Foreign land ownership is back on the table. The recent proposal of a large purchase of dairy farms by Chinese interests has stirred up lots of emotion. Already there is more foreign ownership of rural land than most people realize. Under current legislation, it is inevitable that this is going to increase a lot more.
What we need in New Zealand is an informed debate as to whether this is the way that we want to go. If we decide against it, then we need to understand the costs and benefits. Whatever we do, we need a clear policy rather than lurching from one ad hoc decision to another. And the policy has to be applied on an equal basis to citizens of all countries.
Currently, it is our forest plantations where much of the foreign ownership is found. However, the only comprehensive statistics I have found are from the FAO document database and relate to 1999. At that stage about 72% of our pine forests were foreign owned, with United States companies owning about 35% and Asian companies about 12%. More recent data is incomplete but foreign ownership appears to have further increased.
Our wine industry is also predominantly foreign owned. Montana is owned by French giant Pernod Ricard. Nobilo, Selaks, Kim Crawford and Monkey Bay are owned by American company Constellation. Well known brands such as Cloudy Bay, Matua and Wither Hills are all foreign owned. Although many other wine companies are still Kiwi, they tend to be the small companies, and on a volume basis about 70% is foreign owned. The foreign owned companies have their own estates and then purchase additional grapes from Kiwi contract farmers.
Particularly in the South Island, there are many dairy farms owned by immigrants. These people have in many cases led the way in using new technology. Most have become permanent residents. However, there are some dairy farms that are owned by non residents. New Zealand Dairies at Waimate is Russian owned but Kiwis still own the farms. Synlait in Canterbury, which owns several thousand hectares of land as well as dairy processing facilities, has minority Japanese ownership and now needs more equity. Where will that come from?
In the sheep industry, it is mainly iconic South Island high country that has caught the eye of foreigners. Shania Twain received media attention, and before her it was Tommy Suharto. There are others who have managed to keep a lower profile.
The reason why foreign ownership is going to increase, unless the legislation changes, is very simple. Foreigners have capital and Kiwis don’t. The only way we can buy farms is by borrowing. And the banks are not lending the way they were. By contrast, there are lots of foreigners who have equity capital to invest. In a resource constrained world, our dairy, cropping and forestry land is going to look attractive. Currently the focus is on Chinese investors, but a lot of the big money is in the Middle East. European pension funds may also be interested in investing.
So do we need this money or do we not? Who is it that really benefits? High land prices are good for vendors but are a barrier to young kiwis seeking farm ownership. And there are always questions with foreign owned businesses as to whether they are paying their share of taxes, or whether the products are being exported at prices that shift the taxable profits to another country.
If we look to other countries for guidance we will see a range of policies. In the United States, non residents are heavily constrained from land purchases, although several groups of New Zealanders seem to have got around that with their Missouri dairy operations.
In Uruguay, it is close to open slather, and much of the land is owned by Argentineans, Brazilians and Europeans. Even the Kiwis are there, although so far with limited success.
In China, the norm for any foreign investment is a joint venture. Almost certainly, the Chinese would not look favourably on any land investment that did not also involve major investment in new technology.
Perhaps in New Zealand we need a starting point that says New Zealand land is for New Zealanders. Foreign investment in rural land would only be allowed where it could be demonstrated that it would lead to economic infrastructure developments that Kiwis could not undertake.
Whatever we decide to do in New Zealand, we need to do it now. Leave it another ten years, and there may be no decisions to make.
Keith Woodford
Professor of Farm Management and Agribusiness
Lincoln University
Posts from Keith Woodford 
Does research show any link between the rise of the transnational corporation (TNC) and the decline of owner-operated farms. Can these systems work together or are there going to be adverse social impacts.
Clearly there is a correlation between the two over time, but I am unaware of any research directly linking them. Cause and effect is always tricky. I think a key factor relating to overseas corporate investors wanting to invest in agriculture is that it is now much more easy to manage from a distance than previously. This is due to computers and modern communications, combined with better measuring techniques, which means that corporate managers can monitor performance without physically visiting the farm every day. Forestry was preferred early on because it largely looks after itself. Wine followed, but these were largely overseas companies already involved in producing wine in their homelands. Dairy looks like being next.
Keith Woodford
Neoliberalism is flawed because there is no consideration of New Zealanders’ right to own land. What changes to legislation regarding ownership would support the farming minority.
