Dairy deal highlights our fear of foreigners

Allan Crafar waits for a decision. Photo / Christine Cornege

Last August, weeks before his dairying empire went into receivership, Allan Crafar talked about the Chinese investors who were looking to buy his family's 16 North Island farms.

Allan didn't want to reveal the name of the bidder and said the Chinese consortium, later revealed to be headed by controversial businesswoman May Wang, was publicity shy.

He also joked he was unable to tell the Herald on Sunday who he was talking to because he was unable to distinguish between individual Chinese people. "They all look the same, don't they?"

The dairy farming patriarch then used both hands to pull the skin on his temples tight to make his eyes appear narrow. Laughing, he said: "Ching-chong, ching-chong, ching-chong."

Crafar was joking, albeit in questionable taste, but he unwittingly illustrated the near-national prejudice towards investment from Asia.

The backlash against the Wang-led plans to buy into the New Zealand dairy industry was led by anonymous callers to talkback radio and commentators on the internet. Someone who calls himself "Jerry" suggested that if the Wang bid was successful, the buyers would proceed to poison New Zealand's milk supplies.

"The next thing they will be building melamine factories here enabling them to put additives into our local milk products."

Another, calling herself "Rain Girl", made reference to the Red Menace, saying: "There isn't one of these Chinese businesses that isn't backed and controlled by the Communist Chinese Party. This is not paranoia - it's well-known fact."

Hysterical concern about foreign involvement is not limited to the fringe. New Zealand First MP Doug Woolerton, in a 2008 Parliamentary budget debate about Russian firm Nutritek's purchase of a Canterbury dairying company, said: "Those Russians could well have KGB members among them, because if anyone knows anything about Russia at the moment, then they would know they are all over the show."

And unease over foreign ownership appears also to reach the top of government. Prime Minister John Key, careful to distance himself from direct discussion of the Crafar farms bid, said this week: "I'd hate to see New Zealanders as tenants in their own country and that is a risk, I think, if we sell out our entire productive base."

Key, attending the World Expo in Shanghai, was not made available to elaborate on his comments.

Acting Prime Minister Bill English, who as Finance Minister is overseeing a long-delayed rewrite of the Overseas Investment Act intended to make it easier for foreigners to buy New Zealand assets, was also unavailable for comment. A spokesman said English was in Gore judging the Young Farmer of the Year competition.

While the leadership of the National Party ducks for cover, Don Brash, its former leader, is more forthright. The economy requires capital, he says, and New Zealand has for a long time spent more than it's earned.

"We fund that gap by either borrowing, or we get foreign investment," he says.

"And normally foreign investment is preferable because it brings access to new technology and new markets."

Paranoid criticism of the Crafar farm bid verges on racism, he says.

"The xenophobia which lies behind much of this is deep-seated. It's a widespread phenomenon, and it's not only left-wing. A lot of people feel very twitchy, but it's very hard to see the logic of the opposition."

Brash says arguments against foreign ownership don't usually come from the mouths of Prime Ministers. "That's more Winston's field."

Winston Peters, now out of parliament but still at the helm of New Zealand First, is still making the same arguments that once drew him headlines - but he's finding it difficult to find an audience without a parliamentary platform.

He complains his three-page press release on the Crafar deal has languished. "It's been up on my website for two months, but none of you jokers have picked it up," says Peters.

The release is classic Winston, with references to possession of "documents and information" that give the former Foreign Minister "cause for great concern".

"If allowed, this move would represent the beginning of the end of the local dairy industry," Peters says of the Wang bid. He says suggestion that his criticism of foreign investment is xenophobic is "total humbug".

Also rejecting such criticism is long-time anti foreign ownership campaigner Murray Horton. "Some of the opposition is racism - but not from our organisation," he says.

Horton is the secretary of the Campaign Against the Foreign Control of Aotearoa, and has been agitating on the issue since 1974. "My dear old dad used to give me grief about [flogging] dead horses at the start.

"We grew out of the 1960s protest movement against the Vietnam War, and also out of the strong environmental movement. We're anti-imperialists - and in this case we're targeting foreign corporations."

The campaigner had direct experience of unsuccessful foreign investment when he worked with the Railways until 1992, when the enterprise was privatised and sold to a consortium of most foreign investors.

"There was no investment going on there," says Horton of the 25 years the railways was in the hands of foreign owners. "And I'm not just saying this as an embittered ex-Railways worker."

Horton is heartened by John Key's comments about Kiwis becoming "tenants in their own country". "Key is very much the laissez faire money man, but he can also sniff the breeze," he says.

While the uproar over the Crafar bids makes headlines, over the past decade Irish investor Thomas Clinton has had nine deals approved by the Overseas Investment Office without causing a stir. Clinton now owns a 2500-cow dairy operation in Southland. "The likes of Clinton," says Horton, "have passed under our radar."

THIS WEEK it was revealed the Chelsea sugar refinery in Birkenhead could soon be flying Singaporean livery. While Chelsea sugar is a well-known New Zealand brand, the company that makes it hasn't been New Zealand-owned for more than 100 years.

In the late-19th century the New Zealand Sugar Company merged with the Australia-dominated Colonial Sugar Refinery. The decision to sell Chelsea was made by CSR owners in Sydney.

Just as Chelsea long ago left New Zealand control, foreign investment has seen many iconic Kiwi companies change hands - with much of the doom-saying at the time of sale failing to pass.

Watties, the purveyors of well-known tomato sauce and baked bean brands, was acquired by giant United States food conglomerate Heinz in 1992.

And chicken firm Tegel, also owned by Heinz, was spun off and sold in 2005 to a private equity firm dominated by Australian and United States capital.

And foreign investment isn't a one-way street. New Zealand agricultural companies own large tracts of dairying land in Uruguay and, for a time during the 1990s, Fletcher Challenge was one of the largest loggers in Canada.

Brent Impey, the former head of Mediaworks, saw his owners changed nationalities regularly during his time helming the company that is best known for running TV3. He says foreign investment is crucial - and the experience of New Zealand Rail is far from typical.

Impey says that without foreign investment, the channel that screens Outrageous Fortune would not be broadcasting today. The channel went into receivership in 1991 and was offered to buyers, but strict foreign-ownership laws left the fate of the company in the balance.

"Back then the law was that no foreign company could own more than 5 per cent of a television channel. They had to change the law because the reality was there were no New Zealand investors - this was during a recession - who were prepared to stump up cash," he says.

CanWest, a Canadian firm, stepped in after the law-change, says Impey. "If it wasn't for them, TV3 wouldn't be around today."

Access to funding - domestic or foreign - is the lifeblood of business, he says. "The issue is capital, isn't it? That's the big one."

And this capital appears to be drying up. The number of applications processed by the Overseas Investment Office - the body that vets foreign owners making "sensitive" purchases - has steadily decreased over the past five years, from 251 in the 2005 financial year, to only 189 in the year ended June last year.

Wang's bid is before the Overseas Investment Office, and a decision is expected late next month.

Meanwhile, Allan Crafar's last-minute attempt to halt the sale in the High Court at Auckland was thrown out this week.

Ironically, given the level of level of opposition to foreign investment, Crafar favours the Wang bid. He says the potential Chinese owners are less likely to evict him and his family from their farmhouse homes in Reporoa.