A usually (90%+) reliable source has since told me that Ministers have recently been told that the company with the live bid is owned by the Chinese government.
They can of course afford to pay more because it is the thin end of the wedge – a strategic investment in a move towards vertical integration that would result in an even high percentage of value being added offshore. And of course the establishment of the beginning of a massive chain of farms – because the principle would have been accepted.
And Key is desperate not to offend by turning the bid down – as he indicated was likely pre election.
So look for a further delay in decision making until after to bid lapses in a fortnight.
All because Key hasn’t got the gonads to say no.
And to make it clear, it is my view that there is no reason whatsoever to sell these farms offshore. To anyone. Landcorp could probably hock off a couple of its non core farms and then buy Them all using its very strong balance sheet to raise debt finance for the balance.
This post could do with some actual information, Trevor. Did you do any real research into it? The company with the plan for Vertical Integration was Natural Dairy/May Wang, which was a Hong Kong based company. The new Chinese investors are Shanghai Pengxin Group, which claims at least to be a private equity firm. It was founded in 1997.
Also, as you must know, the Minister of SOEs, the Prime Minister and the Finance Minister have to be very cautious in this area, especially with regard to Landcorp, to ensure no conflict of interests occurs. It’s all very well to say “John Key hasn’t got the gonads” but I think we should be glad we don’t live in a country where one man makes all the decisions. The Prime Minster does not assess OIO applications, nor does he direct Landcorp, nor is he the receiver of Crafar Farms.
If we want to get to the real crux of the issue, what is making it really easy for Chinese to invest in New Zealand is the Free Trade Agreement which was signed in April 2008, by your government.
Shanghai Pengxin is the company whose beneficial owners are the Chinese government, according to my source.
And the Prime Minister chairs the Cabinet where any decision of this magnitude would be taken for discussion.
And the free trade agreement does not override the OIO.
Do your research
Dumb question Trev, but what is the value of a farming operation on this scale for research purposes? Seems like an ideal control environment to examine and test run-off solutions on a commercial scale. A Co-op between Land Corp and the CRIs could help keep the farms producing and also provide a potential research base, but that’s one for the smarter people in the room. Even better if they can be leased to aspiring farmers and still be run as research bases.
The free trade agreement requires treatment of Chinese investors on the same basis as the best-treated of any country (most favoured nation status), so essentially that means they will not be allowed to turn the offer based on the fact that it is owned (allegedly) by the Chinese government. Anyway, China is a communist state, the government is the “beneficial owner” of everything, right?
I’m not saying I want the application to be successful, but the OIO has been investigating Pengxin for ~8 months now (they want to work with Landcorp – sounds like a good compromise, keeping Kiwis in jobs etc. http://www.stuff.co.nz/waikato-times/business/5694454/Crafar-farms-development), so I think an informed decision will be made.
That doesn’t address your allegations about vertical integration.
Indeed the Prime Minister chairs the cabinet, so it should be decided by the cabinet, who coincidentally have the confidence of the majority of the Nation. You decry John Key for not having said “No”, but funnily enough he hasn’t said “yes” either.
What I am saying is that he won’t say either. Just let the bid run out of time.
And if you think the Chinese government owns and controls all HK companies you certainly need some education.
Dan. Landcorp does do work of that sort, and having large numbers of animals means it can trial and keep control samples in a way no other farmer can.
But it can also on sell to Kiwis to get them onto the land. That’s what it was set up to do.
The SHANGHAI Pengxin Group is certainly not a Hong Kong company. It is based in Shanghai. At any rate, that was meant as a light hearted jab at Communist China – they don’t have to control it to take all the benefit. I’m very interested to see some more information about the ownership of Pengxin.
So, you think John Key should veto the bid, and ignore the right China won, by agreeing to the FTA, to be treated fairly and be considered under the same rules as everyone else?
Landcorp could do all manner things (including “hocking off” assets that New Zealanders own – I thought Labour didn’t like that…?), but that wouldn’t be a silver bullet – the Chinese might buy those, shock horror. That would be a bad idea considering that they wouldn’t get the best return by selling off in the current market, least of all to try and outbid a large Chinese investor for sub-par assets. Landcorp is there to make money for the Govt. It isn’t a public agency to advance protectionism. A Free Trade Agreement aims to enhance investment and trade, and we have to give and take a little.
Crafar has only become an issue because it’s big and in one block. If the farms had been sold individually to a Chinese company, it would never have made the headlines, and you wouldn’t be using it to try and harpoon John Key. So why don’t we just let the OIO make their findings.
The real issue is the ability of foreigners to invest in land here, when we do not have a CGT. This makes land here very attractive for investors but their bidding up the price of land does nothing for our farming sector.
Every extra dollar it costs to buy land is one dollar less available to a local farmer to invest in farming and improvement to farms. If farmers faced lower famr purchase costs they would have more money for investment in added value developments via farm co-ops etc.
