While public attention has been focused on the domestic fast-track consenting process for infrastructure and mining, Associate Minister of Finance David Seymour has been pushing through another fast-track process — this time for foreign investment in New Zealand.

But it has had almost no public scrutiny.

If the Overseas Investment (National Interest Test and Other Matters) Amendment Bill becomes law, it could have far-reaching consequences. Public submissions on the bill close tomorrow.

A product of the ACT-National coalition agreement, the bill commits to amend the Overseas Investment Act 2005 “to limit ministerial decision making to national security concerns and make such decision making more timely”.

There are valid concerns that piecemeal reforms to the current act have made it complex and unwieldy. But the new bill is equally convoluted and would significantly reduce effective scrutiny of foreign investments — especially in forestry.

A three-step test
Step one of a three-step process set out in the bill gives the regulator — the Overseas Investment Office which sits within Land Information NZ — 15 days to decide whether a proposed investment would be a risk to New Zealand’s “national interest”.

If they don’t perceive a risk, or that initial assessment is not completed in time, the application is automatically approved.

Transactions involving fisheries quotas and various land categories, or any other applications the regulator identifies, would require a “national interest” assessment under stage two.

These would be assessed against a “ministerial letter” that sets out the government’s general policy and preferred approach to conducting the assessment, including any conditions on approvals.

Other mandatory factors to be considered in the second stage include the act’s new “purpose” to increase economic opportunity through “timely consent” of less sensitive investments. The new test would allow scrutiny of the character and capability of the investor to be omitted altogether.

If the regulator considers the national interest test is not met, or the transaction is “contrary to the national interest”, the minister of finance then makes a decision based on their assessment of those factors.

Inadequate regulatory process
Seymour has blamed the current screening regime for low volumes of foreign investment. But Treasury’s 2024 regulatory impact statement on the proposed changes to international investment screening acknowledges many other factors that influence investor decisions.

Moreover, the Treasury statement acknowledges public views that foreign investment rules should “manage a wide range of risks” and “that there is inherent non-economic value in retaining domestic ownership of certain assets”.

Treasury officials also recognised a range of other public concerns, including profits going offshore, loss of jobs, and foreign control of iconic businesses.

The regulatory impact statement did not cover these factors because it was required to consider only the coalition commitment. The Treasury panel reported “notable limitations” on the bill’s quality assurance process.

A fuller review was “infeasible” because it could not be completed in the time required, and would be broader than necessary to meet the coalition commitment to amend the act in the prescribed way.

The requirement to implement the bill in this parliamentary term meant the options officials could consider, even within the scope of the coalition agreement, were further limited.

Time constraints meant “users and key stakeholders have not been consulted”, according to the Treasury statement. Environmental and other risks would have to be managed through other regulations.

There is no reference to te Tiriti o Waitangi or mana whenua engagement.

No ‘benefit to NZ’ test
While the bill largely retains a version of the current screening regime for residential and farm land, it removes existing forestry activities from that definition (but not new forestry on non-forest land). It also removes extraction of water for bottling, or other bulk extraction for human consumption, from special vetting.

Where sensitive land (such as islands, coastal areas, conservation and wahi tapu land) is not residential or farm land, it would be removed from special screening rules currently applied for land.

Repeal of the “special forestry test” — which in practice has seen most applications approved, albeit with conditions — means most forestry investments could be fast-tracked.

There would no longer be a need to consider investors’ track records or apply a “benefit to New Zealand” test. Regulators may or may not be empowered to impose conditions such as replanting or cleaning up slash.

The official documents don’t explain the rationale for this. But it looks like a win for Regional Development Minister Shane Jones, and was perhaps the price of NZ First’s support.

It has potentially serious implications for forestry communities affected by climate-related disasters, however. Further weakening scrutiny and investment conditions risks intensifying the already devastating impacts of international forestry companies. Taxpayers and ratepayers pick up the costs while the companies can minimise their taxes and send profits offshore.

Locked in forever?
Finally, these changes could be locked in through New Zealand’s free trade agreements. Several such agreements say New Zealand’s investment regime cannot become more restrictive than the 2005 act and its regulations.

A “ratchet clause” would lock in any further liberalisation through this bill, from which there is no going back.

However, another annex in those free trade agreements could be interpreted as allowing some flexibility to alter the screening rules and criteria in the future. None of the official documents address this crucial question.

As an academic expert in this area I am uncertain about the risk.

But the lack of clarity underlines the problems exemplified in this bill. It is another example of coalition agreements bypassing democratic scrutiny and informed decision making. More public debate and broad analysis is needed on the bill and its implications.

Dr Jane Kelsey is emeritus professor of law, University of Auckland, Waipapa Taumata Rau. This article is republished from The Conversation under a Creative Commons licence. Read the original article.

Article by AsiaPacificReport.nz

New Zealand-based Canadian billionaire James Grenon owes the people of this country an immediate explanation of his intentions regarding media conglomerate NZME. This cannot wait until a shareholders’ meeting at the end of April.

Is his investment in the owner of The New Zealand Herald and NewstalkZB nothing more than a money-making venture to realise the value of its real estate marketing subsidiary? Has he no more interest than putting his share of the proceeds from spinning off OneRoof into a concealed safe in his $15 million Takapuna mansion?

Or does he intent to leverage his 9.6 percent holding and the support of other investors to take over the board (if not the company) in order to dictate the editorial direction of the country’s largest newspaper and its number one commercial radio station?

Grenon has said little beyond the barest of announcements that have been released by the New Zealand Stock Exchange. While he must exercise care to avoid triggering statutory takeover obligations, he cannot simply treat NZME as another of the private equity projects that have made him very wealthy. He is dealing with an entity whose influence and obligations extend far beyond the crude world of finance.

While I do not presume for one moment that he reads this column each week, let me suspend disbelief for a moment and speak directly to him.

Come clean and tell the people of New Zealand what you are doing and, more importantly, why.

Over the past week there has been considerable speculation over the answers to those questions. Much of it has drawn on what little we know of James Grenon. And it is precious little beyond two facts.

Backed right-wing Centrist
The first is that he put money behind the launch of a right-wing New Zealand news aggregation website, The Centrist, although he apparently no longer has a financial interest in it.

The second fact is that he provided financial support for conservative activists taking legal action against New Zealand media.

When I contacted a well-connected friend in Canada to ask about Grenon the response was short: “Never heard of him . . . and there aren’t that many Canadian billionaires.”

In short, the man who potentially may hold sway over the board of one of our biggest media companies has a very low profile indeed. That is a luxury to which he can no longer lay claim.

It may be that his interest is, after all, a financial one based on his undoubted investment skills. He may see a lucrative opportunity in OneRoof. After all, Fairfax’s public listing and subsequent sale of its Australian equivalent, Domain, provided not only a useful cash boost for shareholders but the creation of a stand-alone entity that now has a market cap of about $A2.8 billion.

Perhaps he wants a board cleanout to guarantee a OneRoof float.

If so, say so.

Similar transactions
Although spinning off OneRoof could have dire consequences for the viability of what would be left of NZME, that is a decision no different to similar transactions made by many companies in the financial interests of shareholders.

There is a world of difference, however, between seizing an investment opportunity and seeking to secure influence by dictating the editorial direction of a significant portion of our news media.

If the speculation is correct — and the billionaire is seeking to steer NZME on an editorial course to the right — New Zealand has a problem.

Communications minister Paul Goldsmith gave a lamely neoliberal response reported by Stuff last week: He was “happy to take some advice” on the development, but NZME was a “private company” and ultimately it was up to its shareholders to determine how it operated.

Let me repeat my earlier point: NZME is an entity whose influence and obligations extend far beyond the crude world of finance (and the outworn concept that the market can rule). Its stewardship of the vehicles at the forefront of news dissemination and opinion formation means it must meet higher obligation than what we expect of an ordinary “private company”.

The most fundamental of those obligations is the independence of editorial decision-making and direction.

I became editor of The New Zealand Herald shortly after Wilson & Horton was sold to Irish businessman Tony O’Reilly. On my appointment the then chief executive of O’Reilly’s Independent News & Media, Liam Healy, said the board had only one editorial requirement of me: That I would not advocate the use of violence as a legitimate means to a political end.

Only direction echoed Mandela
Coming from a man who had witnessed the effects of such violence in Northern Ireland, I had no difficulty in acceding to his request. And throughout my entire editorship, the only “request” made of me by O’Reilly himself was that I would support the distribution of generic Aids drugs in Africa. It followed a meeting he had had with Nelson Mandela. I had no other direction from the board.

Yes, I had to bat away requests by management personnel (who should have known better) to “do this” or “not do that” but, without exception, the attempts were commercially driven — they did not want to upset advertisers. There was never a political or ideological motive behind them. Nor were such requests limited to me.

I doubt there is an editor in the country who has not had a manager asking for something to please an advertiser. Disappointment hasn’t deterred their trying.

In this column last week, I wrote of the dangers of a rich owner (in that case Washington Post owner Jeff Bezos) dictating editorial policy. The dangers if James Grenon has similar intentions would be even greater, given NZME’s share of the news market.

The journalists’ union, E tu, has already concluded that the Canadian’s intention is to gain right-wing influence. Its director, Michael Wood, issued a statement in which he said: “The idea that a shadowy cabal, backed by extreme wealth, is planning to take over such an important institution in our democratic fabric should be of concern to all New Zealanders.”

He called on the current NZME board to re-affirm a commitment to editorial independence.

Michael Wood reflects the fears that are rightly held by NZME’s journalists. They, too, will doubtless be looking for assurances of editorial independence.

‘Cast-iron’ guarantees?
Such assurances are vital, but those journalists should look back to some “cast-iron” guarantees given by other rich new owners if they are to avoid history repeating itself.

I investigated such guarantees in a book I wrote titled Trust Ownership and the Future of News: Media Moguls and White Knights. In it I noted that 20 years before Rupert Murdoch purchased The Times of London, there was a warning that the newspaper’s editor “far from having his independence guaranteed, is on paper entirely in the hands of the Chief Proprietors who are specifically empowered by the Articles of Association to control editorial policy”, although there was provision for a “committee of notables” to veto the transfer of shares into undesirable hands.

To satisfy the British government, Murdoch gave guarantees of editorial independence and a “court of appeal” role for independent directors. Neither proved worth the paper they were written on.

