Not enough jobs in Lochinver sale

THE sale of Lochinver Station, vetoed by the Government, would have created only a couple of contracting roles and potentially one part-time job, Associate Finance Minister Paula Bennett says.

Ministers rejected the $88 million bid from Pure 100 Farm Ltd – a subsidiary of Chinese owned Shanghai Pengxin -because the benefits to New Zealand were not ‘‘substantial and identifiable’’.

That was despite Overseas Investment Office recommendation it be approved.Substantial and identifiable benefits to New Zealand needed to be weighed against the size of the property, Bennett said.

‘‘We’ve declined this because of how big it is.

‘‘I’m in favour of overseas investment, I think that it benefits New Zealand hugely most of the time – I just had to take into consideration what I’m going to say is 35 times bigger than your average farm, so that’s a big piece of land, and to turn around and think potentially one job and a couple of contractors – is that an identifiable and substantial benefit to New Zealand?’’

Prime Minister John Key said the decision showed ‘‘the process works’’.

‘‘As a Governrment I think people can see we’ve welcomed foreign investment where it meets the legal threshold [and where] it doesn’t...we turn it down."

Key rejected suggestions the decision was driven by a likely public backlash should the sale have been allowed to proceed. ‘‘They [the ministers] can’t think about public opinion...they have to meet a legal test."

That legal test was on whether a sale met the public interest test and in this case that was a line call.

Shanghai Pengxin said it was ‘‘surprised’’ and considering its options after the Government rejected its application.

‘‘The improvements we have made to existing assets are well known,’’ the company said.

‘‘Pengxin has spent more than $18 million, since settlement, to improve the productivity and environment of the former Crafar farms to new historical levels.

‘‘We are surprised and extremely disappointed with the decision and will be considering our options.’’

Shanghai Pengxin, 99 per cent-owned by Chinese richlister Jiang Zhaobai, had a conditional agreement to buy the station for $88m from owner Stevenson Group.

The sale of the 13,800-hectare sheep and cattle station was understood to have been rejected by the Government for not creating enough extra jobs.

The station, which is valued at more than $70m, would have been one of the biggest foreign acquisitions of New Zealand land. It employs 22 workers.

Lochinver had been owned by the engineering, mining and quarrying firm Stevenson Group for more than 50 years, but the company wanted to use proceeds from the sale to invest in its large quarry operations in Drury, near Auckland.

Stevenson had expected to create more than 8000 jobs during the 15-year project.

Stevenson Group chief executive Mark Franklin said he was disappointed with the outcome. ‘‘At this stage I am not sure we agree with the assumptions used or the way the criteria has been applied,’’ he said.

‘‘We are concerned that this process has taken 14 months with the end result that we have been deprived of our property rights to sell to the highest value bidder for some vague national benefit which has not been defined.’’

Shanghai Pengxin had planned to sell its New Zealand farm assets, which include the former Crafar dairy farms, into an offshore partially owned, listed company called Hunan Dakang.

Dakang would have Chinese retail investors and would seek to purchase those New Zealand farm assets.

The aim was to create more investment capital for Shanghai Pengxin, which also was interested in beef, property development and other interests in New Zealand.

Federated Farmers president William Rolleston said the decision gave a message to those purchasing farmland that substantial economic benefits needed to be seen.

‘‘This clearly doesn’t meet the tests.’’

The federation welcomed foreign investment, but as foreign investments became more significant, decisions like this helped draw a line as to where the test level was.

He was surprised with the OIO’s statement, which called the question of whether the benefits of the potential investment to New Zealand are or could be substantial and identifiable as ‘‘finely balanced’’.

‘‘I would have expected that for purchases of this size, that the substantial benefit would be in the realms of bringing new technology to New Zealand that we don’t already have or some degree of market penetration would have given us increased access to markets that Shanghai Pengxin have.’’

Bennett said while they recognised and supported overseas investment, it was a privilege for overseas people to own sensitive New Zealand assets and such investments had to meet statutory criteria for consent.

The OIO said the question of whether the benefits of the potential investment to New Zealand were or could be ‘‘substantial and identifiable’’.

Land Information Minister Louise Upston said she and Bennett agreed parts of the proposed investment could benefit New Zealand, but on the overall balance of evidence, the benefits would not be substantial and identifiable. ‘‘This is an example of our system working well,’’ Upston said.

‘‘The OIO conducted a thorough investigation before making a finely balanced recommendation. Ministers carefully assessed the evidence and ultimately came to different view.’’

Waikato University professor of agribusiness Jacqueline Rowarth supported a rejection of the Lochinver sale.

‘‘They have got a point. What would they be doing that would be different from what is already being done?’’

Shanghai Pengxin had to make a number of improvements when it bought the Crafar farms and was therefore adding value.

That was not the case with Lochinver Station.

Rowarth feared a rejection could precipitate a landslide in farm real estate values because it sent a signal that farms were not being sold to overseas buyers anymore.

‘‘Will land prices start collapsing in New Zealand?’’

If that happened, it would create a terrible problem because of the high debt-toequity ratio on many dairy farms, Rowarth said.