Foreign ownership boosts wages:

September 5, 2014

Trans Tasman on foreign ownership:

The proposed sale of the 13,800ha Lochinver Station, near Taupo to Shanghai Pengxin, which bought the Crafar Farms in a joint venture with Landcorp, reignited the political debate about foreign investment and purchases of Kiwi land. Labour has promised to block the sale if it is not approved before the September 20 election and stop land sales over 5ha except in rare circumstances. Finance spokesman David Parker says land sales to foreigners do not increase output and do not release capital to be reinvested by the NZ owner to create new jobs. Finance Minister Bill English, however, reckons the Govt has struck the right balance between attracting foreign investment and tightening the rules for overseas investment in sensitive land.
Public Disquiet. Chinese investors have been making other investments in the farm sector: they have a minority stake in Blue Sky Meats and the Overseas Investment Office is considering an application to buy Prime Range Meats. Farm leaders have become disquieted. Federated Farmers supports positive overseas investment in NZ’s farming system but is concerned there would be little benefit to NZ if the Lochinver deal is clinched. President William Rolleston says “NZ absolutely needs foreign investment” but only if it benefits the local and national economy. He wants a “substantial and identifiable” benefit test incorporated in overseas investment eligibility criteria. Public opinion survey results this week suggest a majority of voters similarly approve of farm sales to foreigners only when it brings a significant advantage over an NZ buyer such as jobs. Almost 33% want farm sales to foreigners banned.

National raised the already high hurdle foreign buyers have to jump before a purchase is approved and benefits above and beyond those sales to domestic buyers would provide is one of the criteria.

 Better For Workers. An upcoming working paper by Motu Economic and Public Policy Research economists throws some light on the economics by examining how employment in foreign-owned firms affects NZ workers’ earnings. Using data from Statistics NZ’s Integrated Data Infrastructure, which tracks workers as they move between firms, the researchers found workers in foreign firms tend to receive, on average, around 14% higher monthly starting earnings than workers in domestically-owned firms. Compositional differences are the main explanation: foreign firms tend to be bigger and employ workers who would have received relatively high wages regardless of where they worked. The authors also found under-25 year olds get greater gains from joining a foreign firm and smaller losses on exit than older groups, while more highly skilled workers attract a stronger wage premium while working in the foreign-firm sector. In short, foreign firms not only tend to hire more highly skilled workers; they also remunerate these workers more generously.

A very small percentage of land  – around 2% – is in foreign ownership now.

The problem is one of perception based on emotion taking no account of the facts and benefits which include better wages for staff employed by foreign owners.


Rural round-up

August 18, 2014

The circus of foreign ownership - Dr William Rolleston:

The Election has suddenly sparked into life. It was not a policy, a pratfall or a stunt, but Shanghai Pengxin Group’s Overseas Investment Office (OIO) application to buy Lochinver Station.

While Federated Farmers has taken the principled position of trying to learn what the ‘substantial and identifiable benefit’ to New Zealand is of this proposed sale, others have gone off the proverbial deep end.  National has been far too dismissive of concerns being raised in some quarters. Labour has gone to the opposite end by announcing they’d block the sale, along with the Greens.  Meanwhile, NZ First will go further and stop all foreign sales of New Zealand farmland.  That seems to be the position of Colin Craig, who stepped into Mr Peters shoes by breaking this story.

What everyone seems to have forgotten is process.  Our overseas investment rules are meant to operate on fair play under the guise of the OIO.  Instead, it has turned into an election political circus. The coverage of which, has gone global, given the media who have contacted me. . .

Meat and fibre’s time to shine - Rick Powdrell:

Boy oh boy, doesn’t it feel good to be a sheep and beef farmer for once. Of course it wasn’t always that way.  We were the dairy industry for decades, almost as soon as the Dunedin slipped out of Port Chalmers in1882, we rode the sheep’s back.  The good times operated under a simple business model.  We grew meat and fibre and Britain needed it.

Through war and peace, these good times seemed destined to run forever.  Our success blinded us to what the bright sparks at companies like DuPont were doing.  That was until they ‘wool-jacked’ us with oil based fibres.  That wasn’t helped by lamb being seen in the 1970s as your grans’ meal. You could have lamb cooked anyway you wanted as long as it came in a roasting tin.  Other meats became trendier and in some instances, cheaper, while our industry was trapped in a Sunday roast.  . .

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Demand drops for malting barley – Annette Scott:

A shrinking number of Kiwi beer drinkers is creating less demand for malting barley.

As beer consumption falls, coupled with higher prices for New Zealand barley, breweries require less malt and malting companies less barley.

Marton-based malting company Malteurop NZ operations manager Tiago Cabral said New Zealanders’ drinking habits were having an impact on the company. . .

 

Worth sharing - thanks The Horse Mafia

NSW $10m beef deal with China - Roderick Makim:

NSW beef suppliers have secured a $10 million export deal to the Chinese market.

Producers including Andrews Meat Industries in Lidcombe and the Northern Co-operative Meat Company Ltd in Casino are among the NSW suppliers involved in the deal, Deputy Premier Andrew Stoner said today.

