Editorial: Investors sure to be put off by Crafar loops

Photo / Christine Cornege

According to Sir Michael Fay, Government ministers' approval of the purchase of the Crafar farms by Chinese company Shanghai Pengxin will "open the farmgates" for a flood of overseas investors.

That seems unlikely. Sir Michael was speaking as a man miffed that the bid of his rival consortium has been thwarted, and the outcome is more likely to be wholly different. Matters have come a long way from 2009 when the Key Government made it known that it was determined to encourage foreign investment.

In effect, Shanghai Pengxin has been asked to jump through hoops to secure the 16 in-receivership farms. An initial ministerial approval of the purchase was overturned by a High Court judgment, sending the issue back to the Overseas Investment Office. Its reconsideration was originally expected to take "a matter of days".

More than two months later, and following the input of Crown Law and independent legal advice from David Goddard, QC, it has confirmed its original recommendation and Government ministers have given the green light. Such a protracted process is unlikely to have foreign investors bashing down the door.

In reconsidering Shanghai Pengxin's bid, the Overseas Investment Office had to ensure that it met a higher test for the economic benefits to New Zealand of foreign investment in farms. Justice Forrie Miller found these had been overstated in its first recommendation.

He also said the benefits should be compared to what would happen if the same land was bought by an alternative purchaser. Having reviewed the office's new finding, Maurice Williamson and Jonathan Coleman, the ministers responsible for final approval, said that "even on the most conservative approach" the Chinese application satisfied criteria in the Overseas Investment Act and the court judgment.

Such a ringing endorsement rather flies in the face of the 27 conditions that have been imposed to help ensure the venture "delivers sustainable and identifiable benefits to New Zealand".

These restrictions give the impression of limited faith. But among them is now a requirement to invest at least $16 million for additional development by 2017. That is $2 million more than was needed under the original approval. Such an addition hardly tallies with the claim of Green Party co-leader Russel Norman that the deal had been meekly signed off under pressure from Beijing.

This country's ties with China have, however, always been tied to this deal. The Overseas Investment Office notes "the giving effect to or advancement of the NZ Inc China Strategy, one of the aims of which is to increase bilateral investment to levels that reflect New Zealand's growing commercial relationship with China". In the context of that substantial plus, Shanghai Pengxin's interest was bound to find a receptive ear.

The Prime Minister maintains, nonetheless, that New Zealand is "quite a difficult place to buy land if you are a foreigner". That may or may not have been so for the 72 farms sold to overseas buyers in the 20 months leading up to the Crafar purchase. It most certainly is now.

The public outcry for tougher laws has put the Government on guard, and Justice's Miller's verdict has imposed a tougher bottom line. A Shanghai Pengxin spokesman yesterday described the purchase process as "trying" at times. That is hardly a recipe for an opening of the farmgates.