Editorial: Saudi sheep farm deal far too woolly

Foreign Minister Murray McCully said the trade deal was a key consideration when investing in this "agri-hub". Photo / United Nations

Opinion

The Government would be well advised to put all its cards on the table for the public to see before this strange farm investment in Saudi Arabia is another day older. If New Zealand taxpayers have provided a Saudi businessman with a sheep farm in compensation for his loss of live sheep exports, it raises many more questions than Foreign Minister Murray McCully has been inclined to answer.

His manner of answering them gives the clear impression it is a deal the Government never intended the public to see but it is too late for that now. If there are confidences the Government has agreed to keep, it can break them. It is a government, answerable to its country, not to a sheep dealer, no matter how well connected to the Saudi regime he may be.

Word of the farm New Zealand has evidently financed and equipped for him came to light when the Prime Minister was in the region to advance a free trade agreement with Gulf states. But both John Key and his Foreign Minister have denied the deal was to clear the path for a trade agreement. Mr McCully said the trade deal was a key consideration (pun possibly intended) when investing in this "agri-hub". No money would have been put in it if it did not provide a sound opportunity for New Zealand companies.

The owner of our agri-hub, Sheikh Hamood Al Ali Khalaf, has a business partner in Sydney, George Assaf, who sees the deal rather differently. Mr Assaf has told One News the fit-out was done to compensate them for New Zealand's ban on live sheep exports. He said the ban had cost them hundreds of millions and it was the reason the talks on a free trade agreement had stalled.

The Labour Party, which instigated the ban on live sheep exports in 2003, says it knew nothing of any of this. Mr McCully claims that despite their ban Labour ministers encouraged the Saudis to increase their agricultural investment in New Zealand - the Al Khalaf group has two farms in Hawkes Bay - with promises that trade problems would be resolved.

Be that as it may, the ban was renewed by the Government in 2009 and it appears the Saudis had no leverage for compensation until the Government wanted a free trade agreement.

Mr McCully says New Zealand was "exposed to a legal claim for up to $30 million". We need to know much more about that. How likely was such a claim to succeed? Much is being made of investor-state dispute procedures in the proposed Trans-Pacific Partnership agreement, but they are not new, as this case proves, and they are not guaranteed to succeed. The Government ought to have had very good legal advice that it could not defeat such a claim before it decided to do this deal.

All told, it has cost the taxpayer $11.5 million to equip and stock the farm with breeding ewes air-freighted there. Mr McCully thinks this money well spent "even if we achieve nothing more than the removal of a source of major aggravation in the relationship". We need to be convinced.