobia

October 24th, 2012 at 10:00 am by David Farrar

An excellent ODT editorial:

Recently, control of Fisher & Paykel Appliances, the company which maintains a presence in Dunedin, passed quickly and almost quietly into the hands of the Chinese-owned Haier Group. Haier already owned 20% of FPA after effectively rescuing the company in 2009, when it acquired the holding as part of a capital raising that let FPA refinance its debt. FPA got distribution into China as a result of the deal and the ability to further licence its technology.

David Parker has said he wants Ministers to decide on private owners selling their shares to other private owners. What this may mean is companies going bankrupt, as F&P may have gone under if Haier hadn’t rescued them in 2009. We saw this under the last Labour Govt when they refused Singapore Air buying Air NZ, leading to the airline facing bankruptcy.

While the semantics would suggest that 52% ownership means the company is still in Kiwi hands, the reality is that a controlling interest is just that: controlling. (Haier’s offer is still subject to Overseas Investment Office approval, but it seems a formality.)Compare then the ease with which Haier took control of a long-established New Zealand company with the prolonged struggle by Chinese company Shanghai Pengxin to buy 16 central North Island Crafar farms. It now hopes to settle the purchase of the farms after the Supreme Court last week removed the last obstacle to the deal, an appeal by Maori trusts.

While it would be easy for Haier, a global whiteware group, to shift FPA to China, it is impossible for Shanghai Pengxin to shift 16 dairy farms anywhere. It seems xenophobia ruled in the farm debate. Why should the Chinese be allowed to buy New Zealand farms, the critics howled?

Exactly – you can’t move a farm or land. I’d point out that companies can move their manufacturing offshore also, regardless of who owns them.

And compare that reaction with the welcoming of recent news that Canadian film-maker James Cameron continues to expand his south Wairarapa property portfolio.

Incidentally, Mr Cameron’s neighbour, American billionaire Bill Foley, has won permission from the Overseas Investment Office to expand his Kiwi-based wine operation.

However, just like Haier, it is likely both Mr Cameron and Mr Foley paid market rates for their purchases. If the Maori trusts, and their benefactor Sir Michael Fay, had been truly serious about buying the Crafar farms, all they had to do was offer a higher price than that being offered by Shanghai Pengxin.

Xenophobia is not the determining factor in such sales: shareholders make their own decisions based on price and their own circumstances.

Not if Labour gets in. Their policy seems to be that Ministers will approve all sales that are not purely domestic. Decisions will be based on Ministerial opinion, not what is good for shareholders and investors.

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The Haier bid

October 19th, 2012 at 12:00 pm by David Farrar

The Dom Post reports:

Haier looks likely to succeed in its takeover bid for Fisher & Paykel Appliances after lifting its offer for the Kiwi whiteware maker, according to an institutional investor.

The Chinese firm yesterday announced it would raise its offer by 8 cents to $1.28 per share, a level that comes in at the bottom of the $1.28 to $1.57 per share value range independent adviser Grant Samuel put on the firm.

The new offer has won favour with institutional shareholders Accident Compensation Corporation, Harbour Asset Management and AMP Capital, who have all agreed to sell the 14.1 per cent of F&P Appliances they collectively hold.

Haier paid about 80c a share for its existing 20 per cent stake in 2009 as part of make-or-break capital raising by F&P Appliances to stave off a potential debt default.

Haier has already secured an agreement with Australian fund manager Allan Gray to buy its 17.46 per cent stake, and now has control of 51.56 per cent of F&P Appliances’ shares.

Haier’s offer was conditional on getting over 50 per cent, although it would prefer a full takeover.

“Our view is this price should enable Haier to get 100 per cent of the company and we think it is very fair from a shareholder’s point of view,” said John Phipps, deputy head of New Zealand equities at AMP Capital.

Never mind being fair to the shareholders. Labour has invented a new policy on the hoof, of fuck the shareholders. Labour have announced:

“The implications of its sale to New Zealand are too important leave the takeover approval to officials. Such a major decision must be made by Ministers. That’s Labour’s policy.

Labour’s view is that they will decide, who can buy a private company listed on public sharemarkets. Such decisions will of course be based on populism. Labour seem determined to retreat into a xenophobic fortress NZ policy that we last had in the 1970s.

