National is caught on the wrong side of an argument it doesn't want to be having, because it's already busy losing another argument it doesn't want to be having. Know what I mean?

As I've just written in part one of this post, Justice Miller's decision on the Crafar Farms keeps the debate on overseas ownership alive a little longer and over-turns the prevailing wisdom in Wellington. But where does it leave the government?

On the wrong side of public opinion once again and in a tangle about the goodness of foreign investment but the badness of becoming tenants in our own land.

National is already banging its head against the wall of partial asset sales, trying to convince an unconvinced public that ownership doesn't matter. What does it matter whether it's the government or the pension funds that own the power companies, so long as control stay in New Zealand hands? The more important issue is raising capital and paying off debt. That's the government's line.

But now with the Crafar Farms sale hanging around, the government is faced with making the case in favour of foreign investment, and therefore ownership – ie, things not staying in New Zealand hands.

The risk is that voters, clearly worried where in the mix they end up under "mixed ownership", conflate the two stories and wind up thinking that the government's core policy is to flog off the prized assets of this nation. That ownership matters so little to National that we may yet wind up as tenants in our own land, with profits pouring out of the country.

Or from another viewpoint, it's an opportunity for opposition parties to package those two stories together and build an impression that all National does in government is hock off things that matter to us, like our farms and state assets.

"You want three more years of that? There'd be nothing left. Thought not".

So what does National do?

Its belief in the essential rightness of business and free markets pushes it towards some sort of legislation to lower the bar Justice Miller has just raised. Not now while the issue is hot, of course, but perhaps next year or next term. If it truly believes more foreign investment is good for us, even essential for growth, National must act – or rather, enact.

However that drags it further from public opinion, with Labour and the Greens ready to pounce. It's the kind of issue that could move "mainstream" voters from the centre-right to the centre-left, so National will be rightly anxious.

John Key's efforts thus far to say the ruling reflect only on the OIO, not on his ministers, are made a laughing stock by the ruling itself and by experience. As Labour's David Parker has pointed out, as minister he used his discretion to turn down overseas sales (not many, mind you, but that's Labour's problem). So National undobtedly has the power to nix this deal, regardless of what Key says.

As for Miller's ruling, he makes it very clear that it is the minister's decision he is putting aside, not the OIO's advice. At one point he says:

"I accept Mr Hancock's invitation to focus on the ministers' decision, since they adopted the OIO's recommendation and reasoning".

Elsewhere he makes it clear that it's the ministers who "grant consent", not the OIO.

So National shouldn't get away with letting officials take the rap for this one.

Might Key and his inner circle see this ruling as a political opportunity and turn down the OIO's next recommendation? While it would be shameless populism, annoy the Chinese and earn it a few days of newspaper columns about selling out, it would get them back on the right side of public opinion very quickly and very loudly. Done right, it could close off a very wide avenue of attack for opposition parties in the 2014 campaign.

But this isn't a government of risk-takers, and to be fair seems more likely to cautiously stick to its conservative ethos. Cabinet is more likely to kick for touch, keep washing its hands all over the OIO and hope a quick approval so soon after one election is largely forgotten by the next. It'll take its whacks in this battle and try to move hostilities to another field more to its advantage.

The problem is, there aren't many of those around at the moment.

Labour, having approved land sales by the tens of thousands of hectares when last in government, have limited room to manoeuvre. David Shearer, untainted by that administration, will have to lead the charge.

New Zealand First was part of that government and so is also tarnished. But Winston Peters will ignore that and cling to the high moral ground.

The Greens perhaps have the best opportunity to make hay from this, as many centrist voters again find themselves in agreement with a party they once thought full of loonies.

So it'll be interesting to see exactly what shape the Shanghai Pengxin bid finally takes. The one positive for the government is that the Miller decision gives it, the OIO and receivers more oomph in negotiations. He's like some syndicate boss telling his lackeys, "they'll have to up the ante if they want to play in this town".

I'm not sure it's exactly what Justice Miller intended, given that his ruling seems to have been on the principle of national benefits rather than the benefits of this deal in particular, but the public impression created by the ruling is that this bid isn't good enough.

The message to the Chinese seems to be that they will have to sweeten the pot if it wants the government to feel able to give it the big tick.

Comments (5)

by barry on February 16, 2012

It seems to me that the receivers have created the problem by not selling the farms individually.  Even if they had all been sold to overseas buyers (even Chinese) there would not have been the same attention.

Some of the farms may not have been so desirable, but most of them would have sold for more than $10million, so would have not got much less than Pengshin was offering, and they would have saved years of receivership fees.  they are scattered around the country and of varying land types so there is no real synergy in having them as a block.

It is perhaps attractive for Pengshin to only have to go through the OIO process once instead of 16 separate times, but against that they would have attracted less opposition.  There would no place for Michael Fay in that scenario.

by Tim Watkin on February 16, 2012
Tim Watkin

barry, I think the receivers would strongly disagree with your assumption that they would have "not got much less" for individual sales. Their duty is to maximise profit, which was clearly through a bulk sale. Thing is, that's not what's best for NZ. As commented in the other thread, it's what's best for the Aussie banks.

But since when did any of us in selling private land have to sacrifice profit for the sake of the country? No-one asked me to do that when last I sold a property, so why should we expect that of the Crafars?

I guess you might argue that if someone wants to own over X,000 hectares, he/she should be forced to consider the public good when selling. But that would be very 'big government' indeed and any such proposed law would be hell of a controversial!

by DeepRed on February 16, 2012

I wonder if this will be John Key's equivalent of the Court of Appeal's foreshore & seabed ruling? The F&S ruling was a no-win situation either way - accept the ruling and risk pissing off Pakehadom; reject the ruling and risk pissing off Maoridom.

Likewise, for Key to accept the Court ruling on Crafarms would risk getting offside with the Dragon, and to reject it would stoke perceptions that NZ is a Wall St banker's plaything.

In this context, what would be the asset sales equivalent of Orewa Rotary's "dangerous path to separatism"? Somehow "tenants in our own land" rings hollow because John Key said it first and it lost its sting.

by stuart munro on February 19, 2012
stuart munro

Had we a serious and responsible government (rofl), we might expect a timely and thorough multipartite commission to review each and every one of the OIO's decisions, with a view to reversing those that did not meet the test of sufficient benefit to New Zealand.

Our current government however, and their equally irresponsible predecessors would rather that the breadth of their failure to protect the national interest did not became any more widely known than it is already. But the dam has broken, and our erstwhile representatives and their Treasury weasels have been shown to be selling us out. All that is left is the necessity of determining punishment. Historically things go very badly indeed for leaders who betray their people. The people often feel that it's necessary to send a clear message, that foreign investor dependency needs to be nipped in the bud, and our politicians and the privileged echelons of the public service really mustn't forget whom they serve.

Punishment of course needs to be seen to be done, and personally I think we should follow the rigourous style of Timur Lenkh, or Tamerlane as he was sometimes known. Any official who so much as looked at him sidewise was in serious trouble; and any that presumed to betray the national interest would be hunted like rabbits through the corridors of the OIO and the Treasury, and afterward would form part of a lasting memorial, in the form of a pyramid of skulls that made instruction in the virtues of loyalty superfluous for generations if not centuries to come.

That won't happen here of course. The officials were doing exactly what the government told them to do. And the government will surely fess up and take the rap. Not.

by @BoJangles on February 20, 2012

"Sell natural gas to the Chinese? Use it ourselves? Not in America... "

Sound familiar ...???


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