China's keen, why aren't we?

FOR SALE: Sixteen farming units scattered throughout the North Island and formerly operated by business entities involved with Alan, Beth and Frank Crafar have been placed on the market for sale.

Recently, American writer Howard French took a train ride down the east coast of Africa to see for himself how the wave of Chinese investment in Africa was going.

It is well known the Chinese commitment in Africa has rocketed over the past 10 years, with the Chinese building infrastructure - whole cities, in fact - in exchange for mining and oil concessions. Chinese concerns are also looking for land to rent or buy to expand domestic food supply.

Even in the mostly impoverished and dysfunctional countries of East Africa, French encountered a deep suspicion of Chinese ownership of African farmland. Minerals were one thing, but land was another.

In New Zealand, we have been selling hundreds of thousands of hectares of farmland to foreigners for years. At the same time, New Zealanders and New Zealand businesses have also been buying land and assets in other countries.

Much of the New Zealand farmland sold is notable more for its scenic splendour than for its productivity, so the new owners tend to be wealthy overseas buyers who just want a hobby farm in spectacular surroundings.

These sales require Overseas Investment Office approval but with the right lawyer, this is just a matter of granting a bit of public access here or there, agreeing to protect a few bits of native bush or wetland and committing to increasing farm turnover in an ecologically friendly way.

The transactions have not been without controversy. We have an almost instinctive feeling New Zealand land should be owned and worked by people who have a real stake in the country. Selling our farms feels a bit like selling the family birthright.

The main arguments against such sales are the usual problems with absentee landlords and the artificially inflated land values that result when people who have no concern about making a profit enter the market. Loss- making enterprises do not pay much tax - in fact, they get refunds - and often the new owners have a mysterious change of heart about executing the the grand plans they might have talked about in their original applications.

Despite these misgivings, these sales have become relatively commonplace. Why then should the prospective purchase by Hong Kong-backed Natural Dairy of 16 dairy farms in the North Island (often referred to as the Crafar farms) and the taking of a 51 per cent stake in Canterbury's Synlait by Chinese-owned Bright Diary cause such a fuss? So much of a fuss that the Government is calling for another review of foreign investment.

Does dairy farmland have some special significance in the New Zealand psyche?

I would have thought that with the advent of industrial dairying, especially in the South Island, such romantic notions of dairy farmland were outdated.

The fact dairying is to New Zealand what mining is to Australia might explain some of the sensitivity. However, many important New Zealand industries are owned overseas, including most of our banks, and even this newspaper. Welcome to the global world, you might say.

Some of the opposition is clearly based on the fact the prospective buyers are Chinese. Some of this is racist, pure and simple, but not all of it. In some ways, China is a special case. We know China is on an international quest to secure the supply and production of both minerals and oil for its vast manufacturing industries.

It needs to feed a growing population and wants to increase food production. It is also not blind to the prospects for agribusiness.

Although China does have a thriving private sector, when it comes to overseas purchases, the Chinese government is not far removed. Bright Dairy, for instance, is partly owned by the Shanghai City Council.

The Chinese government is a dictatorship tightly controlling a huge population of thrifty savers (whose per capita earnings are way under that of New Zealanders). It is not accountable in any way we understand in the West and without shareholders or voters breathing down its neck, it can take the long view.

These factors put Chinese business in a special class of buyer but it wouldn't be the only one in it.

Foreign investment is always tricky. An overseas company wanting to set up in New Zealand brings capital, provides jobs, supplies expertise and can also provide new markets. Such investment can rescue failing New Zealand companies. The downside is the profits go to shareholders offshore and such investments can be fickle and short-lived.

Foreign investment takes the risk from the New Zealand investor or taxpayer, but it also takes away opportunity. Losing ownership of the means of production is a sure way of becoming, as John Key indicated, "tenants in our own land".

If we are not going to allow the Chinese or the Russians or the Saudis to buy what we regard as strategic assets, where are we going to get capital from? Synlait tried to raise capital locally but did not get enough takers.

If the Chinese believe New Zealand farms and food processing are a such a good long-term investment, why aren't the Cullen Fund or the Kiwisaver funds lining up to buy the Crafar farms or to invest in Synlait?

It's just as well we've having another look at foreign investment. It is just a shame we are doing it because the Chinese are interested in assets that New Zealanders are not prepared to invest in.

- © Fairfax NZ News