Kiwiblog

Fuck they are getting more desperate. The latest in the Dom Post:

Labour is set to ratchet up the debate over sales of land to foreign investors, with figures showing the equivalent of 122 rugby fields of Kiwi farmland are approved for sale to foreign investors each day.

I assume that a rugby field is around equal to a hectare. So NZ has around 27  million rugby fields to sell. Over a year (assuming working days) that is 30 hectares sold, or around 0.1% of total land.

Over a decade, that would be a massive 1% sold. Oh fuck, how the hell would we cope with only the remaining 99%?

Even worse, by the year 3000 all the land may be gone. Well, only if you ignore that those overseas purchasers also sell their land eventually – sometimes back to NZ owners.

And in the past five years, 219 of the 222 applications lodged for a foreign purchase have been approved.

“Let’s send a clear message: We welcome your investment, but there are some things we don’t want your investment in and land is one of those,” Labour leader Phil Goff said.

Past five years? Hmmn. Who was in Government for most of that time? In fact who was the Minister in charge of promoting foreign investment into New Zealand? One Phil Goff?

Is there anything he will not turn his back on, in a desperate bid for relevance? Does he actually have a single core belief?

Labour sold NZ land at the rate of almost 300 rugby fields a working day – at three times the rate of sales under National.

So when exactly did Phil Goff decide this was wrong? When he was out there as Trade Minister encouraging foreign purchases of land?

Can he point to some memos he wrote as a Minister, pleading with his colleagues to clamp down on land sales?

Some 158,588 hectares was approved for sale – equivalent to about 591ha a week or 122 rugby fields every day since July 2005.

Of that 160,000 hectares Phil sold 130,000 of it, and National has sold just 30,000. Actually the land owners sold it, so talking about the Governments that approved it.

Also under Labour, Canadian pop star Shania Twain was allowed to buy 24,731 hectares of high country near Wanaka. Mr Goff admitted he was uncomfortable with the 2005 sale to Twain, although it had included many conditions and some sweeteners for the country

Really – prove it? Where are your memos and file notes, expressing your discomfort and arguing against it?

What did Phil Goff say yesterday about National’s changes to policy on foreign ownership of land:

Labour leader Phil Goff said it was a half-hearted effort that did practically nothing.

“It will do nothing to discourage the increasing foreign ownership of New Zealand land.”

Now I wonder how much actual land has been sold under National. According to Maurice Williamson it is 31,000 hectares or 310 square kms. That is an average of around 20,000 hectares a year.

And how much land was sold under Labour to foreign owners?

Over nine years, you would expect it be 180,000 hectares, if at the same rate.  In fact it was a massive 650,000 hectares!!!

Now personally I think it is a good thing Labour allowed NZ land owners to sell their land to the highest bidder, rather than be forced to accept lower bids.

But the hypocrisy is just staggering.

In a profile on new UK Labour Leader Ed Milliband, The Independent said:

He is soft, cuddly and panders to every oppositional instinct in the party. There has been no position taken by the Labour Government of which he was a member that he was not prepared to trash if he thought Labour members would like it.

Is that not a perfect description of Phil Goff?

• One of the architects of GST campaigning against it
• One of the architects of our inflation focused monetary policy campaigning against it
• One of the Ministers who reaped $3b in profits from state power companies at a time of massive surpluses, now campaigning for them to be lower despite the record deficits
• One of the Ministers who refused time after time to reduce the blood alcohol limit, not campaigning for it to lower
• One of the Ministers who sold 650,000 hectares of land to foreigners, campaigning against 30,000 hectares of sales.

Someone should compile a fuller list of these. Feel free to add others to the comments.

The Herald editorial:

According to the Finance Minister, overseas investment regulations to be introduced in December will “provide extra clarity and certainty for potential investors”. More likely it will produce doubt and confusion.

The only thing more certain, is that Ministers are more likely to interfere if the political heat gets too much.

The regulations are an invitation for pressure groups to create as much fuss as possible to get the ministerial thumbs-down for what may well be desirable bids in terms of efficiency and economic benefit. Some opposition may be driven by xenophobia; others may not wish land sold to any overseas interests, whether they are Canadian or Chinese. Clearly, there will now be added uncertainty. Overseas investment policy, rather than being based on a clear set of principles that are applied without fear or favour and that recognise the limits on foreign control, will be hostage to the ministerial pen. …

Overseas investment, like immigration, has always been a key driver of the New Zealand economy. It also is far too important to be hostage to ad hoc politicking.

