National's Big Idea

Let's Burn Down The House & Hope We Can Get The Insurance

- Murray Horton

Despite all evidence to the contrary from every poll on the subject National claims a mandate, namely the 2011 election result which gave them a one seat majority, to proceed with the “partial” privatisation (or “mixed ownership model”, to use its sanitised PR name for what amounts to theft from the people of New Zealand) of the three State-owned power generators – Mighty River Power, Genesis and Meridian – plus Solid Energy and Air New Zealand. The Government has announced that Mighty River Power will be the first on the auction block and legislative steps have been taken to start the process. This latest acronym is MOM. Isn’t that a beauty! I’m surprised they’re not advertising the policy as “Mom and apple pie”.

Cockups And Guesses

That’s the easy part. Saying you’re going to do something and actually doing it are two very different things, as the Government is finding out the hard way. No sooner had Key signed a coalition agreement with the lamentable Maori Party than the latter was threatening to leave it, because of the revelation that National had no plans to include any requirement that the privatisation legislation adhere to the principles of the Treaty of Waitangi (universally known as the section 9 clause, because that is the section of the 1986 State-Owned Enterprises [SOEs] Act which does require adherence to the Treaty). National’s defence of this omission was that such a requirement could not be imposed on the new private part-owners of these latest SOEs to be sold. That didn’t cut any ice with the Maori Party, or Maoridom in general, which made it plain that the Government would face widespread and active opposition on that issue. Key compounded the blunder by wrongly claiming that section 9 had never been used, whereas it has been used at least three times. Lo and behold, the Government backed down, promised to include Section 9 in some form in the law and blamed Treasury advice for the notion that it should have been excluded (the old good cop, bad cop routine). Entirely predictably, the Maori Party (with all of three MPs) promised to remain in the governing coalition (if it had walked, it would have been into political obscurity and inevitable electoral oblivion. There is nowhere else for the Maori Party to go; the threat to walk was all theatrics to try and convince highly sceptical Maori voters, who overwhelmingly gave their party vote to Labour in the Maori seats at the 2011 election, that it is still in any way relevant to them). That wasn’t the end of Key’s problems with Maori over this issue – the Maori Council has filed a claim with the Waitangi Tribunal over ownership of freshwater and geothermal resources, both key components of power generation. If there is a decision that Maori are entitled to a stake in either or both, that would reduce the amount that the Government will get from any sales.

This wasn’t the only snag that the Government encountered in introducing the legislation. It had campaigned throughout 2011 that private ownership would be restricted to 49%, with the Government retaining 51%. But “…the Government is suggesting that its planned percentage holding in the semi-privatised companies will have to be altered because of the need to avoid a dilution of its stake when the companies seek capital by way of share issues. It is extraordinary that the long-planned sales policy did not address so obvious a problem. That it did not, the prospect of more fundamental issues arising to embarrass the Government and erode confidence in the sales process seems likely. If that happens, a penalty will be extracted in terms of voter support… its handling of the asset sales process has been poor and unnecessarily controversial” (Press, 18/2/12, editorial, “The John Key Government finds itself in choppy waters”).

The biggest cockup was that of Finance Minister Bill English who admitted that the Government’s much touted and oft repeated claim that the sales will bring in $5-7billion was “not our best guess. It’s just a guess”. The Tory editorialists were virtually speechless at the ineptitude displayed by that admission. The Press (ibid) said: “That is a cavalier approach to an issue fundamental to the Government’s programme and to the nation’s wellbeing and counter to the firm figures on which National campaigned”. The Herald on Sunday titled its editorial (19/2/12): “Guesses get wilder by the day”. To quote from that:” His (English’s) hope was doubtless that that the G-word, so easy to ridicule, would draw the fire that might otherwise be directed at the actual numbers of the sale proposal. What he hoped would be drowned out by the laughter was the Government’s admission that selling the assets will cost $100 million more over four years in foregone dividends than it will make by reducing overall debt”. Now, isn’t that a bargain?

