There’s been a couple of stories in the news over the last 24 hours that could do with some scrutiny. The both relate to NZ’s involvement in the global market-place, and raise questions about benefits to NZ and it’s citizens.
The treasury has warned that selling three power companies in quick succession could be counter-productive. According to an RNZ article:
Newly released advice from the Treasury says it is only practical to sell one company every six months – two next year, and one in 2014. It says that still makes the programme vulnerable to a market downturn or a dip in a company’s performance.
Finance Minister Bill English has been considering selling all three power companies next year.
It was good to see that Labour MP Chris Hipkins was onto it quickly. However, as some Standard commenters pointed out, he confused the situation by seeming to both oppose and support the government’s asset sales programme. On TV One last night, Hipkins said:
“The Government would flood the market if they introduced three companies all in the same industry into the market in one year, it would mean the taxpayer wouldn’t get the best possible price for them,” says Labour MP Chris Hipkins.
“I’m not surprised that the Government are running away from this issue, they know the New Zealand public don’t want these assets to be sold,” says Hipkins.
On TV3, Hipkins seemed to totally support the asset sales, by saying the over-crowded sale schedule would disadvantage “Mum and Dad” investors:
And Labour says it would disadvantage individuals wanting to invest.
“Mum and dad investors would struggle to scrape together enough money to invest in one electricity company in one year let alone invest in three of them,” says Labour spokesman Chris Hipkins. “So what this is going to do, if they force all these sales through in one year, we are going to see those shares going to corporate interests and overseas investors, not to mums and dads.”
In contrast, Green co-leader Metiria Turei issued a statement unequivocally opposing asset sales, as reported at the above TV3 link:
“Treasury’s saying don’t do it, the sharemarket can’t handle it – so let’s heed Treasury’s advice,” says Green Party co-leader Metiria Turei. “They’re not a radical organisation, they’re a conservative economic organisation and they’re saying it’s not possible.”
There’s another story today about a milk processing factory possibly being set up in NZ by an overseas company. Some overseas investment is good for NZ. NZ farmers appear to like this one. Others here will be a better judge of that than me.
Federated Farmers says the likely sale of Oceania Dairy to China’s largest dairy producer by market value should be good news for farmers looking to get the best price for their milk.
Inner Mongolia Yili Industrial Group (Yili) plans to buy Oceania Dairy to acquire the resource consents it holds over 38 hectares near Glenavy in South Canterbury, to build an infant formula plant on that site, according to media reports.
The deal is subject to approval from the Overseas Investment Office but if given the green light, Yili will reportedly invest $214 million in the plant.
The upside is that it will provide jobs for Kiwis. However, that is often only a short-term benefit. This potential development should also be seen in the context of how the whole area is being developed. Multiple initiatives in the area could result in over-stressing the environment.
There was still a “huge expansion” taking place in the dairy industry in that region, with a couple of big irrigation schemes like Hunter Downs and South Waitaki still to come off which would increase the amount of irrigated area down there and could lead to increased milk supply.
Leferink said he did not see “a hell of a lot of stretch” in the supply base until the country reached the maximum number of cows it could sustain in the long-term, and even then cows could produce more milk than they were currently.
However, I will leave it up to the knowledgeable Standard commenters to put such potential developments under scrutiny. Many are far more knowledgeable than me about business and the economy.