web analytics
The Standard

Keeping it Kiwi

Written By: - Date published: 4:26 pm, February 18th, 2008 - 18 comments
Categories: economy - Tags:

udder.jpgDairy farmers have rejected the Fonterra Board’s short-sighted plan to sell 20% of the company.

Fonterra wanted to raise cash with a stock-market float to fund expanding its dairying operations in other countries but in the long-run Fonterra would have paid out far more in dividends to (offshore) stockholders. The dairy farmers would end up working to line the pockets of foreigners and New Zealand’s current account would have suffered.

We already send nearly $4 billion a year offshore in dividends, mostly from companies like Auckland Airport, the Banks, Toll, Telecom, and Contact that were foolishly sold by governments in the 1980s and 1990s.

Good on the farmers for having the wisdom to keep their business kiwi-owned. (Now, work on that environmental impact)

Fonterra should fund its expansion plans by reducing the milk payout. That would reduce inflation and result in profits earned overseas returning to this country in the long-term.

18 comments on “Keeping it Kiwi”

  1. The Government shouldn’t be in any private enterprise. Why the heck should they have any say in how an airport is run?

  2. Steve Pierson 2

    The question is: why should a government, having spent millions developing an airport, sell it off cheaply?

    Our largest airport is not just a normal ‘private enterprise’, we’re not talking about a diary we’re talking about a major strategic asset.

    Take your ‘government out of the provision of goods and services’ argument to its logical next steps and we should privatise the road network.

  3. deemac 3

    I would have thought the negative economic effects on the NZ economy of the sell-offs of the 1980s and 1990s (detailed on this site many times) were the perfect answer to Brett Dale’s dumb post. We’re still suffering as a result.

  4. andy 4

    The farmers I know, were more worried about control. They have to buy a ‘share’ for every kilo of milk solid sold to Fonterra. They own it and controll it. With a 20% float farmers would cede control over that portion but continue to fund with thier personal capital. The deal was not clear enough about controlling interests, voting rights and capital raising. With equity markets not looking healthy at present it is prudent in my mind for farmers to bank the profit and pay down debt, then look at the structure of fonterra.

    BTW, who stood to gain most from the float. Management awarding themselves share packages, bonuses based on share performance not milk production and Investment banks generous fees. I think farmers rejected based on the fact that they would have to buy shares in there own company to keep control. Sounds almost like telecom mum and dad investors, who payed for it twice.

  5. Draco TB 5

    The Government shouldn’t be in any private enterprise. Why the heck should they have any say in how an airport is run?

    Because it’s a natural monopoly and so doesn’t respond to the normal free-market forces which drive prices down to cost. Even Milton Friedman agreed that natural monopolies needed to be government owned to prevent private individuals (either individually or in corporate form (Remember Theresa Gatung’s words)) from scamming the populace.

    Natural monopolies found in modern societies include:
    Telecommunications
    Health
    Roads
    Airports
    Electricity (generation and reticulation)
    etc.

    What makes them natural monopolies is:-
    1. Barriers to entry – they’re just to expensive for everyone to set up their own.
    2. Physical space – there just isn’t enough room.
    3. Efficiency – It’s far more efficient and cost effective (due to scale) to have one of them and the bureaucracy that runs it than multiples. Multiple networks won’t drive the cost of broadband down but will, as a matter of fact, drive the prices up. All that cabling, labour and administration costs and those costs have to be recovered.

  6. the sprout 6

    “We already send nearly $4 billion a year offshore in dividends”

    that is an utter disgrace.

  7. Gooner 7

    Steve, I am not sure about that last paragraph.

    If Farmers appear to dislike the current plans, I am fairly sure they won’t vote for reducing their payout and hence their income!!!

  8. AncientGeek 8

    Great summary Draco.

    There is just one thing I’d add. Often the natural monopoly is in the infrastructure rather than the services. For instance there is little point in setting up different telecomms networks side by side. But that doesn’t mean that those networks cannot have services run on top of them by different companies.

