Good foreign investment
Business Insider reports:
Peter Thiel, famous for making billions off Facebook, tells us he’s finally found “utopia” – New Zealand.
Thiel has been investing heavily in the country.
He’s already made two noteworthy venture investments there in the space of a few months. In October 2010, he invested $3 million in online accounting firm Xero, which is based (and publicly traded) in New Zealand. Then he invested $4 million in Pacific Fiber, an ambitious company that is building a fiber-optic cable from Australia to New Zealand to the US and is raising $300-400 million more to do so.
I’m a fan (and share holder) of Xero, and a fan of Pacific Fibre. I want them to suceed. But they need to attract capital to do so, and not enough capital exists in NZ.These investments aren’t just one-offs. Thiel has set up a local venture firm called Valar Ventures. Valar Ventures LP was registered in New Zealand in July 2009, more than a year before Thiel’s first known New Zealand investment, and is managed by Valar Capital Management LLC, based in San Francisco, according to official records. Valar Ventures LP’s offices are at prominent New Zealand law firm Bell Gully, which suggests it doesn’t have full time staff yet. Peter Thiel founded two other companies in New Zealand: Second Star Limited, where he is sole shareholder, and Silverarc Advisors. …Here’s a thought: maybe Peter Thiel wants to turn New Zealand into the next Silicon Valley. Or maybe even the libertarian utopia of his dreams.Investing in a huge undersea fiber optic cable is typically a safe, low-return investment, which isn’t the kind of investments Thiel goes after. But bringing high speed internet into New Zealand would be a first step to turning the country into a new Silicon Valley.
The name of Thiel’s firm Valar Ventures comes from J.R.R. Tolkien’s Lord of the Rings universe. Thiel is a huge Tolkien fan and the Lord of the Rings movies were filmed in New Zealand. In Tolkien’s legendarium, the Valar are deities who created the world of Middle-Earth (portrayed by New Zealand in the movies) and then descended on it to help nurture its infancy and development.
Reached about this idea, Thiel said: “New Zealand is already utopia. But Silicon Valley and New Zealand can learn a lot from each other, and we want to help make that happen.” So Thiel is clearly in it for the long run.
So when Labour and Winston First rail against foreign investment, think about this article and the fact we should be celebrating that someone like Thiel wants to invest in NZ.
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January 19th, 2011 at 12:55 pm
Come on DPF, we both know that the reason Winston and the rest are not up in arms about this man investing in NZ is because he has white skin and round eyes.
January 19th, 2011 at 1:19 pm
Come off it Bruv, even you know that’s not true. The reason Winston and the rest are up in arms about Chinese investment is because it is investment by the Chinese government, and that threatens NZ’s sovereignty (if not immediately, then in the foreseeable future). They are rapacious, and generally not overly philanthropic or generous with the natives in the places they “invest”; just ask some of the Africans currently suffering under Chinese investment.
So quit it with your bullshit, wouldya?
January 19th, 2011 at 1:19 pm
He sounds like a man I’d want to meet.
January 19th, 2011 at 1:23 pm
Offshore
Wake up please, Winston has always played the race card, it has nothing to do with the Chinese government.
Winston (and the others on the left) know there are votes in bashing Asians.
January 19th, 2011 at 2:06 pm
It’s hard to knock holes in this bloke’s investments to date. We need more like him. Problem is that most overseas investors only want to take over existing infrastructure or buy agricultural land.
In the case of the former we as customers are price gouged & the assets are usually run down. eg electricity distribution.
The latter results in farms being overvalued, far beyond what they can realistically produce. eg 90% of East Coast sheep & beef units.
Unless some way of directing overseas capital into growing the NZ economy as opposed to taking over what is already here can be found Winston & Co will continue to gain traction. NZ citizens may be apathetic but they are not totally blind.
January 19th, 2011 at 2:15 pm
*choke*
January 19th, 2011 at 3:06 pm
David:
“People rail against foreign investment as taking profits off-shore, not realising that without it, there may be no profit at all.”
I dispute that. We have all the resources in NZ, both human and mineral/ecological to thrive. We don’t need to borrow billions to be a happy people. We need to print money according to the liquidity required by the market place – and borrow from a bank that is controlled by New Zealanders, for the good of New Zealanders.
