Parties paying attention to voters’ worries about land sales to overseas buyers.

As the National and previous Labour Governments have often reminded New Zealanders, their country's economic future lies increasingly with Asia.

But the speed at which Asian economies, particularly China's, have developed has boosted New Zealand's engagement with those countries at a pace which clearly makes some of us uneasy.

Nowhere is this more obvious than in foreign investment and immigration, where that uneasiness translates into easy votes for those political parties willing to capitalise on it.

Conservative Party leader Colin Craig doused the smouldering foreign investment issue with fresh fuel with his revelation that Crafar farms buyer Shanghai Pengxin was about to snap up the Lochinver Station near Taupo.


Polls done since the proposed sale was revealed show an overwhelming majority of New Zealanders are worried about land sales to foreign buyers.

The Government has maintained that its rejig of overseas investment rules in response to the Crafar farms sale is sufficient to prevent New Zealanders, in the words of Prime Minister John Key, becoming tenants in their own land.

Information given to the Herald by the Overseas Investment Office shows that since then, 33 applications to buy large amounts of farmland have been received. All have been approved.

Labour says its proposed changes to the Overseas Investment Act are effectively a ban on all farm sales to foreigners.

National says Labour's policy - with an emphasis on foreign buyers having to prove they will bring more benefits than a New Zealander investor - is effectively the same as its own.

So, how do their policies stack up?

In response to the initial but eventually abortive bid for the Crafar farms from Hong Kong-based Natural Dairy NZ, the Government said it would introduce two new regulatory criteria that the Overseas Investment Office and ministers would have to take into account when considering applications to buy large amounts of farmland. The first is whether New Zealand's economic interests are being adequately safeguarded and promoted.

The Government told the OIO it was concerned about foreign ownership of New Zealand operations running from farming through to processing, export and sales in overseas markets, which cut New Zealanders out of any share of the profits. It was also concerned about any foreign investor or company accumulating very large tracts of farmland which might in turn affect export earnings.


But the OIO and ministers were told they could offset those concerns against a new "mitigating factors" test if a potential buyer offered to let New Zealanders oversee or participate in their investment.

Labour's policy differs in that it involves changing the Overseas Investment Act to make it compulsory for the OIO and ministers to satisfy themselves that a proposed purchase will give benefits greater than those from a New Zealand investor.

Changes to the act would also make "substantial job creation and increases in exports" the most important factors to be considered.

Watch: Election 2014: Leaders on Foreign investment

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A majority of voters approve of farm sales to foreigners only when it brings a significant advantage over a New Zealand buyer such as jobs, according to the latest Herald-DigiPoll survey. Hear what the political leaders have to say about foreign investment.

Labour believes New Zealand farmers are so much more efficient than their overseas counterparts that it would be virtually impossible for a foreign investor to prove it could run farms better than locals and its new rule would therefore effectively block all purchases.

Complicating matters, however, is the fact that Shanghai Pengxin's purchase of the Crafar farms was challenged in court by a consortium led by Sir Michael Fay. It was sent back to the OIO for further consideration, the court saying it had to be judged on a "with or without" basis which meant the OIO and ministers had to be satisfied it would result in more benefits to New Zealand than a local investment would produce.

The Government says this effectively amounts to a further tightening of the rules which match what Labour has proposed.

But the precedent was created only because Sir Michael and his group were motivated to challenge the application of the rules that had been in place since Labour passed the Overseas Investment Act in 2005.

If Labour became the government and began rejecting farm purchases by foreigners, it would not be long before it faced a legal challenge, and its de facto ban may prove not as definitive as it wants voters to believe.

Labour's unfriendly stance towards foreign real estate investment also extends to the housing market.

It would create new restrictions on the purchase of housing by non-residents, who would be able to buy only if they intended to live in New Zealand or build new houses here.

National's stance is that overseas speculators face the same tax rules as domestic ones, they are not a big issue in the market so it has no plans to introduce new restrictions.

Similarly, in the immigration portfolio, the Government has no plans for major changes.

National set out no immigration policy on its campaign website but its three-year strategy set out in a briefing to incoming Immigration Minister Michael Woodhouse a year and a half ago emphasises immigration's economic contribution.

One of the more embarrassingly visible recent manifestations of that emphasis is the Investor Plus immigration category for wealthy migrants. Entrants under the scheme, which National is reviewing, include Kim Dotcom and Chinese businessman Donghua Liu.

Labour says it will look closely at the scheme if elected.

Labour's wider immigration approach differs from National's in that it would seek to exercise greater control over net migration inflows as an economic management tool, accepting more migrants when the economy is weak.

Local needs must be No 1, says farmer

The sun is shining, the grass is growing and his herd of 600 cows is milking well, dairy farmer Lachlan McKenzie happily tells the Herald last week.

That makes properties like his, situated between Rotorua and Tauranga, "a pretty good strategic investment, I would have thought" for foreign investors, particularly those from countries like China where food security is a big issue.

Mr McKenzie, who stepped down as Federated Farmers' dairy chairman four years ago says New Zealand has had a long history of outside investment in farming, "and it hasn't been problematic".

But where he sees a potential problem is if large overseas businesses begin building up dairy operations here, particularly if they begin processing as well.

Lachlan McKenzie says New Zealand's long history of foreign-backed farming has been largely problem-free but if overseas businesses build up dairy operations and begin processing local co-operatives would suffer. Photo / APN

He's particularly concerned about state-backed companies, including those from China, and he includes companies like Crafar farms owner Shanghai Pengxin in that category reasoning that any Chinese company of any scale from China is implicitly state-backed.

Large foreign-owned integrated farming and processing business where all the profits flow offshore would undermine the strength of local co-operative dairy processors like Fonterra, Tatua and Westland.

"Then every farmer in New Zealand has less income coming in.

"Dairy has been highly successful because of its co-operative structure and through farmers like myself and the other 10,000-12,000 dairy farmers around the countryside all the profits go back to provincial New Zealand."

He's less than impressed that New Zealand's banking industry is already largely foreign-owned, noting the increase in overall revenue as the dairy industry expanded in recent years was roughly equal to the increased banking profits sent across the Tasman over the same period.

He's also sceptical about the economic benefits to New Zealand that are supposed to flow from foreign farming investments under the Overseas Investment Office's current approval process.

He'd like to see greater oversight to make sure those benefits are delivered and sanctions if they're not.

He doesn't believe the Crafar farms are being run any better than they would be by New Zealand owners.

In fact the farms are being run on behalf of Shanghai Pengxin by Government department Landcorp.

"I know several sharemilkers that had worked for Crafar over the years that made money and then went out and managed to buy their own farms. How many of the managers from Landcorp will be able to go out and buy their own farms is questionable."

On the other hand, he believes bringing tougher restrictions in on all farm sales above 5ha as proposed by Labour is a step too far.

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