Mr Stoner announced the deal while visiting Hong Kong and Shenzhen for a three-day trade mission along with representatives from a range of NSW food companies. . . .


70,000,000 reasons for sale

August 10, 2014

Tim Worstall, writing at Forbes, says there’s 70,000,000 reasons for selling Lochinver Station:

There’s a slightly bizarre argument going on over in New Zealand over the ownership of a large farm, Lochinver Station. The argument is over whether it’s right or not for it to be sold to a Chinese company. There’s so many things wrong with even having the debate that it’s difficult for we foreigners to get our minds around it. For a start the very definition of private property is that you can dispose of said property as you wish. If you can’t then it’s not actually private property any more. But more than that the basis of the argument against allowing the sale seems to be that the sale should be in New Zealand’s economic interest as a whole. Which, of course, it is, there’s 70 million benefits coming into the country in the form of the $70 million that’s being paid for it. Why the debate continues after this is a mystery. . .

The debate continues because of emotion and politics.

. . . To which I would just add that one about the 70 million benefits. A foreigner (a corporation, an individual, it doesn’t matter) is bringing money into the country to pay for Lochinver Station. The price that’s being paid is, by definition, everyone’s best guess as to the total current value of all of the future profits from that farming operation. This is thus an addition of $70 million to New Zealand’s capital stock. Before, there was the farm worth $70 million. After the sale there will still be the farm, which will still employ people, pay taxes and so on. And also the family operation that used to run the farm now has $70 million. The deal adds to the capital stock of the country and what makes a place richer is increasing the amount of capital that is added to the labour of that place. Thus there’s 70 million benefits to the sale, each dollar being paid over being a benefit of one dollar.

Other than a xenophobic appeal to economic populism (and those with long memories might care to ponder on where said autarkic populism led the economy under Robert Muldoon) there’s really nothing at all to support the idea that Lochinver Station cannot be sold to anyone at all who wants to buy it.

Private property rights and economics mean nothing to the xenophobes opposing the sale.

They also fail to see the benefits to the seller and the country from those $70,000,000 and all the other money the would-be purchaser, Shanghai Pengxin,  will have to put into the farm to meet the very strict criteria of the Overseas Investment Office.


Labour tries to out-Winston Winston

August 5, 2014

Labour has forgotten that is trying to out Winston-Winston Peters on sales of land to foreigners:

The next Labour Government will keep rural and residential land in Kiwi hands, Labour’s Finance spokesperson David Parker says.

“New Zealanders are sick of seeing their farms and homes sold to overseas buyers with the profits and opportunities going offshore. No overseas person has the right to buy our land.

The opportunities stay here where the land is, so do the jobs which go with it.

The profit is only what’s left after costs – including the purchase price, wages, repairs and maintenance, development and tax – are paid.

A friend is New Zealand manager for overseas investors who own several farms. That company reinvests all its profit in the farms and adds more money from other investments elsewhere for development which includes a very expensive experiment with organic farming.

Their money is making the farms better and they are putting far more into the country than they are taking out.

“In all but the rarest of cases, sales of rural land to overseas buyers will be banned. Non-resident investors will also be banned from buying existing Kiwi homes.

What will those rarest cases be and who will decide?

“Changing who owns what already exists does nothing to increase New Zealand’s output. It just sells off New Zealand’s profit stream and kills off the Kiwi dream of owning our farms and homes.

It could increase New Zealand’s output if the investment improved production.

“Labour will reverse the current approach so that overseas buyers of rural land will have to prove they will create more jobs and exports than any New Zealand investor. Given New Zealanders are among the best farmers in the world it is an extremely hard hurdle to get over.

The hurdles overseas must leap are already very high and include the creation of jobs.  Among other conditions local buyers don’t have to meet but foreigners do is allowing public access.

New Zealand farmers are very good but they often lack the capital to be even better.

“This will ensure our farms are not priced out of the reach of New Zealanders.

If that is the case it would also mean the vendor gets less to invest elsewhere.

“We will also limit the discretion of the minister to ignore recommendations from the Overseas Investment Office.

“Labour will also restrict sales of residential homes to any non-residents unless they intend to move here, helping to keep the Kiwi home ownership dream alive, especially for young New Zealanders currently locked out of the housing market.

“The National Government is ignoring the legitimate concerns of New Zealanders about New Zealand land and houses being sold to overseas interests.

These concerns are largely based on emotion rather than facts.

A very small proportion of farm land is owned by foreigners and the problems with housing are largely a result of planning restricting the supply in Auckland and the earthquakes in Christchurch.

“Instead of accusing New Zealanders of being xenophobic, John Key and Steven Joyce should respect New Zealanders’ desire to keep New Zealand land in New Zealand hands,” David Parker says.

The accusation of xenophobia is because the protest is loud when it is a Chinese buyer and quiet to non-existent when it is from other countries like the USA, Britain, Australia or Germany.

Wee parties can get away with outrageous policies because they can always use the excuse they didn’t have the numbers to get them enacted.

The bigger parties are usually more circumspect.

Labour has forgotten this in trying to out Winston Winston Peters with this dog-whistle to the xenophobic.