In contrast, the constitution of the company that owns The Economist does not permit any individual or organisation to gain a majority shareholding. The editor exercises independent editorial control and is appointed by trustees, who are independent of commercial, political and proprietorial influences.

There are no such protections in the constitution, board charter, or code of conduct and ethics governing NZME. And it is doubtful that any cast-iron guarantees could be inserted in advance of the company’s annual general meeting.

If James Grenon does, in fact, have designs on the editorial direction of NZME, it is difficult to see how he might be prevented from achieving his aim.

Statutory guarantees would be unprecedented and, in any case, sit well outside the mindset of a coalition government that has shown no inclination to intervene in a deteriorating media market. Nonetheless, Minister Goldsmith would be well advised to address the issue with a good deal more urgency.

He might, at the very least, press the Canadian billionaire on his intentions.

And if the coalition thinks a swing to the right in our news media would be no bad thing, it should be very careful what it wishes for.

If the Canadian’s intentions are as Michael Wood suspects, perhaps the only hope will lie with those shareholders who see that it will be in their own financial interests to ensure that, in aggregate, NZME’s news assets continue to steer a (relatively) middle course. For proof, they need look only at the declining subscriber base of The Washington Post.

Postscipt
On Wednesday, The New Zealand Herald stated James Grenon had provided further detail, of his intentions. It is clear that he does, in fact, intend to play a role in the editorial side of NZME.

Just how hands-on he would be remains to be seen. However, he told the Herald that, if successful in making it on to the NZME board, he expected an editorial board would be established “with representation from both sides of the spectrum”.

On the surface that looks reassuring but editorial boards elsewhere have also been used to serve the ends of a proprietor while giving the appearance of independence.

And just what role would an editorial board play? Would it determine the editorial direction that an editor would have to slavishly follow? Or would it be a shield protecting the editor’s independence?

Only time will tell.

Devil in the detail
Media Insider columnist Shayne Currie, writing in the Weekend Herald, stated that “the Herald’s dominance has come through once again in quarterly Nielsen readership results . . . ” That is perfectly true: The newspaper’s average issue readership is more than four times that of its closest competitor.

What the Insider did not say was that the Herald’s readership had declined by 32,000 over the past year — from 531,000 to 499,000 — and by 14,000 since the last quarterly survey.

The Waikato Times, The Post and the Otago Daily Times were relatively stable while The Press was down 11,000 year-on-year but only 1000 since the last survey.

In the weekend market, the Sunday Star Times was down 1000 readers year-on-year to stand at 180,000 and up slightly on the last survey. The Herald on Sunday was down 6000 year-on-year to sit at 302,000.

There was a little good news in the weekly magazine market. The New Zealand Listener has gained 5000 readers year-on-year and now has a readership of 207,000. In the monthly market, Mindfood increased its readership by 15,000 over the same period and now sits at 222,000.

The New Zealand Woman’s Weekly continues to dominate the women’s magazine market. It was slightly up on the last survey but well down year-on-year, dropping from 458,000 to 408,000. Woman’s Day had an even greater annual decline, falling from 380,000 to 317,000.

Article by AsiaPacificReport.nz

Last week, on 26 February 2025, President Prabowo Subianto officially launched Indonesia’s first bullion banks, marking a significant shift in the country’s approach to gold and precious metal management.

This initiative aims to strengthen Indonesia’s control over its gold reserves, improve financial stability, and reduce reliance on foreign institutions for gold transactions.

Bullion banks specialise in buying, selling, storing, and trading gold and other precious metals. They allow both the government and private sector to manage gold-related financial transactions, including hedging, lending, and investment in the global gold market.

Although bullion banks focus on gold, this move signals a broader trend of Indonesia tightening control over its natural resources. This could have a significant impact on West Papua’s coal industry.

With the government already enforcing benchmark coal prices (HBA) starting this month, the success of bullion banks could pave the way for a similar centralised system for coal and other minerals.

Indonesia also may apply similar regulations to other strategic resources, including coal, nickel, and copper. This could mean tighter government control over mining in West Papua.

If Indonesia expands national control over mining, it could lead to increased exploitation in resource-rich regions like West Papua, raising concerns about land rights, deforestation, and indigenous displacement.

Indonesia joined BRICS earlier this year and is now focusing on strengthening economic ties with other BRICS countries.

In the mining sector, Indonesia is using its membership to increase exports, particularly to key markets such as China and India. These countries are large consumers of coal and mineral resources, providing an opportunity for Indonesia to expand its export market and attract foreign direct investment in resource extraction.

India eyes coal in West Papua
India has shown interest in tapping into the coal reserves of the West Papua region, aiming to diversify its energy sources and secure coal supplies for its growing energy needs.

This initiative involves potential collaboration between the Indian government and Indonesian authorities to explore and develop previously unexploited coal deposits in West Papuan Indigenous lands.

However, the details of such projects are still under negotiation, with discussions focusing on the terms of investment and operational control.

Notably, India has sought special privileges, including no-bid contracts, in exchange for financing geological surveys — a proposition that raises concerns about compliance with Indonesia’s anti-corruption laws.

The prospect of coal mining in West Papua has drawn mixed reactions. While the Indonesian government is keen to attract foreign investment to boost economic development in its easternmost provinces, local communities and environmental groups express apprehension.

The primary concerns revolve around potential environmental degradation, disruption of local ecosystems, and the displacement of indigenous populations.

Moreover, there is scepticism about whether the economic benefits from such projects would trickle down to local communities or primarily serve external interests.

Navigating ethical, legal issues
As India seeks to secure energy resources to meet its domestic demands, it must navigate the ethical and legal implications of its investments abroad. Simultaneously, Indonesia faces the challenge of balancing economic development with environmental preservation and the rights of its indigenous populations.

While foreign investment in Indonesia’s mining sector is welcome, there are strict regulations in place to protect national interests.

In particular, foreign mining companies must sell at least 51 percent of their shares to Indonesian stakeholders within 10 years of starting production. This policy is designed to ensure that Indonesia retains greater control over its natural resources, while still allowing international investors to participate in the growth of the industry.

India is reportedly interested in mining coal in West Papua to diversify its fuel sources.

Indonesia’s energy ministry is hoping for economic benefits and a potential boost to the local steel industry. But environmentalists and social activists are sounding the alarm about the potential negative impacts of new mining operations.

During project discussions, India has shown an interest in securing special privileges, such as no-bid contracts, which could conflict with Indonesia’s anti-corruption laws.

Implications for West Papua
Indonesia, a country with a population of nearly 300 million, aims to industrialise. By joining BRICS (primarily Brasil, Russia, India, and China), it hopes to unlock new growth opportunities.

However, this path to industrialisation comes at a significant cost. It will continue to profoundly affect people’s lives and lead to environmental degradation, destroying wildlife and natural habitats.

These challenges echo the changes that began with the Industrial Revolution in England, where coal-powered advances drastically reshaped human life and the natural world.

West Papua has experienced a significant decline in its indigenous population due to Indonesia’s transmigration policy. This policy involves relocating large numbers of Muslim Indonesians to areas where Christian Papuans are the majority.

These newcomers settle on vast tracts of indigenous Papuan land. Military operations also continue.

One of the major problems resulting from these developments is the spread of torture, abuse, disease, and death, which, if not addressed soon, will reduce the Papuans to numbers too small to fight and reclaim their land.

Mining of any kind in West Papua is closely linked to, and in fact, is the main cause of, the dire situation in West Papua.

Large-scale exploitation
Since the late 1900s, the area’s rich coal and mineral resources have attracted both foreign and local investors. Large international companies, particularly from Western countries, have partnered with the Indonesian government in large-scale mining operations.

While the exploitation of West Papua’s resources has boosted Indonesia’s economy, it has also caused significant environmental damage and disruption to indigenous Papuan communities.

Mining has damaged local ecosystems, polluted water sources and reduced biodiversity. Indigenous Papuans have been displaced from their ancestral lands, leading to economic hardship and cultural erosion.

Although the government has tried to promote sustainable mining practices, the benefits have largely bypassed local communities. Most of the revenue from mining goes to Jakarta and large corporations, with minimal reinvestment in local infrastructure, health and education.

For more than 63 years, West Papua has faced exploitation and abuse similar to that which occurred when British law considered Australia to be terra nullius — “land that belongs to no one.” This legal fiction allowed the British to disregard the existence of indigenous people as the rightful owners and custodians of the land.

Similarly, West Papua has been treated as if it were empty, with indigenous communities portrayed in degrading ways to justify taking their land and clearing it for settlers.

Indonesia’s collective view of West Papua as a wild, uninhabited frontier has allowed settlers and colonial authorities to freely exploit the region’s rich resources.

Plundering with impunity
This is why almost anyone hungry for West Papua’s riches goes there and plunders with impunity. They cut down millions of trees, mine minerals, hunt rare animals and collect precious resources such as gold.

These activities are carried out under the control of the military or by bribing and intimidating local landowners.

The Indonesian government’s decision to grant mining licences to universities and religious groups will add more headaches for Papuans. It simply means that more entities have been given licences to exploit its resources — driving West Papuans toward extinction and destroying their ancestral homeland.

An example is the PT Megapura Prima Industri, an Indonesian coal mining company operating in Sorong on the western tip of West Papua. According to the local news media Jubi, the company has already violated rules and regulations designed to protect local Papuans and the environment.

Allowing India to enter West Papua, will have unprecedented and disastrous consequences for West Papua, including environmental degradation, displacement of indigenous communities, and human rights abuses.

As the BRICS nations continue to expand their economic footprint, Indonesia’s evolving mining landscape is likely to become a focal point of international investment discourse in the coming years.

Natural resources ultimate target
This means that West Papua’s vast natural resources will be the ultimate target and will continue to be a geopolitical pawn between superpowers, while indigenous Papuans remain marginalised and excluded from decision-making processes in their own land.

Regardless of policy changes on resource extraction, human rights, education, health, or any other facet, “Indonesia cannot and will not save West Papua” because “Indonesia’s presence in the sovereign territory of West Papua is the primary cause of the genocide of Papuans and the destruction of their homeland”.

