Skycity deal a po­lit­i­cal lemon

Kapi-Mana News - - OPINION -

Ar­guably, the cur­rent govern­ment should never again be al­lowed to ne­go­ti­ate with for­eign cor­po­ra­tions when is­sues of national in­ter­est are at stake.

Over The Hob­bit deal, the as­set sales pro­gramme and in the re­cent SkyCity ne­go­ti­a­tions over the con­ven­tion cen­tre in Auck­land, the eval­u­a­tion process has been such a pre- de­ter­mined cha­rade that it is easy to en­ter­tain the con­spir­acy the­ory that give­aways – and not se­ri­ous ne­go­ti­a­tions – were the in­ten­tion all along.

Was SkyCity ever made to feel that the Govern­ment could, and would, walk away from the bar­gain­ing ta­ble? Hardly.

From the out­set, the Govern­ment not only en­abled SkyCity to be­come the sole bid­der, but its po­lit­i­cal A- Team ( Prime Min­is­ter John Key, MBIE Min­is­ter Steven Joyce) made pub­lic com­mit­ments to con­clud­ing the deal – thereby nailing their po­lit­i­cal cred­i­bil­ity to the out­come and telling the casino op­er­a­tor that it had the Govern­ment over a barrel.

Thus heart­ened, SkyCity de­manded an ar­ray of con­ces­sions.

While some of its wilder de­mands were not met, it has won more than it could have ra­tio­nally ex­pected – more pok­ies, more gam­ing ta­bles and a cast- iron in­su­la­tion from the re­al­i­ties of the mar­ket ( at tax­payer/ ratepayer ex­pense) for the next 35 years.

Its re­turns will re­port­edly ex­ceed its ex­pen­di­ture on the con­ven­tion cen­tre by well over a hun­dred mil­lion dollars, by con­ser­va­tive es­ti­mates.

When the back­ground pa­pers were re­leased last week, the SkyCity set­tle­ment looked like the kind of deal Custer ne­go­ti­ated with the Sioux at Lit­tle Big Horn.

All the de­tailed re­search – by Trea­sury, by the old Min­istry of Eco­nomic De­vel­op­ment – sounded the alarm, but in vain.

In Septem­ber 2009, pre­lim­i­nary re­search by the Min­istry of Eco­nomic De­vel­op­ment flagged that the con­ven­tion cen­tre would need to rely on bridg­ing sub­si­dies to turn an ini­tial, mar­ginal profit.

Sub­se­quently, all the pro­mo­tional costs would need to be met by tax­pay­ers and ratepay­ers, and other con­fer­ence fa­cil­i­ties around New Zealand would have to de­fer to the new en­trant and scale back their own pro­mo­tions and profit ex­pec­ta­tions.

Given the trend for video­con­fer­enc­ing, the prospects of a con­fer­ence cen­tre lo­cated far from global trans­port hubs was mar­ginal, and of­fered few mul­ti­plier ef­fects.

Lo­cal cafes and restau­rants could even ex­pect to lose busi­ness to the con­ven­tion’s in-house cater­ing.

Ul­ti­mately, the Min­istry of Eco­nomic De­vel­op­ment con­cluded, the bulk of any ben­e­fits would be cap­tured by the casino proper, via the sup­ply of well-heeled con­fer­ence at­ten­dees spilling over into SkyCity’s gam­bling op­er­a­tions.

Sub­se­quent Trea­sury re­search has ex­panded on those orig­i­nal mis­giv­ings.

Though Joyce has said flatly that Trea­sury has got it wrong, the re­search to back up Joyce’s claim of Trea­sury er­rors has yet to sur­face.

In sum, New Zealand has been sold a lemon that it will be obliged to sup­port for the next 35 years, even be­fore count­ing the prob­lem gam­bling is­sues that the ex­ten­sion of casino fa­cil­i­ties will bring in its wake.

The Govern­ment al­ready knew – from the Min­istry of De­vel­op­ment re­search four years ago – that the con­ven­tion cen­tre was a du­bi­ous prospect, at best.

Yet ra­tio­nal so­cio- eco­nomic ar­gu­ments do not ap­pear to hold much sway on such oc­ca­sions.

More of­ten than not, the Govern­ment looks like a de­liv­ery mech­a­nism of pre-de­ter­mined out­comes to cor­po­rate in­ter­ests, rather than a proper guardian of the national in­ter­est.


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