No – we don’t need foreign ownership – we need to start believing in our ability to make our own country thrive.
January 19th, 2011 at 3:18 pm
@ magic bullet Why dont you try “thriving” for even a month with only domestic resources.
you can maybe start by stopping using that foreign made computer.
January 19th, 2011 at 3:22 pm
“We need to print money…”
Fail.
January 19th, 2011 at 3:34 pm
Greg – didn’t say we shouldn’t trade currency, or allow imports of goods that require economies of scale larger than ours to be cost-effective.
Kimble – elucidate please.
January 19th, 2011 at 3:43 pm
As usual issues aren’t black and white. No one said all foreign investment is bad but what many people are concerned about is property as an export commodity (as in):
“Chinese economy we all know about…
Chinese government says it’s time to grow offshore…..
Let’s take a good selection of New Zealands “products” over….
“We’re all New Zealanders, we all love the country so I think it’s healthy for us to have the debate and make the right decisions for our country…. but hey!…. young people coming through see it as “our planet” rather than “our country”
http://static.radionz.net.nz/assets/audio_item/0011/2385074/mnr-20100824-0842-More_than_800-million_dollars_worth_of_property_on_display-m048.asx
Harcourts New Zealand CEO Hayden Duncan says with a limited pool of local buyers for high-end property and development projects in New Zealand targeting overseas buyers, with clients’ support, is a logical part of the marketing mix.
“Harcourts want to achieve successful outcomes for our clients and that means being proactive and taking the appropriate approach to reach the maximum amount of potential buyers,” he says,” so I commend Cooper & Co for the effort they are making on their clients behalf to do that.
“They have recognised that China is a key source of investment and new immigrants and have put an immense amount of work into this project, being the only real estate company to date to secure an opportunity to use the New Zealand Pavilion at Expo and NZTE’s New Zealand Centre, building and connecting with an exceptional database of potential buyers in China and establishing relationships for future marketing initiatives too.”
Cooper & Co’s partners in this special initiative include Luxury Portfolio, Umoview, Open2view, ANZ, Austar Immigration Group, Sunteam and Graphic Detail. An 18-strong Harcourts team have made the trip to Shanghai to present the properties to prospective buyers, with those who do not speak Mandarin being supported by translators.
http://www.voxy.co.nz/business/harcourts039-showcase-china-generating-quotserious-interestquot/5/60035
January 19th, 2011 at 3:47 pm
I imagine powerful groups like The Property Council “$6B in assets and 20 Corporate ” members would want to knock Winnie on the head?
January 19th, 2011 at 3:50 pm
MB,
That is exactly what we do today – well, he amount the market dictates we can without destroying the economy – the capital comes up well short and and as a result we require offshore investment.
Unless you think we should be able to print more because we want to, in which case I would like you to explain exactly how that plan worked for the Weimar Repubic
Not just Fail, but Epic Fail
January 19th, 2011 at 3:54 pm
hj – David Langy claimed that the CIA aimed death threats at him after he said no to US nukes.
Also, Norman Kirk died at a convenient time for the rockerfeller/IMF bunch. He was the most left wing pm we’ve ever had, and was taking us down the road of the Scandinavian model.
He so scared them, that they paid several million to Muldoon for electioneering, which he spent on a ridiculous “red scare” campaign (dancing cossacks).
The most important aspects of NZ’s political history are barely known unfortunately.
January 19th, 2011 at 3:57 pm
Kimble
“That is exactly what we do today”
I know – and i advocate retaining that as a way to control inflation. It presently doesn’t work very well because we have a fractional reserve banking system which allows banks to loan many times the securities that they hold. Thus money in circulation soon gets out of hand.
January 19th, 2011 at 4:06 pm
More migrants, please
The best way to get a massive increase in human welfare is simple: encourage much more immigration
http://www.guardian.co.uk/commentisfree/2008/jan/04/moremigrantsplease
January 19th, 2011 at 4:12 pm
What’s wrong with foreigners buying farms at over inflated prices (aside from the fact that it prices locals out of the market), or our run down infrastructure? IMHO it means that the capital can be put to better use.
January 19th, 2011 at 4:16 pm
gazz – too short sighted. The global value of protein is set to sky-rocket. Selling the golden goose is never a good idea.
