by Russel Norman
So it looks like Crafars will be sold to overseas owners. This is a bad idea because:
1. Rural land is now very expensive and allowing overseas investors to buy it will only push prices up further. Crafars farms were not selling in NZ at the price the receivers wanted, which was a good thing because sooner or later that would bring the price down.
Higher rural land prices mean that average income, or even higher income, people can’t afford to save up or borrow for a family farm. I’d rather have family farmers than corporate farmers.
Higher rural land prices mean that those who do buy land are under emormous pressure to get a high return. This is part of the reason for the intensification and loss of biodiversity as every last square metre is flattened, drained and sown with grass. We are currently losing native vegetation at the fastest rate since European colonisation due to agricultural intensification (Landcare Research Annual Report 2009).
2. NZ runs a large investment income deficit due to the large amount of foreign ownership (and loans owed overseas). The current account deficit has improved a little recently because profits of foreign owned companies are down so less is repatriated overseas. Once profits recover so will the current account deficit.
3. Foreign ownership makes it harder to regulate, hence reduces our sovereignty. NZ’s bilateral investment treaties (which are embedded in trade treaties) make it harder to regulate foreign corporations. If regulations are passed that reduce the value of the investment, such as tighter environmental rules, then the corporation can sue the NZ govt in international tribunals for “indirect expropriation”.
Published in Economy, Work, & Welfare | Environment & Resource Management by Russel Norman on Sat, May 22nd, 2010
Tags: Russel Norman; Crafar; foreign ownership
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on the trolls and those who are unable to keep on topic
On the other hand, anything’s a good idea if it gets Alan Crafar off the land!
NZ’s dirtiest and stupidest dairy farmer should be being jailed for incompetence and damaging the environment, not portrayed as a victim.
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TODAY’S “GOLD MINES” TOMORROW’S MORTGAGEE SALES
Mundens I agree with your sentiments, but MR.Crafer has certainly not been made a victim on Frogblog.
Forreign investment is very bad for the country as the the profits go overseas. Basically our politicians (except Greens) have sold us down the toilet.
And now there is talk of a “free” trade deal with the US but that could be disastrous.
There is a good article in Foreign Control Watchdog ‘Chinese Buy Up Dairy Farms’ in this issue http://www.converge.org.nz and http://www.cafca.org.nz
I have mentioned this once before; what would happen if someone in the world is diliberately stockpiling powdered milk?
Will todays “gold Mines” be tomorrow’s mortgagee sales? Read the article and find out!
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A land tax as proposed by Frank DeJong (Ontario Greens) would have solved that problem.
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This issue is about nationalism (recognising that it is o.k to look look after our nation and people in our own interests (we don’t have to get the disease of overpopulation). the Green Party position on New Zealand as a nation is all over the place; on the one hand welcoming mass migration and on the other recognising (as desireable) a nation based on the tino rangitiratanga of “tangata whenua” whose vote should equal more than people without some indigenous ancestry.
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One of the major impacts from the budget is the lowering of the corporate tax rate. The flow on will be yet more NZD flowing off shore as repatriated products meaning even more milk powder needs to be sold for us to tread water financially.
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Ban?
Us?
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These might be the people buying the farms?
http://www.chinahush.com/2010/05/17/chinas-new-rich-set-trend-buying-luxury-homes-in-california-with-cash/
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If you look at all the industries, utilities and land holdings which have moved out of New Zealand ownership over the past 25 years, the common factor is debt-fuelled expansion. Companies (and government) take on debt to expand the scope of their operations, and eventually reach the point where their scale, and their level of indebtedness, makes their sale to overseas interests almost inevitable. Banning foreign ownership, is, I suggest, not the solution to the problem. Restrictiions on debt-fuelled expansion, and saner provisions for capital acquisition, would offer a more sensible way forward for New Zealand. I personally believe that will not happen under the current regime. Rather I believe that this regime will preside over the economic destruction of New Zealand, and it will be for us to build a new economic order from the ashes. http://www.republican.co.nz
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A major difficulty inherent in any ‘banning’, such as no foriegn ownership of NZ land, is that companies & individuals will find a way around it, by false declaration, disguised share registries etc. etc. The trend would quickly be for illegal entities to become involved, (think the international drugs trade), with all the inherent corruption & criminality that would bring to the table.
