By Bernard Hickey
Prime Minister John Key has defended the decision by two of his ministers to reject the sale of the Lochinver Station near Taupo to Shanghai Pengxin, telling an audience of New Zealand and Chinese business leaders in Auckland that the decision was not political.
Key said the decision announced on September 17 by Associate Finance Minister Paula Bennett and Land Information Minister Louise Upston was made independently of the rest of the Government and based on the merits of the bid under the current interpretation of the Overseas Investment Act, which specifies any foreign bid must deliver more net benefit for New Zealand than an equivalent 'counter-factual' New Zealand bid.
The Overseas Investment Office recommended on balance that the bid be accepted, but the Ministers said they were not convinced of the benefits. The decision relied on an analysis of what an alternative New Zealand bidder (the counter-factual) would deliver, including the assumption that a New Zealand bidder would also carry out the same or more dairy conversions than that proposed by Shanghai Pengxin.
"Right or wrong, that was their call and you can read their decision," Key told the China Business Summit in Auckland. He said the ministers had not discussed the decision with other members of the cabinet.
"The problem we have is: if you want to change the Overseas Investment Act, which a lot of people will do, to have more clarity, show me where I'm going to get the numbers from because only ACT will support us. United Future certainly won't. The Maori Party won't. Labour definitely won't. New Zealand First absolutely won't and the Greens absolutely won't," Key said.
"So we are stuck with the Overseas Investment Act whether we like it or not in its current form, but within that there's a lot we can do," he said, pointing to moves to increase fees and resourcing for the office so it could process applications more quickly.
"I can give you an absolute assurance, the decision that the ministers made around Lochinver was nothing to do with the politics of it," Key said.
"Some people might think that's the case, but in my experience of the Government saying yes to the OIO for a whole range of things -- Shanghai Maling buying into Silver Fern Farms, Bright buying into Synlait, Shanghai Pengxin buying the Crafar Farms -- all of them have a degree of pushback. Not a single one of those has moved our polls," he said.
"So personally, lots of people jump up and down and make lots of noise, but I don't think it moves our numbers, and anyway it's consistent with the Government's view that we're not going to get rich selling things to each other. We are going to get wealthy and get more jobs selling things to other people," he said.
'It doesn't affect our polls anyway'
Key said the decision was based on the merits of the case and that National's polls had not been moved by various controversies.
"Two-way investment is really important. We're not saying no because they are Chinese or because they're American. We'll say yes or no on the merits of the case as we believe them to be, on the basis that every decision we take will be judicially reviewed both ways. It's not about whether the public wouldn't like it, because lots and lots of things the public doesn't like and it doesn't actually move our numbers."
Last week Stevenson Group announced the sale last week of Lochinver to locally owned Rimanui Farms for an undisclosed sum. The sheep and beef station with dairy support and dairy conversion potential had a capital valuation of NZ$70.6 million, but Shanghai Pengxin bid NZ$88.1 million for the group.
Later in the conference, Pengxin International Director Terry Lee criticised the analysis done for the OIO on the counter-factual bidder, pointing out no other New Zealand bidder had emerged with dairy conversion plans, and the analysis had used out of date milk price figures.
Lee said Shanghai Pengxin would push ahead with a judicial review of the decision and still held out hopes it could buy the property before settlement of the current deal with Rimanui Farms.
19 Comments
So personally, lots of people jump up and down and make lots of noise, but I don't think it moves our numbers, and anyway it's consistent with the Government's view that we're not going to get rich selling things to each other. We are going to get wealthy and get more jobs selling things to other people," he said.
....
Land is "things"?
John Key is not selling farms to foreigners. Neither is he forcing anybody else to sell their farm to foreigners. If you don't want a foreigner to buy your farm, don't sell your farm to a foreigner - that is your right.
In some instances farm owners are selling farms to foreigners. Those farm owners must consider that that they will be better off as a result of the transaction, otherwise they wouldn't do it. Where exactly is the "treason" in that?
The farms are still in New Zealand, still subject to New Zealand law, still employing New Zealanders, still producing food. In the case of the Crafar farms, for instance, the evidence suggests that they're now doing that better than they did under NZ ownership. How exactly is any New Zealander worse off than he was before that transaction took place?
Although they are subject to it I note you didn't include tax in your subject to rant. Is that because they're owned by a company in a tax haven for only one reason?
Bigger picture, simply tenants on what was our land. Except for Maori owned land of course, they tend for the more pragmatic longer term view.
I am of the view that it is the OIO who have been failing to consider the tax implications when considering the applications I also think many politicians both past and present have failed to consider the tax implication as well......they have shown a complete lack of ability to understand all the necessary facets of each proposal.....I have always been of the opinion that this occurs due to the fact bureaucrats have never been in business, never started up a business and taken it through the necessary hoops etc !!
I am very much in favour of having the right to sell to whoever you like.....but equally hold that that right is not going to affect other people in anyway....given there are tax advantages (there are also other advantages obtained) able to be obtained by foreign investors and these advantages impact on the locals having to contribute more of a share then the OIO should be taking these issues into consideration under the current legislation.......it seems to me the OIO has a narrow interpretation of what a benefit is!!
What does someone in the public services actually have to do to get dismissed these days? Is it not the public servants committing treason when the fail to interpret and carry out the legislative requirements in a manner that is appropriate!?!?
Tax, what about it?
The future income stream that was expected from the farm would have been taken into account and paid for in the price, ie the money that the former New Zealand owner of the farm now has.
Whatever the seller does with the money - buys goods, invests in another business, saves - will be subject to tax.
So even if the farm under its new ownership pays no tax at all, which I highly doubt, tax is still being paid on a sum of money equivalent to the farm's earnings.
How was it "our" land? The Crafar farms, for example. What benefit did "we" derive from them, what control did "we" exercise over them, when they were owned by a New Zealander that "we" do not have now? Were we formerly "tenants" of Crafar?
I repeat - If you do not want to sell your farm to a foreigner, nothing forces you to do so. If somebody else chooses to do so, that brings benefit to him and no disbenefit to you or anybody else.
And that goes for your HOUSE as well as the farms, big problem is everything has been selling at auction so you have no control over who the buyer actually is. Unfortunately its more about the greedy few that are prepared to sell to anyone as long as they stump up the cash. Farms are now a bigger problem because if you cannot find a local buyer who has millions to spend and you want to sell, then what options do you have ?
The obvious answer that no one wants to hear, especially the banks, is that your farm and house aren't actually worth what you thought they were. Same goes for importing labour, if you can't afford to pay the going rate a local demands then perhaps it's cause your paying to much in interest and not enough in wages.
This must be the ludicrous comment of the year! "China needs NZ, a lot more than NZ needs China". I'm sure China's top 2 export destinies include NZ and the other directly dependent on NZ, and NZ is China's second largest source of import. NZ milk powder is so critical to the Chinese that they can't afford to buy from the likes of Aus, EU or the US.
Hilarious...
That's true as far as food is concerned?
NZ 's economic expansion over the last 20 years has been based on selling off it's life style to foreigners.
Michael Reddell said that the shock to NZ economy came with refrigeration, building roads, top dressing etc. We reached a peak but kept importing people. He thinks we would have been better off if we had kept our population at just post WW2 level. He says he "just can't prove it" (it fits with the ecological theory behind The Fates of Nations: A Biological Theory of History ).
Politics is like a pendulum....it will swing away from key eventually...the land sales issue is one of many that is slowly but surely dragging on that pendulum and will eventually drag it to a stop, pause it for a while and then swing back the other way. Don't be too smug about selling out to foreigners Mr key.
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