It is also ignoring the benefits from the sale:

Stevenson Group, the concrete, quarrying and engineering firm that owns Lochinver Station, ran an extensive tender before agreeing to sell the 13,843 hectare farm to Shanghai Pengxin and says it will reinvest the funds in other businesses. . .

 The Stevenson family has owned Lochinver for 60 years but started as a drain-laying business in 1912, expanding into quarrying and construction in the late 1930s, and making concrete blocks from 1946. The original 5,260 ha Lochinver farm was acquired in 1958 and the family expanded to 16,595 ha “breaking the wild country into farming land” with “an enormous amount of hard work.”

“Farming is not the core business of Stevenson Group,” chief executive Mark Franklin told BusinessDesk. The company is freeing up capital to invest in other businesses such as expanding its Drury quarry, he said.

Franklin said the company had “really intensive discussions with lots of people both domestically and internationally. You can be very clear, anyone who was interested, I have spoken to.”

While Lochinver has a rateable value of more than $70 million, the purchase price hasn’t been disclosed. Still, Franklin said Pengxin’s offer wasn’t necessarily the highest on price alone and his company had considered a range of factors including retention of workers and the future of the property. Lochinver was more a farm enterprise than a farm. “In New Zealand a lot of people own farms but this is part of a supply chain.”

He said Pengxin had a long-term strategy to build a vertically integrated business.

The value in the property was “in its ability to grow a lot of grass,” which made it attractive for both dairy support and wintering stock, he said. Sheep farming was likely to remain a core part of the business. . .

The owner gets a large amount of money to invest in its core business, the new owner will bring money into the country, spend more on running and improving the property which will require employing locals and using local goods and services.

Federated Farmers which supports foreign investment in general has some concerns over the sale of Lochinver.

While Federated Farmers supports positive overseas investment into New Zealand’s farming system, it is concerned the potential sale of Lochinver Station to Shanghai Pengxin Group Co. Limited, may not provide sufficient benefit to New Zealand.

“Since there is no requirement to publicly notify applications to the Overseas Investment Office, Federated Farmers is frankly uneasy about the potential sale of Lochinver Station to Shanghai Pengxin,” says Dr William Rolleston, Federated Farmers President.

“New Zealand absolutely needs foreign investment but it has to be of benefit to the local and national economy. 

“That is why a ‘substantial and identifiable benefit’ test was incorporated into the overseas investment decision tree, further bolstered in 2012 by a High Court decision adding a “with and without” counterfactual test. 

“This was to ensure any investment, such as the one being proposed, has benefit over and above just making a farm work better.  Since Lochinver Station is highly regarded in farming circles there must be something very special and we are keen to know what that is. . .

He might be reassured by a speech Prime Minister John Key made to Federated Farmers in 2010:

. . . I want to take this opportunity to outline the Government’s position on overseas investment and talk about the changes we are making to the approvals regime.

In summary, we recognise the huge contribution that overseas investment makes to Kiwi jobs and Kiwi incomes.

New Zealand benefits from openness, both in trade and in investment.

However, New Zealanders have legitimate concerns about some aspects of overseas investment, particularly when it comes to land.

I share those concerns.

Good policy is a matter of striking the right balance.

We have reviewed the rules around overseas investment. For the most part, we think those rules are appropriate and the overall legislation is sound.

However, we have made a few adjustments to the approvals regime and given ministers increased flexibility to consider a wider range of issues when assessing proposed investments. . .

What I want to say first is that you, as individual farmers, and as members of Federated Farmers, have been right in the middle of recent debates about overseas investment, because a lot of those debates have been about land.

I’m sure that between you, you have some strong views and quite possibly some mixed views about overseas investment.

Unfortunately, much of the debate in recent months has been stirred up by politicians who are more concerned about getting on the news than they are about well-thought-out policy.

We are likely to see more of this tub-thumping and political posturing in the lead-up to next year’s election.

Politicians who were unwavering advocates of trade and investment when they were in government have somehow turned into defenders of Fortress New Zealand while in opposition.

Their views appear to have changed 180 degrees, for the sake of politics.

That is a shame, because at stake here are New Zealand jobs, New Zealand incomes, and New Zealand futures.

The reason we allow investment to flow between countries – both into New Zealand and out of New Zealand – is because it benefits New Zealanders.

We don’t do it for any other reason – we do it because we benefit from it.

In particular, overseas investment in New Zealand creates jobs, boosts incomes, and helps the economy grow.

Overseas capital can make things happen here that wouldn’t otherwise happen, grow businesses that wouldn’t otherwise have the means to grow, create jobs that otherwise wouldn’t exist, and pay wages that are higher than they would otherwise be.

Overseas capital makes New Zealand a vastly more productive country.

So there is absolutely no way we could enjoy the standard of living we do without overseas investment.

And part of that standard of living is being able to afford the education, law and order, and health services that our families want.

A recent study concluded that overseas investment in New Zealand lifted national income by around $5 billion between 1996 and 2006. That is an estimate of the return to New Zealand from overseas investment, over and above the cost of paying interest and dividends on that investment. . . .

He gave examples from the wine industry.

Since the year 2000 the number of wineries in New Zealand has almost doubled, and the industry directly employs 6,000 people.

This expansion of the wine industry into one of our most important export industries has largely happened because of overseas investment.