What people always forget, is that when you ban land owners from selling to the highest bidder, you are reducing their net wealth – and reducing the amount of money they may have to invest in other ventures.

Bill English has just done a press release (not online yet):

Ministers will have extra flexibility to consider a wider range of issues – including large-scale ownership of farmland – when assessing overseas investment applications for sensitive land, Finance Minister Bill English says.

At the same time, a new ministerial directive letter to the Overseas Investment Office will provide extra clarity and certainty for potential investors about the Government’s general approach to foreign investment in sensitive assets.

“In recent months, ministers have carefully reviewed the current framework for considering overseas investment applications – particularly in light of issues with respect to farmland ownership,” Mr English says.

“Overall, the measures I’m announcing today strike an appropriate balance. They increase ministerial flexibility to consider a wide range of issues when assessing overseas investments in sensitive land, while at the same time they provide extra clarity and certainty for potential investors and the Overseas Investment Office.”

Ha. In my experience wider criteria to decline an application on, will lead to less clarity and certainty for potential investors.

But I guess it will keep the NZ First potential voters happy. I understadn the politics, but don’t like the economics.

Stuff reports:

An average of 82 hectares of agricultural land per day has been approved for sale to offshore investors, pushing the Government close to deciding on rules to tighten farm sales to foreigners.

Prime Minister John Key says the figures prove “significant foreign purchases” have taken place. The lion’s share of investment has come from the United States, the United Kingdom and elsewhere in Europe.

Key yesterday held talks with Finance Minister Bill English on possible changes to the Overseas Investment Act to protect farms.

“I think we’re making progress in this area,” Key said.

“My concern is about what I see potentially unfolding and that is quite large tracts of New Zealand land coming available for sale rapidly and the consolidation of those farms in foreign hands and whether that’s in New Zealand’s best interests, and my view is, it’s not.”

Foreign investment is generally beneficial to New Zealand. If you restrict foreign owners from purchasing land in NZ, there are two potential negative impacts:

1. The current owner of the land is unable to sell the land for as much as they otherwise would have got. This means less wealth in NZ.
2. The foreign owner of the land, as they valued it more highly, may be able to put it to better economic use (as they need higher returns to cover the higher capital) and this can contribute to a more efficient economy.

The Herald says:

John Key struck an odd note when he observed last week that he would be concerned if large tracts of New Zealand land were being sold to foreign investors. “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,” he said.

Was this the same Prime Minister who, two months ago, reprimanded his Agriculture Minister for saying the sale of the Crafar family farms to a Chinese company was unlikely to go through? Mr Key has obviously discerned a groundswell of concern about such sales. Yet, as a Weekend Herald investigation revealed, we are already selling large tracts to overseas investors.

Minister Carter’s comments were about a specific sale going through the regulatory process, while the PM has been talking more generally.

Foreign investment involving agricultural land more than twice the size of Auckland City has won regulatory approval over the past five years.

That’s 150,000 hectares which is around 0.6% of total NZ land area.

First, New Zealanders can buy land in most regions, and have done so in the Americas, Australia, South Africa and Europe. Secondly, and most apposite, foreign investment has always been a driver of this country’s economy. Banning the sale of farm land would send entirely the wrong message to potential investors. Thirdly, placing restrictions on such investments is always apt to create considerable difficulties in terms of boundaries and interpretation.

As it is, non-urban land of five hectares or more is deemed sensitive, and applicants must refer their bids to the Overseas Investment Office. It must consider criteria including relevant business experience, financial commitment to the investment and good character. The office decides about 75 per cent of applications, but all those for sensitive land must go to the Ministers of Finance and Land Information. In the end, they must balance the protection of sensitive assets with the need to encourage investment.

I see foreign investment similar to immigration. Both are generally very positive for New Zealand and economic growth. But both need a regulatory pipe which can determine the speed, so it is sustainable. A net migration of 10,000 people a year is good. If you increased it to 100,000 a year it would be bad as our infrastructure could not cope.

Likewise foreign investment is good, but that doesn’t mean one would want to sell off say 50% of farm land in a year.

The contribution to the economy of efficient foreign or multinational ownership has, rightly, been the paramount concern. Indeed, the Government’s confidence in the system has seen it delegating more authority to the Overseas Investment Office. Mr Key may have been stricken by sudden doubt, but there seems no reason for dramatic change. Those spreading wildly alarmist sentiment misunderstand the factors underpinning this country’s farming success story.

I agree dramatic change is not needed.

