Brian Rudman: Politicians banging on about China miss point

Will this be the eventual fate of our agricultural land as well? Photo / File

It was just a matter of time before someone pushed the yellow peril button for Election 2014. All the money was on Winston Peters, but he was outsmarted by his Conservative Party rival, Colin Craig. Lock up your daughters, he cried, nasty Chinese company Shanghai Pengxin wants to buy a 13,800ha farm somewhere in the wop-wops out of Taupo.

Few, until then, had heard of Lochinver Station, but from across the political firmament leaders of every hue scurried to man the ramparts to repulse the invader - and to milk grassroots disquiet.

As with the sale in 2012, to the same purchaser of the 8000ha Crafar farms, everyone was at pains to deny any anti-Chinese prejudices.

But if the current uproar is purely about New Zealand land disappearing into foreign ownership of any hue, then where was the uproar in 2003 when Harvard University's endowment fund bought New Zealand's largest forest, a total of 165,000ha of trees in the central North Island, in a receivership sale. At the same time, Fletcher Challenge sold 106,000ha of its forests to another North American syndicate. Together, the two sales represented 15 per cent of the country's exotic tree plantations.

To be fair, Harvard's new forest was already partly foreign-owned, a failed joint venture between Fletchers and the investment arm of the Chinese Government. Where, also, was the outrage in 2006 when rich lister Graeme Hart sold off the Carter Holt Harvey forestry estate, comprising 176,902ha of freehold forests around the country and another 63,615ha of leasehold forests to United States group Hancock Natural Resources. Nor do I recall any squeals 18 months ago when Mr Hart sold off eight Waikato dairy farms totalling 3205ha to a Swedish pension fund.

No, despite politicians claiming their outrage is about our productive land being sold off to foreigners, they do seem to only start wringing their hands when buyers from China turn up.

Of course, they're not alone. Which is why, in the run-up to an election, candidates can't resist scratching this particularly widespread itch.

When the Crafar farms saga hit the headlines in early 2012, 76 per cent of voters wanted tougher restrictions on sales of land, including 68.6 per cent of National supporters. This, despite a ruling by Justice Forrie Miller raising the hurdle for foreign purchasers of land worth more than $10 million. Buyers had to prove they could add additional benefits to land that a local buyer could not.

Prejudice prospers, of course, in the absence of facts and here governments from the right and left are to blame. On television the other night, Prime Minister John Key claimed that less than 1 per cent of New Zealand farmland is foreign-owned. Where he plucked that figure from is anyone's guess. Like the rest of us, he's in the dark. For years, politicians have chosen not to order a Domesday Book analysis which would enlighten the debate.

Council of Trade Unions economist Bill Rosenberg has been beavering away on the issue for years and says his "conservative estimate is 8.7 per cent, or 1,261,000ha [of farmland] in foreign ownership, including forestry". He says it is artificial to separate out forestry because land use can move back and forth between forestry and agriculture. He points to Statistics New Zealand, including plantation forest in its total "land under farming" of 14,580,000ha.

As far back as 1999 - before the sales to Harvard and Hancock - Lincoln University professor of agribusiness Keith Woodford calculated that 72 per cent of our pine forests were foreign-owned.

Will this be the eventual fate of our agricultural land as well? A research paper by KPMG Agribusiness, published before the Crafar furore, suggested that a wave of inward agricultural investment was unlikely for at least a couple of reasons. One was that despite our clean green advantages, average values for New Zealand pastoral land were high compared with the rest of the world, particularly when physical distance and relatively high production costs were factored in. New Zealand pastoral land prices were on average, for example, nearly five times that of the US.

It also estimated that "the maximum number of people that could be fed from New Zealand's agricultural land is around 50 to 60 million, and our relatively high production costs mean that as a country we do not provide a solution to countries looking to feed large populations".

The current disquiet about Shanghai Pengxin seems centred on fears of the Chinese company setting up a vertically integrated business model which will lead to most of the processing of the milk being taken overseas.

This is a legitimate concern. But why are we wasting time fearing the worst with Shanghai Pengxin when, since 1882 and the first frozen lamb carcasses leaving Port Chalmers for London, the failure to add value to our exports before despatch has been the New Zealand way?

For most of the 20th century, for example, the Liverpool-based Vestey family, friend of British royalty, established a chain of freezing works across New Zealand, shipping slabs of meat in their own fleet of ships to a chain of Vestey-owned British butcher shops. Little has changed.

Instead of worrying about where Shanghai Pengxin plans to add value to its New Zealand-produced goods, our politicians would be more profitably engaged in asking the same of our own exporters.

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