Watkin on Crafar

Tim Watkin has a thoughtful piece at Pundit on the decision:

Looking at the OIO decision, it’s interesting to note that the deal literally ticks nearly all the boxes; the only fail is its ability to bring new skills and technology to New Zealand. That’s hardly surprising, given our farmers are as good as any in the world.

It’s very clear this was not a marginal call.

The OIO writes it’s also excited by the fact SPGL has “very strong contacts with the supermarket industry” in China, will create two new NZ brands (Nature Pure and Pure 100) and is promising to spend $100m over the next five years promoting New Zealand dairy in Asia.

I actually regard the effective partnership between Landcorp and SPGL as exciting. They have the capital and contacts, and Landcorp has the expertise. This deal could have major opportunities down the road.

What of the OIO’s point about “tacit anti-Chinese bias”, you ask? This sale deserves to be a major news story because of the large amount of land lost to offshore ownership in one go. But let’s be honest, the fact the sale is going to China has ratcheted up the concern and public debate.

Some of that concern is reasonable – we can’t buy land there, China is in the process of buying vast natural resources around the world, and such purchases are made in its national interests, which aren’t necessarily ours. But some of the concern is out-and-out racism.

Last year a German firm got approval to buy 3300 hectares in Southland. Remember the public debate about that deal? No, me neither.

Did anyone complain when Harvard bought our biggest forest? Or when Britons bought up 22,000 hectares of farmland over the past two years?

Of course not all of the opposition to the sale is xenophobic or racist. There are some people who really think that it makes good economic sense to not allow even one hectare of land to be owned by an Australian or Brit. They’re wrong, but they’re consistent.

But the nationality of the buyers was a factor in this case, for many. The examples Tim gives about the German purchase, for example, is a good one.

Labour leader David Shearer in opposing the sale said this week:

“If there is going to be ownership then we have to make sure New Zealanders have a real interest in it and get real value from it. Now I don’t think that this sale here gives us any return.”

The details of this deal make that a hard argument to sustain; there are clearly significant returns to New Zealand. It’s hard to imagine how, under current law, New Zealand could have done better out of this deal. The original New Zealand bidders couldn’t have offered the strategic links into Asia and, I’m sorry, I simply refuse to take seriously a Michael Fay-led anything as a champion of retaining New Zealand assets in local ownership.

The strategic links into Asia are potentially very good for New Zealand.

Having said all that, why am I still uneasy about this sale? Because ownership matters. The owner is boss, keeps the profits, controls the asset. One sale on its own isn’t the end of the world, but added together we’ve sold 170,000ha of farm land in the six years from July 2005 to May 2011, according to this very good piece in Farmers Weekly.

That rises to two percent of our farmland in the past decade, according to RNZ.

If we keep that up over the next century, that’s 20 percent gone.

And I think there is a valid debate about whether there should be some sort of limit on the total amount of land owned by foreign interests. That is preferable to railing against individual deals which in fact make good economic sense.

However I would make the point that any limit should look at more than just sales. Some of the land sold to foreign owners has been resold back to NZ owners. And some of the land sold to foreign owners was already owned by different foreign owners. What would be useful is a time series showing total foreign ownership at annual intervals. I’m not sure though that such data is easily compiled.

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