As long as West Papua remains Indonesia’s frontier settler colony, backed by an intensive military presence, the entire Indonesian enterprise in West Papua effectively condemns both the Papuan people and their fragile ecosystem to a catastrophic fate, one that can only be avoided through a process of decolonisation and self-determination.

Restoring West Papua’s sovereignty, arbitrarily taken by Indonesia, is the best solution so that indigenous Papuans can engage with their world on their own terms, using the rich resources they have, and determining their own future and development pathway.

Ali Mirin is a West Papuan academic and writer from the Kimyal tribe of the highlands bordering the Star mountain region of Papua New Guinea. He lives in Australia and contributes articles to Asia Pacific Report.

Article by AsiaPacificReport.nz

Analysis by Keith Rankin.

On 12 August, the national-led government announced a new policy program to impose more sanctions on New Zealand’s beneficiaries, meaning people of working age (18-64) whose primary income is a government benefit. (Refer RNZ Government further increases sanctions for beneficiaries, 12 August 2024.)

This policy direction is intended to discourage people from seeking income support from the sovereign state, and therefore income and income support from private sources.

(The official narrative is that a significant number of beneficiaries are ‘workshy’, and are not pulling their weight as wealth-creators for Aotearoa. But the first thing this government did was to reinforce monetary policy in ways to make sure there is enough unemployment in the labour market to ensure that rising wages are not ‘inflationary’. Aotearoa New Zealand is currently in recession; seasonally-adjusted GDP peaked in the third quarter of 2022.)

The principal private source of income support for young adults is the Department of Mum and Dad. (The second most important source of private income support is charity; the third most important source is begging and other forms of recipient-initiated money transfers.)

This is not new. It was the same before the welfare state became a thing; indeed, it extended before 1938 (and increasingly today) to the Department of Aunty and Uncle. The welfare state in New Zealand – essentially 1938 to 1984 – reached its zenith during the Prime Ministership of Robert Muldoon. Pushing people towards Mum and Dad as providers of adult income support is not new in recent times; it was about 1990 that the definition of the age of a child, for the purpose of student allowances, extended to anyone under 25.

People aged 18-29 (and older)

New Zealanders in this age cohort are increasingly likely to be living ‘at home’. In many cases the Department of Mum and Dad has stepped in, giving as much as a 100% subsidy with respect to their adult-children’s living costs. With state accommodation subsidies rapidly diminishing in real terms, this leniency by parental landlords reinforces other incentives for young adults to live in their parents’ homes. And it creates decreasing incentives for adult children – at least middle-class adult children – to even bother with MSD (the Ministry of Social Development which administers a large proportion of benefits in New Zealand).

Is home-dependency a desirable situation: for adult children; for parents of adult children; for the wider socio-economy?

Underclass / Lower Working Class Family Economy, in the context of Modern Class Categories

In Aotearoa New Zealand and other western capitalist countries, traditional labels for socio-economic classes are probably out of date.

This is my preferred categorisations:

• Upper Class: the ‘one-percenters’.

• Upper Middle-Class: the ‘ten-percenter’ ‘bourgeoisie‘; professionals such as managers and lawyers, the ‘political class’, many who would consider themselves politically left-wing and classed in modern statistics as ‘labour’ (albeit high-salary recipients). Their employers, where private sector, might be Upper Class or recipients of government contracts. This class includes small business people with university qualifications supporting practitioner businesses, such as community doctors and dentists. The bulk of ‘the elite’. The Upper Middle Class tend to have a fiscally conservative ‘mercantilist’ mindset, meaning that they see the economic purpose of life as ‘making money’ (or protecting the government’s coin), whether to hoard (miserliness; sovereign wealth) or to accumulate money as a precursor to future spending. They think a lot about ‘nest eggs’, and are smugly ‘financially literate’.

• Lower Middle-Class: successful small and medium businesspeople (‘petit-bourgeoisie‘) and free-lancers; entrepreneurs, ‘tradies’ including builders, successful actors and most professional sports-people, farmers. (The lower middle class, in New Zealand, includes many immigrants.) They are vulnerable to extended recessions. Advantaged lower middle-class people have upper middle class or upper working class partners to soften the cushion of income uncertainty and variability. There are opportunities for upward mobility into upper class.

• Upper Working-Class: skilled salaried people such as technicians, teachers, hospital clinicians, secretaries, librarians; military; have some security of tenure. (The upper working class includes many immigrants.) Some upward mobility to upper middle class, though such mobility has costs as well as benefits; management-type jobs are sometimes what David Graeber called “bullshit jobs”. Vulnerable to extended recessions, though many are less vulnerable than the lower middle class. Consequence of extended unemployment is downward mobility.

• Lower Working-Class: the ‘precariat’, employed most of the time, albeit with uncertain hours and minimal security of tenure; includes stable casual work. They tend to lack formal vocational qualifications. Subject to downward mobility in tough times; may experience upward mobility in good times.

• Underclass: intermittent wage workers, unstable casual work; self-employed without capital (eg sex-workers); long-term working-age non-labour-force (including people in this category for ‘mental health’ reasons); extra-legal entrepreneurs and workers, beggars. Some members of the underclass live ‘at home’ with middle-class parents.

We should also note that those who ‘punch above their weight’ as bearers of children, as creators of the next generation – in 2020s’ Aotearoa – are immigrants and the underclass.

An important feature of both immigrant and underclass life is that the teenage and young adult children contribute to the family economy. (For a good understanding of how the family economy works, look for a good social history of the 1930s’ Great Depression. When I was writing my MA thesis on this topic, I was contacted by an older resident of Holloway Road in Wellington – a lower working class precinct – who told me that that one street had many unemployed single young people who were not seeking help from government agencies because of the terms and conditions which came with such help. Essentially, they were both getting some help from Mum and Dad – for example, free board – while also eking money by undertaking precarious forms of insecure employment and underclass self-employment.)

An important sign of the distressed family economy in contemporary Aotearoa is the significantly increased level of abstinence from secondary school participation. Another part of that family economy is for young individuals to secure a stable fulltime income stream as their contribution to the family economy.

In the idealised form of family economy which prevailed as reality from 1938 to 1984, ‘Dad’ would have a well-paid job that could support a wife and three children. Mum would also be employed once the youngest child was of school age, often returning to a profession such as teaching or nursing.

In the 1985-to-today era, the income of ‘Mum’ became a necessity, not a ‘nice to have’. What then would happen when Mum’s necessary income was lost through unemployment? She never qualified for an MSD benefit; she was expected to get a benefit from the Department of Dad. (Mum and Dad also probably incurred debt, often at high interest rates; for example, payday loans.)

If the Department of Dad could not support a family without a Mum-income, then, when there was no Mum-income, other family members – especially teenagers – would stand up to meet the challenge. This was particularly relevant to lower-working-class families; and increasingly to the increasing numbers of underclass families. Teenagers would leave secondary school as soon as they could; if not sooner.

One way to meet the challenge was to become a beneficiary; maybe a NEET (not in employment, education or training) though there are many near-NEETs who earn around $80 per week in addition to their benefits, or possibly to get a student allowance by pretending to be a tertiary student. For lower-working-class families, the benefits paid to young adult family members had the advantage of not being stood down if another family member became employed. MSD benefits provide a more reliable income contribution than a precarious low-wage job for which hours vary from week to week.

The new welfare policy of the National Government is likely to unravel this lower-class family subsistence economy for which some degree of benefit income is necessary to keep the lights on or the debt-collector from the door. This wider social process of unravelling could turn ugly. And, as we have already seen this month in the United Kingdom, we could start seeing pogroms against immigrants and their families.

Spouses aged 55-64 (mostly women) younger than their partners

I start here by noting that, since ‘marriage equality’, the word ‘partner’ seems to have been used less. Nevertheless, in law and in modern custom, the words ‘spouse’ and ‘partner’ may include people who are not in formal civil unions such as ‘marriage’.

The real ‘squeezed middle’ are married women aged 55-64. Generally, they do not qualify for an unemployment benefit if they are made redundant. Those under 65 with partners over 65 used to have the right to New Zealand Superannuation at a slightly lower level than the full amount. One of the first things the Labour Government did, in 2020, was to repudiate that right. While the spouses of retired people may apply for an unemployment benefit, it’s not automatic. Indeed, retired husbands will get a bigger pension if their income-less wives leave them!

Such women may be providing ‘senior-services’, including palliative services, to their parents. They are often the chief executives of the Department of Mum and Dad, dispensing unemployment benefits and rental subsidies to some of their adult children. They may be significant providers of care to grandchildren. Their older partners may have health issues (older husbands are nearer, on average, to death than the spousal age difference would indicate, because male life expectancies are lower); and on this account the wives may be taking the lead in setting up ‘give-a-little’ pages. These women are also the people who once were the principal principals of the voluntary (ie charity) sector; a sector with reduced capacity yet facing ‘skyrocketing’ demands.

They may have health issues themselves; the numbers of 60-year-old women dying are increasing markedly, in part because such women are in increasing competition for jobs and healthcare resources with each other. (I understand that there is an upsurge in Canada of women in their sixties, along with other demographic groups, who are taking advantage of that country’s liberal ‘assisted dying’ provisions.)

Those who do qualify for a benefit following redundancy may face significant standdowns (eg because of receipt of redundancy pay), or because the labour market is increasingly unkind to older job-seekers. The MSD will be requiring substantial commitments of time towards (often futile) job-seeking, and therefore less time on providing multi-generational family care.

Older married women performing traditional roles have not been well looked after by this government nor its recent predecessors, despite there having been many recent Ministers of the Crown who would be widely accepted as feminists. I am sure that the present Ministers of Finance and Social Development would both consider themselves to be modern feminists.

Conclusion

We need an enabling public income support system; not the present disabling system which increasingly incentivises ‘moral hazard’ behaviours, such as adult children preferring to receive their benefits from the Department of Mum and Dad, and increased financial stress, time poverty, and health burnout being perpetrated upon Mum (and Dad).

Tomorrow I will propose a simple affordable solution which better fits centre-right than centre-left philosophies.

*******

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Today I read this article (David Seymour calls for sweeping changes to make the Reserve Bank more accountable, NZ Herald, 26 October) showing David Seymore’s wish to double-down on New Zealand’s financial model.

