Herald on foreign investment
The Herald says:
John Key struck an odd note when he observed last week that he would be concerned if large tracts of New Zealand land were being sold to foreign investors. “Looking four, five, 10 years into the future, I’d hate to see New Zealanders as tenants in their own country, and that is a risk, I think, if we sell out our entire productive base, so that’s something the Government will have to consider,” he said.
Was this the same Prime Minister who, two months ago, reprimanded his Agriculture Minister for saying the sale of the Crafar family farms to a Chinese company was unlikely to go through? Mr Key has obviously discerned a groundswell of concern about such sales. Yet, as a Weekend Herald investigation revealed, we are already selling large tracts to overseas investors.
Minister Carter’s comments were about a specific sale going through the regulatory process, while the PM has been talking more generally.
Foreign investment involving agricultural land more than twice the size of Auckland City has won regulatory approval over the past five years.
That’s 150,000 hectares which is around 0.6% of total NZ land area.
First, New Zealanders can buy land in most regions, and have done so in the Americas, Australia, South Africa and Europe. Secondly, and most apposite, foreign investment has always been a driver of this country’s economy. Banning the sale of farm land would send entirely the wrong message to potential investors. Thirdly, placing restrictions on such investments is always apt to create considerable difficulties in terms of boundaries and interpretation.
As it is, non-urban land of five hectares or more is deemed sensitive, and applicants must refer their bids to the Overseas Investment Office. It must consider criteria including relevant business experience, financial commitment to the investment and good character. The office decides about 75 per cent of applications, but all those for sensitive land must go to the Ministers of Finance and Land Information. In the end, they must balance the protection of sensitive assets with the need to encourage investment.
I see foreign investment similar to immigration. Both are generally very positive for New Zealand and economic growth. But both need a regulatory pipe which can determine the speed, so it is sustainable. A net migration of 10,000 people a year is good. If you increased it to 100,000 a year it would be bad as our infrastructure could not cope.
Likewise foreign investment is good, but that doesn’t mean one would want to sell off say 50% of farm land in a year.
The contribution to the economy of efficient foreign or multinational ownership has, rightly, been the paramount concern. Indeed, the Government’s confidence in the system has seen it delegating more authority to the Overseas Investment Office. Mr Key may have been stricken by sudden doubt, but there seems no reason for dramatic change. Those spreading wildly alarmist sentiment misunderstand the factors underpinning this country’s farming success story.
I agree dramatic change is not needed.
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July 12th, 2010 at 7:47 am
Beggars can’t be choosers.
Being on that foreign money.
July 12th, 2010 at 8:11 am
“Those spreading wildly alarmist sentiment misunderstand the factors underpinning this country’s farming success story.”
Exactly. And precisely what the above article is guilty of itself.
Clearly a slow news day when they try to negatively spin pragmatic oversight and management of overseas investment in our fixed and (in the general sense) most productive resource base.
Somehow I don’t think the investors will be fleeing because of either of the Crafar farm business or John Key’s comments in the article.
The lobbyists for relaxed oversea investment, on the other hand, will be rubbing hands with glee and ‘strategising’ as to how they play this to their advantage. [having quite possibly sown the seeds of the story with the journo in the first place]
July 12th, 2010 at 8:44 am
The first comment on this thread nails it. A country that couldn’t afford socialism (what country can) was taken down that road by ideologues whose deranged political ideas devalued NZ on the world economic stage.
A country rich of its own accord can afford to regulate foreign investment. A country made poor by wrong political decisions has to encourage foreign investment.
Whether its a good thing or a bad thing, NZ has been put in a position where it has to look to foreign investors. We cannot afford to regulate them out.
July 12th, 2010 at 9:22 am
I think the Chinese had the right idea when the Poms wanted to buy Hong Kong all they could get was a lease for 99 years. Regulate for long term leases, Commissions which decide yay or nay can be corrupted either by ideology or reward.
July 12th, 2010 at 9:50 am
What other opinion would you expect from the NZ Hooerald, the biggest newspaper in a foreign-owned newspaper chain?
China doesn’t allow foreigners to own farmland. They can only lease it. So there two degrees of foreign ownership. One by foreign owners who let you buy the same assets in their own countries (Australia, UK etc etc), and the others.
Economists who regard ownership as just the equity alternative to borrowing, would sell off the whole country if they could.
If a Maori with a Ph. D. in economics could be time-shifted back to the late 1830s-early 1840s he would no doubt be telling his fellow Maori: What’s wrong with you, sell! It doesn’t matter if we take a couple of blankets for the land, they can’t take the land away. It’s better than borrowing those blankets in Sydney.With one eye on pakeha consultancy fees, our Maori economist would probably also be chattering on about beggars can’t be choosers, and the benefits of investment of all those blankets and muskets and rum and tobacco.
Economics is a fluid social science, and its current high priests can be wrong. For example, have countries following Friedmanism outperformed the likes of Germany, Japan, Singapore, China, which have been far more dirigist, and have used low currencies to soar ahead?
