Chester Borrows: Foreign ownership vexed issue

There wouldn't be a rurally based or provincial electorate where the news of the week is not the decision around the sale of Crafar Farms or the proposals to change the Dairy Industry Restructuring Act (DIRA).

The foreclosure of the mortgages financing the 16 Crafar farms, the decision by creditors to sell all farms in one lot and subsequent offers to purchase those farms by Asian investors brought to a head the issue of foreigners owning farmland in New Zealand.

The criteria for foreign ownership were tightened by the government about 18 months ago to make it harder for foreign investors to buy New Zealand land and company assets. Having made those changes, the government was forced to live within the very law it had redrafted. Those arguing against sticking to the letter of the law make us wonder what sort of a country these folk would like to live in. Would they prefer to live in a country where the law could be flouted if it wasn't popular?

The point made by the Minister in charge of Land Information New Zealand, that nobody complained when 650,000 hectares of land was sold by the previous government to the Americans, Germans, Swiss, Australians and the English, but all hell breaks loose when the purchasers are Asian, is an uncomfortable one, and it should make us look at ourselves in sharp focus.

The previous government sold a land area equivalent to the total of Crafar farms per month for the nine years they were in office, and there was not a squeak in protest.

Land values inflated and vendors were happy to accept those values while they were able to borrow against the book value in order to buy more land and expand farming operations. This drove up the value of stock, particularly dairy cows, which tripled in a matter of months, assisted by stronger expected dairy payouts. No vendor ever has to accept any particular offer on their land but the foreign offers were accepted over New Zealand purchasers, and so the merry-go-round went round.

Twelve years ago, the dairy industry was restructured to amalgamate big companies into one conglomerate called Fonterra. The company is a co-operative of thousands of farming businesses working together to maximise efficiencies and so has competed against the best in the world and beaten many comers in all markets. Although Fonterra is only a small fraction of the world dairy production, their products are the highest quality, and the most cheaply produced due to favourable climate, industrial efficiency and years of learning in the selective breeding of animals and pasture.

On the back of all this efficiency, New Zealand profits as a country and so we can afford to have high levels of social policy, First World education, health and welfare. Without farming we'd be languishing at the bottom. The initial legislation ensured Fonterra supply some competitors 5 per cent of their milk to ensure the viability of the industry in light of hostile takeovers in the industry, which held farmers against the wall before Fonterra was formed. The new DIRA proposals restore this 5 per cent. It prevents competitors from continuing access to this advantage while also picking up their own milk; it also stops them only taking milk from Fonterra in the months when milk is short, unduly affecting those milk producers supplying our biggest company, on which our worldwide reputation for excellence was built.

The average townie needs to value what the farming industry provides for our nation, and farmers need to recognise just who is doing what to that vital industry. The government is moving to protect the industry from itself, not only for the benefit of farmers but all New Zealanders.