January 19th, 2011 at 4:23 pm
MB,
The fractional reserve is a red herring. It is not to blame for the recent financial crisis and is, in fact, a cornerstone of enabling growth in markets.
The fractional reserve is about risk management – the reserve itself doesn’t create problems. The way some may abuse it can – e.g the lending practices on Freddy & Fanny are examples.
In any event, you are proposing eliminating the fractional reserve and having an NZ bank print the money the market requires. That has been tried before – the Weimar republic is a good example. Please enlighten us all how good the ‘print the money you need’ model worked for them
January 19th, 2011 at 4:31 pm
“bhudson”
It needs statutory control measures that are strictly successful to be successful. Adequate computer models currently exist to attain a good idea of when and when to not print more money.
January 19th, 2011 at 4:32 pm
MB – the profit that the farm makes is taxed by the government, so around about 1/3 of the profit stays in the country anyway. On top of that, there will (presumably) be profit made on the new investment.
Why not let the owners of the farms decide for themselves whether they think they are getting a good deal? Some might think the same way that you do and belive there’s about to be a protein boom. Others might not and are willing to accept a good price for their land because they think it’s already boomed. It should be up to them to decide whether it’s a golden goose or simply a white elephant that some sucker is prepared to pay over the odds to get.
It’s also not your land at stake, it is someone elses and it’s very easy to pontificate when it’s not going to affect you directly. Why set up a consortium and buy all the farmland that you want to stay in NZ hands? I’m pretty sure you’d be able to raise the money on the stock market (incidentally I have been looking for a long time for a good NZX dairy investment and there simply isn’t one, thanks to the co-op centric nature of the NZ dairy industry).
January 19th, 2011 at 4:34 pm
MB – why does it need statutory control measures to be successful?
January 19th, 2011 at 4:34 pm
“We need to print money according to the liquidity required by the market place – and borrow from a bank that is controlled by New Zealanders, for the good of New Zealanders.”
Yikes, is this really the second coming of Vern Cracknell or Bruce Beetroot?
January 19th, 2011 at 4:39 pm
“Why not let the owners of the farms decide for themselves”
Because it’s a national security issue. We’ve had nearly 30 years of the extreme right-wing property rights paradigm and where has it got us?
One of the greatest sophistries ever conceived by the elite divide and rulers is the notion that people are separate when we are all one. Love is mocked and competition is lauded. It keeps us fighting while the elites keep skimming the cream off our hard work. Looks like you’re another dupe my friend.
January 19th, 2011 at 4:41 pm
gazz – because all fiat currencies are open to inflationary printing if not regulated properly.
January 19th, 2011 at 4:41 pm
davinciloaf – rational argument please?
January 19th, 2011 at 4:43 pm
MB – what 30 years of extreme right wing property rights paradigm? The last 12 have been centre left.
If you’re worried about food supplies at times of war, the food is physically located in New Zealand and will be commandeered if required. That would constitute a virtual transfer of the capital to New Zealand, at least for the duration of hostilities.
WRT your last paragraph, if you can’t bet them join them. Save up and make your own million or two.
January 19th, 2011 at 4:57 pm
MB – you’ll find that the worst inflation scenarios in the world are those where the government switches on the presses because they run out of money. That is inflationary printing. The private sector has never done that.
I favour governments raising money through bonds in the private market. It means that they must pay a fair price for debt that properly factors in risk.
January 19th, 2011 at 4:59 pm
@hj
Geez, that article was totally balanced and reasonable. Lol!
January 19th, 2011 at 5:04 pm
gazz – it’s not because they run out of money, but because they print more than is needed for price stability and market liquidity. We are capable of avoiding these things however.
January 19th, 2011 at 5:08 pm
Opposition against foreign investment has a couple of branches.
One such is those who oppose foreigners owning businesses and property.
Another such is those who oppose foreigners owning land only.
Foreign ownership of most business is fine and, provided appropriately regulated, good for the NZ society for the reasons typially put forward.
Foreign ownership of land is not good. Absentee ownership and tenancy is never good for the backbone of any community. This applies to every community whether yellow, white, red or black or blue. The people that live on the land must own the land. A tenant community is a weak community.
If foreigners (i.e. people who do not live in NZ) want to invest in business, great, but no ownership of land. Why do they need to? They claim they are investing for business purposes, not land ownership purposes, anyway. Land can be leased for business purposes.