To Be Sold At A Loss

“…In lay terms, that means the Government is proposing to sell assets producing returns of at least 6 to 7% a year after tax plus growth, when it could issue debt costing just 4 to 4.4%. On the face of it, this doesn't look particularly bright, does it?…Assuming total asset sales of $6 billion and a sales price implying an after-tax earnings yield of 6% on the assets sold, the assets proposed to be sold will generate profits of $360 million. The interest saved on $6 billion at 4% is just $240 million, so immediately this transaction would see the Government worse off by $120 million a year if all the SOEs paid out all their profits as dividends.

“Again, the economics of the sale option aren't looking all that compelling. But this analysis ignores growth. If the SOEs' profits grow at the rate of inflation plus 1%, the total excess return would be the difference between the earnings yield; plus growth of 4% less the cost of debt, which works out to a difference of 6%. On $6 billion, this translates to $360 million a year, which at current interest rates is well above the cost of servicing the $6 billion in Government borrowings. This is a simplistic analysis as it ignores risk and it's possible the Government will be able to sell the assets at lower earnings yields and thus higher prices, but don't hold your breath. Prices could equally be lower.

“The other aspect of the great 2012 SOE sale bonanza is, of course, the various fees that must be deducted from what the Government gets. Investment banking and other costs including scoping studies will probably run to at least $180 million. That's two-thirds of the cost of servicing the interest on $6 billion at 4%. Other estimates of selling costs are as high as $350 million. In terms of historical performance, the SOEs have been a good investment - Treasury reckons they have returned 17.5% a year during the past five years. From a financial perspective, selling State assets is not a no-brainer. The real tragedy of these asset sales is that the average New Zealander will see his or her equity in these great assets reduced. At the moment, every New Zealander, rich or poor, young or old, has an equal shareholding in the assets proposed to be sold” (Weekend Herald, 12/11/11, “Digging finds huge hole in asset-sale case”, Brent Sheather). Other points made by commentators included that there is unlikely to be sustained sharemarket interest in three power companies being floated one after the other, which will affect any price paid for numbers 2 & 3; and that power customers can expect their prices to go up with a bang as the new owners seek a quick return on their investment.

As an economic strategy, selling public assets is right up there with burning down your house in the forlorn hope of getting the insurance. The end result being: no house, no insurance, and it’s criminally stupid and dangerous. But only a certain amount of weight should be attached to the economic argument for retaining the SOEs. Indeed, by concentrating on that aspect, the whole debate can be diverted down a slippery slope. It is glaringly obvious that by selling something, you get a one off return, and forego the future income stream you get by owning it. The same applies even if you only partly sell something – you will get an income stream reduced to your share of the ownership. But the emphasis should not be on how profitable they are or aren’t, because that accepts the validity of them having been set up as SOEs in the first place, by the 1984-90 Labour government, as one of the central pillars of Rogernomics (and Labour’s 2011 election policy of opposing the privatisation of these SOEs did not propose any change in their status from profit-oriented State-owned businesses).

What is needed is a political commitment that State-owned companies supplying an essential service actually be a public service rather than profit-obsessed corporations, which are publicly owned whilst exhibiting all the worst characteristics of privately owned Big Business corporations. That requires a political decision to change the business model of those and other State-owned Enterprises from profit to service. Now there’s a scary, radical concept – but it was the status quo in NZ until the 1980s and 90s. The country’s electricity system existed to ensure nationwide, coordinated, uninterrupted supply of an essential service, at cost. As Fairfax columnist Rosemary McLeod put it, the electricity system was ”formerly owned by us and run by men in grey cardigans who caught the bus to work carrying their lunch in brown paper bags, and lived in State houses” (referring to the grossly overpaid “princelings” who currently head the electricity SOEs; Stuff, 29/3/12. “MFAT staff costs hardly excessive, considering”,

