Hawke's Bay farmers are upset Japanese-owned Pan Pac Forest Products has been given Government approval to bypass the Overseas Investment Office to buy land for forestry.

The deal is for the next three years as the Government seeks foreign forestry money to help meet its tree planting targets.

Hawke's Bay Federated Farmers president Jim Galloway said there was an unfair bias for forestry investors buying up farmland and transferring it to forestry.

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"It's just surprising that the Government would allow this," he said.

The pre-approval was despite the Green Party having strongly protested land sales to foreigners and Forestry Minister Shane Jones saying he was sympathetic to rural concerns that converting productive farm land to forestry could cost jobs.

Associate Finance Minister David Clark signed off on Pan Pac's pass, known as a "standing consent", alongside Sage, RNZ reported.

The free pass allows Pan Pac to make 25 transactions involving 20,000ha of land and is valid until 2022.

Jim Galloway said he was surprised by the Government's announcement. Photo / File
Jim Galloway said he was surprised by the Government's announcement. Photo / File

Ministers signed off on the decision on September 19.

Galloway said to lose that much land would hurt the farming industry.

"It will be a huge impact on the communities because if it starts buying out farms then it will lead to a ripple effect that will lead to people having to move out and communities starting to break down."

He said the only slight upside to the announcement was that the logs will be processed in New Zealand, keeping some jobs here.

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Sage said Pan Pac had been in New Zealand since the 1970s, was a large exporter of quality timber and needed to secure its wood supply.

"We want to add value to our forestry exports not just have log exports, and Pan Pac is a company that can do that."

Pan Pac managing director Doug Ducker told RNZ the company was likely to buy land around its wood processing mills at Whirinaki, north of Napier, and at Milburn, south of Dunedin.

He said the pre-approval would make it much easier to compete for land purchases, because the company would not have to wait up to a year for OIO approval.

National Party finance spokesman Paul Goldsmith said the Government's forestry strategy threatened to gut rural towns.

"If you're taking land out of food production, with generally quite a lot of employment, and into planting trees, there will be far fewer jobs and rural communities will be devastated."

OIO group manager Vanessa Horne confirmed to RNZ that the deal allowed Pan Pac to buy farm land to convert to forestry. Photo / File
OIO group manager Vanessa Horne confirmed to RNZ that the deal allowed Pan Pac to buy farm land to convert to forestry. Photo / File

The option to give pre-approval to bypass the OIO was made available under 2018 law changes designed to attract foreign forestry money, but the Pan Pac deal is the first time it has been used.