The Ponzi financial model operates much more broadly than the fraudulent Ponzi schemes associated the likes of players Bernie Madoff and Charles Ponzi. In particular, the model can and does operate without the fraudulent deception of these renowned schemers. And it can operate on a global scale.

Ponzi finance takes place when ‘investors’ (people wishing to make money from unspent money) advance saved funds to ‘players’ (understood by ‘investors’ as ‘intermediaries’ such as banks or funds managers). Ponzi players then use the funds for their own gratification (gambling or consumption) rather than reinvesting those funds into a venture which would be expected to yield a profit. Instead of servicing the ‘investors’ with genuine earnings, Ponzi players service existing ‘investors’ by borrowing from new ‘investors’. A Ponzi player ‘borrows from Peter to pay Paul’, rather than paying Paul out of income earned. Peter and Paul are example ‘investors’. (In a fraudulent scheme, one could say ‘rob’ instead of ‘borrow’; although even in fraudulent schemes ‘investors’ only actually lose when the scheme unravels.)

(Note that ‘investor’ is one of the most ambiguous words in the English language. In correct economic language, a saver is not an investor; but a true financial intermediary – such as a legitimate bank – is an investor. An investor is a spender, or a direct financer of spending; a purchaser or manufacturer of new assets. A true investor is neither a saver nor a consumer nor a purchaser of existing real or financial assets. Essentially, an investor operates a productive business or acts in a businesslike way, sinking capital and awaiting an eventual return in the form of profit or interest. Investment is ‘giving up something real to create greater future value’. Investment is not the purchase of existing assets in the hope that those assets can be sold in the future at a higher price; such speculative behaviour is gambling, though not all gambling is imprudent. Genuine investment may be called productive gambling, whereas speculative ‘investment’ is unproductive gambling.)

Non-fraudulent Ponzi finance takes place when there is no overt deception. ‘Players’ and ‘investors’ are open about their activities, though there may be degrees of naivete or self-deception on the part of either.

The nation-state Ponzi model

A ‘nation-state actor’ is not the same as a government. A nation-state such as New Zealand, when considered as an economy or as a financial actor, may be called New Zealand Incorporated (NZ Inc. for short). The chart here (Intersectoral financial balances from 1980: New Zealand, from Visualising Countries’ Deficits and Debts, Surpluses and Credits, Evening Report, 29 May 2023) shows, from 1993, the telltale fingerprint of a nation-state ‘player’ adopting the Ponzi financial model as its ‘business model’. New Zealand Inc. is the player in this chart. ‘Peter’ and ‘Paul’ are represented (in green) as the ‘foreign sector’. Paul has always been very happy to ‘invest’ in New Zealand Inc. because Peter keeps supplying the funds which pay Paul. Likewise, Paul pays Peter. There is an ongoing long-term flow of funds from foreign savers to New Zealand consumers as well as to other foreign savers. Much of it is channelled through asset markets; thus the end-consumers are often people who sell their houses or shares to speculative ‘investors’.

The funds from foreign Paul and foreign Peter are channelled into the New Zealand private sector, supporting a mix of private consumption, private speculation, and private investment. The Government gets its cut, indirectly, by taxing the indebted and profligate private sector. In New Zealand, unlike some other nation-state economies, the government is usually able to collect most of the taxes that it levies; so the government is enriched by the process while looking ‘squeaky clean’; the government is taxing debt rather than incurring debt.

While the Ponzi financial model was not fully operable in New Zealand until 1993, it was established in 1985 with the deregulation of the financial sector and the adoption of a monetary policy which ensured that interest rates would be high enough to attract Peter’s and Paul’s money.

We should note that, before 1985, it was also normal for New Zealand to receive a substantial net inflow of foreign funds. But, until then, New Zealand Inc. was following a traditional development model. In that development model, New Zealand – and especially the New Zealand government – was an active borrower, with the foreign sector sufficiently responding to New Zealand’s requests for investment funds. As an active borrower, those pre-1985 debts would be serviced out of incomes generated because of those debts.

In the development financial model, government deficits are a central feature, driving the economic development of the nation-state. In the Ponzi financial model, governments feed off private deficits; while not always in surplus, governments tend to be surplus-seeking. In the development model, governments are the active party. In the Ponzi financial model, the Reserve Bank – the immediate player – sends interest-rate signals to foreign Peter and foreign Paul; Peter and Paul become the rentier ‘investors’, and the banking system of the nation-state is the Ponzi intermediary. In New Zealand at least, the Reserve Bank plays this financial game in part of its own volition; and in part because it is mandated by the government to do so, through the Policy Targets Agreement which David Seymour wishes to modify. The irony is that the Policy Targets Agreement is the ultimate in Government intervention, which is most strongly advocated by those who otherwise claim to be anti-interventionists.

National economies which pursue the Ponzi financial model have overvalued exchange rates for their national currencies; this is the result of the ongoing inflow of foreign funds from the many Peter and Paul ‘investors’. That is the key feature and consequence of setting elevated interest rates, where ‘elevated’ means interest rates sufficiently high to successfully bid for Peter’s and Paul’s spare money.

Excess elite consumption in New Zealand is thus underwritten by foreign ‘investors’, foreign Peter and foreign Paul; indeed, such excess consumption – debt-financed enjoyment – has been funded in that way in New Zealand since 1985, when the floating exchange rate mechanism was introduced. New Zealand has become one economy in which the foreign-exchange market is dominated by ‘investors’ and ‘players’ rather than by exporters and importers. Not in the top-fifty economies in the world based on gross domestic product (GDP), New Zealand Incorporated is among the top 15 in foreign-exchange transactions.

While private sector deficits in New Zealand did not become prominent until 1993, we may see from Governments run financial deficits; it’s their role to do so (Evening Report, 17 Oct) that private sector surpluses are the global norm, and when global private sector balances approach zero then trans-national financial crises are the result. New Zealand only shows private sector surpluses during financial crises, and even then these private surpluses are smaller than in most other countries.

To see the converse financial model, we may note these two countries: Netherlands and Denmark. These countries, with their financial signatures opposite to New Zealand’s, in slightly different ways pursue the ‘mercantilist financial model’, which relies on an undervalued exchange rate. (Noting that a central feature of the Ponzi nation-state financial model is an overvalued exchange rate.) Netherlands, if you like, is Paul. And Denmark is Peter. Whereas New Zealand’s consumers – especially its elite consumers – overconsume, Netherlands’ and Denmark’s underconsume. Netherlands’ Paul and Denmark’s Peter transfer material enjoyment to New Zealand consumers. In general, in the Ponzi financial model, ‘investors’ transfer consumption enjoyment to ‘players’.

Netherlands is a small nation-state within the Eurozone of the European Union. And Denmark, though in the European Union, has its own currency and banking system, untied to the European Central Bank. Denmark Inc. is the closest to being the antithesis to New Zealand Inc. As such, it became the best-known country in the world for its negative interest rates, which its Reserve Bank operated from 2012 to 2022. (Refer Reuters 22 July 2022, Denmark’s decade-long experiment with negative rates seen ending soon.)

The Netherlands’ case is more complex; it is linked to an unstable (and perhaps unique) example of the Ponzi financial game; the example which operated within the Eurozone during the first decade of this century. In that 2000s’ scenario, inflation in the southern European Union countries created an effective currency overvaluation there, and an effective currency undervaluation in the north of the Eurozone. Netherlands became the northern exemplar, while Greece was the southern exemplar. The dynamic in this case was the ‘investors’ in Eurozone north whereas the south was the ‘player’. In this case the game crashed in the early 2010s, and now the Eurozone as a whole is playing the role of ‘investor’ in the same global Ponzi game which New Zealand and Denmark (and others) have been playing since the 1990s.

Why do I call this game a ‘transfer’ from ‘investors’ to ‘players’? If we look back over the decades, we see a direct subsidisation of ‘player’ living standards by ‘investors’. Under conventional financial principles, this would be called a player ‘liability’ rather than a ‘transfer’. However, the issue is that players’ debt to income ratios have not been increasing, thanks to a mix of economic growth and inflation. (This economic growth is largely despite the engagement with Peter and Paul, not because of their ‘investment’ in us.) New Zealand as a player has never had to repay its debts to its Peter and Paul ‘investors’. NZ Inc. services these debts with ease, by enlarging these debts. This debt servicing becomes even easier when global inflation diminishes the accrued debts as well as the interest payable. Nevertheless, New Zealand continues to play the Ponzi game; in order to keep its exchange rate overvalued, New Zealand must pay Paul by borrowing more from Peter than it is paying to Paul. The player pays its interest (and any repayments) from newly borrowed funds.

Iceland’s banks played the same Ponzi game in the mid-2000s. It got severely burned by the 2008 Global Financial Crisis. But, after what amounted to a painless bankruptcy, Iceland Inc. recovered soon enough.

What applied in the past will not necessarily apply in the future. Global deflation, if that happens in the future, would increase the debt-to-GDP ratio of NZ Inc. But global stagflation looks to be a much more likely bet for much of the next twenty years. New Zealand’s accumulated debts to date would then largely disappear into the ether of financial history. New yet-to-be-incurred debts would probably enjoy the same fate. Nevertheless, New Zealand’s financial game will end when there are no longer willing Peters to facilitate New Zealand’s servicing of Paul. Paul might even ask for repayment in full. New Zealand’s exchange rate would then fall, and Paul’s payout in New Zealand dollars would convert to a lesser amount of Euros. The only substantial consequence for New Zealand would be that the Peters and Pauls of this world would no longer see New Zealand as exceptional; would no longer see New Zealand as a player who would pay them higher ‘risk-free’ returns than other players.

Is it a Problem?

This state of affairs is not (and has not been) a problem for any of the participants, because they are all ‘consenting adults’, and all parties have been rewarded so far. Indeed as noted in my Governments run financial deficits; it’s their role to do so (Evening Report, 17 Oct), this is a case where two wrongs do seem to make a right. Two forms of destabilising financial behaviour – mercantilist and Ponzi – offset each other. So long as the Danes and the Dutch keep playing their game, they (taken together) do not want to be paid out simultaneously; they want to keep playing. Repayment for them would mean that their incorporated countries, long-used to private sector surpluses, having to enjoy deficits; they would have to spend more than they earn, something they are not used to and have never been comfortable with.

