Both sellers and buyers gain when a farm is sold

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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