Can you imagine the horror of Ministers personally deciding on all NZ takeovers? We’d become rife for corruption amongst other things. You want to be able to buy a company – make sure you look after the Minister.

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Foreign investment

August 29th, 2012 at 9:00 am by David Farrar

Stuff reports:

The OECD ranks New Zealand as among the most restrictive foreign investment regimes in the developed world – which dispels the popular view we are easy pickings for investors, says think-tank the New Zealand Initiative.

An NZI report analyses the Organisation for Economic Development’s Foreign Direct Investment regulatory restrictiveness index published in April. This shows New Zealand has the sixth most restrictive foreign investment regime of 55 developed economies.

NZI research fellow Luke Malpass said the view that New Zealand was really open for anyone to come and invest was not true.

The index measures statutory restrictions on a country’s FDI, including screening and prior approvals, key personnel and equity and operational restrictions. Most of New Zealand’s negative rating comes from its screening of investment applications, he said.

“New Zealand relies more than any other OECD country on ministries and ministers second-guessing investment intentions and possible outcomes on the most contrived criteria.”

Of the 55 countries measured, 35 didn’t have screening restrictions.

Investment in New Zealand is a good thing. It often creates jobs, and also frees up NZ capital for investment overseas. We don’t and can’t live in a silo.

Malpass said though New Zealand’s foreign investment regime restricted investment only in “sensitive land”, this category is absurdly broad. It includes any rural land of more than 5 hectares and anything larger than 0.4ha near inland water.

5 hectares is just 0.05 of a square kilometre. 0.4 hectares is a tony 0.004 of a square kilometre. Far too small.



August 15th, 2012 at 3:00 pm by David Farrar

The Dom Post reports:

Greens co-leader Russel Norman says his member’s bill to restrict foreign land ownership is likely to be narrowly defeated
tonight by an ‘‘evil coalition’’.

If anything is evil, it is xenophobia.

The bill aims to retain New Zealand ownership and control of sensitive land and has the support of Labour, NZ First, the Maori Party and Mana.

However, Dr Norman said it was likely to be opposed by National, UnitedFuture and ACT.

‘‘The job of Parliament is to represent the will of the people and people don’t want land going into overseas ownership,’’ he said.

What hypocrisy. One week after around 80% of New Zealanders voted that parental correctional smacking should not be a criminal offence, the Greens voted down a members’ bill that sought to do just that.

If people do not want land to go into overseas ownership, then they should not sell their land to someone overseas. But it is quite a different matter to ban fellow citizens from selling their property to the highest bidder.

Under this bill, James Cameron would be banned from buying his Wairarapa farm, even though the benefits to NZ of having one of the world’s most influential movie makers owning land here is huge.

Norman’s bill would ban any foreign investment in land over 0.05 of a square kilometer! It would not matter how great the benefits to NZ are – a total ban. It is xenophobic hysterical nonsense.

Applications for purchases over 0.05 of a square kilometer are assessed against the national interest, under the criteria in the Overseas Investment Act. Deciding on the merits if each application is far more sensible than a xenophobic ban.

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Labour on electricity assets

July 24th, 2012 at 7:00 am by David Farrar

Chris Trotter writes:

Speaking to a group of corporate head-hunters on July 11, Mr Parker spelled out the details of Labour’s policy on foreign investment. Concerned to prevent “infrastructure assets with monopoly characteristics” from being sold to offshore buyers, Labour, in the run-up to last year’s election, drew up a “closed list” – to keep a “bright line” between “what is to be sold and what is not”. Among the infrastructure that was not to be sold were any electricity line, water storage or irrigation networks; seaports or airports; and public hospitals, schools, railway lines or roads.

Not included in Labour’s “closed list” were telecommunications networks and – amazingly – “electricity generators”.

According to Labour’s policy: “While the electricity market is on the cusp of becoming uncompetitive and exhibits monopoly-like characteristics, generation assets are diverse in nature, location and ownership.”

What this means is that although Labour went into the last general election on a policy of “no asset sales”; and in spite of the fact that its campaign advertising showed a vast banner displaying that very message being draped over a hydro-electricity generating dam, the party was unwilling to include electricity generators on the list of state-owned infrastructure that “ought to be run in the New Zealand interest” – and never be sold to foreigners.

