OnPoint: AIA and Maori Seats
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A NZ-based investor at the least is more likely to keep some of the dividend stream here.
For sure, but what does that have to do with restricting control?
And like I said, 40% is already offshore owned by short-term money-plays who were keen to sell into the offer so no change.AIA was well and truly already a private company with significant offshore holdings. This play is going to make zero difference to that but with the lovely side effect of screwing with our risk profile internationally...
I'm all for local ownership of NZ assets (hell, I'm all for NZ ownership of foreign assets!) and like the Super Fund and Kiwisaver primarily for the benefits it will eventually bring in this area - but if you want to start to bring already offshore owned assets "back into the fold" this doesn't help.
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Really? Got any evidence? Frankly I think that is a huge assumption. Did Fay Richwhite have such concern over rail? What about Alan Gibbs and Telecom?
Oh for sure, it's purely speculation on my part - but so is the assertion that there is no difference between NZ based or overseas investment. I just think it's a valid point that the airport is hugely important economically. Although you're probably right, it's unlikely such a macro view would be taken when considering the company bottom line.
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Really? Got any evidence? Frankly I think that is a huge assumption. Did Fay Richwhite have such concern over rail? What about Alan Gibbs and Telecom?
In both those cases, there were actually large foreign shareholders who took huge dividend incomes out of the respective companies, at the same time as they ran down capital investment.
New Zealand government debt was retired with the $4.2 billion Ameritech and Bell Atlantic paid for Telecom in 1990, which was good, but it's actually hard to see what value they brought the company after that -- Rod Deane once muttered something about the "advice and assistance on projects" they provided, but it's hard to see what advice would have been commensurate with the cash they took out of the company. Their chief influence was probably on the size of dividends.
So that's one reason to be wary of big foreign shareholders moving into established businesses. Perhaps the Canadians were in it for the long haul, but a 30% voting bloc is a pretty big one if they suddenly decided to rip out cash and exit.
I'm also in agreement with Stephen about the different forms of investment. Vietnam is taking billions every year in foreign direct investment, but it's nearly all for new ventures.
I don't buy that this sort of restriction is a major barrier to equity investment in transport infrastructure, if only because everyone else, including the Australians and the Canadians (who are moving from federal to regional ownership of airports) is doing it. The manner are timing are another matter.
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The fact that the Maori seats do this shows these are the smartest electorates in New Zealand.
Nicely put. And good idea too. Naturally National could do the same thing with ACT. Just so long as they can convince everyone that would normally vote for them to vote for ACT, and so long as they could trust ACT with more than half of their votes in parliament :-).
If there is a marriage of convenience between the Maori party and the Maori seats, that is only the fault of the other parties for failing to contest those seats in a way that appeals to those electorates.
I guess the overhang itself is somewhat 'unfair', even to Maori. All the Maori who don't care to enroll on the Maori roll and don't want the Maori party are losing out on the overhang factor. They could, however, get it back by putting themselves on the Maori roll and voting en masse for someone they think represents them better. If that happens to be Labour, then it is Labour's fault for not conveying the message to those Maori better that their vote is worth more in the Maori roll.
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Lots of assets are hugely important economically. What about Trade Me? Yet that is foreign owned. There are a whole bunch of power stations, a refinery, petrol stations, lots of tv and radio assets that are considered critical for a state of emergency (couldn't get more local interest than that).
Hell, even the national power grid is owned by an overseas bank http://bernardwoolley.blogspot.com/2005/05/wachovia-corporation-owns-si-grid.html
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Race based seats should go: Maori and the general seats. Move to list system only where 1% of the vote gets you 1% of the seats and you can run all kinds of parties to get 1%+. Overhang should be restricted to describing excess foreskin only.
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The major problem with Australia's STV system is single member electorates in the lower house, and perverse preference allocation systems, which does effectively render it no better in most cases than FPP.
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Also, what uroskin said.
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Race based seats should go: Maori and the general seats.
That one really should be up to Maori. Te Tiriti predates Parliament, and does confer some racial rights, however bad an idea I think it is - they're not my rights to give or take.