    For instance the most ISP’s share the same infrastructure for international bandwidth, but often purchase from the same suppliers.

    cap: in structural

  9. Phil 9

    Draco / AG

    I disagree with some of your thinking.

    While I accept that natural monopolies exist, and need to be subject to non-market control, simply saying that “health” is a natural monopoly is a complete fallacy.
    Certainly there are aspects of health services that should remain in public hands (A&E being the prime example) but other componenets of a health system can, and do, run very well in market/competition models. Ryman Healthcare and the Medical Assurance Society come to mind here, so does F&P healthcare for that matter.

    Same goes for Telco’s – I agree completely that two sets of copper wires running the length and breadth of the country is woefully inefficient, but the advances seen in wireless technology make that less relevant – I am told by those much more tech-savvy than myself that throwing a satelite into stationary orbit and running a wireless network is actually not that (comparatively speaking) difficult or expensive.

    Roads too are not able to be painted as an all-or-nothing public good. A road from say, a forestry plantation to the closest railyard of port could quite concievably be a privately constructed road, held in ownership and subject to a toll.

  10. Phil 10

    “”We already send nearly $4 billion a year offshore in dividends’

    that is an utter disgrace.”

    Would it be less or more of a disgrace if we had decided not to borrow the capital in the first place, and were nearly $40 billion in total revenue worse off?

  11. AncientGeek 11

    I agree with a lot of what you say. The situation is a case of it depends.

    For instance, there is virtually no way to run a public health (as vaccinations, outbreak control, sewerage, etc) on the basis of a private system. It has huge benefits for the country as a whole, but only if there is almost universal coverage.

    That being said, there is nothing to stop the state purchasing those public health services from private providers. But what happens when the private provider decides not to continue in that area of business. You are left with hole in your coverage, and a high level of risk. Now the obvious rejoinder is that will be other providers available. But they are likely to not want to increase their capital expenditure..

    I’m a bit tired so I won’t expand the argument. Suffice it to say, that frequently where there is a private coverage system, it is usually very patchy.

    I am told by those much more tech-savvy than myself that throwing a satelite into stationary orbit and running a wireless network is actually not that (comparatively speaking) difficult or expensive.

    Depends what you regard as a wireless network and what your position on earth is. It is a geometry and usage problem. Geosync sats are good at broadcast, and painful as a bidirectional systems.

    Geostationary orbit

    To have a geostationary orbit you need to position the satellites at an equatorial position at something like 35k km’s up (look up the exact figure). The half circumference of the earth by comparision is 0.5 * pi * 12k odd, but the usually you’re heading to something quite a lot smaller than that, say from NZ to Alaska.

    That is fine if you live at the equator, 35k up. Even there you are looking at latency problems. You hit speed of light limitations – at least 0.25 secs each way. These are present on land line systems as well – there are measurable speed limitations between here and aussie. But they are 4k km’s worth rather than 70k km’s (35k up and 35k down at best).

    If you live in southland, the angle means that you are probably at about 40k kms (find a calculator). However you have a lot more atmosphere because of the angle in the way, attenuating the signal through the last 20km’s or so of air and other assorted radio freq absorbers like water vapour.

    Thats not counting if you have a large hill between you and the equator. What I’m saying is that because of angles not all places are equal. Direct satellite coverage is patchy at best. You usually overcome this using local repeaters. Like the cell network, this works best in built up areas, and gets expensive pretty fast if you want to get wide coverage.

    That is one side of the problem. The other side is the uplink. You’re looking at considerable power to punch complex signals out of the atmosphere. Thats ok on the sat side because you’re punching signal over half the globe – becomes worth while. But if I’m sending signal from my location out to at least 35k to a small target, it becomes uneconomic pretty fast, especially when you’re doing at the household level.

