Saturday , October 21 2017
Informed Influential Indispensable | newzealandinc.com
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O’Sullivan: Saudi deal: bribe or facilitation payment?

Auditor-General Lyn Provost must investigate Murray McCully’s secret Saudi deal, which is attracting far too much adverse comment on the international stage to be easily swept under the carpet.

Cabinet documents do not shed sufficient light on why McCully spearheaded an initiative which at its kindest interpretation resulted in a sweetheart deal to look after Saudi businessman Hamood Al-Ali Al-Khalaf, whose company had made legal threats to seek $30 million after National reconfirmed its predecessor’s ban on the live sheep exports.

Nor do those documents – which are very carefully constructed – pass the smell test for a Government that has become rather too easy a prey for commercial shakedowns by aggrieved foreign investors.

The story goes that the Al-Khalaf Group employed public-law lobbyist Mai Chen to prosecute its grievance with the National Government by arguing that it had been commercially harmed by a policy about-face. This after rival lobbyist Matthew Hooton – who ultimately blew the whistle on the affair – lost out on the representational contract.

The chain of events so far disclosed suggests that Cabinet ministers were not prepared to run the risk that Al-Khalaf – a powerful figure in Saudi Arabia – could permanently sour New Zealand’s negotiations towards a free-trade deal with the Gulf states unless he was “looked after”. There may have been legitimate reasons for compensation to be made. But in an environment where investor disputes are becoming politically charged through opposition to such measures within the proposed Trans Pacific Partnership, McCully and his officials instead opted for a creative face-saver which delivered value to the aggrieved Saudi businessman and got him off their backs.

The resultant moves to invest in an agribusiness hub on Al-Khalaf’s farm and fly pregnant ewes to Saudi Arabia have not been dressed up in the official documents as outright compensation. Instead, they are investment towards securing the free-trade deal.

Opposition politicians have tried to damn McCully’s actions as a “bribe”. This is clever politics.

But under the Crimes Act 1961, bribery is a crime, and it is difficult to see how that allegation – made under parliamentary privilege – can be sustained on the facts so far disclosed.

The problem facing Provost is whether the Government’s effective “payment” to Al-Khalaf was justified – and if so, why wasn’t it accurately recorded. If it was dressed up as a payment to secure a free-trade deal, the question is what legal advice did the Government seek before going down this path and “investing” public money. Facilitation payments remain a controversial issue on the international stage.

In many countries they are still legal. In New Zealand, nearly half the listed companies have policies prohibiting bribery but less than 30 per cent prohibit facilitation payments.

It would be hugely ironic if the private sector is ultimately proved to have higher standards than those of the Government.

It’s interesting also to note that Hooton was on the Prime Minister’s initial trip to the Middle East that was effectively aborted when Key came back to New Zealand after three defence personnel lost their lives in an Anzac weekend accident. But this is not sour grapes. In a previous career Hooton was press secretary to then National Trade Minister Lockwood Smith. His own writing – and conditioning as a press secretary for a straight-as-a-die trade minister – would suggest McCully’s subsequent actions cut against the grain for him personally.

The reality is that what has been disclosed in this affair is a cavalier approach to securing international trade deals.

The straightforward approach – as with the Hollywood investors who threatened to bypass New Zealand if they did not get the help they wanted – would have been to simply say straight-up that the Government had made a decision to retain the ban on live sheep shipments and would compensate the Saudi businessmen who had invested on the basis of prior government policy commitments.

It would have been rightly embarrassing and would have caused great controversy.

But it would have been in the open.

This would have been far more preferable to the current situation where the Government has been confirmed as willing to buy its way into a free-trade deal through assuaging the private interests of an influential Saudi.

It does not pass muster.

The big – and so-far-unanswered – question is has the foreign minister (or any other Cabinet minister) brokered any other such deals to open the way to free-trade deals.

About Fran O'Sullivan

Fran O’Sullivan is Managing Director of NZ INC. She is a former editor of the National Business Review and a prominent columnist for the New Zealand Herald, where she writes on business, politics, and international affairs, and manages the annual high-profile Mood of the Boardroom project. Fran took up the position of Editorial Director – Business for NZME in April 2015.

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