The farming sector is a National Asset

The farming sector is a National Asset that must be protected, says Productive Economy Council

The proposed buyout of the Crafar dairy empire by Natural Dairy (NZ) Holdings, a Cayman Islands registered, Hong-Kong based company – previously known by the more illuminating name of the China Jin Hui Mining Corporation – should start alarm bells ringing with the New Zealand public, says the Productive Economy Council.

The public has a historical resistance to asset sales, but many might not understand that our agricultural sector is just such an asset, of such importance to the economy that selling large parts of it off to foreign interests is not in the national interest.

“Ill-informed commentators like Paul Henry might say that ‘it doesn't matter who owns the business as long as it's here’ but that just shows their lack of understanding of the basic business issues at stake,” says PEC spokesman Selwyn Pellett. “Thinking it doesn’t matter where ownership of the country’s productive assets resides is nonsense. The public realised it was nonsense when previous governments pursued asset sales as some type of economic silver bullet, and they should realise it remains nonsense today.”

The reality is that a business exists to make a profit, and that profit is retained by the business owners, not the workers. When the business owners reside in the same country, that profit is re-invested to the benefit of the local economy. When they do not, the greater part of that profit goes off shore and does not benefit the country.

“If our tax laws were robust, then at least the country would retain some of that money via the tax system,” says Pellett. “But that’s not the case. Foreign entities have the ability to shift the location of the high value-add activities off shore and leave large debt servicing here, meaning tax can be organised to be near zero. Why wouldn’t a foreign owner do just that? It makes sound business sense.”

“As the value-add migrates off shore so do the jobs and the PAYE that was collected from those employees. The result? A bigger tax burden on those that are left.”

“And if we sell enough agricultural assets off, then the scale of our farming sector and its ability to contribute to the economy suffers as well,” he says.

“Chinese businesses have become very competitive by driving the cost of production down. It’s a strategy that applies to food production too. Quality may not always suffer, but the environment often does and that's a potential risk to New Zealand's already tarnished brand,” says Pellett.

“This is not scare mongering,” says Pellett, “we have already seen our hi-tech businesses picked off one by one and slowly migrate off shore. First the manufacturing went, then the research and development and finally the entire company.”

“We cannot have a first-world lifestyle without wealth generation. If all our businesses are owned off shore then we have lost our economic sovereignty and we are now just a source of labour – and only then if it’s cheap enough. We’ll be little better off than the Irish were under absentee English landlords in the 19th Century.”

“Farming is today a marginal business given the high on-farm debt, but allowing those debt levels to result in the transfer of a significant portion of our farms to foreign ownership would be a mistake that future generations of New Zealanders would come to bitterly regret,” says Pellett.
“The government needs a coherent vision and strategy to get through the current debt issues facing many farmers so that the country can retain the wealth generation, both in terms of productivity and tax, those farms represent.”

About PEC
The Productive Economy Council represents a growing community of people that wish to see New Zealand return to the upper end of the OECD in terms of GDP per capita. It was founded by four of the former Trustees of the Hi Growth Project including current President of the Hi Tech Association Wayne Norrie, former executive of the Hi Growth Project, Garth Biggs, Former Chairman of the Hi Tech Association and entrepreneur Selwyn Pellett.

ENDS

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