Vernon Small reports:

The Labour Party is opening the door to policy change, including taking GST off food and clamping down on foreigners buying farms.

Phil Goff is trying to go to the left of Helen Clark. Taking GST off food is a daft idea. Mind you McDonalds will think it is a great policy.

And it is vital we must stop farmers from being able to sell their farms. Imagine if a foreigner buys a farm. One minute it is sitting there in the Waikato, and suddenly the foreigner has packed the farm up and moved it overseas. The dirt, the grass, the cows, the sheds – all gone. Just a big chasm left in the earth.

I wonder if Winston will sue Phil for stealing his policies? I mean they already share major funders, so sharing policies is next logical step. Maybe their shared name can be Labour First.

A reader writes:

The truly pavlovian response by the media to the statement yesterday about changes to overseas investment rules, makes me marvel that we have any decent public policies in NZ.

The English statement today sets out facts that competent journalists would have worked out for themselves, if they were professional and not dependent on recycling statements from politicians and others with little or no interest in the truth. Their coverage has been truly pathetic.

The statement the reader refers to is this:

Removing the strategic asset test from the overseas investment rules will reduce confusion and uncertainty for investors but will have little other practical effect, Finance Minister Bill English says.

“The strategic asset test has never been used to block a sale by any government in this country,” Mr English told the Shareholders Association Annual Conference in Wellington today.

So a never used ill defined test is going, and this got the headlines about everything for sale.

“Contrary to Labour’s spin, it did not use this test to block the sale of Auckland Airport. Instead it relied on nine existing criteria in the rules relating to the sale of sensitive land. They were applied as part of the normal screening process.

Yet many media reported that this test was used to block the sale.

NZPA has reported:

New Zealand’s overseas investment watchdog has approved a Chinese conglomerate’s bid to buy Vector’s Wellington power lines network.

Vector sought approval earlier this year for the $785 million deal to sell 100 percent of the shares of Vector Wellington Electricity Network Limited to Hong Kong-based Cheung Kong Infrastructure Holdings (CKI) and Hongkong Electric Holdings Limited (HKE).

Now I don’t care at all who owns my power lines, but isn’t it ironic that the Government moved heaven and earth to stop a Canadian pension fund having a minority voting stake in Auckland Airport, yet has absolutely no problems with a Chinese business owning 100% of Wellington’s power lines?

Didn’t Helen Clark say ownership of such assets would be a defining issue for the election?

It is good to see the media focusing on the hypocrisy in the Government over Auckland Airport and Wellington’s electricity network. In the former example they moved heaven and earth to stop the private owners selling a minority stake to a Canadian pension fund. And for the latter they say there is no issue at all, despite it being 100% sale of a crucial monopoly.

So the NZ Herald editorial is welcome.

It is hard to find in these decisions any consistent policy that might guide foreign investors. The sensitivity of Auckland Airport had nothing do with its land, abutting Manukau Harbour, and it is hard to believe the Government’s comfort with the Vector sale has anything whatsoever to do with the land under the power lines.

It’s ridicolous. Is Dr Cullen really saying that all the hysteria he whipped up about asset sales (overlooking Winston sold it in 1998) was about the land under the airport, and not the airport itself? Yeah, right.

But for reasons that remain unexplained, Labour does not regard an urban electricity network as “strategic infrastructure”.

If that phrase has any meaning it must apply to power lines. A line network cannot be practically duplicated for the sake of competition. It is the classic natural monopoly. If line networks are not kept in public ownership they require careful regulation, as Telecom has shown, to prevent them gouging consumers or denying access to competing traffic.

Now again, so there is no confusion, I have no problem with the sale of the power lines. They will be subject to price regulation as most monopoly assets are. My problem is the hypocrisy.

Vector, as it happens, is a quasi-public entity, owned by a trust elected by Auckland consumers, whom it rewards at the expense of its consumers elsewhere. Wellington’s network has not been sold from this form of ownership wholly into the hands of a private company. It is a privatisation in anyone’s language. Yet the Government was more concerned about the partial sale of an airport in which two Auckland councils would have retained significant stakes. It will defy investors’ understanding.

This is a good point. This sale is far more of a privatisation than Auckland Airport was which was private fund managers selling to other fund managers. Vector is a public trust selling to a private entity.

The Government has steadfastly declined to publish a list of assets it regards as “strategic” because it has no consistent definition in mind. The public and potential investors are left to conclude that a property becomes “strategic” simply when it suits politicians to regard it so. At least that means that assets as vital as power lines can attract foreign investment when their luck is in. But this country’s process of approval should be better than a lottery.