If even the Government admits that flogging off the SOEs will actually cost the taxpayer money, let alone do SFA to reduce the country’s public debt (the official reason given for this whole pointless exercise), then the only explanation for why it is adopting this policy is ideological. And it is truly nothing more complicated than that – the wilfully blind zealous belief of both major parties, since the 1980s, that public is bad and private is good. “Then there is the issue of who the assets will be sold to. I remember not being able to get anywhere near enough Auckland Airport shares for my retail clients. However, one wealthy client who also dealt with a major American stock-broking firm that didn't even have an office in New Zealand was able to get 100,000 shares through the US firm. So not only was Auckland Airport sold cheaply but, to make matters worse, it appears overseas brokers got large allocations of stock and many New Zealand retail investors missed out” (Weekend Herald, 12/11/11, “Digging finds huge hole in asset-sale case”, Brent Sheather). That was written by a financial analyst whose angle is that ordinary New Zealanders won’t get a look in when these shares are offered. That is definitely not CAFCA’s angle – as far as we’re concerned, shares shouldn’t be offered to anyone, because the SOEs shouldn’t be sold. But Brent Sheather points out the obvious conclusion of all this – they will become foreign-owned, by transnational corporations. Not by John Key’s mythical “Kiwi mums and dads”. Indeed, when the bill to establish the “mixed ownership model” was introduced into Parliament, in March 2012, it contained no legal requirement for Kiwis to have first rights to the shares despite National having always promised that it would put Kiwi investors “at the front of the queue”.

That is as much bullshit as Key’s facile claim that restricting private ownership to 49% provides some sort of protection. Ever since 1973 the Overseas Investment Act has defined a foreign-owned or controlled company as one with more than 24.9% foreign shareholding. It doesn’t matter whether that percentage is held by one or many foreign owners; if it totals anything higher than 24.9%, it is recognised as a foreign company. In other words Key is talking about accepting a level of private, inevitably foreign, ownership which is double the legal definition of a foreign company. And there is an inherently absurd contradiction in this whole “Kiwi mums and dads” nonsense – they already own these assets, because that is what public ownership means. They have paid for them by their taxes, why should they be expected to pay for them again by buying a few shares in them and diluting their ownership to the status of a minority shareholder? What happens if one of these privatised companies goes bust? Mum and dad will go to the back of the queue as unsecured creditors, just as happened with the shonky finance companies that toppled like dominos. And mum and dad will be left with nothing. Isn’t that a great bargain!

Handing Over ACC To Insurance TNCs

The SOEs are not the only public assets being lined up for privatisation, partial or otherwise. The Accident Compensation Corporation (ACC) is the other current high profile candidate. For several years National has been talking about opening up its work account (which deals with the highly lucrative field of work-related injuries) to competition from private companies, leaving ACC with the less lucrative portfolio of non-work injuries. This actually happened under the 1990-99 National government but was reversed by the succeeding 1999-08 Labour government. So now the Tories want to have another go. It surfaced as a National commitment in its post-election support agreement with ACT (i.e. that Party’s solitary MP, John Banks) despite not having featured in ACT’s election campaign.

And who are these companies that are keen to get their hooks into NZ’s globally unique, no-sue accident compensation scheme? The insurance transnational corporations (TNCs), of course; the very same ones who are playing hardball with the people of Christchurch, holding the country to ransom and slowing the post-quake rebuild of the city to a crawl, while the Government sits on its hands and says “leave it to the market”. The insurance transnationals are not very keen on meeting their obligations but they are very keen on securing a very lucrative new income stream from ACC, which has been funded since the 1970s by levies on all New Zealanders. But the process is not going smoothly to plan. Originally the work account was going to be opened to competition from October 2012; that is now likely to be pushed out until April 2013 because ACC Minister Judith Collins says she needs more time to consider the Government’s options. And Collins has revealed that she is not necessarily wedded to the same vision as the ideologues driving this agenda. “Collins said she ‘was very committed’ to ACC, which saved businesses, professionals and courts from being tied up or ruined with expensive litigation. There would be no ‘holus bolus destruction of ACC. I’m seriously not into level playing fields with this. Insurance companies want all sorts – I can’t be bothered because I know that, when it all hits the fan, the people who will have to pick up things are ACC’. Asked about opening up the work account to competition, Collins replied: ‘Who said I was? But it’s important to have more choice’” (Press, 15/3/12, “Collins ‘committed to ACC’”, Danya Levy). And besides, the whole extraordinary Bronwyn Pullar affair has suddenly meant that ACC is proving to be a tar baby for the National Party as a whole and Judith Collins as its Minister. How richly ironic that one of the Government’s ideological whipping boys has caused the end of the Ministerial career of Nick Smith; it remains to be seen what further damage this affair will do to the Government and Party. It couldn’t have happened to nicer people.