Mrs Osborne
I will leave the question of how the legislation should look to others. But I think it is important to recognise that the decline of the family farm is likely to continue even if foreign ownership is prevented. The average NZ dairy farm is already over 360 cows and increases every year. It won’t be long before it is 500 cows. The current average farm is worth well over 4 million dollars, and there is nothing unusual about a 10-15 million dollar farm.
Keith W
Subject: Do we need this money.
One assumption of neoliberalism, structural adjustment and free trade, is that the market is fair. The banks have finance accessible to farmers according to the indicators. Farmers can get the money to buy land. What is interesting is not that a TNC is willing to buy land, when the market price is high, but how much over and above the market price they can offer. When the banks are not willing to lend at this price, is this going to be a fair price. If the TNC can buy cheap land then how are they contributing to growth in GDP.
You mentioned in your article, that viticulture buys on contract from small farmers. Is this model working.
At the moment we have self-reliance and innovation in our dairy production. Some farmers have succession without going to the banks for finance. What is the trade off in development or underdevelopment. What do we gain in terms of standard of living, by selling land at a price that could be cheap on the world market.
In general, good comments. However, I think your assessment is simplistic. To state that “the reason why foreign ownership is going to increase, unless the legislation changes, is very simple. Foreigners have capital and Kiwis don’t” is only a partial answer. It makes out the issue to be solely economic which it isn’t – it is actually more about survival. In the future food resources – soil and water – will become a dominant strategic assest for countries. This will be the fundamental driver in future land acquistions around the world. In the past, this was acquired by conquest – now it is done by a signature and capital. One just has to look at Africa and see where land purchases/contracts are being made and by which countries. It is not just about capital – it is about access to resources. Unfortunately, as it always seems, such issues get framed in economics (due to the myopic approaches of neo-liberialism) when it is more about protecting basic needs – the demand for food. And our food resources arre our competative advantage in the world and we need to protect it by appropriate legisation. But I won’t hold my breath – neo-liberalism policies of this country doesn’t see the world this way. All they care about is making a profit – not to protect ourselves for the future.
Yes, except that foreign ownership of resources does not over-ride sovereign rights to control exports. A couple of years back when it looked like there might be a global shortage of rice we saw many countries imposing controls on rice exports (e.g Vietnam). China did the same thing to exports of fertiliser which were in short supply. And Argentina regularly controls and prevents exports of beef in a ‘populist’ move to reduce local beef prices. These laws apply to all firms, regardless of whether they are locally or foreign owned. So the power of ‘signature and capital’ is not quite the same thing as physical conquest.
KeithW
Yes, maybe just but a weak agrument. Where is the sovereign rights to control exports under a neo-liberial economic policy like NZ? Would NZ really stop a company from exporting milk products to, say, China? We live and die, to a large extent, on the export trade. No government is going to infere with that, without some very good reasons Just think of the market response if this happened here…! And we see that in a number of African countries where products are made directly for markets overseas. It’s as if the farm is part of another country. While there maybe exceptions to the rule, export controls are a thought experiment more than a real example of issues around food sovereignty. The issue at the heart of this is land ownership and that can’t be smothered by secondary economic arguments.
Unless you are a Chinese citizen, you cannot buy land in China. You can get land on lease, but not freehold. The same is true in many other countries like Thailand, Malaysia, Singapore, Indonesia, the Phillipines, many of the pacific islands and so on. Many of these countries have learned from the colonial experience and explicitely outlaw the sale of land to foreigners because of that experience.
Kiwis and those that profess to govern in their interest are stupid for allowing the sale of ANY land to foreign interests of any kind. It always ends badly for the natives.
Peter
My understanding is that even for Chinese citizens the land ownership that they have is a form of lease. The leases are long term.
Chinese law does not seem to be explicit as to rights of renewal at the end of the lease. It is also worth noting that most of our forestry land and many vineyards here in NZ are already foreign owned. I believe that there are stewardship responsibilities associated with land and I am therefore more comfortable if new Zealand land is owned by people who actually reside in New Zealand.
KeithW
Very well written & a huge concern. What can be done? Where do we start? WhenWhenever we (NZ) try to keep our land for fellow kiwis often they use the ‘Xenophobic’ or ‘race’ card. But we need to move beyond that for all kiwis interests.