Bottom line.
January 19th, 2011 at 5:13 pm
Agreed vto. I would add to that, foreign ownership of domestic banks. Direct foreign capital investment often has a good cost to benefit ratio though.
January 19th, 2011 at 5:14 pm
MB – it is because they have run out of money. In 1920s Germany it was because of punitive war reparations, and the current problem in Zimbabwe is simply poor governance. When the government directly controls something like the supply of money, there is no point where enough is enough and somebody says “no, we will not keep lending you $300M per week”. That point exists in the private sector.
January 19th, 2011 at 5:22 pm
gazz – isn’t that more to do with authoritarianism than debt-free currency? What if such a mechanism were subjected to a more democratic and transparent process?
January 19th, 2011 at 5:23 pm
vto – there are ways and means of getting around foreign ownership bans. It’s pretty easy to set up a trust and a foreigner be the beneficial owner, with an onshore trustee who controls it (who you can fire if need be). It doesn’t even have to be that formal.
You say that tenancy is not good, but would you rather everyone have to stay at home with Mum and Dad until they can afford their own place? What about the poor who can’t afford to make ends meet, let alone save for a housing deposit? There is a place for tenancy.
Where do you draw the line with your argument? Should a Taranaki farmer be prevented from owning a second or third farm and installing a manager on those properties? How is that different than the absentee owner living in the Waikato? Or in Australia? Or in China?
What if the owner moves to England? If you’re allowing someone living in England to own property, what about somebody from Australia? USA? China? What about Ex-Pat kiwis who live in Australia? Many of us are in Australia because of the limited opportunities to earn big money in NZ. Should we be prevented in investing in our own country?
January 19th, 2011 at 5:26 pm
MB – it is convenient to use the Legal Tender of the country you’re in because everyone accepts it. There is absolutely nothing stopping you using gold soverigns or tobacco or cannibis to pay your bills, so long as the other party is happy to accept them. Good luck with trying to use cannibis to pay the IRD though.
January 19th, 2011 at 5:27 pm
It seems like opaque trusts cause a hell of a lot of trouble. But the nature of secrecy is to cause corruption, so that’s hardly surprising. Why shouldn’t we ban such money laundering mechanisms?
January 19th, 2011 at 5:29 pm
MB – how is it money laundering? There are no illegal transactions involved.
What about a foreigner registering a local company to buy land?
January 19th, 2011 at 5:30 pm
In Thailand it is quite common for the Thai wife of an ex-pat to have land in her name, with a mortgage over the property owned by the ex-pat husband. The husband still owns the capital.
January 19th, 2011 at 5:31 pm
gazz – trusts are the main mechanism used in the world of political bribes. Lyndon Johnson and Muldoon come to mind. Then there’s the Waitemata trust …..
January 19th, 2011 at 5:33 pm
Ha ha ha so does Winston Peters.
Trusts are also one of the main structures that own property in New Zealand. It’s not for money laundering, it is to keep the business risk away from the main asset.
January 19th, 2011 at 5:34 pm
I am sure, gazzmaniac, that there will be some who expoilt legal loopholes. That is not an argument.
All your other questions are answered by a further pondering of my earlier post.
January 19th, 2011 at 5:36 pm
VTO I take it you oppose people being able to rent a house to live in.
January 19th, 2011 at 5:37 pm
meh – don’t like the secrecy of them on principle. If something doesn’t need to be secret, then it shouldn’t be. Particularly where money and power are involved. It’s as old as the ancient Greek Myth of the invisibility ring. If people are offered a means to acquire wealth and power though corruption they will so often take it.
January 19th, 2011 at 5:42 pm
You only don’t like it because you don’t know how it works.
January 19th, 2011 at 5:49 pm
It just occurred to me that could be the reason you don’t like fractional banking also.
January 19th, 2011 at 6:46 pm
Gazzmaniac @ 4.32pm
The one thing that makes land a relatively safe investment, regardless of upturns/downturns, is the simple fact that there’s a finite amount of it. Add in NZ’s reliable rainfall & landbanking becomes attractive to overseas investors. I don’t possess a crystal ball but it seems unlikely that an increasingly affluent Oriental population are going to collapse the demand for protein in the near future. NZ could be on a roll but there is a sector hellbent on sending the advantage overseas.
