July 12, 2010 5:50am by David Farrar

Herald on foreign investment

John Key struck an odd note when he observed last week that he would be concerned if large tracts of New Zealand land were being sold to foreign investors. “Looking four, five, 10 years into the future, 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, so that’s something the Government will have to consider,” he said.

Was this the same Prime Minister who, two months ago, reprimanded his Agriculture Minister for saying the sale of the Crafar family farms to a Chinese company was unlikely to go through? Mr Key has obviously discerned a groundswell of concern about such sales. Yet, as a Weekend Herald investigation revealed, we are already selling large tracts to overseas investors.

Minister Carter’s comments were about a specific sale going through the regulatory process, while the PM has been talking more generally.

Foreign investment involving agricultural land more than twice the size of Auckland City has won regulatory approval over the past five years.

That’s 150,000 hectares which is around 0.6% of total NZ land area.

First, New Zealanders can buy land in most regions, and have done so in the Americas, Australia, South Africa and Europe. Secondly, and most apposite, foreign investment has always been a driver of this country’s economy. Banning the sale of farm land would send entirely the wrong message to potential investors. Thirdly, placing restrictions on such investments is always apt to create considerable difficulties in terms of boundaries and interpretation.

As it is, non-urban land of five hectares or more is deemed sensitive, and applicants must refer their bids to the Overseas Investment Office. It must consider criteria including relevant business experience, financial commitment to the investment and good character. The office decides about 75 per cent of applications, but all those for sensitive land must go to the Ministers of Finance and Land Information. In the end, they must balance the protection of sensitive assets with the need to encourage investment.

I see foreign investment similar to immigration. Both are generally very positive for New Zealand and economic growth. But both need a regulatory pipe which can determine the speed, so it is sustainable. A net migration of 10,000 people a year is good. If you increased it to 100,000 a year it would be bad as our infrastructure could not cope.

Likewise foreign investment is good, but that doesn’t mean one would want to sell off say 50% of farm land in a year.

The contribution to the economy of efficient foreign or multinational ownership has, rightly, been the paramount concern. Indeed, the Government’s confidence in the system has seen it delegating more authority to the Overseas Investment Office. Mr Key may have been stricken by sudden doubt, but there seems no reason for dramatic change. Those spreading wildly alarmist sentiment misunderstand the factors underpinning this country’s farming success story.

I agree dramatic change is not needed.