Christchurch’s Assets; Charter Schools; Health PPPs

Nor is it only the assets held by central Government that are at risk. Christchurch very wisely held onto its wide-ranging portfolio of City Council-owned assets, both social and trading; while other Councils up and down the country flogged theirs off over the past quarter of a century. Now the huge cost of the earthquake rebuild is providing a heaven-sent excuse for the ideologues to urge that those assets be sold and already the various corporate vultures, of the likes of Infratil, are licking their lips at the prospect of getting their hands on the Lyttelton Port Company, Christchurch Airport Company and Orion, the third biggest electricity network business in NZ. Nothing has happened yet but the pressure to sell the Council’s assets will only increase.

The other insidious prong of the privatisation agenda is public private partnerships (PPPs). This is already Government policy in relation to schools’ infrastructure (and the creation of new private schools was sprung on the country in the shape of charter schools, which were announced as part of the coalition agreement with ACT. See the articles on charter schools elsewhere in this issue by John Minto and Liz Gordon). PPPs are now being pushed hard into the public health sector. In December 2011 the Government recommended that the Canterbury District Health Board (CDHB) explore the PPP model to get funding for the $600 million redevelopment of Christchurch and Burwood Hospitals (a project which has become both more urgent and more complicated because of the major quake damage suffered throughout the whole CDHB). The Public Service Association pointed out that overseas PPPs had proved to be “wasteful, costly, complex and a poor use of public money” (Press, 23/12/11, “DHB to explore private funding”, Jo McKenzie-McLean & Georgina Stylianou). Green MP Kevin Hague, the former head of the West Coast DHB, said: “This is just National government ideology. Governments can get capital more cheaply than through the private sector. Private investors require a dividend to return to shareholders. What this means is that health services will have to cost more because so much of the money will be to pay for the shareholder dividends” (Press, 27/12/11, “PPPs cost more, deliver less, says ex-health boss”, Georgina Stylianou). The NZ Resident Doctors’ Association said: “The public health system operates on a not for profit basis – every dollar spent goes towards patient care. In contrast, the private sector dictates that dollars are delivered back to shareholders. In the United Kingdom, the Private Finance Initiative (PFI) has resulted in unintended consequences, with health trusts under severe pressure from inflexible private contract obligations. The emergence of a two-tiered health system is just one of the reasons New Zealanders are implacably opposed to the emergence of similar schemes in this country” (Press, 28/12/11). In February 2012, when the CDHB Board had its first meeting since the Government’s announcement, the Chairman expressed fears that adopting the PPP model could delay the project by two years. Now that’s efficient, isn’t it?

TNCs: Tax Dodgers & Corporate Welfare

It’s useful at this point to remind ourselves who are, and will be, the beneficiaries of this policy of privatisation (be it “partial”, PPPs, or whatever): none other than our old mates the TNCs. And let’s just remind ourselves of some of the reasons why turning New Zealand into even more of a branch office economy run by the TNCs is such a dopey idea. To give one example – they’re not keen on paying tax in New Zealand. In 2011 the Big Four Australian-owned banks made a combined NZ profit of $3 billion. These banks always make a big PR fuss about how much they contribute to the NZ community. But these are exactly the same banks who, in December 2009, settled out of court with the Inland Revenue Department (IRD) for attempting to dodge payment of an astonishing $2.2 billion of taxes that, between them, they avoided via deliberately complicated structured financial transactions. And that out of court settlement was for 20% less than what IRD was seeking – plus they would have had to pay costs if they’d persisted in going to court and losing (two of them had already lost in court before they all decided to throw in the towel). Their current tax burden is obviously not too onerous if they can still rack up a combined $3 billion profit in one year.