A good example of this in action is the registry of shipping where ships on many kinds (fishing, tankers etc.) are under flags of convenience to avoid many laws /regulations/taxes of their real owners country.
This is quite apart from the retalitory banning that may result from partner nations. e.g. No Fonterra holdings of any foriegn land or property, no expansion internationally of any NZ company, no foriegn holdings of land or property by any NZ National.
Please see how this is an absolute non-starter, unless you wish for a completely regulated international market of all goods, services & property, with quotas, import/export taxes, and horror of horrors, a body such as the WTO to arbitrate on all disputes – heaven forbid !
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Try to imagine for a moment a world where there is one currency, one government, one tax system, one system of laws, etc. etc. Unimaginable ?
Quite.
Next try to imagine one where there is a complex system of agreements, treaties, dispute resolution systems, laws, opt outs, subsidies, etc.etc.
Will either one work well enough to avoid wars, catastrophe, shifting allegiances, violent upheavals. No ?
Need one say more ?
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But, bigblu, land is somewhat unique that it is the great immoveable (if we ignore tectonic plate movement). Ships, drugs etc etc can all be shifted around, land can’t. To have it you should have to be here. If foreigners want to pay kiwis to ‘own it on their behalf’, I’m sure we can sort out some mechanism.
NZ land for NZ’ers
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Matt Nolan blogs on that here:
” Applying a feeling of ownership on the basis of nationalist sentiment is weird.”
http://www.tvhe.co.nz/2010/03/29/foreign-investment-explained/
let anyone who owns a piece of land sell to anyone (and let anyone move here who wants to… let them live in a tent if they so wish) -all will even out and come out smelling of roses* (or Mumbai). You only own what is defined by private title, there is no group ownership of (say) a quality of life?
*The flaw in that argument is that there is no equilibrium in the human population.
“There are private individuals that happen not to be New Zealanders that would like to buy these things, and guess what – they *value them more highly than the New Zealanders do*.”
they can afford to pay more than New Zealanders because [those in power] allowed monstrous asset inflation?
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So Samien – you would agree therefore that no New Zealander should be ‘allowed’ to own property in any other jurisdiction – England for the Englanders, Australia for the Australians etc. How silly !
The Asset inflation argument is a Red Herring. Land or any other commodity is valued according to it’s desirability & the ability of a prospective purchaser to pay the price demanded. Whether part of that price is a ‘land tax’ meant to act as a disincentive to foreign purchasers is somewhat irrelevant because there will always be some foreign person who has the required capital & will buy if he/she desires it enough. Even if the purchase is through some mechanism to disguise the fact that it is owned by a ‘foreigner’, it still will be owned by that person & not the NZ ‘agent’. In the end what does it really matter anyway. The person is just a person. That they may hold a NZ Passport or a Chinese one matters what ? They may turn out to be a better neighbour that a Crafar.
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“Whether part of that price is a ‘land tax’ meant to act as a disincentive to foreign purchasers is somewhat irrelevant because there will always be some foreign person who has the required capital & will buy if he/she desires it enough.”
a land tax would have kept the price to a level related to it’s real earning capacity making it easier to find local buyers. If foreigners are prepared to pay a very high price for dairy farms they must be betting that the price of milk solids will stay high or increase. Perhaps they know their own market better than local people. What if (say) 50% of our farmland was sold to foriegners: the people who sold would probably end up as consumers rather than producers, running dowmn their savings. The people living overseas are the main beneficiaries of the production as while goods and services are spent on the farm the profits go into the foreign economy.
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Why is rural land expensive? because primarily NZ farmers have been bidding it up. Yet in your weird value set, foreigners get the blame and should be banned from buying overpriced NZ land. Wouldn’t we solve the ‘problem’ by banning NZers, because they have obviously been making poor investment decisions in the past.