Looking back over the last 30 years, New Zealanders have benefitted; and Dutch and Danes have lost, though they would have lost by more if they had ‘invested’ elsewhere at lower interest rates. They have been the givers, and New Zealanders have been the takers; and have been the takers without any form of systemic financial default.

However, this Ponzi financial model is a past and present problem in that it has substantial adverse distributional implications for New Zealand (high domestic wealth and income inequality); and, distributional implications for Netherlands and Denmark too (less domestic inequality than they otherwise would have had). In this sense, it is Netherlands and Denmark – not New Zealand – who become the winners of the game.

The differences, domestically, are linked to the interest rates. New Zealand’s financial model depends on setting interest rates above the norm for economically advanced nation-states. Netherlands and Denmark’s mercantilist model depends on setting interest rates below that norm. High interest rates create inequality; and perpetuate cost-of-living crises; crises which are ameliorated by the overvalued exchange rate keeping elite consumption cheap. Low interest rates in Netherlands and Denmark diminish inequality, reduce the costs of housing and other basic needs, and, through their undervalued exchange rates, raise the prices of elite consumables.

Summary

The New Zealand economy has worked according to a simple Ponzi model since 1985. The model relies to a degree on New Zealand exceptionalism which works by creating the perception in world financial markets that New Zealand is a sure bet: both ‘safe’ and providing ‘investors’ with relatively high returns. The model relies on the government’s anti-inflation mandate to justify the higher domestic interest rates required.

Interest rates in New Zealand are set to ensure an inflow of foreign savings which stimulates (while indebting) New Zealand’s private sector, and which sees significant amounts of that credit pass through the private sector into government coffers.

New Zealand’s Ponzi financial model is stable so long as New Zealand retains its exceptional status in foreign perception. Is New Zealand’s Ponzi financial model stabilising? Yes, given the mercantilist games played elsewhere in the global financial ecosystem. How will the model fare in the next Great Depression? Possibly no worse than Iceland fared in the 2008 Global Financial Crisis.

Should New Zealand Incorporated shift to another financial model? Yes, because ultimately two wrongs do not make a right. And because this model underpins the increasingly grotesque inequality we see in Aotearoa New Zealand. And because the two extranational Ponzi games which we are familiar with from the late 2000s, that played by Iceland’s banks and that played by the Southern Eurozone (including Ireland who got away with it; see Economic Growth, Ireland compared to Australasia, Evening Report, 12 Oct 2023), both crashed and burned soon enough.

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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

The gamble that the previous FijiFirst government took in 2016 — in reducing the value added tax (VAT) rate from 15 percent to 9 percent — was basically done to please the people, says Fiscal Review Committee chair Richard Naidu.

He said this gamble failed miserably because government expenditure continued to increase while the income it received was reduced.

“I think that for a long time, the government has been underfunded,” Naidu said.

“We forget that VAT used to be at 15 percent and personal income tax used to kick in at $16,000 [NZ$12,000] and now kicked in at $30,000 [NZ$22,000].

“So, what happened was that for the last 10 or so years, we have reduced the amount of tax we take, basically to please people.

“We’ve cut the VAT and we’ve cut personal income tax, but we’ve kept spending.

“We took a gamble that somehow this would create economic growth and the gamble failed.”

Debt level a threat
He said the possibility of adopting some of the old tax rates was unavoidable as the level of debt the country had was a threat in itself.

“The advice that we are getting is that we have to get our debt to GDP (gross domestic product) ratio down and over a 10-year period.

“What we are saying is that debt does not drive what we do.

“We have to have a national vision; we have to execute that vision, but we have to keep in mind the debt, because the debt is one of the threats that we are facing.

“Now really all we are saying is that in respect of some taxes — not all — we might have to go back to the old rates.

“So, when people say this is terrible, this should never happen and we’re being cruel and imposing pain, people need to remember that this is actually what the tax rates used to be.”

Naidu stressed that the abnormal situation that people were referring to was what the economy endured in the last 10 years when it could not raise enough money to fund critical infrastructure investments.

Playing catchup
He said this was why the current government had to play catchup and raise funds to meet the needs of the people.

“That means we have delayed investments in critical infrastructure.

“Why is it that we have thousands of people in the Suva-Nausori corridor who do not have water for 10-12 hours a day.

“It is because we did not invest and now, we have to play catchup, we have to invest harder and faster, and we don’t have the money and somehow, we have to raise that money quickly.

“So, we do not have a lot of choices in terms of the investments that we have to make.”

Meri Radinibaravi is a Fiji Times reporter. Republished with permission.

Article by AsiaPacificReport.nz

Foreign investors could be sent to jail in Fiji for breaking a new investment law, says the prominent Suva law firm Munro Leys.

The company said the “vague and unsatisfactory” new Investment Act could create greater uncertainty for foreign investors.

In a legal alert to its clients, Munro Leys lawyers also said aspects of the new law could do “more harm than help” and “poor legal drafting leaves us more confused and slightly alarmed”.

It said serious investors relied on the laws of their target country to give them certainty and transparency.

“The Investment Act, unfortunately, does the opposite. In place of transparency, there is significant potential for confusion and frustration,” the legal firm said.

Munro Leys criticises some of the wording of the new law as “vague and almost impossible to legally pin down”.

“If we don’t know who a ‘foreign investor’ is and when they are investing, it is impossible to know which rules apply,” the legal alert said.

New regulations criticised
The firm’s alert also criticised new regulations which required foreign investors to bring into Fiji their total investment amount within three months of “incorporation” and said an investor could be prosecuted for failing to do so.

“The penalty for the offence, for an individual, is a fine not exceeding $10,000 or imprisonment for a term not exceeding five years or both. Bodies corporate can be fined up to $50,000.

“To make matters worse, it’s not clear to whom this three-month rule applies. From a plain reading of the regulations, it applies only to those foreign investors investing in restrictive activities,” the legal advice said.

“However, the authorities appear to have expressed the view that it applies to all foreign investors.

“It is difficult to see the government prosecuting a foreign investor which does not bring in its money on time. But criminalising delay may create other issues for investors going to the legality of their investment and double down on the uncertainty that has already been created.”

Criticising Section 7 of the Act, Munro Leys said that an investor was required to send an investment proposal to the government for consent to invest in certain “critical sectors” but it was not clear what those sectors were.

“No one knows what the proposal should say, what criteria the minister will apply in his/her decision and how long the minister will take to approve it.

Other problems
“It seems that the government intends for regulations to be made to decide what sectors need ministerial approval. [But] with about a month to go before the new law comes into effect, there are no regulations.

“The problems are not confined to new investors.

“Existing investors, including those who complied with the old Foreign Investment Act, are not immune.

“They may now need to apply for permission to make new investments. Some companies who were not previous “foreign investors” may find they are now in that category (and vice versa).”

The Act will come into effect from August.

Questions sent to Attorney-General Aiyaz Sayed-Khaiyum, Fiji Commerce and Employers Federation (FCEF) and Fiji Chamber of Commerce and Industry remained unanswered.

Luke Nacei is a Fiji Times reporter. Republished with permission.

Article by AsiaPacificReport.nz

Prime Minister Jacinda Ardern has spoken to media to demonstrate to the US market that New Zealand is “open for business”, having arrived in the US yesterday.

Her trip includes meeting members of Congress and the UN Secretary-General, attending a launch event for sustainable meat exports, delivering the Harvard Commencement speech, meeting with California governor Gavin Newsom, and meeting with executives of tech giants like Twitter and Microsoft.

With US President Joe Biden in Japan for the launch, and Ardern having only just recovered from covid-19, the hoped-for meeting between the two is still up in the air, but there is optimism from the New Zealand side it will happen.

Ardern’s first event was a sit down with major American tourism media, as part of the drive to update the US market about New Zealand, and she will later meet meet with representatives of US multinational investment management firm BlackRock.

Ardern said the message of New Zealand being open for business and open for travel was really important at this time.

Travelling with a business delegation and doing as much as possible to open doors on their behalf is important, she said.

“Our high level meeting with BlackRock enabled our business delegation to sit face-to-face with a number of influential individuals in their investor sector from the United States. A really thoughtful, interesting discussion and dialogue which all of our business representatives had the chance to participate in.”

Ardern said the dominant issue discussed was sustainability.

Watch the PM speaking

PM Ardern in the US.      Video: RNZ News

One-on-one with UN chief
Ardern also had a one-on-one with the United Nations Secretary-General Antonio Guterres, where Ukraine was top of the agenda.

Ardern was keen to hear the secretary-general’s perspective on the war in Ukraine and to offer New Zealand’s support in the ongoing diplomatic work.

She said it was a chance to “discuss everything from the conflict in Ukraine to climate change and more broadly, the role that New Zealand can play in UN reform which we’ve long been an advocate and supporter of”.

“A really fruitful discussion but really useful to hear the secretary general’s reflections on the current conflict,” she said.

Ardern said that predominately the focus was on issues of climate sustainability and the war on Ukraine.

“Any reflection on the relationship between China and the United States whilst ultimately that is a matter for them, what we will continue to advocate is for peace and stability in our region, including any discussions around increasing tensions around Taiwan.”

Ardern said NZ would continue to be strong advocates of the US using the CPTPP as its port of call for a meaningful trade option.

‘An alternate framework’
“They have proposed an alternate framework, our mission as a country needs to be to keep our aspirations high but also work with what’s on the table,” she said.

“Ultimately the CPTPP is an existing framework that offers a significant amount from New Zealand’s perspective. However we will also engage with what’s currently on the table.”

Ardern does not yet have an update on a meeting with Biden.

Ardern said that having an independent foreign policy meant New Zealand had been very consistent in maintaining its values of peace, stability, the use of dialogue and the importance of multilateral institutions like the UN as an honest broker in difficult situations.

“There is tension in our region, we have our various periods of time seen escalation in language, we will constantly call, on New Zealand’s behalf and ours, on peace and stability in our region.”

The Chinese foreign minister is doing a tour of a number of Pacific nations. Ardern is not surprised by this.

“It’s not necessarily just presence, it’s the nature of that presence and the intention around it,” she said.

‘We want collaboration’
“From our perspective within our region, we’re very firm that yes, of course, we want collaboration in areas where we have shared concern, issues like climate adaptation and mitigation, we want quality investment and infrastructure in our region, we don’t want militarisation, we don’t want an escalation of tension.