There are other aspects to foreign ownership than equity v. borrowing. Look what the sellouts did with our big breweries. Now we have Japanese and Dutch owned brewers influencing our laws on alcohol consumption. Look what Dutch dairy farmers want to do by virtually enclosing the Mackenzie Country.
Nor does foreign investment necessarily entail sale of our farmland, our prime assets. We have had plenty of foreign investment in our companies, such beneficial (such as, IMHO Telecom initially) and some less so. That’s why we have our own sharemarket.
The nature of the foreign owner is relevant. I fail to see what Malaysia’s sovereign investor (that is the State owned investor of Malaysia) has brought to Opus International, formerly NZ’s Ministry of Works, which was evolving into a successful international company when National sold it abroad.
In the Crafar farms case, you have to consider the track record of the person apparently at the centre of the bid.
July 12th, 2010 at 9:56 am
Your missing the obvious point. If you own land and the government says you can’t sell it to the highest bidder than you have effectively had some of your property (the delta between the highest and the next highest bidder) forceably expropriated.
July 12th, 2010 at 10:03 am
Re Kiwigreg’s 9.56:
A libertarian Utopian view.
There are plenty of restrictions on selling private property. You can’t sell your liquor to underage consumers. You can’t sell your marijuana to anyone. Until a few years ago, those who would prostitute themselves couldn’t sell their bodies legally in NZ.
Name me a country that doesn’t have some approval process for the sale of its land. Most don’t allow it.
To say the State should have no controls over land sales and use is libertarian-anarchism, which is just as Utopian as full-blown socialism
July 12th, 2010 at 2:21 pm
Yeah… no need to worry… it’s “only” 0.6% or whatever. Like, if 0.6% of our land mass was sliding into the ocean every few years, also taking it out of the ownership, control and benefit of New Zealanders, I’m sure no one would worry.
After all, we won’t be around to see the end result of the slow but inexorable process.
As Jack5 points out:
Nor does Japan. Unless they’ve changed the law from when I researched it, even if you live and work there and marry a Japanese citizen the fact that you weren’t born there means you can’t even own your own home, you can only lease it.
Meanwhile DPF opines:
No, it’s not. And foreign ownership of a finite asset is a very particular type of foreign “investment” anyway. What used to annoy me more than anything when I was with NZF was that people would conflate our policies on foreign investment and immigration.
Genuine immigrants want to come here and bring something with them… their culture, their labour, sometimes their money. Foreign owners want to remain where they are and take possession of NZ assets. If those assets are renewable, fine. If they are finite we need to very carefully weigh the cost-benefits, and we’re not and never have.
July 12th, 2010 at 2:33 pm
It’s not unusual to have land purchase restrictions. Two countries that are often mentioned here as having desirable attributes, Switzerland and Singapore, have tight restrictions:
The sale of real estate to a non-Swiss citizen is subject to several laws. The actual law is named Lex Friedrich. Each canton has an annual quota of properties authorized for sale to non-Swiss.
Non-Swiss may only buy one property of maximum 200 square metres of liveable space per family: a family is defined as husband and wife and / or under-age children.
http://www.property-abroad.com/switzerland/buyers-guide/
In the year 1973, the Singapore Government has imposed restrictions on foreign ownership of all private residential property in Singapore. Such ownership is governed by the Residential Property Act.
The Residential Property Act (RPA) is then amended on 19 July 2005 to allow foreigners to purchase apartments in non-condominium developments of less than 6 levels without the need to obtain prior approval.
For restricted property such as vacant land, landed properties such as bungalows, semi-detached and terrace houses, prior approval is still needed if foreigners wish to buy. Landed properties is a special class of residential property that Singaporeans aspire to own, and should remain restricted. Foreigners need to apply for approval from Singapore Land Authority before buying.
http://www.singaporeexpats.com/guides-for-expats/procedure-for-purchase.htm
July 12th, 2010 at 2:46 pm
Kiwigreg at 9:56 is absolutely right. He describes precisely the effect of ad hoc intervention. General prohibitions against selling alcohol (to youngsters), marijuana or sex are not valid comparisons with episodic (perhaps even politically-driven) interventions in sales of land, Auckland Airport shares or other so-called sensitive assets.
Nobody that I know of is suggesting a totally laissez faire attitude to foreign investment. But in order to function for the overall good of the economy markets require confidence and – if not certainty – then at least a transparent and reasonably predictable process that does not bounce around on the prevailing political or xenophobic tide. A good starting point for requiring approval might be a minimum dollar value for the investment in question (say, $25m? or $50m?) for any NZ asset acquisition or series of linked acquisitions, regardless of what assets may be involved – farmland, company shares, coal mines, casino licences or commercial property.
