Shanghai Pexquin could have done with a little PR
The clear left and right divide over the purchase of the 16 North-Island Crafar Farms (7,900 hectares) by the joint
venture of Landcorp and the Milk New Zealand Holding (a subsidiary of Chinese investor Shanghai Pexquin Co Ltd.) created
media frenzy. It is purported that the joint venture agreement has Landcorp managing farms operations with Pexquin
investing $15.75 million towards property development, including investment into an effluent management system. This
investment excludes the purchase of shares in Fonterra, to whom the joint venture plans to sell its milk.
Woburn International works with overseas investors looking to invest in New Zealand and understands some of the
challenges faced when investing in New Zealand. Looking at the way the media and public reacted to the Crafar farms bid,
there is an interesting lesson for Chinese investors wanting to invest in New Zealand.
Judge all investors fairly
The Crafar farms have been in receivership since October 2009, and with the exception of a $175 million low-ball bid
from a cooperative organised by Sir Michael Fay there has not been New Zealand investor with the financial clout and
interest required to sell the deal. In the absence of sufficient internal interest the farms will require foreign
investment if they are not only to sell for a fair price but also to ensure the investment required to return these
farms profitable productivity. While the integrity of this should not mean that a purchaser is discriminated against by
virtue of nationality. This is also contrary to free trade agreement signed in 2009, under which New Zealand is also
obliged to welcome Chinese Foreign Direct Investment. According to University of Auckland law professor Jane Kelsey the
FTA is a two-way street, and if we expect kiwi businesses to have the opportunity to invest in China, the reverse must
happen: Chinese business must be free to invest in New Zealand.
The only valid reason to for the Labour party to oppose the joint venture Landcorp, Shanghai Pengxin sale would be basis
of the investor's integrity. The OIO conducted its investigation of Shanghai Pengxin's, and whilst the owners were
rumoured to have ties to the Chinese underworld it was found that the company met all the requirements for the
investment. The New Zealand public can put some trust in the OIO finding, given that they had refused Kim Dotcom the
purchase of three properties.
Why then once the company was established as reputable did the Chinese investors continue to receive so much opposition
from the New Zealand public and the Labour party?
Do a little PR
The sale of land, assets continues to be an emotive subject for New Zealanders, this coupled with a sprinkling of
distrust and ignorance of Chinese Business methods made the sale highly contentious. New Zealanders needed to be
convinced that the sale was in everyone's best interest and that it would not result in a wave of land sales to foreign
investors with the financial reserves to buy New Zealand for a price. Understanding the culture, environmental issues
and political hot potatoes (such as asset sales) are key to producing convincing arguments that with a little public
relations investment can smooth the passage to successful business outcomes. This is not an isolated case as the lack of
PR is a common failing of Chinese investors. Ensuring that New Zealand farms are operated ethically with regards to the
environment and clean green image while returning profits to New Zealand is important. Although this should not factor
into the case for the Sale of the Crafar farms as New Zealand's Landcorp will be managing the operation, Shanghai
Pexquin could have done more to calm the New Zealand public and Labour's fears that this was not selling the "family
silver" instead it was preserving the silver for future generations. Unlike business in China, where doing big business
deals relies on having connections with people in positions on influence and the opinion of the public is not factored
into business deals, western economies like New Zealand, value the opinion of the public. Although Shanghai Pexquin had
a representative in New Zealand they could have done more to tell the company's story, and tell the New Zealand public
that their investment of $15.75 million in the lands development, would: create jobs, create an on-farm dairy training
facility, enhance ecological sustainability, and would introduce overseas agribusiness marketing opportunities for New
Zealand agricultural expertise in China and spend $100 million over the next five years marketing New Zealand dairy
products in China.
Woburn International has had experience matching overseas investors with investment opportunities in New Zealand. Woburn
International also understands and can support the need for foreign investors to work with and consult the community
when conducting deals.
ENDS