Foreign Investment – from the bowels of Nexus
This was first published in Nexus Magazine Issue 8 2012, released on Monday 7th May 2012.
Yes, it’s another week where I’m ignoring the theme of the magazine. The theme is Pop Culture and I’m talking foreign investment. So shoot me. Or don’t. Whatever.
Anyway, you’ll remember a month or so back, there was an issue with the the Crafar Farms being sold off to a Chinese based group trading under the name Milk New Zealand. The Overseas Investment Office and two Ministers of the Crown (Land Information Minister Maurice Williamson and associate Finance Minister Jonathan Coleman) made the decision that the Milk New Zealand group would be allowed to own the Crafar Farms. Sir Michael Fay, previously alleged of tax evasion and insider trading (have a look into the Winebox Inquiry), accused the OIO and Crown of not looking at the issue fully. Going to court for a judicial review, the judiciary said that the OIO and Crown had not taken certain issues into account. The OIO and Crown looked into the issue again. The Government has been accused of “softening up the public to give in to Chinese political pressure” before saying that the investment can proceed. Michael Fay is appealing (at a ridiculous waste of taxpayer money) again.
The public has been overwhelmingly against the sale of these farms to Chinese interests, certainly with the help of the media sensationalising the issue. Some said it was xenophobia. Others were more blunt, calling it racism. But the fact is New Zealand gains a lot from overseas investment – particularly with the number of conditions put on the ownership of Crafar Farms.
What does New Zealand get out of overseas investment? The main benefit is that it boosts the economy. As a small country, we only have a certain amount of money to go around. Overseas investment boosts the potential of the economy. You might argue that the profits go offshore, but this isn’t always the case. Overseas investment creates companies, which create jobs. Jobs put money into our communities, which can be used to purchase goods from local businesses. That’s money that wouldn’t have come into the country without overseas investment, particularly with a business that trades a lot overseas.
Then there’s specific benefits. Look at the Crafar Farms as an example. If Milk New Zealand successfully purchases the Crafar Farms, that opens New Zealand dairy products to the Chinese market without tariffs – Milk New Zealand is Chinese owned. It would effectively be a Chinese company importing rather than a New Zealand company exporting. Yes, we have a Free Trade Agreement with China, but we don’t get free access to the Chinese markets for milk products until 2017 under the agreement. The economic benefit to New Zealand is huge. Chinese families want to buy New Zealand milk products after the San Lu scandal. Yet the racism of New Zealanders would mean we couldn’t offer them that, nor could we get the benefit. Another benefit is that Landcorp gets 50% of the profits from milk sales – this goes straight to the Government, helping put the public purse back in the black quicker.
Yes, there are negatives to overseas investment. New Zealanders aren’t owning New Zealand companies, so the companies don’t have New Zealand values. I would point out that this was very different in the Crafar Farms example though, given Milk New Zealand and their owners had to remain with “good character” – something Michael Fay has never had.
If we put a block on overseas investment, we are effectively saying New Zealand wants to limit their economy. I do find it funny that Labour is so against foreign investment, given Labour penned the China-New Zealand Free Trade Agreement and started the process for the Trans-Pacific Partnership Agreement.
If you are against the sale of the Crafar Farms, answer these questions:
- What’s more important – the long-term prosperity of a strong economy or the short-term gain of blocking foreign investment?
- Why is the world moving toward Free Trade if protectionism is going to benefit people more?
- Is it really not about the fact they’re Chinese?
Once you’re happy with your answers, send them in the form of a Lettuce to Nexus.