That investment has not just been into big producers, like Montana, but smaller wineries like Craggy Range, Sacred Hill, Dry River and Te Awa.

Overseas investment has allowed the industry to grow exponentially, and also develop from being a small and family-based sector into a more capital-intensive and technologically-advanced industry with real global connections.

Overseas investment also plays a positive role in New Zealand agribusiness, providing a vital source of capital for ongoing expansion and growth. PGG Wrightson, Synlait, CRV Ambreed and Anzco are good examples of such investment. . .

He also pointed out investment is a two-way street.

New Zealand businesses and individuals are themselves investing abroad.

There has been considerable investment, for example, by New Zealand dairy farmers in overseas farms. Fonterra, of course, has processing facilities in a number of different countries.

A free flow of investment also allows New Zealanders to diversify their savings across different countries and different industries. Most of the savings that are in the Super Fund, for example, and in many KiwiSaver funds, are invested overseas.

In fact, the total amount of equity investment into and out of New Zealand is surprisingly balanced. According to the latest figures, New Zealanders have around $53 billion of equity invested abroad while overseas investors have $61 billion of equity in New Zealand.

So international flows of investment – both into and out of New Zealand – are very important for our standard of living. . .

Then he addressed concerns about foreign investment:

I’m sure most people have these concerns from time to time, because as New Zealanders we have a very real and very profound sense of attachment to the land.

For one thing, our economy is based on agriculture so we recognise and respect that the land has an important economic value.

We also have a strong tradition of aspiring to own land – our own house, section, lifestyle block, farm, or block of native bush. We are not entirely comfortable as tenants – we want to put our roots down and call some place our own.

We also value outdoor pursuits – tramping, hunting, fishing, camping and picnicking – and even when we don’t do those activities, we like the fact that we could if we wanted to.

Our tourism marketing is very focused on New Zealand’s natural beauty, and we’re proud of it.

I have recently said myself that we don’t want to end up in a position where New Zealanders are tenants in their own country.

So I think the fact that people are concerned with overseas ownership is perfectly legitimate.

But we should be careful not to let those concerns get out of hand.

For a start, about a third of New Zealand – including our most iconic land – is protected by being in the conservation estate. So no-one from overseas can come in and buy Mt Taranaki or the Franz Josef Glacier, for example.

Second, it is a simple fact that land can’t change nationality. People can change nationality, of course, and factories can be relocated overseas. But a piece of land in New Zealand will always be here in New Zealand.

Because it will always be here, the use of that land will always be subject to New Zealand laws and regulations. And ultimately we as New Zealanders get to determine what those laws and regulations will be.

Third, and contrary to what some people might think, there hasn’t been an acceleration of overseas sales in recent years.

In fact, as at a couple of days ago, only 11, 203 hectares of land has been sold so far this year. That is certainly well below the peak of 380,000 hectares that were sold in 2006.

Fourth, the issue of whether businesses and properties are owned by New Zealanders or people from overseas, is for the most part, squarely in our own hands.

What I mean is that no-one can be forced to sell their business to an overseas investor, just as no farmers can be compelled to sell their land to foreigners.

Obviously with mortgagee sales or receiverships things get a little more complicated but, in general, people who feel very strongly that New Zealand-based assets should remain in New Zealand hands are free to sell only to New Zealanders.

The problem is that it’s people who don’t own the land who are complaining and wanting to dictate to whom the owners can sell.

Moreover, New Zealanders can always buy land and other assets back. What makes that difficult isn’t the rules around overseas investment, it is the fact that New Zealand has a poor savings record and therefore a relatively small stock of capital available for investment.

If, as a country, we saved more, we would own more of the assets in New Zealand, including land, as well as being less in debt to overseas lenders.

Finally, there are specific safeguards contained in the Overseas Investment Act and in the regulations which the government makes under that Act.

Over the past year or so the Government has been reviewing this system of rules, to make sure we have got the balance right between three key objectives:

welcoming desirable investment, in recognition of the benefits it brings for New Zealanders

providing a stable investment environment, where the rules are settled and everyone is clear about what they are; and

addressing public concerns about overseas investment, particularly in regard to land.

This review has come to three conclusions.

The first conclusion is that the Overseas Investment Act is a fundamentally sound piece of legislation.

The Act makes it clear that it is a privilege for overseas people to own or control sensitive New Zealand assets.

In particular, it lays out that foreign investment in land is only acceptable if it substantially benefits New Zealand, according to a range of factors which include, among other things:

  • the creation of new job opportunities in New Zealand
  • the introduction into New Zealand of new technology
  • increased export receipts for New Zealand exporters
  • the introduction into New Zealand of additional investment for development purposes
  • increased processing in New Zealand of New Zealand’s primary products
  • protection of native bush and other indigenous vegetation; and
  • protection of game species and walking access.
  • In addition, farm land has to be offered on the open market so that New Zealanders can bid for it as well.

These are very stringent criteria.

In fact, these are the very same criteria that Phil Goff was trying to pass off as brand new policy a few weeks ago. I welcome his endorsement of the current provisions of the Overseas Investment Act which, of course, was passed by his government back in 2005. . .

The third conclusion we came to was that a couple of additions should be made to the existing rules.