The argument that income the land generates will still be taxable in NZ ignores the reality that by the time multinational accountants have structured the ownership there will be diddly-squat tax paid into government coffers.
I’m not against all overseas ownership. I just believe that since about the only thing that NZ can do properly is grow protein that the means of it’s production should stay in local hands.
January 19th, 2011 at 7:03 pm
nasska – are you against New Zealand ownership of foreign farms?
Fonterra is one of the biggest dairy farm operators in Chile.
If you are against NZ ownership of foreign land, then that is not in the best interest of NZ. If you are for it, then you are a hypocrite.
January 19th, 2011 at 7:58 pm
gazzmaniac claims:
Speaking for myslef, no I’m not against NZ ownership of foreign land, but it doesn’t make me a hypocite IMO. I’m for it because I know that all the benefits accrue to the foreign owner. If other countries are stupid enough to act in ways that benefit my homeland well that’s their problem. I care only about NZ.
If that makes me a hypocrite it also makes one of virtually every Asian goverment, especially China, which realises the same thing. Which is why the restrict or ban foreign ownership of their land, while being more than happy to take advantage of our greedy, short-sighted stance regarding our own.
January 19th, 2011 at 8:19 pm
gazzmaniac @ 7.03pm
Since I live in NZ what Chile allows Fonterra to do in Chile has to be their governments prerogative. Short view is that if they are daft enough to let us get away with it let’s do it. I’m also a day or two too old to attach much importance to ‘global citizenship’ & my stance, hypocritical or otherwise is that what is good for NZ is good for me, my family & my community.
All that overseas farm sales will accomplish is to fund the retirement of a few farmers who have counted on land escalating in price. A sharp downturn in farm sales is sorely needed to bring land back to some sort of relativity with what it can produce.
Few developed countries will allow wholesale overseas takeovers of their income base & I see little reason for us to lead the way. About 50% of NZ’s GDP relates to primary production & a quick look at the Stock Exchange listings will confirm that there is bugger all else in the horizon that will pay the bills.
January 19th, 2011 at 8:21 pm
gazzmotormouth, best engage brain before putting post into gear.
January 19th, 2011 at 8:33 pm
More migrants, please
The best way to get a massive increase in human welfare is simple: encourage much more immigration
http://www.guardian.co.uk/commentisfree/2008/jan/04/moremigrantsplease
…..
that of course is the UK which shows that the process is a train which never arrives at the station.
January 19th, 2011 at 8:34 pm
National’s Third World Solution
By Gareth Morgan
http://nbr.infometrics.co.nz/column.php?id=409
January 19th, 2011 at 8:37 pm
I wonder what Hugh Pavletich has to say about building houses on concrete slabs on Queensland’s floodplains?
January 20th, 2011 at 10:53 am
If we cared about farms being sold overseas, we would buy them. The fact that we dont shows that the value we place on them is lower than the value others place on them.
Prohibiting the sale of property to foreigners is effectively a tax on the property owners, as they realise less return on their investment because they are prohibited form entering into a sale contract with the highest bidder. This is a tax that did not exist before the intent to sell and is applied only in certain, arbitrary situations.
If you think having the farms owned by NZer’s is important, and you are also against the government arbitrarily loading a stealth tax on a single, normal economic activity, then by extension you must either support the government purchasing the farms outright, or using taxpayers money (for the good of society) to subsidise the purchase of farms by locals.
January 20th, 2011 at 12:56 pm
Offshore_Kiwi 1:19 pm
Spot on, GG.
January 20th, 2011 at 3:19 pm
A confused Rightwing Resistance goosestep furiously about the yard.
January 20th, 2011 at 3:57 pm
Investment by the Chinese in no way threatens NZ’s sovereignty.
NZ could nationalise the property after the Chinese ‘government’ bought it. That would be an exercise of our sovereignty.
We probably wont do that, but that is not the same as not being able to.
January 20th, 2011 at 4:13 pm
“All that overseas farm sales will accomplish is to fund the retirement of a few farmers who have counted on land escalating in price. A sharp downturn in farm sales is sorely needed to bring land back to some sort of relativity with what it can produce.”
Yeah that will teach them for thinking it was THEIR private property. Fucking farmers, what have they ever done for the country.