But what u sed about teh thresholds. They serve only National and Labour and UF.
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Lots of assets are hugely important economically. What about Trade Me? Yet that is foreign owned.
If TradeMe's owners decided to run it into the ground like our railways were, we could build an alternative pretty quickly and cheaply. ie. there are alternatives.
As Keith points out, there are no realistic alternatives to AIA.
Race based seats should go: Maori and the general seats.
I'd trade the Maori seats for what you suggest plus an upper house that is based on the Treaty partnership principles. I predict such an upper house would have positive moderative effects on both Labour and National governments. The FS&SB saga would have been very different, as would state asset selloff programmes of the 90s.
As long as Maori are over-represented in the bad stats, and underrepresented in the good ones, I'm not at all keen to reduce our political representation.
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Re keeping dividends here: sure, I take both Rich and Gareth's points. I myself have a fair chunk of my assets in Australia.
But the context was the benefits of overseas investment to New Zealand, and an investment that does nothing but hoover up our profits and repatriate them to some foreign domicile doesn't bring any benefit and has a (maybe) small negative. And hence Hickey is flat out wrong about this case.
I am all for foreign investment that builds things here or employs people here. Let those foreigners enjoy a return on their capital, I say. And I actually don't really mind the other kind, which after all I would like to practise in other countries. But it's dishonest of the Herald to be wringing its hands over the loss of benefits which don't actually exist.
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But it's dishonest of the Herald to be wringing its hands over the loss of benefits which don't actually exist.
Sorry, I'm not sure I follow the lost benefits they have alluded to?
We also have to remember that NZ companies require capital to grow; that capital is not available locally - so even when offshore investors simply provide capital and repatriate profits they still do some service to the NZ economy by letting our companies grow as opposed to staying as small minnows making no impact. Not saying they're all fantastic but the provision of capital can be worthwhile in it's own right. -
And hence Hickey is flat out wrong about this case.
Yes, he often goes into excruciating detail which only serves to cover some of this "wrongness". Bernard Hickey's absolute and real strength is in analysing stuff from a business perspective, however, it is a micro rather than macro analysis. I would always go for Rod Oram for the broader picture.
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Mikaere
SO no one can build another airport anywhere ever again? No land anywhere that couldn't be suitable, no other airports that could be expanded ever...?
Stephen
if the Canadians are offering 30% more than the market rates the AIA shares it may be that they see the opportunity to make the airport more productive. Why is investment in a successful business to make it better seen as of less value than someone building a new factory which may then shift offshore chasing cheaper labour etc? Isn't productivity one of the key economic issues?
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There obviously needs to be some backstop that stops the airport owner (Kiwi or foreign) from simply shuttering the place and building houses. I suspect if they tried, they'd rapidly find emergency legislation passing through to keep the airport in place.
More likely would be that an exploitative owner let the airport deteriorate to the standards of LAX, for instance. Oh wait, who owns LAX? - yes, it's the City of Los Angeles.
It's a monopoly, it needs a regulator. Like Telecom and the New Zealand Herald.
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insider outsider, unless they have directors on the board, how does their merely owning shares enable them to make the business more productive? (I read today that the Canadians are content not to have board representation).
If they were buying more shares in a capital raising, and AIA was going to use the capital to do something, then sure. But mere passive ownership can't possibly have any effect.
Gareth, I have not read anything which suggests the Canadians are offering new capital, only that they want to buy already issued shares from existing shareholders. Please correct me if I'm wrong, because that would make a big difference.
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I thought they were wanting to buy it all and run it how they wanted. If wrong, then why the big fuss and change in the law over tehm merely having a shareholding?
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SO no one can build another airport anywhere ever again? No land anywhere that couldn't be suitable, no other airports that could be expanded ever...?
I'd like to see the Whenuapai airport built, but here's huge resistance to it.
But even if it was, it wouldn't be a replacement as such. The third-party business investment in the area around the AIA site is enormous now. Freight businesses, a full-size supermarket, etc. Public infrastructure (including the Western ring route) continues to be built around it. It really is not replaceable in a realistic sense.
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insider: no, they wanted a 40% minority stake.