These additions would make sure that all public concerns about overseas investment, both now and in the future, could be covered off under the rules.

So the Government is adding two more factors that ministers must consider when they assess the benefits of a proposed overseas investment in New Zealand land.

The first new factor is very wide-ranging and looks at whether New Zealand’s economic interests will be adequately promoted by overseas investment.

This will allow ministers to consider, for example, whether any of our key exports are in danger of being controlled by an overseas entity, or whether there are non-commercial motivations driving a proposed overseas investment.

The second new factor is a “mitigating factor” which looks at whether the investor has a meaningful commitment to New Zealand involvement in the running or oversight of the investment.

That could include, for example, part ownership with New Zealanders, appointing New Zealanders to the board, or listing on a New Zealand exchange.

These two new factors will be weighed up alongside all the existing factors when ministers consider applications for investment.

We are also going to outline the Government’s policy on foreign investment more clearly by amending the Directive Letter issued to the Overseas Investment Office.

This will make things clearer for both the Office and for overseas investors.

So in conclusion can I stress that we allow overseas investment to flow between countries – both into New Zealand and out of New Zealand – because it benefits New Zealanders.

With the appropriate checks and balances in place, this investment is good for jobs, wages and growth.

After reviewing the overseas investment regime, and making some amendments to it, the Government is satisfied that we do now have the appropriate checks and balances. . .

National strengthened those checks and balances.

Foreign investors must jump very high hurdles and if they don’t meet the conditions imposed on them by the OIO – conditions which are strictly monitored – they cannot keep the property.

The Overseas Investment Office has yet to make its decision on the sale of Lochinver.

If it does approve the deal, the strict criteria it must apply, made stricter by National, will ensure that the benefits to New Zealand are greater than any which would come from the sale to a New Zealander.


Debate policy not specific purchase

August 3, 2014

Pure 100 Farm Limited, a local subsidiary of Shanghai Pengxin Group has signed an agreement to buy Lochinver Station between Napier and Taupo.

The Central Plateau farm acquisition is now before the Overseas Investment Office (OIO) and will then go through the Chinese regulatory approval process prior to settlement.

The Group currently owns 16 farms in the North Island and has significantly enhanced these assets. According to a Land Information New Zealand report[1], PNZFGL (another local subsidiary) has been instrumental in the re-development and improvement of the North Island farm properties it owns.

The Group plans to secure operational synergies over time with this planned farm acquisition and some of its neighbouring North Island farms.

In March this year, the Group secured a 74 per cent stake in 13 farms in the South Island and has committed to capital improvements and implementing innovative industry concepts.

The Shanghai Pengxin philosophy is to work co-operatively through its local subsidiaries within the New Zealand farming industry and support new investment and innovative opportunities, as well as productivity enhancement, sustainable farming practices, and building supply chain capability.

It didn’t take long for the usual suspects to get agitated about foreigners buying land.

Lisa Owen started the interview with Steven Joyce and Grant Robertson on the topic:

Lisa Owen: . . . I want to start with you, Mr Joyce. Ownership of assets is what makes you wealthy. So what do you think of this 18,000 hectare Lochinver Station being sold to foreigners?

Steven Joyce: What I think it it’s election time because we’re getting a sale of land, and therefore a couple of people now – it used to be just Winston; now it’s Colin Craig as well – beating the anti-foreigners drum, and I suspect we’ll see a bit more of this between now and election day. But it’s as regular as every three years that this comes up.

Grant Robertson, it’s just electioneering?

Grant Roberston: Well, no. I mean, New Zealanders are actually sick of our assets being sold off, and it’s the same for farms as it is for Steven selling off energy companies. We want to see value held by New Zealanders. We don’t get this land back once it’s sold. It’s gone.

Joyce: Well, actually you do.

Robertson: Well, no, we don’t.

Joyce: No, you do.

Robertson: And it’s New Zealanders who need to have jobs being created from assets that we own. Our message for foreign investors is if you want to come into New Zealand, help create jobs.

Joyce: That’s right.

It is right, that is one of the criteria the Overseas Investment Office must take into consideration when approving a purchase of land by foreigners.

Roberston: Build a processing plant. But we don’t want to sell off the land like this.

Mr Joyce, this is—

Joyce: Well, actually, I need to answer that, because, actually, I mean, Grant, you’re interesting there, because I haven’t seen you out protesting James Cameron’s land purchases in the Wairarapa, so I’m assuming it’s only Chinese investors.

Robertson: No, it’s not. The allegation is just wrong, Steven.

Joyce: When did you go out and oppose purchasing James Cameron?

Roberston: We’ve never opposed foreign investment that is not productive for year.

Mr Joyce, can we–?

Joyce: Give me a chance. When did you go out and actually oppose the last purchase of James Cameron’s land? Where’s the press release on that?

Robertson: We have been opposing the purchases of dairy farms by anyone, and wherever they’re from, if it’s strategic land like this—

Joyce: But this isn’t a dairy farm. You know that, don’t you? This isn’t a dairy farm. . .

Robertson: That’s right. But this is about what New Zealanders want, and New Zealanders what to control their own land.

