Foreign investment isn’t easy here

The New Zealand Initiative is researching foreign direct investment and is seeking information:

The $200 million sale of the Crafar farms to Shanghai Pengxin generated a storm of controversy last year, as well as massive legal fees as teams of lawyers waded through rivers of red tape to get the deal across the line.

Yet if the same deal were proposed in Australia, it would apparently have passed with barely a squeak of protest under their Foreign Direct Investment rules, while in Canada it is a more complicated “maybe”.

It seems not all FDI regimes are created equal, particularly as inbound investment is often subject to grey-area factors that are not captured in the black ink of the rules.

We would like to tap into the knowledge of our international friends and followers, so perhaps you can help us:

In what international jurisdictions would the purchase of $200 million (US$165 million) of productive farmland by a Chinese conglomerate have gone through smoothly, and in what countries would it have been red-flagged, as it was in New Zealand?

Your input will be included in our second FDI report, which compares New Zealand’s inbound investment policy framework to other international jurisdictions. All submissions will be published anonymously.

If you would like to help us, please do so in email form to khyaati.acharya@nzinitiative.org.nz by 18 November 2013.

The NZI has comparisons with other countries:

Australia: A $200 million investment would appear to be able to sail through because it is below the investment threshold of A$244 million that triggers Australia’s FDI rules.

Canada: A $200 million investment would appear to sail through at the Federal level because it would be under the threshold level of C$344 million that applies to Chinese investor as China is a WTO-member. However, perhaps it would trigger FDI scrutiny at the provisional level, perhaps most particularly in Alberta, Quebec, Saskatchewan and Manitoba, all of which restrict significant investments by overseas persons in productive farmland.

Hong Kong: Presumably, no FDI restrictions would apply to a $200 million purchase in Hong Kong.  But does Hong Kong have $200 million of dairy farmland to purchase?

Korea: We understand that South Korea does limit investment in arable farmland given its limited availability and national significance, but we don’t have any details.

Singapore: We understand that Taiwan does not consider productive land to be a sensitive national asset and applies no monetary threshold to inwards FDI. If so the investment should sail through.

UK: We understand that the United Kingdom would impose no screening requirement on such a transaction and has no monetary threshold for triggering scrutiny, nor is farmland regarded as a ‘sensitive area’.  Presumptively, the purchase would sail through.

USA: At the Federal level the purchase would sail through since all a foreign purchaser of US farmland is required to do is to disclose the purchase to the Secretary for Agriculture.

Foreign investment in farms isn’t easy here.

A New Zealander who manages a farming business for an international company tells me that going through the Overseas Investment Office was a long and difficult process.

It took ages, and was expensive, even when the company was selling a farm it already owned here to buy another and had a good record of employment, development, and responsible stewardship of and best environmental practice on its properties.

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