“We want peace and stability so we will remain firm in our values.”

She said the question would continue to be whether some of those engagements were necessary.

Ardern’s day will be rounded off with a repeat appearance on The Late Show with Stephen Colbert.

Just before departing New Zealand, she virtually attended the launch of the Indo-Pacific Economic Framework, an alliance of 13 countries including New Zealand that proposes joint efforts on climate change and digital issues but is widely considered a US attempt to limit China’s economic influence.

The IPEF also includes the members of “the Quad” – the US, Australia, India and Japan – who have been meeting in Tokyo, along with Brunei, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam.

Together, the grouping represents 40 percent of the world’s GDP.

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

The Asia-Pacific region is at a crossroads today – to further breakdown or breakthrough to a greener, better, safer future. 

Since the Economic and Social Commission for Asia and the Pacific (ESCAP) was established in 1947, the region has made extraordinary progress, emerging as a pacesetter of global economic growth that has lifted millions out of poverty. 

Yet, as ESCAP celebrates its 75^th anniversary this year, we find ourselves facing our biggest shared test on the back of cascading and overlapping impacts from the COVID-19 pandemic, raging conflicts and the climate crisis.  

Few have escaped the effects of the pandemic, with 85 million people pushed back into extreme poverty, millions more losing their jobs or livelihoods, and a generation of children and young people missing precious time for education and training. 

As the pandemic surges and ebbs across countries, the world continues to face the grim implications of failing to keep the temperature increase below 1.5°C – and of continuing to degrade the natural environment. Throughout 2021 and 2022, countries across Asia and the Pacific were again battered by a relentless sequence of natural disasters, with climate change increasing their frequency and intensity. 

More recently, the rapidly evolving crisis in Ukraine will have wide-ranging socioeconomic impacts, with higher prices for fuel and food increasing food insecurity and hunger across the region.

Rapid economic growth in Asia and the Pacific has come at a heavy price, and the convergence of these three crises have exposed the fault lines in a very short time. Unfortunately, those hardest hit are those with the fewest resources to endure the hardship. This disproportionate pressure on the poor and most vulnerable is deepening and widening inequalities in both income and opportunities. 

The situation is critical. Many communities are close to tipping points beyond which it will be impossible to recover. But it is not too late. 

The region is dynamic and adaptable.

In this richer yet riskier world, we need more crisis-prepared policies to protect our most vulnerable populations and shift the Asia-Pacific region back on course to achieve the Sustainable Development Goals as the target year of 2030 comes closer — our analysis shows that we are already 35 years behind and will only attain the Goals in 2065.

To do so, we must protect people and the planet, exploit digital opportunities, trade and invest together, raise financial resources and manage our debt. 

The first task for governments must be to defend the most vulnerable groups – by strengthening health and universal social protection systems. At the same time, governments, civil society and the private sector should be acting to conserve our precious planet and mitigate and adapt to climate change while defending people from the devastation of natural disasters. 

For many measures, governments can exploit technological innovations. Human activities are steadily becoming “digital by default.” To turn the digital divide into a digital dividend, governments should encourage more robust and extensive digital infrastructure and improve access along with the necessary education and training to enhance knowledge-intensive internet use.

Much of the investment for services will rely on sustainable economic growth, fueled by equitable international trade and foreign direct investment (FDI). The region is now the largest source and recipient of global FDI flows, which is especially important in a pandemic recovery environment of fiscal tightness. 

While trade links have evolved into a complex noodle bowl of bilateral and regional agreements, there is ample scope to further lower trade and investment transaction costs through simplified procedures, digitalization and climate-smart strategies. Such changes are proving to be profitable business strategies. For example, full digital facilitation could cut average trade costs by more than 13 per cent. 

Governments can create sufficient fiscal space to allow for greater investment in sustainable development. Additional financial resources can be raised through progressive tax reforms, innovative financing instruments and more effective debt management. Instruments such as green bonds or sustainability bonds, and arranging debt swaps for development, could have the highest impacts on inclusivity and sustainability.

Significant efforts need to be made to anticipate what lies ahead. In everything we do, we must listen to and work with both young and old, fostering intergenerational solidarity. And women must be at the centre of crisis-prepared policy action. 

This week the Commission is expected to agree on a common agenda for sustainable development in Asia and the Pacific, pinning the aspirations of the region on moving forward together by learning from and working with each other. 

In the past seven-and-a-half decades, ESCAP has been a vital source of know-how and support for the governments and peoples of Asia and the Pacific. We remain ready to serve in the implementation of this common agenda. 

To quote United Nations Secretary-General Antonio Guterres, “the choices we make, or fail to make today, will shape our future. We will not have this chance again.”

*******

Armida Salsiah Alisjahbana is the United Nations Under-Secretary-General and Executive Secretary of the Economic and Social Commission for Asia and the Pacific.

This last week I watched Push: The Global Housing Crisis on Al Jazeera, featuring Leilani Farha, Canadian lawyer and former United Nations special rapporteur on adequate housing. She is now leader of The Shift (the global movement to secure the human right to housing).

The central takeaway from this ‘Witness’ documentary is that the housing crisis is a global financial crisis (as opposed to the Global Financial Crisis of 2008).

The problem is essentially the concept of housing (and the real estate that it sits on) as more a form of financial wealth (‘financial wealth’ is an oxymoron, by the way; it means ‘wealth comprised of claims on wealth’) than a human right; as such, whether housing is occupied or not – or whether it is occupied by sojourners rather than residents – is incidental. In this financial view, all that matters is the dollar value attributed to assets, and that wealth is somehow generated through a bidding process that raises that dollar values of financial assets.

Managed Funds, especially Government (or government-mandated) Pension Funds

While we may emphasise the self-perceived entitlement culture of individual speculators in financial assets, the point of emphasised by Leilani Farha was the role of managed funds, which means that – indirectly – many of us, with savings ‘invested’ in these funds, are financial speculators without thinking of ourselves as such.

A particularly important class of managed funds is government funds, including and especially government pension funds. The worst kind of these funds would be the kind such as the New Zealand Superannuation Fund created by Roger Douglas in 1974 and thankfully disestablished by Robert Muldoon in 1976. The Canadian government pension fund is notorious in this regard. And New Zealand does have a smaller-scale government fund of this sort; it came to be known after its establishment in the 2000s as the ‘Cullen Fund’.

We can generalise here, by thinking of Sovereign Wealth Funds, many of which are classed as ‘pension funds’; and we can think of private managed funds – the mainstay of the financial industry – many of which (like KiwiSaver) are government partnerships with that industry. Governments, around the world, have a deep stake in the financialisation of real estate assets; both as governments, and in the private capacity (as speculators) of finance industry and technocratic and bureaucratic and elected elites. In the formal sense, as citizen holders of public equity, we are all speculators when government-directed funds are deployed in the speculative financial marketplace.

Yes, including the homeless and the underhoused among us; the deprivileged among us can still feel good that our unrealisable public equity increases as our housing and other material rights deteriorate. We own notional shares in the lands we are evicted from.

The way around this financialisation approach to ‘wealth management’ is the ‘pay-as-you go’ approach, which was last championed – in New Zealand – by Sir Robert Muldoon. New Zealand Superannuation is still largely funded – as it must be – out of current economic product; and not through the sale of financial assets that we hope can be converted by retirees into goods and services of a certain value. Further, pay-as-you-go is the essence of the Basic Universal Income, an income distribution mechanism based on democratic accounting standards (ie based on basic human rights); a mechanism that can form the basis for the re-engagement of the rapidly marginalising populations of each country in the world.

(The scandal of Covid19 is how the entitled minority of the world’s population has spread this virus to the disentitled – including the disengaged poor – infecting them, and killing them in numbers on a World War scale.)

Pandora Papers

Other stories this week underscore the conjoint problems of financialisation, inequality, and impoverishment. One such story is the release of the Pandora Papers’ leak to global media organisations.

These papers reveal a comprehensive story, not of illegality, but of uber-elite entitlement; of legal theft.

Control of price-appreciating financial assets, as revealed by these papers, is more than ‘mere’ tax avoidance. It is theft in the fullest sense of the word, in that it is increasing the claims of the entitled on the world’s finite economic output, thereby diminishing the claims of the disentitled, and pushing them into unsustainable survival practices. Financialisation is an entitlement mechanism, and it applies to both the demanders and the suppliers of financial products.

Entitlement is not only a problem of the uber-elite. Indeed, through our KiwiSaver accounts and the like, we all come to align ourselves to some degree with the highly entitled. Further, the highly entitled go well beyond the ‘one-percenters’; rather the top nine percent (or even the top nineteen percent) of the ’99-percenters’ tend to have an entitlement mindset towards property values and interest rates, even while blaming the conspicuous ‘one-percent’ for the world’s woes.

One test of entitlement culture is a person’s attitude to interest payments. People who believe that they are entitled to an interest ‘return’ on saved income over and above the inflation rate are people who believe that they are entitled, as a form of self-congratulation, to an increased share of the world’s goods and services. It was in medieval times clearly (and correctly) understood that it was sinful to ‘make money from money’. This is distinct from making a profit from investments, such as planting a crop, irrigating a field, retaining livestock for breeding, or learning a trade.

In reality, the ‘real rate of interest’ is sometimes positive; that’s when lenders (ie savers) are scarce and borrowers (including investors and willing governments) are abundant. Under those conditions – rare in the lifetimes of people alive today – a legitimate premium is payable to people holding rather than spending money. The reverse conditions are much more familiar – an abundance of unspent money, and an aversion to deficit financing – in which, naturally, the real rate of interest should be negative.

Indeed, it was the negative real rates of interest during the global Great Inflation of the 1970s and early 1980s, that rumbled the uber-entitled, and led to the global financialisation coup of the late 1970s and (in New Zealand) the 1980s; the world event that is commonly called the neoliberal revolution. Theft through financial chicanery has prospered ever since.

New Zealand’s Official Cash Rate (OCR)

The first raising of the OCR in New Zealand for several years is indicative of this entitled view that real interest rates (as an indicator of real financial returns) should always be above zero. As such, the management of interest rates is the illiberal intervention in the marketplace that is most used to support economic liberalism.

