McCully met Saudi businessman in farm deal - documents

By Nicholas Jones, Isaac Davison

Foreign Affairs Minister Murray McCully met businessman Hmood Al Khalaf while on a visit to Saudi Arabia in April, documents have revealed.
Foreign Affairs Minister Murray McCully met businessman Hmood Al Khalaf while on a visit to Saudi Arabia in April, documents have revealed.

Foreign Minister Murray McCully recently met the Saudi businessman at the centre of a controversial farm deal being probed by the Auditor-General.

Treasury documents released under the Official Information Act yesterday reveal McCully met up with Hmood Al Khalaf in April.

They also reveal further Treasury concerns about the controversial 'agri-hub' project being investigated by Auditor-General Lyn Provost.

Ahead of a trip to Saudi Arabia McCully's office said the minister had no scheduled meetings with Al Khalaf.

However, the newly-released papers show the Saudi businessman travelled to Riyadh to attend a function aimed at furthering business links between the countries and hosted by McCully.

They had a discussion that was "regarded as being very beneficial to the ongoing partnership," according to minutes from the agri-hub's governance group, which includes a Ministry of Foreign Affairs and Trade official.

A spokesman for McCully said today the meeting was not scheduled and the two men bumped into each other at the event and had a brief discussion.

Al Khalaf spoke with the help of an interpreter. McCully had not known Al Khalaf was attending when asked by media of any planned meetings.

McCully's Middle East trip was another effort to progress a free trade agreement with Gulf states - also a reason why $11.5 million of taxpayer money was pledged to develop Al Khalaf's farm.

The businessman's unhappiness with New Zealand's ban on live sheep exports for slaughter was cited by McCully as a reason why Saudi Arabia cooled on a trade agreement. McCully has also claimed the agri-hub was to help avoid legal action over the ban.

The papers show Treasury itself had not treated it as a tool to pre-empt legal proceedings.

They include a June 9, 2015 email from senior analyst Becky Prebble to another staff member, asking for clarification as to why Treasury did not support the spending on the farm deal.

"Am I right in saying that it was just because we didn't have enough information about it? As opposed to, say, because we don't think we should be paying people not to continue with legal proceedings?"

In response, the unnamed official said she had trawled through documents and "at no time did any of our briefings refer to it being about pre-empting legal proceedings".

Speaking in Parliament a week earlier, Prime Minister John Key had said a Cabinet paper showed "quite clearly that there was the threat, potentially, of legal action".

Al Khalaf's ill-feeling was a major obstacle in the way of a free-trade deal in the region, McCully said, and negotiations were now able to move on.

The farm would also act as a demonstration base for New Zealand agribusiness, McCully said in a paper to Cabinet, and remove the threat of legal action.

Opposition parties say there was clearly never a realistic threat of legal action and it has been used by the Government as justification for the "corrupt" deal.

Treasury officials were also unhappy they had not been updated on the farm for as long as six months - despite Cabinet having specifically instructed them to have oversight.

The total cost to taxpayers of the deal is around $11.5 million, including about $6 million on establishing the farm and $1.5 million to fly 900 pregnant breeding ewes from New Zealand.

The new release of Treasury documents also reveal:
• A briefing from June 8 states the delay in the project since mid 2015 was because the Saudis had not given approval to build the abattoir, the final stage of the project: "this has not yet been resolved and the process seems unclear".

• The delays required Finance Minister Bill English to sign-off a special transfer of spending into the current financial year.

• On February 5, a Treasury official sent an email saying that Mfat and NZTE were required by Cabinet to keep Treasury updated on the project but "we have not heard from either in around six months".

• On March 3, another email from a Treasury official was sent about the project. "At the moment we have governance concerns," the email states, with the next sentence redacted.

Documents released last year revealed that a key part of the farm kit-out - a state-of-the-art abattoir - could be gifted to the Saudi Government.

All 2000 slaughterhouses in Saudi Arabia are Government-owned. One option discussed was for the abattoir to be gifted to the Saudi Government, and then leased back.
The controversial agri-hub has been examined by the Auditor-General Lyn Provost, with a report expected shortly.

Her inquiry would look at procurement and contract management practices, whether spending was within appropriations of Vote Foreign Affairs and Trade, and whether the services received were in keeping with the business case and contract specifications.

• In 2003, publicity around the treatment of live-sheep exports led to a voluntary moratorium.
• In 2007, the Labour Government banned the export of live animals for slaughter.
• In 2009, Agriculture Minister David Carter began negotiations with Saudi Arabia for a resumption of live-sheep exports.
• In 2010, the National Government extended the ban.
• In February 2013, the Cabinet approved a proposal by Foreign Minister Murray McCully to pay $4 million to Hmood Al Khalaf's business to secure it to run an agri-hub to promote New Zealand agriculture in Saudi Arabia.
• A further $7.5 million was spent on kitting out the farm and flying over 900 pregnant sheep.
• Questions over the deal emerges after the Prime Minister's visit to Saudi Arabia and other countries in an effort to get a free trade deal over the line.
• Foreign Minister Murray McCully said the farm deal was in part to placate Al Khalaf and remove Saudi opposition to the trade deal.
• He also said Mr Al Khalaf could have sued for up to $30 million, and blames the previous Labour Government for angering him to that extent.
• In August 2015, Auditor-General Lyn Provost announces an inquiry into the farm deal. Her report is expected shortly.
• In April this year, McCully meets Al Khalaf during a trip to Saudi Arabia, amidst significant delays to the project.

- NZ Herald

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