Am I alone in thinking that Labour’s foreign investment policy fatally compromises its current campaign against asset sales? If the generation of electricity is an activity which properly belongs to the market, and if New Zealand’s electricity generation assets are “diverse in nature, location and ownership” and, therefore, able to be purchased by foreign interests, then I’m at a loss to know why the Labour Party is opposed to their partial privatisation.

In one sense you can argue that there is no contradiction. The foreign investment policy deals with assets owned by the private sector while the privatisation policy is about assets owned by the Government.

However considering the hysteria from Labour over minority share-holdings in some SOE energy companies, it is interesting to contrast that with their policy that it would be fine for (for example) a foreign company to buy all of Contact Energy or Todd Energy.

Also useful to contrast to their record in office. They claim they are now against any foreign investment in electricity lines companies, yet they approved the sale of the Wellington lines company.

At the end of the day, you have to wonder if Labour actually stands for anything, apart from wanting to be in power.

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Foreign land ownership

July 9th, 2012 at 11:00 am by David Farrar

Bronwyn Torrie at Stuff reports:

Ninety-nine per cent of land in greater Wellington is still owned by Kiwis, according to an analysis of foreign ownership consents.

In the past seven years, overseas applications to buy 7500 hectares of land in the region were approved by the Overseas Investment Office.

“That’s less than 1 per cent of the region’s land area, so it dispels the myth Wellingtonians are becoming tenants in their own land,” said Mike Donald, managing director of land and property specialist Terralink International. …


Wellington land sold to overseas buyers:

Dairying, 100 hectares – 0.28 per cent of total dairying land

So what is all the panic about?



Dom Post on Crafar

April 21st, 2012 at 1:00 pm by David Farrar

The Dom Post editorial:

No application by a foreign investor looking to buy New Zealand land has attracted more attention than Chinese company Shanghai Pengxin’s bid for the Crafar farms.

It is hard to escape the conclusion that opposition to the deal, approved yesterday, is mostly driven by the nationality of the purchaser.

Of course it is. Not all of it, but much of it.

When Canadian film director James Cameron purchased more than 1000ha of Wairarapa land, including a 250ha dairy farm, the news was generally welcomed, even though the residency requirements he must meet mean he has to live in New Zealand for only 44 days in each of the final two years of a three-year investment period. The sale of the Crafar farms, on the other hand, has met howls of protest, despite Shanghai Pengxin having to satisfy 27 stringent requirements.

These include establishing a farm school on one of the properties, to be run by state-owned enterprise Landcorp, which will also manage the farms, and providing $5000 university scholarships to two students. It must also provide public walking access across two of the farms, protect Maori archaeological sites and undertake significant conservation requirements.

The company has also, apparently on its own initiative, undertaken to spend at least $100 million over five years promoting New Zealand dairy products in China and elsewhere in Asia, a key developing market. The increased trade that could flow from that will benefit all New Zealand dairy farmers and, with it, the wider economy.

As I have said for some time, I see this sale as having huge opportunities for New Zealand.

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Another Hikoi

April 21st, 2012 at 9:52 am by David Farrar

Andrea Fox at Stuff reports:

Maori are promising the “biggest hikoi New Zealand has ever seen” following the Government’s second green light for a sale of the 8000-hectare Crafar dairy farming estate to Chinese company Shanghai Pengxin.

I do wish the term “Maori” would not be used when talking about presumably one person or Iwi.

Meanwhile, central North Island iwi who are part of Sir Michael Fay’s court action against the sale have confirmed they are talking to Pengxin in the hope of buying three of the 16 farms from the company.

As one can see, there is far from a common view.

Nigel Baker – who represents a group within the Taupo region’s Ngati Tuwharetoa iwi, which is part of Fay’s group and has met Pengxin twice seeking to buy the 1700-hectare Tauhara Crafar farm – considered ancestral land, said there would be a “very strong” Maori backlash against the latest land sale to foreigners.

But details of the protest action, which would be against the wider sovereignty issue of the sale of land to foreigners, were still secret, he said.

“This is an issue for all New Zealanders. It will be the biggest hikoi this country has ever seen.”

What a wonderful idea. A hikoi to allow Sir Michael Fay to buy up farms on the cheap.

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