By and large, the New Zealand public falls for the argument that higher interest rates are needed to slow down the rate of increase of financial asset prices (eg of house prices). There is little evidence for this, and indeed the 2004-08 house price inflation was in large part a result of rising interest rates.

The problem is that genuine economic borrowers are discouraged by high or rising interest rates, and that rising interest rates make very little difference to speculative borrowers. Thus, when interest rates increase, increasing proportions of all borrowed funds are lent to acquire financial assets with a view to making returns through capital gain. (Capital gains’ taxes are rarely sufficient to offset this reality; the main driving force pushing money into speculation is reduced lending to the real economy.) This truth is clearly evident by a cursory inquiry into the behaviour of house prices during periods of rising real interest rates.

In addition to rising interest rates ‘inadvertently’ stimulating financialised markets, the countries which intervene to raise their interest rates the most find that their exchange rates increase, as foreign money increasingly treats domestic money as a speculative asset. While this currency appreciation may dampen inflation in these countries – while exacerbating inflation pressures in the countries with falling exchange rates – it also does much harm to the export industries of these countries. Export industries suffer the double whammy of higher borrowing costs and an appreciating exchange rate. Indeed, the aggressive raising of interest rates to engineer an appreciating exchange rate has all the entitlement hallmarks of a Ponzi scheme. (Just look at New Zealand in years such as 1987, 1995-97, and 2004-08. If you don’t believe me, look at Iceland in the years before 2008.)

We should note that if rising interest rates make any difference at all to the global rate of inflation, they indeed exacerbate rather than diminish inflation. The only proviso to this is that rising global interest rates also create global economic crises, such as 1929-31, 1979-82, 1989-93, 2000-01, 2005-08, and 2010-12. While rising global interest rates are inflationary – they raise business costs, including higher required rates of profit – global recessions are clearly deflationary. Higher interest rates only reduce inflation by creating recessions, an even worse problem.

Basic Principle

Consumption entitlements should be distributed as human rights, and not as greed premiums. They should be paid as we go, and not divvied out from greed funds. As it is, most entitlements are of the greedy, by the greedy, for the greedy. Inasmuch as we are incentivised to contribute to government-sponsored greed funds, most of us are a little bit greedy. We live in a greedocracy, not an economic democracy. A true democracy distributes public equity dividends – as the economy goes – as a human right.

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

* August 2000: IMF Report contends Irish property prices are almost certainly heading for a collapse in the medium-term.
* Between 2007 to 2013: Irish house prices (nominal) fall 54%.
* March 2021: IMF Report contends New Zealand’s unsustainable house price rises could trigger a pronounced correction.
* April 2021: New Zealand house prices up 16.1% in a year.

A ‘ghost estate’ of unoccupied homes in Ireland circa 2010. Even buoyant housing markets can change quickly. Source: Daily Mail

At a recent event in Auckland, I remonstrated that house prices could slide. It may not seem possible, but it is. You could have felt the perspiration dampen the room. As I provided an uncannily similar series of events in the mirror of history, the mood began to darken.

You see, when people’s hope is built on a beneficial pile they are invested in — and you point out that pile could reduce, you risk their aversion. Not because you may be right or wrong, but because you are dashing hopes in something they rely on to be true: That property prices will keep going up.

Wealth Morning does not exist to toe the line. We are here to challenge assumptions, provide warnings, and find opportunities beyond the radar.

The trite disclaimer that ‘past performance does not provide a guide to future performance’ is not entirely correct. It may apply to fund management returns over, say, a decade. But past performance over a much longer period — I’m talking 40 years or more — could provide signs.

Property prices have been shooting up. Because debt is cheap, supply is short, cashed-up migrant money is still evident, and high sale prices support the momentum. I will show you, in a moment, how these conditions can change on a dime and pull the rug from under you.

Look, it’s our job to point out risk factors. We may not be right. But if, in our view, we see a child about to get hit by a bus, we will shout.

Yet property, at least here in New Zealand, should always find some underlying support. It is another emerging asset class that may be looking more and more unsteady…

Bitcoin

‘You’re a sharemarket investor. What do you know about cryptocurrency?’

You may well ask this. And I will tell you I worked for the world’s first regulated Bitcoin fund in Europe for over a year. I understand that sophisticated investors can make money on Bitcoin and other cryptocurrencies. Because they are volatile.

But when you analyse the asset, you find support for the price to be flimsy.

No supporting assets.

No guarantee from a respected government.

Competition from 5,000 other cryptocurrencies.

Threat of regulation over concerns of widespread financing of illicit transactions.

An alternative digital payment system under discussion by the US Federal Reserve.

Climate change concerns: Bitcoin mining activity has an annual carbon footprint equal to New Zealand.

As an investor, I might buy Bitcoin if I could see a path for it to go from around 50k to 200k within a year. A 150k profit could cover the potential risk of near-total loss of my 50k. So you see the stakes.

But I do not see Bitcoin at 200k next year. Frankly, there are more risk-managed investments with attractive upside out there. Where the potential gain does not come with such heady downside.

It is all about pricing risk.

Is it worth it?

Often, when you run the ruler, it is not.

Property

‘You’re a sharemarket investor. You have a vested interest in seeing property slide!’

We do, in part. As residential property investment has become more challenging, our enquiry rate is up. For many people, there are simpler ways now to seek income and potential growth.

But this is not the whole story. We are also property owners and investors. And we still see attractions in the asset class, particularly with commercial property. So much so that many of the shares we analyse are based on property assets.

My sense of the risk currently on residential property begins with my memory as a kid in the 1980s. Actually being unable to sell a house. Having to rent it to a chain-smoking, deep-fat frying family from England to move on.

Then, after more than a year, seeing my parents get next to nothing for it.

In the late 1970s in New Zealand, house prices fell around 40% in real terms. In fact, it was a lost decade, with homes being worth no more at the end than they were at the start.

The run-up we saw from 1971 to 1974 has eerie similarities to the longer 2011 to 2021 build-up. It was based on high net migration and shortages of builders and materials.

Muldoon’s government became alarmed then, as Ardern’s one seems to be now. Planning controls were loosened to allow more flats to be built in cities. My neighbourhood is testament to this. Historic villas subdivided with 1970s units behind.

Even more compelling is the example of the Roaring Twenties. An economic boom period following the last world pandemic — the Spanish Flu — and heavy ‘money printing’ stemming from World War I. Pent-up demand and low interest rates fed raging asset prices. Manhattan real estate reached its all-time high in 1929, as did stocks across the New York Stock Exchange.

Then came the unravelling.

By 1932, Manhattan real-estate prices had fallen 67%. They did not fully recover until the 1960s.

The stock market lost more than 80% of its value from its 1929 high to its mid-1932 low.

In this case, the potential advantage of more liquid assets came to pass.

By 1936, stocks had in real terms fully recovered. They went on to outperform property growth by a factor of 5.2 between 1920-1939.

Of course, this discussion is speculative. The Roaring 1920s are very different from the Roaring 2020s.

Yet, if we look at other more recent bubbles a century later, we see some similarities here in New Zealand.

The Irish property bubble

In August 2000, the IMF warned that Irish property prices were almost certainly heading for a collapse in the medium-term.

Between 2007 to 2013, Irish house prices (nominal) fell 54%.

In March 2021, the IMF warned that ‘New Zealand’s unsustainable house price rises could trigger a pronounced correction’.

Yet there is a key point of difference.

Ireland in the 2000s was outbuilding demand. About 75,000 units were being built each year for a similar population size to New Zealand. By one estimation, about 12% of the workforce was engaged in construction.

In New Zealand, annual figures last year were just under 40,000 homes built. We’d need to see at least a 50% increase to get into Irish over-building territory.

The more likely source of risk here comes down to leverage. As it so often does.

When Ireland joined the European Union in 1999, it soon come to enjoy much lower interest rates than before. People were encouraged to take on debt to get into homes. Property was seen as a guaranteed bet, and mortgage debt exploded.

Household debt-to-GDP rates in Ireland reached very high levels, as we see today in New Zealand.

Interest rates in New Zealand now sit around their lowest levels ever. And the mortgage brokers we speak to routinely see DTIs (debt-to-income ratios) of 6x.

Ireland, in contrast, has learnt hard lessons in more recent times. And today, most residential lending in Ireland is restricted by the Central Bank to a DTI of 3.5x.

The Central Bank of Ireland refers to this as the Loan to Income limit:

‘The LTI limit restricts the amount of money you can borrow to a maximum of 3.5 times your gross income. So, for example, a couple with a combined income of €100,000 you can borrow up to a maximum of €350,000.’

It would appear the most significant risk to New Zealand property is the re-pricing or restricting of lending.

Interest deductibility rules have already re-priced loans to property investors. But the greater risk is the introduction of DTIs and inflation.

Inflation is now so evident in New Zealand it is hard to see interest rates staying low forever.

There are clear lessons from Ireland. And also Spain. You can out-build the market. And high leverage can, in the end, haemorrhage prices.

I do not see New Zealand out-building its supply gap any time soon. But I do see a lot more activity than before coupled with a twisted greed and fear gap, a debt bomb, and growing regulation.

In this regard, the ghost of Muldoon could well come to sit in auction rooms across Auckland. Especially for investor-focused residential properties.

The markets

Of course, many speculative stocks raise the same concerns in the financial markets.

Advisers will say you need to diversify. Which neutralises returns across the board and denies outperformance from a smaller number but still diversified set of high-conviction opportunities.

For those, you need to go back to assessing value. Price is what you pay. Value is what you get. A good investment should have a clear measurement of underlying value. And a view on how its price is really supported.

The key to identifying a bubble is to identify a lack of price support.

Markets are complex. But right now, we are seeing old support get shakier.

EDITOR’S NOTE: This article is general in nature and should not be construed as any financial or investment advice. To obtain advice for your specific situation, please consult an Authorised Financial Adviser. The author is involved in portfolio management for Wholesale and Eligible Investors via Wealth Morning’s Vistafolio Managed Account Service.

MIL OSI New Zealand News –

By Hans Nicholas Jong in Jakarta

A top Indonesian official has declared a halt to new oil palm plantations in the country’s heavily forested West Papua region in favour of other – “greener” – crops, apparently contradicting his vigorous earlier defences of the industry.

The remarks by Luhut Pandjaitan, the chief minister in charge of investments, including in the palm oil industry, come in the wake of a court verdict ordering the government to publish maps and concession-holder details for plantations in Papua.