As to why the fuss: good question. I suspect the loss of a large income stream overseas does figure in the Government's thinking though.
Certainly if the Canadians want to pay such a high price, it makes you wonder what they see that others don't. NZers have a history of taking apparently high offers from foreigners for assets that over time turn out to be worth even more. We seem to have a very high discount rate in this country.
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(Note to self: Don't put *two* contentious threads in the same post.)
AIA:
1) Local investors, especially large, local, listed investors, are more easy to persuade, cajole or coerce, simply because they have many other business interests here. Political and public pressure would actually have some influence.
2) The benefit that the Herald was alluding to, I think, was what Hickey was talking about. Not so much that there's additional benefit to be gained from foreign investment, but that we're already its bitch, with our spending habits requiring constant flow of foreign investment to feed it.
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Maori Seats:
Please - read the stuff I wrote in 2005. Here and here.
Not all overhangs are equal, nor all tactical voting. Yes - it's very smart for Maori Party supporters on the Maori roll to tactical vote and gain 7 seats *and* pump another 3% of party vote to Labour, but it's an abysmal failure for the electoral system (with the Maori seats) to let this happen.
The Maori seats were conceived to give Maori representation in Parliament at a time when there was no way they could get there, because we were a FPP system, Maori were few and dispersed, and the general electorate would never vote for a Maori MP. With MMP, none of those arguments stand.
And would the Maori Party fall under the threshold if there were no Maori seats? I doubt it, as a huge number of tactical voters double-dipping with a Maori Party-Labour split vote would give their party vote to the MP to keep it alive. But if not, then you've got to ask - can a party that's unable to get 1/3 of Maori votes really claim to represent Maori?
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I though Mark Weldon had a pretty good take on it on Morning Report today: as a policy move, it's very much in line with international trends, but the manner and timing of it are more ... unusual.
What's unusual about it, pimping xenophobia and junk economics for poll points is hardly a rarity. Just ask the Minister for Foreign Affairs.
Anyway, why doesn't the Government just bite the bullet and nationalise the airports, ports and rail network and tell us what social services are going to be cut to pay for it all? :)
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The Maori seats were conceived to give Maori representation in Parliament at a time when there was no way they could get there, because we were a FPP system, Maori were few and dispersed, and the general electorate would never vote for a Maori MP. With MMP, none of those arguments stand
No, Keith. The Maori seats were introduced at a time when there was a property qualification to vote. It's one of life's delicious ironies that Maori men had universal suffrage about twenty years before their honky brethren. (The wahine, like their pakeha sisters, had to wait a little longer.)
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The idea that Maori seats are a taonga depends on just how you see that concept of taonga.
They are deeply undemocratic, and should go. And I don't accept that only Maori have a right to decide on them.
I want to see the best possible representative system for the country, and I think STV gives the best value for the vote. But it needs an upper house of some sort. The select committees here were supposed to provide some level of supervision over our MMp system but have failed in that dismallyAnd yes Keith, one contentious thread at a time ;-)
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With respect to the current account deficit: there will be a one-off win as New Zealand shareholders sell their shares.
Thereafter, there will be a stream of smaller losses as AIA earnings leave the country, which ultimately will be equal to or greater than the original sum paid. (Otherwise those Canadian pensioners are not going to get value for money).
Now, if the New Zealanders who sell their shares reinvest in some other productive enterprise (preferably more productive), it will all even out. If they sink it into houses and champagne and fur-bearing trout farms, it won't.
Hickey asks "What on earth was the government thinking? Clearly, it was not thinking clearly at all."
Well, look at the long term consequences of Kiwisaver and the Cullen Fund: an ever-increasing pool of investment capital, some of which will stay here to fund local businesses, some of which will earn investment income overseas. The kind of thinking that really likes that idea may be the kind of thinking at work here.
Now, of course shareholders should be able to exercise their property rights and sell to whomever they please. But if Hickey and the Herald care that much about the current account deficit, and can take a longer view than next week, they would see this as a rational policy, albeit a very badly timed one.
I come back to the point that there are two kinds of foreign investment, and the Herald deliberately confuses the two.
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