What he’s saying is that people want to control other people’s land. this land isn’t owned by New Zealanders in general it’s owned by individuals.

Joyce: So this is not a dairy farm and this is not James Cameron, therefore you’re opposing it?

Mr Joyce, I just want to ask you about your own leader’s comments.

Joyce: He’s against Chinese investment.

Robertson: Oh, for goodness sake, Steven.

Mr Joyce—

Joyce: Little xenophobia from the Labour Party to start the day off.

Mr Joyce—

Robertson: See, this is typical of the personal politics. He doesn’t want to debate what New Zealanders want, which is to control their own future. Steven’s happy to sell off our future rather than have New Zealanders in control.

Mr Joyce. Can I ask a question please, gentlemen?

Joyce: Yeah.

Your own leader has said that he doesn’t want us becoming tenants in our own country, but isn’t this exactly what is happening under your watch?

Joyce: No, it’s not. No, look, it’s a tiny amount. It’s actually a ridiculously small amount of land than under Labour, because, actually, under Labour, the average over the last five years they were in office, 90,000 hectares a year were sold to offshore purchasers. Under National, it’s been an average of 39,000 hectares a year. So it’s ridiculous for Labour to turn around—

So that’s the point, isn’t it? More under Labour, more under National. The pie being sold off is even bigger.

Joyce: But let’s look at the real benefit of international investment, actually, because, I think, all this hysteria which Grant’s trying to stoke this morning is actually incorrect, because there’s plenty of fantastic examples of international investment in this country which has brought real benefit. For example, Whirinaki, the big forestry processer in Hawke’s Bay, owned by OG for 43 years. The investment, it hasn’t had much—

So are you happy, Mr Joyce, that an enormous amount of productive New Zealand land is going offshore?

Land, productive or not can’t go offshore regardless of who owns it.

If foreigners own it some of the profit will go overseas but only after the owners have paid all the costs of running and improving the farm and also paid tax.

Robertson: Are you going to guarantee, Steven, that when this farm is sold off, this estate is sold off, that there will be some kind of added jobs? There will be processing coming and there will be something in the economy for New Zealanders? Rather than just selling off our—

Joyce: That’s one of the criteria that we put in in 2010, so absolutely.

Robertson: And you have not stuck to that.

Joyce: We have absolutely stuck to that.

Gentlemen, excuse me. We’ve spoken to sources at Tuwharetoa and other iwi who said this farm was outside of their price bracket. $70 million. So I’m interested to know where are the New Zealanders who are wealthy enough to buy our own assets? Isn’t that part of the problem?

Joyce: Well, actually, there’s plenty of New Zealanders that are wealthy enough to buy our own assets, but, look, the point of view is international investment is very important to New Zealand. It’s been very important all the way through, and it’s important to our future. And there are plenty of examples. I was actually at one the other day. Frucor, which is now owned by Suntory, a Japanese company, and they’re making big investments in their processing plant, and all the workers are in favour of that. Now, if you take the example of this particular company, Shanghai Pengxin, they have made investments in the older Crafar farms. Nobody, I think, is arguing that the Crafar farms used to be well-run. My understanding is there’s been some good investments out of that and more investments expected. So that’s all good stuff. There has to be a benefit to New Zealand—

Robertson: What Steven fails to understand here is that New Zealanders are completely sick of seeing their land sold off. This is about our lands and our future. Steven, the thing is we have learned our lesson.

I want to ask you—Mr Robertson, the Labour Party—No, no, let me—

Robertson: Steven Joyce refuses to learn the lesson that New Zealanders want land retained in New Zealand ownership.

Labour plans to stop foreign purchases. People who are not living in New Zealand, under Labour, would only be allowed to buy up to 5 hectares of land. So, would you stop the sale of this farm?

Robertson: Our criteria would definitely mean that a sale like this would be highly unlikely, unless—

Highly unlikely isn’t a no, it’s another yeah-nah answer from Labour which knows there are benefits from foreign ownership, which is why it allowed sales to go through when it was last in power.

Paul Walker makes some good points on this issue:

For efficiency reasons we want resources to be in the hands of those who value them most highly and the way to do that is sell them to the highest bidder. We want land (and other resources) to be used in the most efficient manner and the country of origin of the buyer is irrelevant to this. A thought experiment: ask yourself, Why are auctions used for so many goods? Its a way of finding out who values the good most highly. Whoever bids the most gets the goods. This is how we maximise the probability of getting an efficient allocation of resources. Secondly would a Labour government compensate the seller of the land for their policy? Under the Labour policy the seller would be forced to sell their land at a lower price than they would otherwise get (or not sell at all) and would a Labour government make up the difference between the actual sale price and the highest possible price? And if not, Why should the seller receive a lower return than they otherwise would?. And if this is a good policy for land why not implement it for other goods as well? What makes this idea land specific?

What makes land specific is emotion.

When PGG Whritghtson was purchased by a Chinese company no-one made a fuss about that yet the intellectual property that went with it in seed development may well have been more valuable than thousands of hectares of land.

But most of the fuss over foreign ownership of land is emotional.

It doesn’t take into account the benefits to the sellers and the country nor is it based on complete understanding of the area involved.

The issue is a hot-button one and should be debated.