    There are several solutions to the uplink issue (iridium,copper or microwave to transmitter etc), but they all add costs. In particular you’re talking about broadcast systems using high power with correspondingly high maintenance, compared to lower power and maintenance cable systems.

    The reason the uplink is important is that the net isn’t a broadcast medium. It is almost as important to me to send my video of the kid to the grandparents as it is to download the next blockbuster. Thats becoming more and more the case everyday.

    And in all of this you’re looking at latency. My experience of using sat systems hasn’t been good, probably because I use a lot of real time systems. The min latency or about 1/2 sec (and usually more like 1 sec in NZ) between me sending a request and getting an answer is a killer. Compare that with the average 0.225 secs I just got pinging my favourite server in the US. It gets hard to run an accounting system in the US from India with a satellite system.

    Teleoperating in various forms (like running remote servers) is getting more and more important these days economically. I avoid sat system like the plague these days – adequate for watching movies. Useless for remote desktop.

    Short answer is that sat is a good expedient where you don’t have good copper/fibre. Great where you want to do a rapid setup for people to view things on something like the web. Not particularly good when you wnat to do more direct economic things with the net. Will get replaced by cable systems as people go beyond just looking at things.

    Yawn & off to bed

  12. Andrew Jull 12

    “That being said, there is nothing to stop the state purchasing those public health services from private providers. But what happens when the private provider decides not to continue in that area of business. You are left with hole in your coverage, and a high level of risk. Now the obvious rejoinder is that will be other providers available. But they are likely to not want to increase their capital expenditure.”

    What AncientGeek says is quite accurate. Private health care providers are very canny about what will actually cover. Thus they are a happy to provide low risk surgical services (including quite complicated procedures, such as cardiac surgery, but to low risk individuals), but do not provide high risk services. Any surgical patient that moves from being low risk to high risk during their private hospital stay is transferred (without appropriate reimbursement) to the public system. For example, it is quite common for surgical patients to move from private to public if they develop complications that need further surgery or if they need intensive care. The private providers not only cherry pick what conditions they will treat, they cost shift their most expensive patients into the public sector.

    Examples of work the private sector is unlikely to pick up: any chronic condition (this is why they do not provide any non-surgical services for cardiac or neurological conditions, stroke, diabetes etc.), intensive and critical care work, emergency work, any training, etc. It is all just too expensive for them, because the work is in essence open ended. So private provision of hospital services is no panacea and it is quite mindless for politicians and other associates (thinking here of the slew of Health Ministers under National and Labour who were driven by monetarist ideology – David Cagill, Simon Upton, Jenny Shipley, Bill English, and possibly in the near future Tony Ryall) who have never been involved in the sector to think simplistic sloganeering will “fix” provision of services.

    By the way Phil, last time I looked Ryman Healthcare operated retirement villages, not private hospitals, The Medical Assurance Society provides insurance cover to medical insurance and financial services to health professionals and F&P Healthcare manufactures medical devices such as humidifiers for oxygen. Thus none of your examples are actually exemplary of private health care providers.

  13. Phil 13

    And there-in lies the problem in your argument Andrew – those companies are quite sucessfully involved in the health sector, and make good profit (haven’t looked at the results from the latest reporting season yet…) doing so. The whole point of my OP was that “health” as one diverse entity of services, products, and institutions, cannot and should not be thought of as being exclusively public or private in nature.

    With respect to AG’s thoughts on private sector services being dicontinued, I think thats a totally spirious argument. Having suppliers change, and needing to update your operational practices to take account of that, is Management 101 stuff. The ‘risk’ you describe seems to me to come from a failure of the public health provider to account for, or ensure against, that prospect arising.

  14. insider 14

    Surely sending $4b in dividends is not an issue if NZers are investing overseas and getting dividends back? Fonterra owns businesses overseas and sends dividends back to farmers. Is that a bloody disgrace?

