The controversial Saudi sheep deal been shut down, which the Government says will save about $1 million.

The deal was made to set up an agribusiness hub in the Saudi desert for Saudi businessman Hmood Al Ali Al Khalaf, which would be used to showcase innovative New Zealand farming operations.

Taxpayer spending on the agrihub was approved by the previous National Government in February 2013, and the following year 900 sheep were flown over on Singapore Airlines.

But Trade Minister David Parker said the deal has now been axed.

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"We're not spending any more money on its installation or delivery," Parker told 1 NEWS.

"We have managed to bring it to an end, saving the last million dollars or so. But I'm afraid the other $10 million that has already been spent has been flushed down the drain by the prior Government."

It means that a $2.5m kitset abattoir, which is in the Hawke's Bay and was intended for the hub, will no longer be sent overseas.

About $1.17m had been identified for abattoir delivery and installation.

The then-National Government had paid about $10m, including a $4m payment to Al Khalaf, for the deal.

Opposition parties at the time called it a bribe to set up a free trade agreement.

The deal was made partly as an effort to secure a free-trade deal with the Gulf States.

Al Khalaf had lost millions of dollars after New Zealand banned live sheep exports for slaughter over animal welfare concerns in 2003, and ill-feeling over his treatment was identified as an obstacle to an FTA progressing.

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Former Foreign Minister Murray McCully also said there was a risk Al Khalaf could take legal action. As a result, the deal saw a $4m facilitation payment made to the Al Khalaf Group, and a further $6.5m allocated to create a farm on his land.

The Auditor-General criticised the deal, but found no evidence of corruption or bribery.

Progress on a free trade agreement with the Gulf countries has stalled after fallout with Qatar.