'The Nation'

Don Nicolson
Interviewed By Duncan Garner

DUNCAN Hong Kong based company Natural Dairy Holdings has passed the first hurdle in its application to buy the 16 Crafer Farms in receivership. The proposed buy up has caused much public consternation, but it's hardly the first. Since 2006 the Overseas Investment Office has approved applications to purchase dairy land from 13 foreign applicants as far afield as the Netherlands, Ireland, Germany, Russia, US and Australia. Just last week an American buyer was approved to buy a Marlborough Sounds farm for 7.8 million dollars. Nice deal for the farmer, so are Federated Farmers worried? President Don Nicolson is now live from Invercargill. Thanks very much for joining us Don.

I just want to get it quite clear what is your position, Federated Farmers position on foreign ownership of New Zealand farms?

DON NICOLSON – Federated Farmers President
Well we're reviewing that right now. I was directed to do that our national council meeting recently but their position has always been that as long as foreign investors respect the New Zealand rules and regulations, they pay tax in New Zealand, they effectively can't take the land away, so effectively it should all be good for us. I mean there's been many foreign investments in this country that have brought a lot of money to this country and have developed our land very very well. I mean the concern we have now though is that we don’t perhaps have reciprocity with some of the countries that wish to invest in our land and our processing industry and that is an issue. So if we can't go to their countries and do the same like with like, then we need to put that up in front of – to make judgement in this country we need to have that in front of the people.

DUNCAN Why has it taken so long for Federated Farmers to get a position effectively, because if you look around some of your associations, and Taranaki Farmers want land ownership restricted to those holding citizenship, there's also some strong views down south, why do you not have a position, yet we're so far into this debate?

DON We've always had a position Duncan and in fact it's only this last month that I've been directed to revise that. That will be done by November. But the bottom line is our New Zealanders need to have foreign capital, we need to have foreign investment. The farmers that think that you can restrict that haven't been looking widely or far enough. I mean New Zealand balance sheets in farming are so seriously weakened by consistent attacks at our balance sheet by New Zealand domestic policy that we've weakened ourselves so much that we are ripe for the picking. Now I would love New Zealand to have strong balance sheets inside the farm gate, and the way we can do that is to have less government not more, and the size of government, the cost of government has doubled the last ten years in New Zealand, and the farm gate, inside the farm gate has paid one heck of a lot of those prices...

DUNCAN So does Federated Farmers support the Chinese potential buy up of Crafer farms or not?

DON Bottom line OIOs gotta do its job, and if we haven't got reciprocity with the Chinese people in their own country, if we can't go there and have freehold title, and we know we can't, then obviously we've got a problem there.

DUNCAN So what you're saying is New Zealand dairy farmers want to be able to buy land in China, cos right now my understanding is you can only lease it there, so are you saying that without a deal done between the governments, that you're saying no to this potential deal?

DON That’s the way I would handle that myself. I'd say if we can't – at best they could only lease here and work from there because one thing I think we've done wrong in our Free Trade Agreements is we really haven't looked to putting in these sort of elements. We talk about what we can trade in terms of produce, but we haven't talked around perhaps the institutions around freehold title or land ownership.

DUNCAN So what you're saying to the government today, I just want to get this clear, is that without some kind of reciprocal arrangement where New Zealand farmers can buy land, you are saying as a group, Federated Farmers, no thanks, stay out?

DON Absolutely the way I read it, that is not Federated Farmers' policy as of today, because as I said we are reviewing that right now, but that is how I would read it. Without reciprocity we've got a serious problem.

DUNCAN That’s fascinating. I just want to bring in the panel here if I can Don. I mean Patrick that’s quite a movement isn't it?

PATRICK SMELLIE – Businessdesk.co.nz
It is, it's a significant change I guess, if that’s the way that you end up moving, but I guess I have to ask Don, how realistic is it do you think to think that New Zealand which ultimately is an importer of foreign capital, can actually dictate those kinds of rules? I mean as you say yourself we need that money.