    Seems like a rather childish whining. “I’m too small, I’m special, I need to be protected from all these nasty foreigners.” Yeah yeah, go tell that to the Singaporeans, Swiss or Luxembourgois

    I have westpac shares and get about $30 dividend a year so am doing my part. :-)

  15. Draco TB 15

    With respect to AG’s thoughts on private sector services being dicontinued, I think thats a totally spirious argument. Having suppliers change, and needing to update your operational practices to take account of that, is Management 101 stuff. The ‘risk’ you describe seems to me to come from a failure of the public health provider to account for, or ensure against, that prospect arising.

    This would be a viable argument if there was any competition supplying the required services. This is unlikely to be the case due to what AG said – private companies don’t do high risk. There is also the simple fact that the public health system is a very large undertaking and so any company that provides for it is likely to be in a monopolistic position and therefore any other company that bid for the tender would likely need to set up from scratch. There’s even a very nice example of this in Auckland where the competing bid pretty much depended upon them hiring most if not all of the doctors from the previous tender holder. Things didn’t go to well when most if not all of those doctors said they wouldn’t work for the new company.

    There are certainly exceptions to my list but they are the exception and not the rule.

    Surely sending $4b in dividends is not an issue if NZers are investing overseas and getting dividends back? Fonterra owns businesses overseas and sends dividends back to farmers. Is that a bloody disgrace?

    Yes, it is.

  16. Steve Pierson 16

    Net flow of investment income is $3.2billion out of NZ.

    captcha: “cocktail City”, sounds like a nice place to visit

  17. AncientGeek 17

    With respect to AG’s thoughts on private sector services being dicontinued, I think thats a totally spirious argument.

    It isn’t. Look at the epidemiology of disease outbreaks. Get a outbreak of something like measles or bird flu or something. The initial diagnosis and containment is always at the front end. If that is going through a ‘transition’ like say the med labs have been, it is bloody dangerous to the wider population.

    I’m afraid that primary health care is too important to be left to the private sector.

  18. AncientGeek 18

    Phil: Just one point.

    Your arguments seem awfully familiar. They sound exactly like the ones used to justify deregulating building inspections. It wasn’t exactly a raging success at any level you want to look at it. It led to more regulation because the building standards dropped, and we had leaky buildings.

    Perhaps if you specified the obligations and penalties for the private industry if they did not fulfill their role. The obligations should include the extent of coverage, and the minimum contract periods. I’d start by specifying the insurance backing for liability, and the requirements for directors.

    In other words rather than look at benefits, make sure that the risks are covered.