But the debate should be on the big picture of how much land in foreign ownership is acceptable and any policy changes needed to ensure that. It shouldn’t be based on individual purchases, especially when it looks like at least some of the opposition is based on xenophobia.


Rural round-up

March 27, 2014

Guy prepared to help, but unwilling to interfere - Allan Barber:

Nathan Guy gave a very positive speech to Beef + Lamb NZ’s AGM on Saturday which covered three major points: what the government is doing for farmers, his vision for the red meat sector and thoughts on the discussions about industry structure.

Obviously, given MPI’s bullish view of agricultural exports, the Minister was extremely positive about economic performance. However he was at pains to point out the government’s role as an enabler, citing his focus on biosecurity resources, trade negotiations for market access, and investment in research.

He began by referring to his intention to strengthen resources at the border and to establish Government Industry Agreements (GIA) with various sectors which will ultimately involve the private sector in sharing the costs of biosecurity; different sectors are at various stages of negotiation on this issue. . . .

Project explores the potential of EID:

Warren Ayers farms 890ha of rolling country near Wyndham. The property runs 600 Perendale stud ewes and another 5,700 commercial ewes.

Lambing averages 135 per cent and lambs are finished to 17kg. Two-year-old replacement heifers are bought in annually for the 120-head Angus cow herd. Every year, all but the lightest 10 calves are sold at weaning. The policy is simple to manage and keeps the genetics of the herd diversified sufficiently that the same bull can be used for several years. For the past five years, the property has also wintered 650 dairy cows.

Warren has EID tagged his stud animals since 2006 and the commercial two-tooths have been tagged since 2009. . .

Fonterra begins construction on new IDR357 billion plant in Indonesia:

Fonterra today commenced construction on its first blending and packing plant in Indonesia, which will support the growth of its market leading consumer brands Anlene, Anmum and Anchor Boneeto.

Located in West Java, the plant is Fonterra’s first manufacturing facility in the country and its largest investment in a new manufacturing facility in ASEAN in the last 10 years.

Director General of Agro Industry at the Ministry of Industry, Panggah Susanto, joined Fonterra at an event in Jakarta to mark the official start of construction today.

Pascal De Petrini, Managing Director of Fonterra Asia Pacific, Middle East & Africa (APMEA), said that Fonterra Brands Manufacturing Indonesia Cikarang Plant will allow Fonterra to meet the ever-growing demand for dairy nutrition in Indonesia. . .

Dry conditions in Northland and Waikato remain a big concern:

Primary Industries Minister Nathan Guy says dry conditions in parts of Waikato and Northland remain a serious concern.

“Local authorities in Northland have announced the western parts of their region are in drought. This reflects the tough few months they’ve had as pasture has browned off.

“Cyclone Lusi has helped green tinges appear in some places, but the rainfall was erratic and insufficient. Western Northland and large parts of the Waikato remain very dry.

“The Ministry for Primary Industries is keeping a close eye on conditions here and elsewhere. I’ve seen for myself how dry things are on two trips to the Waikato in the last two weeks. . .

West Coast Northland drought declaration a relief:

The adverse event declaration covering drought in Northland’s West Coast the declaration will not provide a lot of direct financial assistance but will provide huge psychological relief.

“New Zealanders will get an inkling of what the guys on Northland’s West Coast have been going through. Not just since November, but since 2012 and even before that,” says Roger Ludbrook, Federated Farmers Northland provincial president.

“The big thing a declaration triggers is the Northland Rural Support Trust, so any farmer can approach the RST for free advice on farm management, or just someone to have a decent chinwag with.

“Beyond this, it doesn’t mean much financially unless the absolute worst happens. There is a safety net, but it is exactly the same as for any other New Zealander and carries the same eligibility rules.

“Then there is Inland Revenue and to be fair to them they aren’t unapproachable. . .

Drought-affected farmers encouraged to talk to their banks

Drought-affected farmers should talk to their banks said the New Zealand Bankers’ Association in response to increasingly dry conditions in parts of Northland and Waikato.

“We encourage any farmers facing hardship as a result of the lack of rain to contact their bank to discuss options for assistance and how they can work through these challenging conditions,” said New Zealand Bankers’ Association chief executive Kirk Hope. . . .

Fonterra profit down but revenue on track to break $20 billion:

Fonterra Cooperative Group’s half year results means it could be back on track to break the $20 billion revenue barrier; corporate New Zealand’s ‘four minute mile.’

“I think the fall in operating profit will grab attention instead of where it ought to be focussed, on revenue,” says Willy Leferink, Federated Farmers Dairy chairperson.

“This is real money coming into the New Zealand economy.  I mean revenue for the half-year is up 21 percent to $11.3 billion.  While we’ve got close to the $20 billion barrier in the past, this time, we’ve got a real chance of breaking it.

“That said, the declared drought in Northland along with drought-like conditions in the upper North Island could act like a brake.  We’ve also seen GlobalDairyTrade retreat in recent trading events due in part to increased volume. . .

Pengxin picks up former Fonterra executive Romanos for NZ Milk role, report says:

(BusinessDesk) – Shanghai Pengxin has hired Gary Romano, who resigned from Fonterra Cooperative Group last year during the botulism scare, to oversee the Chinese company’s overseas operations including its New Zealand farms, the NZ Herald reports.