DON Absolutely right, but we have gotten plenty of foreign investment in this country that we do have reciprocal rights, just because of the institutions in the countries we deal with. With China I gather we don’t have the same ability to do the trade that we're talking about here, clearly we've got a problem, and yes it is my own opinion, but we definitely need that reciprocal right to take place. We do need foreign investment though, I don’t want to spoof the capital markets, New Zealand farmers do need foreign capital. I want to be able to sell to the highest bidder possible when I sell my farm. I don’t want someone like Chris Trotter from the left saying that all farm land should be offered back to the Crown, which is what he said in the Dominion recently.

DUNCAN I just want to jump in here. I mean it seems slightly xenophobic, because you’ve got the Germans here, you’ve got the Irish here, the Americans, the Russians, the Dutch, I mean the list goes on and on. I mean aren't you just looking for an excuse for the Chinese. I mean these are people bringing significant amounts of money to New Zealand.

DON No, it's not xenophobic, I know there's xenophobia alive and well in New Zealand, as I said from the left there was a person saying you know you’ve gotta offer it back to the Crown first. Look I want foreign investment in this country, we need it, we've got it everywhere we look in cities and towns and in rural New Zealand, but we definitely need to have that ability to do like with like. Now you know you could argue that China has certain institutions around state control. What's happened in New Zealand in my farming life is a movement towards state control through the heavily regulatory burden coming at farmers, weakening our balance sheet so that we're attractive to foreign takeovers. Now New Zealand's done that to itself, not farmers doing it to themselves. We've got a bit of a contradiction here.

DUNCAN Comment from Tracey Wilkins from the Dominion Post.

TRACEY WATKINS – Fairfax Political Editor
Yeah I spose you made the point yourself Don, and I guess this is the one that’s going to be difficult to resolve. You want to be able to sell to the highest bidder as soon as you put restrictions on who those bidders can be you start limiting the price don’t you. So are farmers going to support a policy that might actually cut back or curb some values?

DON Oh no, not at all, and in fact what I'm suggesting is actually going to give some surety around what could in fact happen. If we haven't got reciprocity then perhaps those bids that come in, like we've got now, wouldn’t be in the mix, without going through proper and due process of OIO before we get out of the blocks. I mean what I'm observing in this latest round of discussion is the very public tender process. What is effectively a private transaction has become so public it worries me. As Duncan said in his intro there's been several other foreign investments in recent years, there hasn’t been an eyebrow raised.

PATRICK Isn't this a bit convenient though Don, I mean the reciprocity argument you know pertains to just about any country you care to name, all countries have different views about who can and how much you can buy, particularly of land. Isn't this really more about being able to have a position that allows Federated Farmers to show some leadership on foreign investment, while showing a bit of a sop to that part of your membership which in fact can't stomach the idea.

DON Look our job is to make sure the right information is in front of the membership. Yes you're right Patrick that there's some who haven't perhaps seen the wood for the trees, but in fact we definitely have some tension, and it's actually not being driven by farmers, it's being driven by society in general, who are the xenophobes. I don’t think you'll find too many farmers are xenophobes when their balance sheets are that stretched, they are definitely looking for – some farmers are looking for an out and if it's foreign capital that’s you know – and they don’t want to go into in depth understanding of where it's coming from. They will take the highest and best price and who can blame them.

DUNCAN Don can I just ask you there, would you like to see a national interest clause perhaps put in some of the new overseas investment rules once this review is completed, so effectively it would be seen this final tick off would come from Cabinet?

DON Look we've got those institutions in place now, I just want the OIO to do its job, I wish that in this instance that we're talking about with Crafer Farms receivership that everything was done in a more private setting, rather than it being such a public arrangement. The thing is we've already had strategic asset sales stopped in recent times, the Auckland Airport sale.

DUNCAN Do you agree with it, do you agree with that Don, a strategic asset type, the stopping of that?

DON I personally don’t, I think it took the property right from shareholders, whether they be in New Zealand or wherever they invested from, and that is the problem. We haven't been allowed to maintain authority over our own property in this country for about 20 years, as long as I've been sort of in this political realm, and it concerns me that every year we lose the property right in this country by a heavy handed government that’s burgeoning, and we need to diminish the size of government, all this sort of stuff would diminish in stature.

DUNCAN Thank you very much for joining us today Don and for joining the panel as well.

ENDS

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