Nor were the banks the only TNCs to operate tax avoidance schemes. IRD is currently prosecuting 16 Australian companies which lowered their tax bills using New Zealand subsidiaries, specifically by using a structure called optional convertible notes. In December 2011 IRD won its case against one of those companies, Alesco; the sum involved was around $8.6 million of tax, penalties and interest charges. The judge ruled that: “The arrangement was an artificial device designed only to secure a tax advantage in New Zealand and could not otherwise have been obtained” (New Zealand Herald, 12/12/11, “Taxman chalks up a big win against Aussie tax avoiders”). There are some big names among the other Aussie TNCs awaiting their day in court with IRD, such as Mediaworks, Qantas, Telstra and Toll Holdings.

The Government is currently wringing its hands about having to borrow hundreds of millions of dollars per week because of the global financial crisis and the huge cost of the Christchurch earthquakes. It presents that as an excuse for asset sales. But if it needs to raise some serious money, all it has to do is squeeze the transnational tax dodgers who are costing this country billions. And, while it’s at it, restore the tax rates on business and the rich to more sensible levels, rather than cutting taxes on them and then shedding crocodile tears about having no money and having to slash public services. Stop waging economic war on the poor and make the rich, business and the TNCs pay their fair share. There’s no shortage of money in the country – the crucial factor is who’s got it and who hasn’t. In the words of the old classic phrase: ”Who’s up who and who’s paying?” Or, who’s not paying, more to the point.

And to give another, particularly egregious example – TNCs here have the cheek to ask us to pay for the privilege of them ripping us off. In December 2011, speaking at the opening of Coca Cola Amatil’s Christchurch bottling plant, that TNC’s Group Managing Director called on the Government to consider “incentives” for food and beverage manufacturers. Why? This is a very slippery slope. Why should the New Zealand taxpayer subsidise a gigantic transnational corporation such as Coca Cola, one for whom the $15m cost of the bottling plant would be what its American executives would refer to as “chump change”? Would they like breakfast in bed while they’re at it? And this is not even to raise the subject of whether Coca-Cola itself is a product worthy of any taxpayers’ dollars.

A decade ago when the Labour government gave taxpayers’ money to giant American transnational EDS, National’s associate commerce spokesman called it “corporate welfare” (Press, 12/3/03). And who was that then obscure National MP? None other than John Key. It’s a rare day when CAFCA agrees with National but Key expressed our views exactly. Of course, once in power, Key became the transnationals’ biggest sugar daddy, as evidenced by the squalid Warner Brothers/“The Hobbit” saga in 2010. What happened to calling it “corporate welfare”, Prime Minister?

In the US, individual states, counties and cities undercut each other to attract foreign investment, such as car assembly plants, with guaranteed union-free workplaces. Some US states have paid transnational corporations hundreds of millions of dollars to pick them. “You want our foreign investment? OK, then you’ll have to pay us to come there. And pay again for us to stay". Of all cities in New Zealand, Christchurch should be the one most wary of offering “incentives” to transnational corporations. In December 2002 Pratt and Whitney, a huge US transnational, announced an $80 million expansion of its Christchurch Airport jet engine testing centre; yet, by March 2003, Christchurch’s then Mayor, Garry Moore, announced that the centre would close and move overseas, with all jobs lost, unless the Council put up $20 million of ratepayers’ money. Sir Angus Tait, chairman of Tait Electronics, put it most succinctly when he said: " …One could, a little unkindly, interpret it as Air New Zealand and Pratt and Whitney putting a gun to the city’s head, saying ‘build this new building or we’ll go elsewhere’" (Press, 1/3/03).