Even Labour Party President Mike WIlliams has agreed that here should be a list of these so called strategic assets.

What this means is that each time Labour in the campaign tries to whip up populist sentiment on the basis of its actions in “protecting” Auckland Airport, their bubble will get pricked by reminders of the Wellington power lines, and Helen Clark’s lofty pronouncement that “asset sales will be a defining issue” looks as hollow as “carbon neutrality”, “closing the gaps” and “top half of the OECD”.

Bernard Hickey reacts to news that a Hong Kong company is buying the Wellington electricity network by blogging that the Government has a choice between hypocrisy or stupidity.

The government now has to choose between blocking the deal, which would be stupid and dangerous, or approving the deal, which would expose the government’s recent comments on foreign ownership of strategic assets as politically motivated and opportunistic hypocrisy. I suspect it will choose hypocrisy and hope no one notices.

Indeed, they appear to be doing so. They have this magical invisible list of strategic assets which they won’t let anyone else see. And whether or not an asset is strategic or not seems to be pure political whim.

But let us look at the difference between Auckland Airport and the Wellington power lines:

1. Electricity is arguably the most vital utility
2. Every Wellingtonians uses electricity everyday, while relatively few Aucklanders use the airport every day
3. While inconvenient there are other airports Aucklanders could use, while Wellingtonians have no other option for getting electricity to their homes.
4. There are alternatives to air travel such as car, bus, train and boat. There is no real alternative to electricity

So how on Earth you must wonder does a Government deem a Canadian pension fund buying a 24.9% voting stake in Auckland Airport an evil evil takeover which must be stopped at all cost, yet having the richest man in Hong Kong buy 100% of Wellington’s electricity network not even worth a pause for consideration?

Is this the same Prime Minister who declared at her Congress that asset sales were a defining issue? WHat has happened to the lofty rhetoric in just two weeks?

Now please don’t think I against the sale. I think foreign investment is good and necessary in New Zealand. Without it we would be a lot poorer than we are. I would not stop either deal. But the Government’s hypocrisy is massive.

Bernard looks at the issue further:

Just a few weeks ago two junior ministers in the government decided to block a deal to sell a significant stake in Auckland Airport to a Canadian pension fund. They did so after Finance Minister Michael Cullen shifted the goalposts near the end of the bidding process by saying the Overseas Investment Office should consider blocking foreign acquisitions of strategic assets on sensitive land. This cost Auckland Airport shareholders dearly and damaged New Zealand’s reputation as a reliable place for foreign fund managers to invest. It was a blatantly opportunistic, political decision with little rhyme or reason apart from it helped Labour in the polls, marginally.

So the question now is: Do Michael Cullen and Helen Clark believe that Wellington’s power network is a strategic asset on sensitive land?

The availability of power to the nation’s capital sounds strategic. Would the Beehive work without power? What about the Ministries of Defence, Foreign Affairs, Agriculture (Biosecurity), Education and Health? Sounds important and strategic to me. What about the Reserve Bank of New Zealand and Treasury? Don’t they manage our financial system and wouldn’t they be our crisis managers in a financial crisis? Then there’s a mere trifle of around a tenth of the population needing that network to keep working and living.

Bernard also points out the proposed buyer has connections to the Chinese military, and there have been official warnings in the US about him. So the question again is:

But will our government judge a man who was considered by the US government to be a security threat as safer than bunch of Canadian pension fund managers to run a network supplying power to the heart of the nation? Looks like they will. …

This just shows the naked hypocrisy of the Auckland Airport decision. If Auckland Airport is a strategic asset on sensitive land then surely Vector’s Wellington power network is too. If so, the government should reject this latest deal.

Having said that, I think the government should choose hypocrisy over stupidity. We need the money and we can’t afford to damage our reputation as a safe place for international investment any more than it already has been.

I agree hypocrisy is preferable over stupidity in this case, but people should be in doubt the total lack of consistency in the two cases, and that Auckland Airport was merely about polls, not what is good for New Zealand or even a honest belief for or against foreign investment. I can respect people who honestly believe foreign investment is bad. The trouble with Helen and Michael is they know it is good (otherwise would block this deal), but when down in the polls revert to xenophobia to ramp up hysteria against foreigners investing in NZ.

NZPA reports on advice from Treasury released under the OIA, which confirm the decision to sabotage the Canadian bid by way of retrospective regulation was economic sabotage, and worse of all breached our legal obligations under international agreements.

