Written By: - Date published: 6:32 am, April 23rd, 2012 - 203 comments
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Fran ‘sell it all’ O’Sullivan says the government’s case for selling Crafar farms “appears robust“. Well, she would say that. But, if you read it, you’ll see they’ve just done a half-arsed, perfunctory attempt to appear to abide by the law as defined by the Court while coming to the same decision on the same offer. It’ll be shot to pieces in Court.
The government didn’t even bother to work out if Pengxin would create more jobs than already exist or a new owner would create, but that Pengxin is likely to employ fewer people than a New Zealand buyer:
The Applicant and Landcorp estimate having 88 FTE positions on the farms (including casual labour). The receivers have not advised, and the Applicant understands that the receivers are not aware of, the number of persons currently engaged by the farm operators but it is not expected to exceed 88 FTEs. In any event, the Applicant acknowledges that the number of FTE positions is likely to be less than the industry average.
And, the OIO report that the minister accepted even admits that Pengxin’s purchase won’t generate more exports:
The Overseas Investment Office does not know whether or not the Investment will result in, or is likely to result in, increased export receipts for New Zealand exporters.
The Overseas Investment Office considers that without the Investment, an Alternative New Zealand Purchaser would likely increase production on the farms, due to the current run down state of the farms. Therefore, without the Investment, increased export receipts will likely still result.
Where the OIO does see real gains from Pengxin’s ownership it’s only because they’re employing Landcorp to run the farms and Landcorp has higher than average standards.
the Overseas Investment Office is satisfied that the efficiencies will likely be greater with the Investment than without. This is due to the efficiencies arising from managing the farms together with Landcorp’s existing farms and likely reduced farm input costs.
The Overseas Investment Office considers that the claimed increased productivity is largely a function of the MilkHub technology, capital investment, and the greater efficiencies identified above. The Overseas Investment Office considers that an Alternative New Zealand Purchaser will likely not use the MilkHub technology, as Landcorp claims it is used by less than 1% of the dairy industry.
the farms will be managed to Landcorp’s “Farmpride” standard, which the Overseas Investment Office
accepts an Alternative New Zealand Purchaser is unlikely to do
That shouldn’t be a ground for Pengxin to be allowed to buy the farms, of course. Landcorp’s expertise doesn’t arise from Pengxin’s investment and Landcorp has been a prospective domestic buyer for the farms.
There’s a claim that Pengxin will invest more than a fictive ‘Alternative New Zealand Buyer’ would but this a model designed by the OIO to meet its purposes – ie allowing it to approve Pengxin’s applications – so, of course they find that Pengxin compares favourably to their model. At any rate, Pengxin’s investment totals just $2m more than it did in the application that was rejected earlier this year. Margin of error stuff.
Then, the OIO bizarrely argues that Pengxin would be more likely to give rights to the farms for Maori and for trampers. This despite the fact that the New Zealand consortium trying to buy the farms includes the local iwi.
This actually points to the problem with the OIO using a fictive ‘Alternative New Zealand Buyer’ as comparator against the Pengxin offer. Sure, I can understand that you wouldn’t always be able to assess what a New Zealand buyer might do instead of a foreign buyer so you would invent a model New Zealand buyer but, in this particular case, there is just one real alternative New Zealand buyer. The OIO could have chosen to weigh the benefits of the Fay consortium against Pengxin. It should have, but it didn’t. Instead, it used a strawman designed to be worse than Pengxin’s offer.
Also, the OIO’s comparison of benefits between its strawman and Pengxin is limited to the benefits that Pengxin claims it will bring. But what about benefits that any NZ buyer would bring? What about a reduced current account deficit, strategic control over resources? These are real and identifiable benefits of local ownership that Pengxin’s offer should have been assessed against. But the Government failed to do so.
The Overseas Investment Act requires that foreign purchases bring with them “substantial and indentifiable benefits” that a New Zealand buyer would not bring. Pengxin either doesn’t provide as good benefits, may provide about the same benefits, or possibly provides more benefits but only thanks to Landcorp.
Fay’s consortium will shoot this to pieces if they take it to court. It is clear that the OIO set out to approve Pengxin’s application despite it being manifestly the same as the one that was rejected by the Court just two months ago. The OIO was determined to carry out the Nats’ agenda and approve the sale, so it created a process to deliver that outcome. It even made explicit reference to how this sale would meet the Nats’ ‘China Strategy’.
Can anyone tell me why the Nats have a China Strategy but no strategy to insure that the basic resources of our economy stay in New Zealand hands?
And, can anyone tell me why this is a good deal for New Zealand?