Links to post

Recent Comments

Recent Posts

1 2 3 8

  • Tragedy must be impetus for better training
    The Police Minister needs to explain why unsworn and inadequately trained custody officers were put in a situation of caring for a medically unwell prisoner on a busy Saturday night, Labour’s Police spokesperson Kelvin Davis says. Commenting on an IPCA… ...
    3 days ago
  • Government must be more transparent on investor state clauses
    The Government must be more transparent around the draft investor state dispute settlements in the TPPA, says David Parker, Labour’s Export Growth and Trade spokesperson. “Labour is pro trade, and is proud of the FTA we negotiated with China, which… ...
    3 days ago
  • Protect university staff and student voices
    The Green Party believes ensuring student and staff representation on university councils is important. National recently passed a law reducing the size of university governance councils while increasing the proportion of the members nominated by, guess who… Steven Joyce. The… ...
    GreensBy Gareth Hughes MP
    4 days ago
  • C’mon Nick what’s the truth on the RMA
     “Nick Smith has got to fess up and tell us what is happening to his much vaunted RMA reform, Labour’s Environment spokesperson Megan Woods says.  “With just a day and a half to go before the polls open in Northland,… ...
    4 days ago
  • SSC salaries sink National’s spending spin
    Massive pay rises at the State Services Commission prove National’s claims of clamping down on spending in the public sector are simply fantasy, Labour’s State Services spokesman Kris Faafoi says. “Salaries in this one department are almost $70,000 more than… ...
    4 days ago
  • We can fix Christchurch and keep our assets
    The Christchurch City Council is seeking public feedback on its proposed 10 year plan for Council revenue and spending. This is probably one of the most significant 10 year plans ever to be written by a local council because of… ...
    GreensBy Eugenie Sage MP
    4 days ago
  • Epidemic of serious assaults in our prisons
    Labour wants stab proof vests and pepper spray for all corrections officers to keep them safe from the epidemic of serious prison assaults that are occurring around the country’s jails, says Labour’s Corrections Spokesperson Kelvin Davis.  “There have been five… ...
    4 days ago
  • Listen to the locals Hekia!
    Minister Hekia Parata needs to understand what consultation is, Port Hills MP Ruth Dyson says. “It means you have to listen to what people say in their submissions and then be able to demonstrate you have considered their views when… ...
    4 days ago
  • Thanking our caregivers
    Let’s celebrate and thank our caregivers. This week is caregivers’ week. It’s a chance to acknowledge the thousands of women, and occasional other person, who are caring for the elderly and disabled in our country. They hold people’s lives in… ...
    GreensBy Jan Logie MP
    5 days ago
  • Mana Post shop the best outcome for community
    Labour MP for Mana Kris Faafoi has welcomed the move to place the services from the Mana Post shop to a local small business. “This is the best outcome for the community we could ask for. All the vital services… ...
    5 days ago
  • Labour looks to put the tea back into entitlements
    Labour is moving to restore the rights of Kiwis to take tea and rest breaks, Leader Andrew Little says. “Within months of the Government’s Employment Relations Amendment Bill becoming law we are already seeing some of our largest companies, including… ...
    5 days ago
  • Desperate money grab to keep Ruataniwha afloat
    The Hawke’s Bay Regional Investment Company’s decision to borrow $4 million to keep the Ruataniwha project afloat is a case of throwing ratepayer’s good money after bad, says Labour’s Water spokesperson Meka Whaitiri and Napier MP Stuart Nash.   “This bridging… ...
    6 days ago
  • Roundup: UN finds it “probably” causes cancer
    At last the UN has spoken out against the widely-used weedkiller Roundup. The UN’s International Agency for Research on Cancer has identified glyphosate, the principle ingredient in Roundup, as a probable carcinogen. They also include as probable carcinogens the insecticides… ...
    GreensBy Steffan Browning MP
    6 days ago
  • Invermay petition delivered to Parliament
    Labour’s Economic Development spokesperson David Clark handed over a 12,450 signature Save Invermay petition to Dunedin South MP Clare Curran on the steps of Parliament today.  “The level of support that the petition has received across New Zealand is overwhelming,”… ...
    6 days ago
  • Redcliffs School closure plan wrong
    The Government’s proposal to consult on the closure of Redcliffs School not only goes against the best geotechnical advice, but more importantly goes against the best educational outcomes for Redcliffs children and the health of our community, Port Hills MP… ...
    6 days ago
  • Cotton On first to test the tea breaks law
