Q+A: Jessica Mutch interviews Fred Pearce
Q+A: Jessica Mutch interviews Fred Pearce
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Q + A – August 5, 2012
Interviewed by JESSICA MUTCH
CORIN Jessica Mutch spoke to Fred Pearce in London shortly before we went to air this morning and began by asking about the Crafar farm buy-up by a Chinese company and whether New Zealand should be nervous.
MR PEARCE – Author
I think people are nervous about the Chinese because they are becoming such huge investors round the world, whether it’s agriculture or buying up commodities or forests or minerals especially. So China are just big players and it makes everybody jumpy. They’re jumpy in Australia, they’re jumpy in Brazil, they’re jumpy across Africa. But Chinese aren’t the only players. There are many other big players trying to buy up land round the world right now, including New Zealanders, of course.
JESSICA Are we right to be jumpy here in New Zealand?
MR PEARCE I think you are, actually, because you’re a relatively small country. Your land is valuable. Clearly there's a lot of interest internationally in your dairy farming. There's a tradition of German interest in New Zealand. And it could easily get out of hand, but it’s still relatively small-scale in New Zealand. Now, the figures I’ve seen suggest 1% or perhaps 2% of New Zealand farmland is in foreign hands, and while that could increase, that’s a heck of a lot less than, say, Liberia in West Africa, where two-thirds of all their land is now under some kind of concession to foreign investors, or South Sudan, the new state that was just set up a year ago in Africa, where 10% of all the land had been given away in some kind of lease deal to foreigners even before the state was created, before they’d raised the flag. So, you know, on the scale of things, New Zealand isn’t in a bad state. But you do have to watch out, because there is a huge kind of land rush round the world going on, and prospectors and national governments and big corporations in expanding nations like China and India are looking out for really quite large areas of land, and if they can get hold of them and at a good price, then they will.
JESSICA Why does it matter whether its foreigners or locals who own the land?
MR PEARCE Well, maybe it doesn’t matter. In good times, people will invest and it probably won’t matter too much. But in bad times, it can be a problem. And you have to say that land is a very fundamental asset for a country. There's nothing much more fundamental than land to a nation. And if you sell or give long leases on that land to foreign entities, then you lose control of it. You have much more democratic control, if push comes to shove, with a nationally owned company than you do with a foreign-owned company. But it is also true that we’re all part of a global economy now. Even if the company that owns the land is based in New Zealand, it may well have bankers who are abroad. So we can’t, I think, sort of put up very high walls around our country. But we do need to have democratic accountability. We need make sensible democratic decisions about how much we’re prepared to give land to other countries or other countries. Now, they may bring in expertise, which we want; they may bring in finance that we want. But there again, they may be out for a quick hit. They may be wanting to make a quick profit and not really contribute to the national economy, and those are the kind of things that one has to look out for. As I say, I think New Zealand is a kind of grown-up nation. New Zealand can look after itself. But many – especially in Africa – small, new, poor nations really do have great difficulty in keeping control of their assets if rich foreigners want to come calling.
JESSICA So does New Zealand need to be cautious? What are land-grabbers looking for specifically?
MR PEARCE Well, they’re looking for cheap land, and I would guess that your land is not among the world’s cheapest. But it is well-watered land. It is good soil. So, you know, people are going to be looking out for it, and of course you have a very strong dairy industry, in particular, and your forestry is well-regarded around the world.
JESSICA You talked about Fonterra earlier. On the flipside, the New Zealand company is going to China and buying up several farms there. Would you classify that as land-grabbing?
MR PEARCE Yes, it is.
JESSICA And what do you make of that?
MR PEARCE I think I would, really, yes. It’s a foreign investment in buying up land. You would say that Fonterra’s not just buying land They’re developing, processing. And I think the Chinese are keen to have Fonterra. It’s not being done against the wishes of the Chinese, because Fonterra can bring genuine expertise to help the Chinese dairy industry develop. So that’s perhaps an example of quite good land-grabbing, if you like, or foreign investment. So again I think, you know, the lesson here is if foreign investors, land-grabbers are bringing in something which is genuinely useful to the country that they’re coming into, then that’s good news. But if they’re not bringing anything substantial – they’re not bringing in new expertise or anything in; they’re just coming in because they think it’s an asset that they can kind of drain a profit quickly – then that’s a bad. And those are the things that a country, especially a relatively small country like New Zealand with relatively small amounts of land compared to some nations, needs to have to bear in mind. You know, they’re not making land any more, so, you know, you’ve got to look after what you have.
JESSICA I was travelling in Samoa earlier in the week with the New Zealand prime minister, and there was a lot of talk there about the influence of China in the Pacific. You also mention this whole idea of “the Chinese are coming” in your book. What do you think of that influence in the Pacific?