Don’t worry about the much maligned solo mothers and other beneficiaries who are regularly attacked and subjected to draconian measures. They’re not remotely in the same league. It’s the transnational corporations who are the country’s biggest bludgers. They suck billions of dollars in profits out of this country every year, so they can well afford to pay their own way (whatever happened to “market forces”?). If anything, they should be paying the NZ people for the privilege of being allowed to operate here.

Crafar Farms Huge Headache For National

The other, major, manifestation of the mania to flog off the country is the hardy perennial of land sales. This one is proving a huge headache for National and I bet Ministers are heartily sick of the words “Crafar Farms” by now. That particular saga has been dragging on since 2010 with no end in sight. Right on Christmas of that year (the traditional time to make announcements that officialdom hopes nobody will notice) the Overseas Investment Office (OIO) and relevant Ministers rejected the application by Chinese TNC Natural Dairy to buy all 20 Crafar Farms (in receivership, following the collapse of the North Island dairying empire built up by the tragic-comic Allan Crafar, aided and abetted by the criminally negligent banks which allowed him to accumulate hundreds of millions of dollars in debt to fund the purchases at the zenith of the lunatic gold rush that was the dairying boom. The outcome was entirely predictable but banks are always secured creditors, so they don’t suffer when a business like this collapses).

The application was rejected because the people involved in the Natural Dairy bid (May Wang was the most high profile) did not meet the “good character” provisions of the Overseas Investment Act – which is one of the very few grounds on which an application can be rejected (and it applies only to individuals, not the applicant companies). It’s worth noting that charges have since been laid in Hong Kong against some of the principals of Natural Dairy’s bid, including May Wang. The charges arise from that bid – but no charges have been filed in New Zealand against anyone, which just goes to show the toothlessness of our so-called regulatory authorities.

This was a first for the OIO – CAFCA has documented years of our “not of good character” complaints to the OIO and its predecessor, the Overseas Investment Commission; not one of which was successful. And it illustrates the intensely political nature of this particular case. The media had produced so much evidence of lack of “good character” that it was impossible for the OIO and Ministers to reach any other conclusion. So, Natural Dairy was out of the running – but certainly not off the scene. It had already bought four of the Crafar Farms, without OIO approval, confidently expecting retrospective approval, which is a depressingly routine feature of the OIO’s rubberstamping. When turned down to buy all 20 farms it defiantly asserted that it already owned four of them and wasn’t about to return those. At the time of writing*, it is unclear just what the status is of those four. But, ever since that rejection, all mention of this issue only refers to 16 Crafar Farms, not 20.

Never mind, along came a more “respectable” Chinese bidder, Shanghai Pengxin, so the whole process was started again. The receivers of the Crafar Farms made it plain that they weren’t interested in lower bids from State-owned Landcorp or a consortium headed by poacher turned gamekeeper, Sir Michael Fay. Nor were the receivers prepared to consider selling off the farms individually, but only as one job lot, which ruled out family farmers being able to afford to buy them. Only corporate agribusinesses could afford to bid the hundreds of millions being asked. And, lo and behold, in January 2012, the Government and OIO trumpeted that the bid by Shanghai Pengxin’s subsidiary, the aptly named Milk NZ, had been approved. Just as the Labour government had done last decade with the equally controversial purchase of South Island high country land by Canadian singer Shania Twain, National announced that the deal included a number of “high quality” conditions to make it more palatable to the public, including a sizeable majority of National voters. And, as a booby prize, unsuccessful bidder Landcorp was announced to be the manager of the Crafar Farms on behalf of the new Chinese owners. The Government and OIO rubberstampers had every reason to believe that would be the end of the matter.