The Government’s moves to block Auckland International Airport (AIA) were strongly opposed by Treasury who said it would breach international agreements, scare foreign investors and damage the economy.

Treasury wrote a scathing paper on the suggestions, saying the benefits of the Government’s proposed policy were “likely to be small relative to the detriments”.

It advised against any intervention in the share bid on three main grounds:

* Legal — “It is almost certainly a breach of our international obligations under various multilateral agreements”.

* Commercial — “Such an intervention would create considerable disruption and uncertainty. By affecting investors’ property rights and reducing value it may cause investors to be sceptical … and more wary of investing”.

* Economic — “It is likely negatively impact on international investors perceptions … increase the risk premium for investment in New Zealand with potential to raise the cost of funds for all New Zealand companies”.

It is a pity the Canadian pension fund is not going to court over this. I think they would have a field day. This now puts on the record that he Government ignored the advice of both the Overseas Investment Office and Treasury on this retrospective intervention. Funny how Helen says we couldn’t have tax cuts earlier because of Treasury advice – they do pick and choose.

Some will argue decisions on investment should be at political whim, and not have any consistent rules or laws around them. You can do that, but we will find there is a lot less investment if people can’t trust the law to be applied fairly.

The Dom Post reports that the Government is not likely to block the sale of Wellington’s electricity network to a foreign party.

So the Government hysterically whips up opposition to a Canadian pension fund having a 25% voting stake in Auckland Airport, but has no problems with a Chinese, Hong Kong or Australian company buying 100% of Wellington’s power network.

Confused? Surely this is a Government of principle, and having proclaimed strategic asset sales to foreigners is bad, will not allow an asset as strategic as a power network to be sold?

I mean an airport is surely less strategic. Not all Aucklanders use Auckland Airport, there are substitutes to air travel, and competing airports can be built – as Waitakere Council wish to do.

But the power network in Wellington is used by 100% of Wellingtonians. No one goes without electricity. There is no way that someone could come along and put in a whole new set of power lines to every home. And there is no real alternative to electricity, as there is to air travel.

So why is the Government so inconsistent? I thought asset sales were the defining issue for this year? Why is the Government allowing this strategic asset to be flogged off?

Personally I would not be stopping private owners of either asset from selling them to other private owners. But as the Government has made asset sales a defining issue, their response is awaited.

Fran O’Sullivan wants the Government to list what is and is not a strategic asset. I agree this must be done, so people know which set of rules apply to them.  Regardless of your views on Auckland Airport, you probably agree it is not desirable for the rules to be changed halfway through a sale.

At the forum last night on how to “super-size” the economy, there was a lot of discussion on how we need more investment in NZ – in infrastructure, in businesses, in research & development etc. Investment helps us grow. But there will be less investment if the status of certain companies and/or assets are not known.

I’m delighted to see such a strong response from National to the poll driven economic vandalism over Auckland Airport.

Labour are spinning to the media how popular this decision will be, which confirms it was not a decision based on the law. One journalist joked on ZB that he would be surprised if the two Ministers even read the application!

Dr Cullen is quoted as saying:

“We’ve not had a good experience of selling strategic assets overseas,” Dr Cullen said.

Firstly Dr Cullen it isn’t your asset. It belongs to the tens of thousands of share holders, whose net worth you have lowered. Secondly you can’t actually take an airport overseas. Thirdly how do we know what is strategic when you won’t say so in advance. And fourtly it was for a puny 25% voting stake.

The Dom Post reports that business leaders want clearer rules about foreign investment. And this is really the big issue (not just one decision). The rules were changed retrospectively and have been changed in such a way few people can make investment decisions with a high degree of confidence about what the rules are.

At a minimum the Government should list what the so called strategic assets are. No one wins when it is a guessing game.

As predicted here for weeks, the “independent” Ministers has by pure coincidence turned down approval for the Canadian bid to buy a partial stake in Auckland International Airport.

The Canadians only wanted 40% of the shares, with a reduced 25% voting strength. Ironically many of the current shareholders who wanted to sell are foreign.

It is sad to see a Government so willing to do the right thing with the China FTA and ignore NZ First type xenophobia, yet succumb to it on this issue.

The Canadians have a pretty good chance of getting the Ministers’ decision over-turned in Court as it was obvious they pre-determined the matter before they even considered it. From what I can tell, reading the decision, the neutral officials in the OIO concluded allowing the investment would be beneficial to NZ, but the Ministers substituted their own political judgement.

A massive 63% of shareholders (close to 90% when you exclude the Council stakes) have agreed to sell their Auckland Airport shares to the Canadian pension fund.