Romano’s Linked In profile says he is “currently on the beach before becoming active again in 2014.” He resigned as head of NZ Milk Products at Fonterra last August as the company embarked on a global recall of whey protein concentrate. The bacterium was eventually shown to be harmless.

He will become chief executive of NZ Milk Management and a director of Pengxin’s two farm groups in the North Island and South Island, according to the Herald. Terry Lee, managing director of Pengxin’s Milk New Zealand unit, didn’t immediately return calls. . .

Samoa sheep farming increasing:

Sheep farming in Samoa is growing through a programme funded by the World Bank.

Under the Samoa Agriculture Competitiveness Enhancement Project, the World Bank is helping develop livestock, fruits and vegetable farming.

Sheep were introduced in Samoa in 2004, with the flock now grown to 700. . .

Macca’s hits milestone of three million kilos of Angus

AngusPure recognises programme as instrumental to success of Angus demand

McDonald’s New Zealand today announced it has sold a whopping three million kilograms of New Zealand Angus beef since 2009. With today’s launch of the promotional Angus the Great burger, the company expects to continue its contribution to the success of local Angus beef sales

This milestone is acknowledged by AngusPure’s chairman Tim Brittain, who says the ‘McAngus’ programme has been instrumental in helping grow the demand for Angus cattle, and that Kiwi farmers have been well rewarded since the original launch of the Angus burger range in 2009. . .


Less than 2% of land foreign owned

February 16, 2014

The sale of Synlait farms to a Chinese controlled company brought the usual xenophobic response.

However, OIO approval for the sale of three North Otago farms to Cragimore Investments went unremarked.

That adds credence to the belief that at least some of the opposition is racially motivated.

Whatever, the motivation, a lot of it is based on the erroneous belief that we’re in danger of becoming tenants in our own country when in fact only 2% of land is foreign owned.

The sale of Synlait Farms to a Chinese-controlled buyer is part of a process ensuring New Zealand grows the right products to meet world demand, NZ Institute of Economic Research (NZIER) economist Chris Nixon says.

“That’s the fundamental point – land must reflect world prices because that’s how we decide what to grow on the type of land we’ve got,” Nixon said.

NZIER didn’t comment on the merits of individual deals but the trend was important for NZ to be a successful part of an international world, he said.

Nixon, who has written research papers on foreign direct investment, said the level of overseas ownership of land in this country was low by world standards and wasn’t growing quickly.

 “We’ve missed out really. The land is seen as relatively expensive and we are a long way from world markets.

“The deals we see are high profile but they are small and it tends to be spiky – it happens now and then.”

NZIER studies showed less than 2% of NZ land was owned by foreigners. The exact level of farmland ownership by foreigners wasn’t known but it would be within that range, Nixon said.

Most of the acreage was expected to be in forestry.

Less than 2% is a very small amount and that inwards investment brings benefits.

Waikato University professor of agri-business Jacqueline Rowarth said overseas investment helped maintain farm values and protect the high debt levels held in the dairy sector.

Restricting sales would make many current farmers “green round the gills” because of the impact on their farm values and debt they had taken on.

“Treasury says we haven’t got enough money coming in as a country to make investments and the Reserve Bank says that dairying debt is a major issue if things go wrong.

“Without the interest shown by overseas buyers the value of farms would drop.” . . .

The benefits aren’t just to those who sell the land.

          SFL will invest $20 million to develop the Synlait farms and Pengxin is spending about $18m on development in the North Island.

The multiplier effect of that level of investment in infrastructure and services in a regional economy meant everyone would benefit, Rowarth said.

The proof was in the Southland economy, which was booming because of dairy conversions. Dairy investment involved huge expenditure.

Rowarth also counters the myth that foreign owners compete unfairly with locals.

While overseas investment would maintain farm values, it wasn’t pushing prices out of the reach of New Zealanders as long as milk prices and operating costs were at levels to make the farm business profitable, she said. . . .

While foreign direct investment was important for the economy, it was also important for New Zealanders to capture the foreign trade benefits through ownership of the processing and marketing companies, Rowarth said.

“I’m less worried about the foreign ownership of land than I am about the companies, because that is where the brands and the value is.

“We’ve got companies like (PGG) Wrightson and now Synlait Milk majority overseas owned and the questions are where are the profits going? Are they coming back to NZ?”

It’s not the profits but the loss of  intellectual property a company like PGGW has in seed development which might be of concern. But there’s not the emotional attachment to IP the way there is to land.

Synlait Milk had said it was not paying dividends but would invest in its assets and the risk was  NZ investors would sell out if they weren’t getting an income from it.

Nixon has also noted greater reaction to farm acquisition than to foreigners buying agri-businesses, saying that was surprising when agri-business had more impact on the daily lives of New Zealanders.

Having open markets that encouraged overseas investment was important for credit rating agencies, he said.

Without that NZ would face greater interest costs on overseas borrowing.

Higher interest rates, and the inevitable increase in the value of our dollar that would follow, would be a very high cost for banning sales to overseas interests when such a small amount of land is owned by foreigners.


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