Brian Fallow: New regime doesn't deliver clarity

Bill English. Photo / Greg Bowker

The changes to the overseas investment rules the Government announced yesterday fall between two stools. It's not surprising. They are only little.

They fail to address public concerns about the status quo, and they fail to give potential foreign buyers of New Zealand farmland the clarity and certainty they might expect.

Public concern reflects a fundamental distinction between foreign ownership of farm land and foreign investment into businesses.

Businesses have a life cycle, they live and die, and they can be replicated.

But land is a natural resource and, as the truism has it, they are not making any more of it.

And as Maori could attest, once lost it is generally gone for good.

The second limb of public concern is not about the nationality of the foreign buyers but about their absentee status.

If their only stake in New Zealand is as a source of profit, that is utterly different from an immigrant prepared to become a New Zealand farmer and ready, in Bill English's phrase, to "live it and love it".

The third concern is about who controls the value chain between the farm and the people it feeds.

We need to capture more of that value. That is hard enough as it is. Lose control of the beginning of the chain and it will get harder still.

Faced with these concerns what has the Government done?

It is going to give the Overseas Investment Office - ultimately two ministers - the 'flexibility' to decide that too much land is involved. But it won't say how much is too much.

And they will be empowered to have a problem with "vertical integration."

But that is at odds with the current criteria in the Overseas Investment Act, which is not being changed.

It allows would-be buyers of sensitive land (which includes farmland) to claim as a benefit that it would be likely to increase processing of primary products in New Zealand, create jobs and increase export receipts.

Hardly a model of clarity and consistency.

The Government has tip-toed through this issue like a cat through thistles.

Its polling is probably telling it that there is a visceral popular dread of becoming in John Key's phrase "tenants in our our country".

But too radical a change, especially in the context of a weak market for farmland and tight credit, risks bursting a bubble in dairy land values in particular, with nasty effects on the balance sheets of highly leveraged farmers and their bankers.

English believes the family farm is the most durable model for New Zealand and that corporate farmers, foreign or domestic, struggle to make a go of it. The latest minimalist changes to the overseas investment regime indicate he is prepared to risk a lot of our future on that intuition.