Why so many?

Simple.  The Government’s actions have driven the current share price down so much, that it has made the Canadian offer much more attractive.

The next step, assuming over 50% have also voted for the bid, is for David Parker and Clayton Cosgrove to pretend to impartially consider the bid.  They will go through the farce of asking for reports, and taking time to make a decision, and then shock horror they will turn it down.

And then the Canadian pension fund will haul their little behinds into court, and point to massive and compelling evidence they predetermined the matter because persons no less than the Prime Minister (who can sack them) and the Finance Minister (who controls their budgets) has made it very clear they are expected to turn the bid down.

And so the Canadians will get their 24.9% voting share – which is less than the current level of overseas voting strength I suspect.

John Armstrong reviews the latest move by the Canadians:

An unadulterated shareholding of 40 per cent is widely considered to amount to control. However, the act’s criteria refer to “control” – not “ownership”. The distinction is important because the ministers’ decision is open to judicial review.

I am sure the Canadians were aware of this point.

The Prime Minister, who declined to comment on CPP’s move, yesterday suggested a 25 per cent stake fell within the definition of control if the remaining shareholding was widely dispersed, as it is in Auckland Airport’s case.

However, limiting CPP’s voting rights to 24.9 per cent would give the pension fund less influence than that of the Auckland and Manukau City Councils when their two holdings are combined – arguably not control.

The PM’s knowledge and experience of commercial law is limited, to say the least. As Armstrong points out two local Councils will have a combined greater controlling stake.

What is interesting is that her comments strongly suggest it is purely about politics, and not about any actual concern about control of strategic assets.

The law requires the two ministers to decide on the basis of Overseas Investment Act criteria – not political factors. Yesterday’s move by CPP effectively makes it that much harder for Parker and Cosgrove to say “no” without sounding political and ending up in the courts.

I have little doubt it will go to court, if turned down. The comments by all the other Ministers, the off the record briefings, and the decisions by Cabinet to keep changing the rules will make it almost impossible for the Ministers to argue they were not affected by political factors.

The Canadians have today said they will reduce their voting strength in Auckland International Airport to 24.9%, even if they get 40% of the shares.  This is definitely below the level regarded as having “control” and makes it very difficult for the Government to turn the bid down, unless they want to be exposed as total xenophobes.

The Hive reports:

CPPIB intends to voluntarily reduce its voting power for all shareholder resolutions, with the exception of resolutions that affect the rights attaching to CPPIB’s shares, to 24.9% of all AIAL voting shares on issue. CPPIB will also provide that the limitation to 24.9% can only be relaxed or revoked by CPPIB if it is permitted by a New Zealand overseas investment law or regulatory approval to vote more than 24.9% of the voting shares in AIAL on issue. The voluntary restrictions that CPPIB will put in place in relation to its voting rights reinforce the fact that CPPIB will not have control over AIAL in any respect.

The Government’s response will be most interesting.  If they still send out signals saying no, then it will be clear they have done a full 180 degree flip and are now against overseas investment in New Zealand, regardless of control of assets.

Two separate columnists in two separate papers have used the “Muldoonist” tag in relation to Dr Cullen’s overnight secret law change regarding overseas investment in private companies.

Brian Gaynor in the Herald writes:

Finance Minister Dr Michael Cullen’s decision to effectively stymie the partial takeover offer for Auckland International Airport (AIA) is an unwanted reminder of the meddling policies of former Prime Minister Robert Muldoon.

Dr Cullen’s edict was so appalling, and so inconsistent with his policies of the previous eight years, that one can only conclude it was strongly influenced by political considerations ahead of this year’s general election. …

Cullen’s decision was announced nearly a decade after the Crown sold its 51.6 per cent controlling interest in the airport and more than seven months after the first offer for AIA was revealed. As a result the offer has been a terrible waste of resources – the airport had already spent $5.8 million on the process by the end of December.

Meanwhile Garry Sheeran in the SST says:

The crudely political nature of the government’s late-night move to block the Canadian bid for 40% of Auckland International Airport is highlighted by a barely cold, two-year review of the Overseas Investment Act.

That review, enacted into law in August 2005, was supported by a government “committed to maintaining a liberal investment regime”.

The legislation’s sponsor, Finance Minister Michael Cullen, said at the time that New Zealand needed foreign capital to develop the economy.

No surprise, then, at the collective gasp which greeted the same minister’s announcement late on Monday that the same act would be amended to send the Canadians packing, once and for all.