Foreign investment in our land actually diminishes our local farming sector and reduces it to a less productive sector of the economy than it could have been. Thus reducing it to dependence on farming for CG and thus dependence on foreign buyers bidding up the price when they retire. This leaves our new farmers heavily in debt when they join the industry.
One could look at this buy up of land as part of a worldwide trend – for hedge funds to buy up land as an investment around the world and China’s focus on realising secure resource supply lines rather than bid for the scarce product at the future market price (or savers with capital taking the opportunity offered by spenders who sell).
http://www.bbc.co.uk/news/world-africa-16590416
Poor Joel. Having Shanghai in the name doesn’t mean it is based there.
And if the Crafar farms came up individually there is no chance the OIO would approve.
John Key really is going to have to get better help on the night shift.
To me, the real issue is not about selling our land – it is about our food quality reputation.
The Chinese have and will continue to pay a premium for foods sourced from New Zealand because our produce has a very high reputation for food quality. In selling our land to international producers who will sell the production from that land as “premium quality from New Zealand”, we risk having that reputation destroyed when an international, vertically integrated food supplier inevitably does things that sacrifice quality.
If the only serious willing offer for $x worth of land is an offshore company, and you’re suggesting that Landcorp should sell off $x worth of it’s exiting assets to purchase this land instead, who is going to buy the $x worth of assets that Landcorp intends to sell to finance it’s purchase?
@ Andrew M
Simple. Chinese investment vehicles!
Trevor what chance Mr Fay’s group will end up with the farms on the basis of Mr Key not wanting the land to go offshore because that’s what “ordinary kiwis” want?
It scares me that I can go on holiday, go out in a boat, for only ten minutes, drop a line and four of us can land over 20 snapper in 2 hours. Throw a bunch back. Have several at over 2kgs but pop down to our supermarket and pay $35per kg for the same fish.
Joel seems to forget that one of Landcorps three objectives is social responsibility, making money is only 1 of 3.
Remember too that buying farm land is not really a FTA situation, and is certainly not reciprocated.
Regarding the big OIO approved investment that didnt go through recently, Im wondering if it was for a part share of Auckland Councils Watercare ?
What do you consider to be a non-core farm? ‘Hocking off’ a few of them plus raising debt is a non-sensical business model in current economic times. The length it could take sell the farms initially and raise debt would probably count the uncertain nature of this type of bid out in the first place. You do need a level of assurance to get the bank to support you in the financing (even temporarily) after all. Making the current assets they have work harder and purchasing more farms (or investing in orhter workable assets) in the future is a much more robust business model during a financial crisis.
Furthermore, it could be a good move to ease back on the condescending tone in your replies to these posts. It screams of arrogance and is unattractive, especially for swing voters like me.
Landcorp always has a few (developed, non strategic and therefore not core) that they are considering selling. And their balance sheet could stand it anyway so bank support not an issue. Agree that it might be better not to sell for a while.
And my tone often depends on history with the person commenting.
A simple google search will take you to http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=41268057 which can tell you a simple overview of the company. It IS based in Shanghai. You can also go to their own website to find more information about them. http://www.peng-xin.com.cn/ It has an english version, or use google translate.
Why is there no chance if they were individually done (by which I meant, if they had come up one by one without the high-profile collapse of Crafar)? I know of other cases where overseas companies have invested in New Zealand dairy farms, with a local partner, and have taken full (or at least majority) ownership (information on most OIO decisions can be found at their website).
This is quite similar to what Shanghai Pengxin wants to do. If Shanghai Pengxin meets the criteria in the Overseas Investment act (2005), for example being of good character, having good business acumen, delivering benefit to New Zealand (eg creating/retaining jobs), and improving productivity, then under the law the investment is allowed to proceed. And rightly so.
On the topic of “history with the commenter”, I’ve actually agreed with quite a lot of what you’ve had to say, of late. I just think you’re providing a lack of information to scaremonger with this post.
Also, I’m not on the night shift.
Trevor
You and Labour are against the sale of state assets , yet you are suggesting the very same by selling Landcorp farms.
The fact that you are proposing to buy different land is irrelevant.
What is the difference with what you propose and the National policy of selling parts of some SOEs and reinvesting that money in other assets
For goodness sake. Inverness. Landcorp is set up to buy, develop and sell land. It is a land developer and trader – just like a power company develops and sells power. Very very different from selling the company or safes in it.
1) I looked up a government website to find out what our government owned assets are and if I understood correctly, got the feeling we were misled by National citing that the power companies are only 4% of all government assets, in the sense that one of the items listed were our roads….do we generate revenue directly from our roads? (I’m sure indirectly we do)
What percentage of our assets generate revenue?
2) I am of the understanding that when foreign owned companies ‘invest’ in our country the point that isn’t often factored in to the equation is that the profits made from the investment is often exported. Is this correct?
2) I am of the understanding that when foreign owned companies ‘invest’ in our country the point that isn’t often factored in to the equation is that the profits made from the investment is often exported. Is this correct?