    Australian corporate Cotton On, the first major business operating in New Zealand to exploit the new tea breaks law, could walk away from negotiations if it doesn’t get its own way, says Labour Party Labour Relations spokesperson Iain Lees-Galloway.  “Cotton… ...
    7 days ago
  • World water day: eight rivers in one day
    Our photo journey started by the Waioweka (also known as Waioeka) River which flows from Te Urewera to Opotiki, and is surrounded by beautiful forest. The water looked great! Kopeopeo Canal It contrasted greatly with the Kopeopeo Canal near Whakatane,… ...
    GreensBy Catherine Delahunty MP
    7 days ago
  • Council can stop Port’s encroachment on harbour
    As owner of the Port of Auckland, Council can stop the wharf extension and reclamation if it wants to, says Labour’s Auckland Issues spokesperson Phil Goff. ‘As owner the council is custodian of the port and harbour on behalf of… ...
    7 days ago
  • We all benefit when education meets everyone’s needs
    As Dyslexia week comes to a close,  Dyslexia NZ have reminded us that around 10% of our citizens are dyslexic and are entitled to better support. One of their strongest arguments is that failure to provide identification and support for… ...
    GreensBy Catherine Delahunty MP
    7 days ago
  • State house sell-off fiasco a gift for developers
    The Government’s property developer mates are the only people who can salvage National’s state house sell-off now the Salvation Army has torpedoed the policy, Labour’s Housing spokesperson Phil Twyford says. “Having been cynically used by the Government as the poster… ...
    7 days ago
  • National reinforces inequality in schools
    The National Government’s flagship programme Investing in Educational Success is clearly reinforcing inequality in the school system, Labour’s Education spokesperson Chris Hipkins says. “The analysis released today by the NZEI clearly shows schools in wealthier suburbs are the main beneficiaries… ...
    7 days ago
  • Big change starts small
    Today marks Race Relations Day in New Zealand. Race Relations Day coincides with the International Day for the Elimination of Racial Discrimination.  The United Nations General Assembly chose this day as it marks the day in 1960 when 69 peaceful… ...
    GreensBy Denise Roche MP
    1 week ago
  • Israel, Palestine and the question of statehood
    The knife-edge election in Israel complicates the Middle East situation, even more than usual. The Prime Minister-elect, Binyamin Netanyahu, is moving to form a government. Netanyahu has indicated that, during his term, a Palestinian state would not be established. That… ...
    GreensBy Kennedy Graham MP
    1 week ago
  • Christchurch transport goes backwards
    The Green Party has a vision of a liveable, accessible Christchurch with a sense of identity and strong connected communities. Instead, 2013 census figures released by Statistics New Zealand reveal a fractured community, and tell a story of frustrated Christchurch commuters… ...
    GreensBy Eugenie Sage MP
    1 week ago
  • Super Fund should divest $140 million in high risk coal
    The Green Party is calling on the New Zealand Super Fund to divest their $140 million investment in coal companies that are vulnerable to becoming financially stranded according to a damning new report from Oxford University. The Smith School of… ...
    GreensBy Russel Norman MP
    2 weeks ago
  • Learn to count with Mark Osborne: 0 + 1 = ?
    The adage about the first casualty of war being truth is one that might often be applied to the political battle for hearts and minds, and of course votes. A rather unfortunate example of this has been arriving in the… ...
    GreensBy David Clendon MP
    2 weeks ago
  • Is it still a safety net when the holes are this big?
    Over the last few weeks I’ve been wondering how safe our income support system is for people, especially those with cognitive or learning disabilities. I’ve been trying to support a young man who was severely injured in a workplace accident… ...
    GreensBy Jan Logie MP
    2 weeks ago
  • Pasifika – protecting the Pacific needed now more than ever.
    Over the weekend thousands of Aucklanders flocked to celebrate our city’s diverse Pacific communities and cultures at the annual Pasifika festival and the Greens were there to join them. The Pasifika festival has been held every year for 23… ...
    GreensBy Denise Roche MP
    2 weeks ago
  • Sounds Stakeholders Seek a Sustainable Future
    It was heartening to see a large number of people who care about the Marlborough Sounds come together at the Marlborough Marine Futures’ forum in Picton on March 8. Fellow Green MP Steffan Browning, who lives in Marlborough, and I… ...
    GreensBy Eugenie Sage MP
    2 weeks ago
  • Solid Energy, who will clean up the mess?
    What can you say? This state-owned coal miner is facing some very serious problems. They haven’t run a profit in years, have required two Government bailouts, laid-off more than 700 staff and look like they need a third injection of… ...
    GreensBy Gareth Hughes MP
    3 weeks ago

Removed at the request of The Daily Blog.
Public service advertisements by The Standard

Current CO2 level in the atmosphere