Political commentator Chris Trotter said the use of an order-in-council to rewrite the law harked back to the 1980s. “It would have been just another day under Rob Muldoon,” he said, “but using the governor-general and most of the cabinet to rewrite the rules is not something we are used to any more.

Also the NZ Herald Editorial calls on Cullen to name the assets covered by this new law:

Dr Cullen suggests the infrastructure he has in mind comprises only a “narrow” group. The inclusion of Auckland airport means it could be narrower. But, hopefully, dams and ports are the other ingredients. Certainly, there is no need for the likes of Television New Zealand, which can, in an emergency, be easily replicated.

The other factor in this equation is xenophobia. That is the unspoken reason for the obstacles installed by many overseas jurisdictions. It should not be an issue here. Dr Cullen must list what the Government considers strategically important infrastructure. That should be the prelude to a reasoned debate. From that, it should not be difficult to reach bipartisan agreement on strategic assets, and the degree of protection they should be afforded.

Indeed Dr Cullen has resorted to Winston’s old trick of xenophobia. And it is quite unacceptable for people not to know which assets or companies the Government now deems strategic. Why would people spend money investing in a company when the Govt by overnight whim can declare it is strategic and off limits.

Lots written on Auckland Airport today. I’ll divide it up into the legal, political, and economic. First of all look at this story by Audrey Young:

On Monday night, after the Australian sharemarket closed, the Government changed overseas investment rules ensuring that if even the Overseas Investment Commission approved the sale, the two ministers with the final say, Clayton Cosgrove and David Parker, would be able to say “no” and withstand judicial review.

I would not be so confident about it withstanding judicial review. Despite attempts to isolate the two decision making Ministers, it is obvious that the issue has been pre-determined for them. And as Chris Carter found out with the Whangamata marina, the Courts do not like Ministers pre-determining issues.

On the political side, Vernon Small blogs:

Labour is cock-a-hoop today over the Auckland Airport (we-won’t-let-it-be-bought-by-a-Canadian-pension-fund-but-don’t-want-to-say-it-that-blatantly) regulation change.

Just a day after Prime Minister Helen Clark predicted the ‘fun would begin’ once National started debating policy John Key has looked surprisingly leaden-footed in response to the change – a popular move with the electorate, I would imagine, but one which National would instinctively reject.

National’s response hasn’t been particularly well-targeted it seems to me. The issues I would focus on are:

• One shouldn’t change the rules at the last second – moves like that destroy investment and jobs and push up interest rates
• The rules should be clear as to what is and is not allowed, and this change means no one will be sure now what the ground rules are

Tracy Watkins has an article in the Dom Post, with the headline being “Nats will not ban airport sale”. Now please bear in mind Tracy does not write the headline even though it is her story. The headline though is a misleading one as it suggests Labour is banning the sale, and they are not. They are changing the rules, but they are not banning it.

On the economic front NZ Herald economic editor Brian Fallow looks at the dangers:

The Government is running risks with New Zealand’s reputation as an investment destination by suddenly turning Overseas Investment Office approval, long a rubber stamp, into a serious hurdle for the Canadian bid for Auckland Airport.

It has changed the rules in the closing minutes of the game.

And it does this reckless thing at the worst possible time.

The country has for 20 years enthusiastically taken advantage of the opportunities globalisation provides to access foreign capital.

Had we not, had we relied on what we ourselves are prepared to save and invest, the economy would be a lot smaller than it is.

Indeed.

Fran O’Sullivan counts the cost:

Helen Clark’s Government has wiped hundreds of millions of dollars off Auckland Airport’s value in a vainglorious move to exert “local control” over an asset that passed into majority private ownership more than a decade ago. …

The upshot is that New Zealand’s hard-won reputation as a “fair dealer” that welcomes foreign investment has now been carelessly hammered by a Government which is bent on milking the Auckland International Airport takeover for political advantage.

What Helen Clark and Finance Minister Michael Cullen forget as they blatantly ramp up the foreign investment bogey during election year is that the 50,000 retail shareholders in Auckland Airport also have votes.

The NZ Herald Editorial labels the move xenophobia:

This is populist politicking, pure and simple. An administration reeling in the polls has stooped to courting xenophobia. Only that explains the timing of the intervention. If the Government genuinely viewed this as the right policy, it could have acted when the airport first attracted overseas interest.

Andrew James in the Dom Post reports:

More than $300 million was wiped off Auckland International Airport’s market value after the Government introduced a late rule change …

$300 million wiped out.

