Scrutinise away

Friday, February 17, 2012

TEyebrows will also arch at the perhaps newfound understanding that the law sets up the office to focus resolutely on comparing positive outcomes, to the extent of wilfully disregarding detrimental ones. he High Court’s decision that the sale of Crafar farms to Chinese interests must be reconsidered cannot be portrayed as just a matter of requiring a few undotted i’s and uncrossed t’s to be tidied up. But neither was it a case of the judiciary casting from the courts, with blows and curses, an inherently abominable idea.

The instruction is to go back and assess the deal properly.

The court found fault with the scrutiny applied by the Overseas Investment Office, working under legislation the Government itself acknowledges was complex. Plenty of people are taking the view that the OIO was simultaneously working under a climate of Government expectation that was anything but complex, given the wider political agenda of buddying up with such a huge trading partner.

The upshot of the judicial review is simply that the OIO got the requirements of the act wrong. We should pause here to acknowledge that this is no small thing, given that it strikes at the core of what the office was set up to do, and has busily been doing for some time.

The court was unhappy that the office considered the sale by comparing matters on a ‘‘before and after’’ approach when nobody was suggesting that the farms were likely to remain in their present, shameful state. Whoever bought them would improve them to some extent.

It gets a tad weird because the OIO argued in court that trying to compare, in meaningful detail, what an existing applicant would do with what someone else might do, would be too complex a task to deliver any meaningful result.

And yet now that the courts have required a greater degree of comparison with what a rival bidder might do, it is surprising that the office seems to be on a promise to come up with a revised consideration just in a matter of days. That, in itself, would invite further suspicion that due diligence is still not really on the agenda.

There is a high level of nationwide cynicism about the Crafar deal. Too much.

Much as the OIO and the Government should be chastened by the court ruling and must be prepared for any reconsidered decision to once again be scrutinised with redeyed suspicion, and potentially litigious intent, this remains a deal that could, plausibly, still pass muster, and do so on its essential merits.

We are entitled to reservations about this sale simply because it cannot be reciprocated – it is not open to New Zealand interests to buy Chinese soil.

But there really is nothing inherently wrong with selling the Crafar farms to the Chinese.

Those farms, for so long an environmental disgrace, were an example of the folly of an enterprise growing as fast as it can without putting in the work on proper systems to protect the environment.

The Chinese bring huge resources with them and will be acutely aware that those farms will be the subject of continuing scrutiny. They have the means and the motivation to transform some of New Zealand’s worst farms into modern-day models of productivity. The surge in dairying has brought many benefits, but also many serious problems, for New Zealand. We could stand to learn something here.