Judicial Hand Grenade

But Sir Michael Fay, that born again patriot, had other ideas and, for entirely self-interested motives, his consortium, which includes iwi, took court action against the approval for the sale to Milk NZ. In February 2012, to the astonishment of the Government, OIO, Milk NZ, the transnational corporate media, the “experts” and the ideologues, the judge ruled in favour of Fay’s consortium and ordered a review of the decision. To quote a CAFCA press release (15/2/12; “Crafar Court Decision A Welcome Outbreak Of Sanity”): “Justice Miller's decision to order a review of the decision to approve the sale of the Crafar Farms to the appropriately named Milk NZ, owned by Shanghai Pengxin of China, is a welcome outbreak of sanity in this whole sorry saga. Not to mention a two fingered judicial poke in the eyes of the Government and its Overseas Investment Office rubberstampers.

“It's only three weeks ago that the Government was trumpeting the ‘strict conditions’ attached to the approval. They have been swept aside by the judge for the load of piffle that they are. The decision recognises that the would-be foreign owner has no dairy farming experience, thus failing the legislative requirement that it have relevant business expertise. The Chinese company, and the Government, aimed to get around this inconvenient law by contracting Landcorp to manage the Crafar Farms. The appellant's lawyer pointed out that this would set a precedent for future land sales as any ‘well-resourced overseas conglomerate could come and buy dairy farms in New Zealand provided it had a contract with Landcorp’. This attempt to sugarcoat the bitter pill of loss of yet more of our land could be described as a policy of phony New Zealandisation. Landcorp would be nothing more than a property manager for the Chinese owners. The judge recognised the central fact that the sale would bring no discernible benefit to New Zealand, as required under the Overseas Investment Act, saying that the benefits were likely to accrue regardless of who owns it. ‘If a given benefit will happen anyway, it cannot easily be described as a substantial consequence of the overseas investment’. Exactly. CAFCA couldn't have put it better.

“CAFCA stresses that the race or nationality of the buyers is irrelevant. Flogging the Crafar Farms overseas is reprehensible regardless of whether the foreign buyers are Chinese, Americans, British or Australians. But CAFCA doesn't carry a flag for Sir Michael Fay and his merry men. His track record speaks for itself…The opportunity to have the Crafar Farms genuinely stay in local hands was lost when the receivers rejected Landcorp's bid to buy them outright (as opposed to the booby prize of managing them for a foreign owner).

“This decision provides a chance to halt this whole policy of flogging off the country's agricultural land (of which they ain't making any more), which is New Zealand's comparative advantage in the global market. New Zealand is, first and foremost, an agricultural country. And we're very, very good at it, which is why foreign buyers want to snap it up. As a bare minimum first step, freehold sales of such land to foreign buyers should be stopped ASAP, with them only allowed to lease land, as is common practice overseas. And all such leases should be subject to much stricter conditions and scrutiny than is the case now. CAFCA urges the Government to take the opportunity of this major rebuff to reverse its self-defeating policy of allowing the country to be sold off, farm by farm. Or will it do what it has done in other such judicial defeats and simply change the law in order to get its own way?”

At the time of writing**, that’s where things are at. Having conducted a review, as ordered by the judge, the OIO has sent its second recommendation to the Government and it remains to be seen whether the Government will give the go ahead, again, to Shanghai Pengxin. Speculation is pointless but, bearing in mind the OIO’s track record, I wouldn’t hold my breath. It routinely approves nearly everything put in front of it. For example, see elsewhere in this issue for James Ayers’ analysis of the Kim Dotcom saga. The OIO recommended that he be approved to buy land here, despite several documented breaches of the “good character” requirement. One Minister, Maurice Williamson, agreed; but the other Minister, Simon Power (who retired from Parliament at the 2011 election) disagreed and got Williamson to change his mind. Hence, Dotcom was refused permission to buy land and had to settle for renting New Zealand’s most expensive house. In that case Ministers overruled the OIO’s recommendation. But regardless of what the Government decides, it is obvious that the Crafar Farms saga is far from over. Fay and co have got the money and the self-interested motivation to keep up the fight.