And The Press editorial weighs things up:

… But it is doubtful if it is much more amenable to the national interest — whatever that is — under its present ownership than under Canadian ownership. Both owners would be subject to the same laws and regulations, and liable to the same pressures from governments local and national. Both owners would seek to maximise their profits and returns to shareholders. Materially, the only difference to occur under Canadian ownership would be a larger flow of profits offshore.

New Zealand does not have the capital or human resources to fuel its development, but it does not like the large foreign inflow of people and finance that development needs. The way to solve the conundrum is not to pass regulations but to upskill New Zealanders and make them more wealthy. Then they could own and manage their assets.

The Press gets it somewhat wrong with saying more profits would flow overseas. Because the domestic money freed up from any sale could well result in more money flowing to NZ from overseas.

The Visible Hand  in Economics deals with this and other economic issues. Gives a nice list of benefits and costs of foreign investment.

The Government’s decision to change overnight without warning the rules around overseas investment into NZ is surely a sign of poll panic leading to a desperate attempt at populism.

This is not just about Auckland Airport.  That deal was looking shaky anyway.  It is about having consistent rules that are not changed halfway through a process. And it is also about having a degree of objectivity about over investment decisions.

Financial journalist Bernard Hickey blogs:

The government’s decision overnight to invent a new rule that allows it to block the sale of Auckland Airport is a stunning turnaround of decades of official policy. It will hurt our ability to encourage foreign investors to come here and help us pay for our current account deficit. It is also another sign that the government is on its last legs. Fearing it may not be in power for too much longer, it is showing its true colours and is embedding its naturally anti-foreign-investment instincts into law. 

Suddenly the government has decided that selling the Auckland Airport is a bad idea. It has invented a rule that says it can block any sale of ”strategically important infrastructure on sensitive land” …

I believe there could be a lot of sensitive land out there that needs to be protected from foreign investors. After all, this land could be insulted or bruised in many ways. Are you confident that a minister of the crown can decide this for the nation without reference to Parliament or voters in an election? And will foreign investors give our government the benefit of the doubt whenever they’re considering buying an asset here on “sensitive land”?  

There are a hundred of these types of assets on this type of land. What about our banking system? There is no more strategic asset. Should the buildings with the servers hosting all our accounts be seized back by the government? I jest just a little here, but it shows the absurdity of this decision and how it could be extrapolated by an even more insensitive and insane government. For example, what about the assets of Fletcher Building. It is held in large part by foreign investors and is responsible for a good chunk of New Zealand’s public and private infrastructure building. Sounds a good enough reason to stop foreigners from owning it.

Read Bernard’s full column.  It is justifiably scathing.  This is a kneejerk abandonment of a decades old policy. And it is not a reversal after public consultation, and careful policy analysis. It is poll driven panic politics. Bernard goes on:

And finally, what was the government of a debtor nation with a current account deficit of around 8% of GDP thinking? That it doesn’t matter if we discourage foreign investment? That the foreign institutional investors will understand if we change our minds about the fundamental rules of the game right at the end of a bidding war? That they won’t mind? This is a plainly dumb thing to do when we need foreign investors to keep funding our way of life and building up our infrastructure. We spend more than we earn. We need to borrow from foreigners to do that or we need to encourage foreign investment.

What will turning off foreign investors mean for voters? It will mean higher interest rates on mortgages. When foreign investors believe we are a riskier proposition, they will increase the risk premium they demand for the money they lend us. That will increase wholesale interest rates and that will be passed on (as we’ve found in recent weeks) to us in the form of higher mortgage rates.

What on earth was the government thinking? Clearly, it was not thinking clearly at all.

And NBR Editor Nevil Gibson writes:

The simple take from the government’s decision to tighten overseas investment rules is that the country’s ports and airports will be run more by political whim than business strategy.

In a sudden move, taken a year after the first move by overseas interests to take control of Auckland International Airport, the new rules extend the ‘importance of local control’ to the approval process.

Under the Overseas Investment Act regime, two cabinet ministers have to approve changes of ownership of ‘sensitive land.’ In other words, political imperatives are paramount to business ones.

Even if one agrees with the rule change, the way the Government has gone about it is atrocious. The Canadian Pension Fund could have saved millions of dollars if it was told a year ago, the Government will not allow the airport to be sold.  They could have announced an intention a year ago to change to the rules and consult on them.  Investors – both domestic and foreign – will be very wary of a Government which acts so capriciously. And as Bernard Hickey says – the price may come in higher interest rates.