The Court of Appeal emphatically threw out the Sir Michael Fay-led challenge to Shanghai Pengxin’s bid for the 16 Crafar farms and with it, hopefully, one of the most xenophobically charged episodes of commercial behaviour in New Zealand.
Lest I be accused of “triumphalism”, let me just say that the court’s robust decision restores much-needed clarity to New Zealand’s foreign investment regime.
The upshot of the Fay-led challenges is that the bar has been raised for foreign buyers of farms or businesses worth more than $100 million. But Cabinet ministers are entitled to rely on their judgment when it comes to assessing the additional value to New Zealand that a foreign bidder brings when acquiring assets.
Critically, the court has shot a massive hole in the notion that a foreign buyer must have direct industry experience if they are to buy local farms or $100 million-plus Kiwi businesses. In crude terms, this means you don’t need to know how to apply teats to cows if you want to buy dairy farms. You do need a proven commercial track record and sufficient business acumen to develop the purchase in line with assurances to the Overseas Investment Office, which chairman Jiang Zhaobai has in spades.
Fay has thrown in the towel. But the two Maori trusts are now bleating about going to the Supreme Court.
I doubt that the Court of Appeal will grant them leave. The three presiding judges made the point that in light of the Cabinet ministers’ “unchallenged conclusion” that the Shanghai Pengxin investment would bring substantial and identifiable benefit to New Zealand, ministers would undoubtedly decide to grant consent again if the matter were referred back to them.
The strongest signal of the court’s thinking is its comment that any further delay to the Crafar farms sales process would be prejudicial to the interests of third parties (such as the creditors of the Crafars’ farming companies) and detrimental to the state of the 16 farms, which are being managed by receivers.
The great irony is that while the high-priced lawyers for Fay and the Maori trusts have been fighting a legal war of attrition to try to scuttle Jiang’s bid, the Chinese businessman has been busy signing agreements with eight counties in China’s northern Anhui province to invest 1000 million yuan ($194 million) in setting up 40 standardised pilot dairy farms. Reports suggest $586 million will be invested over the next five years with 200,000 dairy cows in place by 2017.
The upshot is that Pengxin will be at the centre of new dairy farming, processing, supply and logistics operation in the Yangtze Delta – which makes the Fay camp’s claim that Jiang lacks relevant business acumen farcical.
The court’s decision also removes a major thorn in the bilateral relationship between New Zealand and China. Prime Minister John Key will travel to Beijing this year for the official celebration of 40 years’ diplomatic relations with China.
New Zealand is just one of many countries whose leaders have been invited to Beijing this year to celebrate a similar milestone. But Key will arrive at a relatively auspicious time.
The Chinese leadership transition will have been confirmed. President Hu Jintao and Premier Wen Jiabao will be preparing to make way for the fifth leadership generation, which takes over in early 2103. Deputy President Xi Jinping – who is already thoroughly familiar with New Zealand’s political leadership – is expected to be confirmed as the country’s new leader. China’s top leaders have been discussing the transition in the coastal resort town of Beidaihe this week. But just who becomes a member of the elite standing committee of the Chinese Politburo will not be confirmed until the 18th Party Congress.
There are strong hopes that Chinese-New Zealand entrepreneur Richard Yan’s long-talked about “New Zealand House” in downtown Shanghai will be opened during the PM’s trip. Yan’s dream has been to house New Zealand government agencies like the Ministry of Foreign Affairs and Trade, New Zealand Trade and Enterprise, NZ Central and private Kiwi companies all under the same roof. A “Kiwi hub”. It’s an idea whose time has come.
There will also be a New Zealand business week in Shanghai. In Beijing, the first partnership forum between New Zealand and China will be held, eight years after New Zealand and the United States held their first such forum in Washington, DC. All these events would have been clouded if the court had ruled in the Fay camp’s favour.
But former Commerce Minister Bo Xilai – who kicked off free trade negotiations between China and New Zealand in 2004 – won’t be present. Bo was sacked from the Politburo this year and faces disciplinary charges. His wife, Gu Kailai, did not contest murder charges this week.
But when Bo first talked up the FTA, China was still coming to grips with its entrance into the World Trade Organisation. Its growth has since rocketed.. As the East Asia Forum recently emphasised, China is now the world’s largest exporter, largest importer, largest holder of foreign reserves and second-largest economy and is in a much more powerful position than was projected at the time of its WTO debut in 2001.
New Zealand has since ridden the commodity wave with China. There’s much more to do to take advantage of the relationship in a fashion that drives greater returns to the economy and Kiwi businesses. The Court of Appeal’s judgment will reinvigorate the bilateral platform.
Copyright: This column is republished by permission of the New Zealand Herald (APN).