I reckon we should sell foreigners as much of our land as possible as quick as possible because, if it really is overpriced, then we can bank the cash, they will lose money and end up selling it back at a loss, which we can pay for with their money, leaving a healthy surplus in the bank.
AS for overseas companies being hard to regulate. Utter crap. They are just as subject to the law and in my experience are far more conscious of the need to follow it. In many cases their internal governance standards are far higher than the places they operate in, NZ included. A look at the budget and the way our own government operates is a good contrast.
But once again Green political analysis is demonstrated in this brief post as driven not by sense and logic but by xenophobia, petty jealousy, an overarching belief that they know so much better than anyone else how everything should be done, and the desire to return us to the feudal villages of the past.
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Why is rural land expensive? because primarily NZ farmers have been bidding it up.
……
Naughty NZ farmers. Where did they get the funds to bid it up to such a high point?
Or maybe the question should be why can’t they borrow now?
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I don’t suppose this is relevant is it?
http://www.listener.co.nz/issue/3314/features/1021/house_of_the_rising_sum.html
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jh – your analysis is so wide of the mark I hardly know where to begin. Insider seems to have the measure of it !
It is quite rediculous to speak of NZ investors & foreign ones in the way you have. Why should a NZ buyer be seen as having good judgement in playing a certain price for land when a foreign one is bidding up the price ‘because he has some sort of secret knowledge’ of what the price of a commodity may be in the future.
All kinds of investors make good & bad decisions.
Nor are we speaking of ‘land used for dairy farming’ exclusively here. This argument must apply to any and every asset from land, to businesses to housing, to intellectual property.
As far as tax is concerned, profits are taxed and whether they end up in a foreign bank account or not is surely irrelevant. Would you also prohibit funds of any kind from being repatriated overseas on the basis that they had been made from the utilization of NZ assets. That seems to be what you are saying. Your whole argument is just silly!
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jh – I suppose your point is that most of the funds for the ‘property boom’ came from overseas & therefore with it came a disproportionate amount of ‘foreign buyers’. From this must follow the argument that by some means, not stated, a barrier should have been erected by ‘the government’ to prevent this ‘foreign’ ( and therefore somehow tainted) money from entering our pristine shores. A land tax seems to be your favourite method. Would this tax then have been only charged to ‘foreigners’ or all of us. I’m very keen to learn how this system would have have been helpful in any way. Please explain.
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No my point is that we are in an unhealthy situation post a boom in farm prices which was related to high commodity prices but also credit expansion and rising asset values where many who made money in property shifted to dairy farms. Strong arguments have been made that a land tax would (could be used to) control bubbles in a land market.It would also collect tax from foreign owners. I consider this sale a way to get banks of the hook but they were the ones who caused the problem.
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“Farm prices and sales volumes have collapsed in the last two years as the withdrawal of easy bank lending has dried up farmers’ appetites for capital gains, fresh figures show.”
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10632187
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Some people maintain that no one should be involved when property is sold to foreigners other than the buyer and seller. I don’t agree I believe citizenship gives us a right to a say in how the collective actions of private individuals affect the big picture (as in: I’d like to live in Sumner and could have years ago but I can’t afford to live in “Pomna”).
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Of the top of my head if you review the arguments for foreign investment I don’t think they relate well to our most efficient land based industries. Of course a land sale to a foreigner introduces capital which will have a multiplier effect. This will be short term, however, unless the money goes to another productive investment. Otherwise it will just go towards filling a hole left by those who benefitted from property/ land price inflation.
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jh – I know not where you learnt your economic theory but can only suppose it was La La Land.
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Landcorp wants to put in its own bid. With farms nearby they can add value to their existing assets.
The issue is whether they need a foreign partner to form an integrated company adding value to products exported into the Chinese market – one suspects the Chinese bid is based on using the farms as both collateral for business growth borrowing and an untaxed CG.
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