MR PEARCE I think we have to recognise that China is, if you like, the United States of the 21st century. It is becoming the dominant power. As American power, economic power, military power and political power is retreating, China is moving into – all around the world; this is not just a nation or a Pacific issue – all around the world, China is taking a dominant position in a whole range of industries and endeavours. After all, one in five or one in six of the world’s population lives in China. China is taking between a third and a quarter of all the metals that the world wants, so China has huge demands and is going to be looking around the world for resources to fulfil its needs. So that’s going to carry on. But of course it’s at its most intense in areas that are somewhat nearer China. So the Asia-Pacific region is of prime interest for the Chinese But I don’t think we should panic about that. I think we should be realistic about it, but I don’t like that sort of xenophobic feeling. I don’t really like the view – and I’ve heard this expressed by environmentalists and the Green Party and so in on New Zealand – that New Zealand land should be kept just for New Zealanders. I don’t really buy that, but I do think that you need to make kind of democratic, informed decisions about when you allow foreign investors in and when you don’t.
JESSICA Because countries like Argentina and Brazil are putting in place restrictions about foreign ownership. Do you think that New Zealand should do the same?
MR PEARCE Yes, they are. I don’t think you should put blanket restrictions on, no. I don’t think, because there are reasons why you might want to invite countries in. But I think you have a not unreasonable policy which says that if somebody from abroad wants to buy up any significant amount of land, then it’s subject to a government review. It’s subject to an assessment of whether it’s in the national interest for you to do that, and that seems to be a very sensible thing to do.
JESSICA I’d like to broaden out now and talk more globally. Let’s just go through some of these things briefly. Who is the main buyer of land?
MR PEARCE Who are the main buyers of land? The Chinese are big buyers. The South Koreans are very big buyers, because they rely hugely on imports of food and they’re very worried about their food security if food is in short supply around the world. The Gulf states – Saudi Arabia in particular – are major buyers of land. What's happened with quite a lot of these countries is that since the big rise in food prices that began in 2008, they’ve got worried about being able to ensure supplies of food for their people, especially if they lack good farmland themselves, and Saudi Arabia, of course, has plenty of land but very little water.
JESSICA And how much land has been grabbed?
MR PEARCE Something over 200 million hectares, we think, but they aren’t any reliable data for this. This is NGOs, environment groups and others trying to make assessments on the basis, often, of media reports, because there's no central database. But something of that order, and that’s an area, if I can put— You know, who know what a million hectares is? But that’s the size of Britain, France, Germany, Spain, Italy and the Netherlands all put together. It’s very large amounts of land, and that’s all in the last 10 years. So there is genuinely a global land rush going on, and it’s not just these nations that are short of food. A lot of speculators are moving in. So you find that Wall Street speculators, speculators from the City of London have been moving in in a big way, buying up land, seeing that land prices are increasing and seeing this as a good potential investment for the future. And biofuels has become another issue. That’s a new thing that you want to plant on the land, so many people are buying up land in order to grow biofuels – palm oil or sugar or the new kind of crops that are being used in vehicle fuels, especially in Europe now. There's a lot of reason why people are buying up land. And George Soros, the kind of notorious or certainly very famous investor, said very recently that land was just about the best investment that people could make now. And a lot of investors have followed his lead. So, as I say, there's a kind of land rush going on, and I don’t see it ending any time soon.
JESSICA The Ethiopian prime minister has said, and I quote, “We want to develop our land to feed ourselves, rather than admire the beauty of the fallow fields while we starve” What do you say to that?
MR PEARCE I say if he’s going to produce genuine development, that’s good. But what he has to be very very careful about is companies coming in who talk about development but are trying to go for short-term profits. I think this is a big issue, especially in Africa where investors don’t really have any confidence about the quality of government in Africa. They’re a bit reluctant to put a lot of money in in case they don’t get it back or the regime changes or something goes wrong. So foreign investors in Africa especially are looking for very quick profits. They’re not looking, generally, to invest in the country, invest in its economic development. So I think there are real risks, especially in Africa, over that. African governments feel guilty that they’ve not invested in their agriculture for the last 30 or 40 years, and they’re right to feel guilty. They’ve done their farmers a massive disservice by doing that. But what's happening now is that they are bringing in foreign investors in the belief that they can provide a quick fix for that underinvestment. But I believe and many development economists and people I talk to believe that that’s only going to make matters worse, because Africa’s future lies in investing in its existing farmers, its smallholder farmers, allowing them to do a better job to join world markets or to just kind of develop their own livelihoods and the way they live so they’re not just subsistence farmers.
JESSICA That’s a nice place to leave it. Thank you very much for joining us this morning, Fred Pearce, from London.
MR PEARCE Thank you very much.