What Michael Cullen did to “rich prick” shareholders of Auckland International Airport Limited was a telling example of how turning foreign investment into a political plaything can strip New Zealanders of their wealth (close to $2 per share to ward off a 40% shareholding by a highly dangerous Canadian pension fund) while also portraying meaningful foreign investment in listed New Zealand companies as something of a lottery. The new Key-led government has done little to repair that damage by way of promulgating and implementing clear and predictable criteria for approval of foreign investments.
Meanwhile, the NZ sharemarket continues to wallow around in the climate of uncertainty. We are all the poorer for that, whether or not we own shares directly. And the Crafer farms will effectively be nationalised by a government agency while the government itself continues to borrow $250m a week to fund poor quality policies of the past. Don’t hold your breath for those farms to find their way into dynamic alternative ownership any time soon. This country seems incapable of embracing public practices that might have the effect of enhancing economic productivity.
July 12th, 2010 at 4:43 pm
I’m pleased that John Key has changed his mind on selling our land to the communists.
But perhaps a more pressing issue is his recent decision to hand over our coastline to iwi by Christmas in exchange for Maori Party votes.
Because that’s what National’s latest musings about the foreshore and seabed amount to. A sweet deal where iwi will only have to negotiate with the (pro-Maori) minister rather than prove their customary right to a stretch of coast.
The press has typically and unhelpfully characterised this handover as ‘Peace deal on beaches’ (DomPost headline) and such like.
But it’s anything but a compromise. It’s outright theft of taxpayer property and it’s going to become law before Christmas.
And once the coast is gone, it’s gone.
Yes, it’s that serious.
Anyone with an interest in boating (marinas) or flying to other countries (airspace) or oil or ironsand or telecommunications (cables) or importing or exporting (ports) should focus hard on whether they want one race of NZers to have the right to tell them what to do with anything on, above or below New Zealand beaches and water out to 22km.
How long before Maori are given the whole 100 mile economic zone in the interests of National Party power in perpetuity? Metiria Turei has already started beating the drum on that one.
It’s the Great Kiwi-Iwi Coastal Handover, soon to be snuck through a parliament near you
July 12th, 2010 at 5:54 pm
Calendar Girl posted at 2.46:
But what are those practices, Calendar Girl?
Sadly, dirigist economies such as Germany, China, Japan (until recently anyway), Singapore, seem to progress more quickly than open-market countries.
Britain was going to thrive on the City as the world financial centre, but Germany has left Britain well behind economically as Britain’s traditional industries were left to wither away. The banks and financial institutions of China and Japan have left British competitors well behind.
And why would Chinese farm ownership be more dynamic than NZ ownership? NZ farmers have been among the most dynamic in the world. Meanwhile, our financial sector has stumbled along. It wants to sell NZ farmland so PR people like Ralston, lawyers, real estate agents, and bankers can clip the sales ticket, a once-only boost compared with the benefits of owner-farmers driving productivity.
July 12th, 2010 at 6:52 pm
Jack5 – by dynamic ownership I meant the possibility of likely purchaser Landcorp actually selling on the Crafer farms to well-qualified young NZ farmers whose energies could turn them into efficient, highly-productive and profitable business units. The Corporation could even look to offer terms of sale and loan finance that might enable new farmers to buy first farms that would otherwise be beyond their borrowing capacity. (After all, the state provides no-questions-asked interest-free loans to students, even those of questionable ability and achievement.)
To me, if Landcorp feels a need to get involved in the Crafer farms (a poor precedent in my view) then facilitating early ownership of those farms by capable young NZ farmers in the private sector seems like a pragmatic “public practice”. It doesn’t require a wider debate on the rights and wrongs of world economics such as you have in mind.
Why do I fear that Landcorp will get its hands on the Crafer farmland and lock it up indefinitely in state ownership? (Like DOC tends to lock up a lot of conservation estate rather than make it accessible to New Zealanders.)
July 12th, 2010 at 7:04 pm
calendar girl:
Love your idea of on-selling the Crafer farms to young NZ farmers. Landcorp wouldn’t need to offer “loans” per se, just vendor financing, thus making it even more attractive.
I think it’s something you should seriously advocate for. Wonder if it’d find much favour at Fed Farmers, who I imagine would be torn between their desire to see more young farmers on the land and their usually blind adherence to the invisible hand of the market?
July 12th, 2010 at 8:41 pm
Anyone contemplating the selling of land to non citizen’s is a fruit loop and that statement doesn’t need an explanation.
July 13th, 2010 at 12:17 am
No good will come of short term visions! China phobia is widespread …. cos they can go on a land shopping spree and become world landlords. But as we know their long term planning thanks to a dictatorial and single minded communist government as a big part of the reason they are so successful. Our flip floppy 3 year term governments think what will the public think …. how many times have i read the phrase “john key is good at reading the electorate” well thankfully he had read the electorate again on this occasion …. but it doesn’t tell us what he really thinks. Given his background …. its all about showing him the money …. dont get me wrong money rocks and not having it is a total drag but selling NZ land to other countries is a short term solution and will lead to down the track issues. owning land is where it is at …. after all then you get to vote !