*After this was written, and after the hard copy edition was published, the OIO responded to an Official Information Act request from CAFCA to confirm that nothing has been done to take those four Crafar farms back from Natural Dairy. That shows just how toothless the Overseas Investment Act is.

**Likewise, after this was written, and after the hard copy edition was published, the Government announced – surprise, surprise – that it had conducted its review of the OIO Decision, as ordered by the judge, and decided, once again, to approve the sale to Shanghai Pengxin.

Turning Point

The judge’s decision in the Crafar Farms case really does mark a turning point on the whole issue of foreign ownership of NZ land. Poll after poll on the subject has shown that an overwhelming majority of New Zealanders, including National voters, oppose the sale, not only of the Crafar Farms, but rural land in general, to foreign buyers. And not just sales to Chinese buyers but to all foreign buyers, regardless of nationality. This has always been CAFCA’s position (we opposed the sale of rural land to Canadian white woman Shania Twain as much as we oppose it to a Chinese corporation) and it is gratifying to see that our view is so clearly supported by our fellow New Zealanders right across the political spectrum. It also gives the lie to those, such as Cabinet Minister Maurice Williamson, who routinely libel opponents of foreign control as “racists” and “xenophobes”. That judge’s decision led to an outpouring of soulsearching in the media by journalists and commentators who had always been “on message” with the Government, whether National or Labour, in regards to an “open foreign investment regime”. These guys had to face the fact that they are out of step with the great majority of New Zealanders, now backed up by the force of a judicial ruling, in relation to the decades-long laissez faire policy of allowing wholesale land purchases by foreigners, whether individuals or corporations. Public opinion really has reached the “that’s enough!” stage.

Journalists who are no friends of ours made some sensible suggestions. For example, John Armstrong, in the New Zealand Herald (18/2/12; “Not-so-public process backfires in Crafar case: Judgment blasts holes in approach to overseas investment” wrote: “What passes for debate is going on in a vacuum. For starters, no one knows how much productive land is foreign-owned. The Prime Minister claims the figure for farms is less than 1%. The Left-leaning Campaign Against Foreign Control of Aotearoa, which has assiduously collected data over the past two decades, puts the figure closer to 7%…That justifies some kind of commission of inquiry whose prime task would be to determine first how much land actually is in foreign hands and then assess how much should be”. Good idea – but only if it is accompanied by a moratorium on land sales while it deliberates.

But the media still has plenty of work to do. It plays into the hands of those who label opponents of foreign control as “anti-Chinese racists” by not highlighting the ongoing and much larger scale buy up of NZ land by individuals and corporations from white countries. Case in point – Germans are now the biggest owners of dairy land in Southland. Read any of James Ayers’ analyses of the OIO’s monthly approvals in any month of any recent year and you will find the detailed evidence. That is not featuring in the national debate centring on the Crafar Farms. And it damned well should be.

“Fix Your Own House, Don’t Sell It”

To conclude: the local ruling class treats its own people with arrogant contempt which translates as “New Zealanders are too stupid to run their own country, so we’ll flog it off to our mates to do so”. Well, speak for yourself, boys and girls, but it’s not yours to sell (or give away, for that matter). Privatisation, asset sales, land sales and transnational corporate control are an international phenomenon, so it’s appropriate that I finish with an international quote, which sums up the whole issue most succinctly. It was reported in the December 2011 issue of Focus On Public Services that Nigeria is moving to privatise its electricity company; an officer of global union body Public Services International met Government leaders and told them: “Fix your own house, don’t sell it”. That says it all.

A large number of organisations have joined together to form Keep Our Assets, which is petitioning for a citizens’ initiated referendum to stop asset sales. Contact details: Box 27110, Wellington 6141; (04) 3814640;; The contact person is Malcolm Larking. CAFCA is actively involved with this campaign and urges all our members and supporters to get involved.


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Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. .



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