When someone invests in something, of course they recieve the profit. It’s not “factored into the equation” because that is the precise definition of an investment. I’m confused by your question.
Joel,
I observe an ideology excitedly promoting foreign investment in the media/financial/political circles, yet from observation I have seen that foreign investment can just as easily be destructive to a community as it can be beneficial; the outcome isn’t a given and shouldn’t be assumed to be inevitably positive.
In the case of money entering the country and being unhelpful; a district/nation can be left with costs externalized (onto the community) and the profits leaving on the first plane out, there can be a lack of loyalty with absentee company owners (pack up and move quickly to greener pastures, or at the first hint of challenges, without recourse to the effect it has on the people depending on the wages or products the company is providing). I don’t see discernment in those soliciting foreign investment when it comes to these issues: It appears there needs to be conditions placed on investment to safeguard our communities. I don’t consider they are present.
Joel dont be taken in by a ‘paid for ‘ business listing. Its like yellow pages, you get what you pay for. Doesnt seem that dairying is something they add extra value to. Real estate is their main business.
I’m not taken in – merely proving the point that they are based in Shanghai – something they have no reason to lie about, paid-for or not. Indeed their main business is real estate, of which agricultural land is a part.
They actually wanted to just buy the land and allow Landcorp to rent/lease it and run it – I am not sure if that is still their plan, but they should not be confused with the failed bid from a different Chinese (Hong Kong, in fact) company, who wanted to vertically integrate the operation and take all the benefits from New Zealanders.
Are you also opposed to New Zealand companies buying land overseas. You know, like a consistency thing to show you aren’t xenophobic?
Joel , if they were just wanting to be a rent taker, having Landcare do all the work, then their application would have been returned in the first week, as this sort of passive investment is a no no. Especially at this scale.
Frontrower, NZ individuals have to comply with overseas countries laws about buying land, including the Chinese ones , which only allow foreigners to lease land not buy.
Your point about xenophobic would be better directed to Key , who has stated his reservations about this application, and has held it up for 9 months.
Ghost – so if a foreigner complies with NZ law they should be able to land buy in NZ, even the ex-Crafar farms. Glad that’s sorted!
And yip, I thought the refusal to sell a share in Auckland Airport to Arab interests but then to allow Canadian interests was just a little short of kowtowing to the NZ racist streak. So a refusal to sell the ex-Crafar farms (which really were owned by Australian Bank Westpac) to a Chinese company that complies with NZ law stinks in the same way.
See the Herald poll I can’t help but feel there is some zenophobia in this country which should concern us. Not zenophobia equally dished out, but zenophobia toward Chinese. We seem far more concerned with them buying farms here than we do with their appalling breaches of human rights (ironically while in another thread people are going hammer and tong in a free speech/censorship discussion).
Europeans and North Americans have been buying “our land ” in greater numbers and larger tracts for much longer than the Chinese
Tracey,
I agree there does seem to be xenophobia toward Chinese investment in contrast to European/North American investment. People do seem blind to the damages done by the European/N. American investment and remarkably quick to see the effects of Chinese influence. I question, however, you on your comment re the appalling human right breaches of China.
I have observed despicable human right breaches, despicable violence conducted toward whole nations of people in recent history (and continuing) by European/North American nations. I don’t really understand why people are so quick to cite the atrocities that Chinese conduct while being so slow to note the atrocities that Western Nations are conducting blatantly and consistently.
Is it because Western propaganda is more powerful than China’s? Could it be because our mainstream media have vested interest in citing Chinese atrocities and on the other side of the coin have vested in refraining from enlightening us about those atrocities conducted by those from ‘our’ culture?
SJW – I agree with your observations regarding human rights abuses in all countries. I was trying to convey the hypocrisy of our nation being one of many which condemns the lack of democracy and human rights abuses in China, while entering agreements to assist the enrichment of the perpetrators. We have been quick to put ourselves on a human rights pedestal, and let’s not forget the genocide committed by our closest neighbours which is rarely spoken of.
Tracey,
Yeah I agree with you, and good point
Frontrower, can foreigners buy land in China, na, yet companies from there want to buy land here …
New Zealand farmers can buy land in Oz – if they farm it themselves – go and live there. Do we limit Australians to having to farm land they buy here, na – should we?
Personally, I oppose all foreign purchase of farmland here and I suspect most New Zealanders do too. So why is this not policy of either National or Labour – what interest groups or lobbyists, domestic or foreign prevent this?
“New Zealand farmers can buy land in Oz – if they farm it themselves – go and live there. Do we limit Australians to having to farm land they buy here, na – should we?”
I’m sorry, that is a total fallacy. New Zealanders can buy farms and operate them with whatever staffing arrangements they like in Australia.
How do I know? I know a man who runs a company that is setting them up with Kiwi money and paying Australians to farm them.
Is he a New Zealander and it’s a New Zealand based and registered company?
If so, do you know whether that is limited to CER parties, New Zealanders only?