By Melinda Collins
Foreign investment deals in agriculture are nothing new. In colonial times European countries established plantation economies in Africa, Asia and Latin America to export food.
Today Persian Gulf states are working out land deals in Africa, Asia and Eastern Europe while India has set up agricultural projects in Brazil and South Korea recently tried to purchase almost half the island of Madagascar.
“If food was ever a soft policy before,” editorialises the Financial Times, “it now rivals oil as a basis of power and economic security”. Control over the land that produces this power is as critical today as it has ever been.
NZ foreign investment
Land ownership disputes have been long associated with our little slice of south Pacific life. But recent high profile transactions (like the Chinese-backed bid for the 16 farms in the failed Crafar empire), have reignited discussions over foreign investment in our precious agricultural land.
While he wouldn’t address the Crafar sale specifically, Prime Minister John Key recently expressed his concern. “I’d hate to see New Zealanders as tenants in their own country and that is a risk, I think, if we sell out our entire productive base.”
New Zealand’s regulations governing foreign investment restrictions are liberal by international standards, as New Zealand maintains targeted foreign investment restrictions in only a few critical areas. Overseas investments in New Zealand assets are screened only if they are defined as ‘sensitive’ within the Overseas Investment Act 2005.
While the country has shown little concern at land and buildings being purchased by Australian interests, which own $80 billion of Kiwi assets, Winston Peters is suggesting the act’s criteria be revisited by the government.
“There will be more and more Crafar scenarios and company takeovers in the future unless action is taken now.”
He says that 25 years ago 19 percent of our sharemarket was foreign owned, today that figure is 70 percent. He also claims more than 150,000 hectares of New Zealand farmland — almost the size of Stewart Island — has been lost to foreign ownership in the past five years alone.
“Land ownership is not a two way street – for example, Japanese can buy our land, but we are not allowed to buy theirs, Chinese can buy our land, but we are not allowed to buy theirs. They are not to blame — we are.”
Federated Farmers agrees, suggesting the solution is simple — reciprocity. “We have no issue with direct foreign investment, so long as we can buy farmland there, on the same basis as they can do here,” Federated Farmers president Don Nicolson said in a recent speech.
But direct foreign investment is not without its opponents. The wider economic threat from foreign ownership is what Murray Horton of CAFCA (Campaign Against Foreign Control of Aotearoa) calls economic imperialism. “We’re anti-imperialists — and in this case we’re targeting foreign corporations.
“It’s simply a new, Chinese version of the British economic colonisation that dominated this country’s agriculture up until the 1970s.”
It takes a similar view to that of the recently formed Save the Farms group, which proposes what is effectively a closed door policy to any overseas investor who wants to invest in New Zealand farming.
Friend or foe?
Foreign investment fears have been slammed as “media hype” by global accountancy firm KPMG in its latest report into the agricultural sector. Titled Evolving Agenda: Foreign Investors — friends or foes? the report says there is no evidence New Zealand is experiencing an unusually high level of foreign investment in agricultural assets.
KPMG’s head of agribusiness Ian Proudfoot says the country is not as attractive to foreign investors as Kiwis may believe.
“The high price of quality agricultural land and our remoteness to the rest of the world means that even with the natural benefits of water and the link product has to New Zealand’s sustainable brand, we are unlikely to be top of the list of preferred destinations for most international land investors.”
The report says New Zealand’s small, developed economy will always require “inbound investment” to supplement a lack of equity, but there is no justification for significant changes to the overseas investment rules.
The paper does recognise the high price of land in New Zealand as a deterrent to getting young people onto the land and investing in farms.
It suggests we develop schemes to link young farmers with potential equity investors and provide an entry point to the farm ownership ladder.
It says the government should not rush the process of reviewing the Overseas Investment Act, but must ensure investor confidence is maintained and that New Zealand remains an attractive destination for foreign investment capital.
“New Zealand needs to establish a set of rational criteria to ensure that the best outcome is achieved for growing New Zealand’s wealth and exclude, to the maximum extent possible, emotion from the decision making process,” Proudfoot says.
Regarding potential areas of change, the report says “Areas where changes could be considered include ensuring the criteria used by the Overseas Investment Office to assess an application expressly consider the value the transaction creates for New Zealand and the inclusion of a cap on the amount of land an inbound investor can hold, to prevent excess concentration of land ownership to the detriment of the future wealth of the economy”.
With regards to reciprocity, the report says enacting a ‘one-way’ policy could be detrimental. New Zealand agribusiness companies need to follow the lead of Fonterra and Zespri by adopting a strategy for sourcing globally.
“The achievement of such strategies requires the companies to be able to source product from owned or controlled facilities around the world to provide key customers with guaranteed year round supply, enabling the profits of these activities to be remitted back to New Zealand,” the report says.
The success of that strategy means New Zealand companies need to be able to access land in other countries. The report says New Zealand cannot afford to “adopt policy settings which would restrict this access in an adverse way”.