Feds make case for rural bank lending probe
Bankers have been making record profits in the last few years, but those aren’t the only records they’ve been breaking, says Federated Farmers vice president Richard McIntyre.
Federated Farmers president, William Rolleston, says while the organisation supports positive overseas investment into New Zealand’s farming system, there needs to be a clearly demonstrated benefit to the local and national economy.
“This was not proven here and we believe the Lochinver decision reinforces the importance of changes made to the Overseas Investment Office rules over recent years,” he says.
“We now have a more thorough and robust framework for making critical decisions on foreign investment in rural land, and what we’ve seen here is ministers applying this framework as it was intended to be used. What we need is for foreign investors and those involved in the sale of rural land to work harder to find ways to demonstrate economic benefit, both on the property they are targeting and for the broader industry.
“This might be the introduction to New Zealand of new technology or using their overseas networks to open up new markets for other kiwi businesses.”
In December 2010, the Government tightened the rules around foreign ownership by way of an “economic interests” factor in the Overseas Investment Office’s consideration. The rule allows ministers to consider whether New Zealand’s economic interests are adequately “safeguarded and promoted” in the case of land aggregation or vertical integration.
This land aggregation threshold applies where an applicant is seeking is purchase a property or portfolio of properties which equates to more than 10 times the average size of a dairy or sheep and beef farm. Lochinver is three times larger than this threshold.
A ‘substantial and identifiable benefit’ test was also incorporated into the overseas investment decision framework in 2010, further bolstered in 2012 by a High Court decision adding a ‘with or without’ test. This test has been a key determinant of the Government’s decision over Lochiniver.
“The ‘with or without test’ is designed to ensure that any investment has benefit over and above just making a farm work better, and that these benefits can only be driven by foreign investment,” says Rolleston.
“Since Lochinver is so highly regarded in farming circles this was always going to be a tough test to pass, and because the station is three times the land aggregation trigger level for foreign investment, it had to be a test that was carried out thoroughly and confidently.”