“We agree that [we] no longer want palm oil development here [in Papua],” Luhut said on February 27 as quoted by CNN Indonesia. “We’ve announced a moratorium on [new] palm oil [plantations] but now we’re strengthening it.”

READ MORE: Activists sceptical of win as court orders Papua plantation maps published

Luhut, speaking during a visit to the district of Sorong in West Papua province, said the companies investing in the palm oil industry in Papua were predominantly foreign ones or those controlled by wealthy Indonesian businesses, and that their investments “don’t necessarily benefit local people.”

“Don’t [let] only rich people cut down the forests and destroy us all,” he added.

‘Not being consistent’
Edi Sutrisno, the executive director of TuK Indonesia, an NGO that advocates for social justice in the agribusiness sector, questioned the about face by Luhut, widely seen as the Indonesian government’s most vocal defender of the palm oil industry.

“We’re confused because he’s not being consistent,” Edi told Mongabay. “So far, he’s been the main supporter of palm oil. So why did he issue such a statement?”

Luhut has led Indonesia’s diplomatic battle against European Union’s plans to end recognition of palm oil as a biofuel by 2030, even threatening to withdraw Indonesia from the Paris climate agreement in retaliation.

He also owns, through his family-run conglomerate, a string of palm oil companies. Last year, he declared palm oil a key commodity for Indonesia, which is the world’s top producer, and credited the industry with helping to alleviate poverty. (An estimated 20 million Indonesians are engaged in the palm oil industry.)

“We’ll fight whoever hampers the development of the palm oil industry in Indonesia,” Luhut said last April as quoted by local media. “The palm oil industry has played a significant role in reducing the poverty rate and creating jobs.”

Papua is home to a large variety of indigenous communities and Indonesia’s last great expanse of tropical rainforest. It’s an area increasingly targeted by the plantation and logging companies that have depleted much of the tropical rainforests of Sumatra and Borneo.

The combined area of oil palm concessions in the Papua region, comprised of the provinces of West Papua and Papua, is 18,099 sq km, according to the latest figure from Papua Atlas. Papua Atlas is a real-time interactive map showing the spread of plantations and roads in Papua region developed by the Center for International Forestry Research (CIFOR).

A fifth of that figure, or 3,914 km2 (1,510 mi2), was controlled by just seven conglomerates as of 2017, according to a report by TuK Indonesia. That figure includes both developed (cleared) and undeveloped land.

“These figures show that palm oil plantation development in … Papua is almost exclusively in the hands of tycoon-controlled groups,” TuK Indonesia said in its report.

‘There’s no point’
Luhut said there were other crops better suited for the Papua region than oil palm, such as nutmeg, coffee, cacao and seaweed, which he presented to potential investors during his visit to Sorong in a “green investment” pitch.

“With green investment, people will start economic activities,” Luhut said as reported by CNN Indonesia. “The nature-based economy [will] grow and people can reap social benefits from it.”

He added the concept of green investment would contribute to protecting the forests of Papua, home to the third-largest expanse of tropical forest in the world, after the Amazon and the Congo Basin, and maintain the region as an important carbon sink in the fight against climate change.

The plan calls for $200 million in investments, said to directly benefit 60,000 households in the Papua region. He said Starbucks had agreed to invest there.

But activists are skeptical about the proposed switch, raising concerns that large-scale deforestation for palm plantations will simply be replaced by large-scale deforestation for other crops.

Franky Samperante, the director of Pusaka, an NGO that works with indigenous communities across Indonesia, said the problem with industrial-scale agriculture in Papua was not the commodity, but the development model. The top-down model as it works now, he said, fails to prioritize the needs of the local and indigenous communities, and fails to recognize their rights.

He cited the example of nutmeg, now being grown on land from which indigenous tribes were evicted in the district of Fakfak in West Papua province.

“So Luhut’s statement needs to be clarified,” Franky told Mongabay. “Green investment doesn’t only mean sustainable but we also need to ask who does it side with? If it’s only green but doesn’t side with the people, then there’s no point.”

The governor of West Papua, Dominggus Madacan, also advised residents against selling out their land to investors. He said history had shown that those who did so were inevitably impacted by deforestation and environmental degradation, including landslides.

“If you sell the land, the trees all around will be cut down and you’ll be left with bare land,” Dominggus said in Manokwari district on Feb. 25. “Then when disaster strikes, who will you blame?”

‘Textbook land grab’
Edi said the plan to invest in crops other than palm oil was similar to the government’s Merauke Integrated Food and Energy Estate (MIFEE) programme, launched in 2011 to turn Papua’s Merauke district into the “future breadbasket of Indonesia.” That project, pitched by the government as the answer to Indonesia’s food security needs, has become a “textbook land grab”, activists say.

Only two of the 10 proposed blocks in the MIFEE project are supposed to include oil palm, but Greenpeace has noted that “significantly” more oil palm concessions will be included.

“They said that MIFEE was aimed to develop rice fields, but instead it’s oil palm plantations that are being developed,” Edi said. “Don’t let the statement [by Luhut] be a manipulation to make it seem like other commodities will be developed to make the public open to the idea, when in the end it’s all about palm oil.”

He said that despite the talk of prioritizing other crops deemed to be “green,” the fact remains that palm oil continues to be the most privileged in terms of incentives and other favorable policies offered by the government.

“The tendency is for the government to give incentives only for palm oil, not for other commodities,” Edi said. “So if civil society is sceptical, it’s normal because we don’t see incentives for other crops, such as cacao. Are there any factories to process cacao in Papua?”

Franky said he was concerned the voices of indigenous Papuans would be silenced, as they have been during the palm oil rush, under the plan to attract “green investments” to the region.

“In the meeting [on green investment in Sorong], I didn’t see representatives from local communities,” he said. “I only saw representatives from the local government. So I don’t know what the people think about it. The voices so far continue to be those of the central [government] and the investors there.”

Enforcing the moratorium
Franky said that if Luhut was serious, he should follow up his latest stance with concrete action.

“There needs to be a strong policy to support Luhut’s statement,” he said. “We can’t just accept a statement from an official who’s a politician and has investments there.”

He said there needed to be stronger enforcement of a prevailing moratorium on issuing new plantation permits, as well as greater scrutiny of existing permits. President Joko Widodo imposed the moratorium in September 2018 in response to fires in 2015 that razed large swaths of forest, including inside oil palm concessions. The moratorium is expected to end no later than September 2021.

But enforcement of the moratorium has been patchy, according to a report by Pusaka. It shows that the agrarian ministry, in charge of approving the plantation permits known as HGU, issued one to the company PT Permata Nusa Mandiri for a concession Papua’s Jayapura district in November 2018 — two months after the moratorium was enacted.

The report also identified continued instances of deforestation in areas earmarked for plantations, with 2,285 sq km of forest cleared last year.

Given how much land has already been allocated for oil palm plantations, the government must conduct a sweeping review of the issued permits and do more to recognise indigenous claims to disputed land, Franky said.

Short of that, he said, Luhut’s statement will ring hollow.

The government’s lack of recognition indigenous land rights is the missing key to the development of Papua, Franky said. Indonesia is home to hundreds of indigenous groups, but for decades their land rights were trumped by state control over all public land in the country.

In 2013, a historic Constitutional Court ruling removed customary forests from under state control. Since then, President Widodo has vowed to grant customary forest ownership titles to indigenous groups.

The Papua region, covering the western half of the island of New Guinea, is home to the greatest number of indigenous groups in Indonesia, but none have been granted titles to their ancestral forests.

In Papua province alone, an estimated 6,400 sq km of forest qualifies as customary land.

Republished from Mongabay under a Creative Commons licence.

Article by AsiaPacificReport.nz

Remember the ‘knowledge economy’. It was a buzz-expression around 20 years ago. The impression was that the leading growth sectors would be in education, information, and communication. So, what has happened?
The chart converts employment numbers (fulltime equivalent jobs, where part-time jobs are counted as half a job) into indexes with a base of 1000 set at the year to March 2009 (the year of the Global Financial Crisis – GFC).
Prior to 2009, the growth sectors were ‘Information Media and Telecommunications’ and the assortment called ‘Professional, Scientific, Technical, Administrative and Support Services’. ‘Education’ and ‘Real Estate’ were slower growing sectors despite obvious boosts to the demand for these services in the 2000s’ decade.
After the GFC, the sector dominated by real estate (‘Rental, Hiring and Real Estate Services’) grew sharply, until the last 12 months when it dropped off markedly. Few surprises, except that the same thing did not also happen from 2003 to 2008.
The big employment stories this decade are the dramatic retrenchment of the 2000s’ darling ‘Information Media and Telecommunications’. And the flatlining of the education sector.
To understand what has been happening – rather than what has not been happening – we need to unpack the ‘Professional …’ hodgepodge. This assortment of services now represents 15% of all employee jobs, up from 10% in 2000.
Basically, this industry sector is ‘non-financial business services’, though there are many services to businesses in the other sectors as well. (The chart only shows 4 of 16 employment sectors.) The keywords are: ‘design’, ‘legal’, ‘accounting’, ‘marketing’, ‘management’ and ‘consulting’ services. These are sometime called ‘transaction services’, which represent ‘transaction costs’; ie the outsourced costs of other businesses doing business. We note that these services are not growing as a direct response to increased desire by consumers for these activities. Increased productivity in these sub-sectors should mean them releasing workers into other parts of the economy.
Another way of characterising these services is as ‘problem-resolving’ services. That means the increased demand for them is generated by an increased incidence of problems faced by businesses in other sectors. It also suggests that these are sub-sectors that grow as a result of their own failure; and that growth here follows from the persuasiveness of these professionals in convincing other businesses to purchase more of their professional services.
If meaningful economic growth represents the removals of obstacles (problems, barriers) that absorb too many of our resources, then this kind of employment should decline as these problems are solved, while employment in high level consumer services (which include media and liberal education) should be expanding in line with those services capacities to satisfy the higher levels of Maslow’s ‘hierarchy of needs’ (see Youtube explanation).

Why is employment in education increasing so slowly compared to employment growth generally? Why do we need 100 percent more transaction service professionals in 2018 compared to 2000, but only 15 percent more teachers? These business service professionals are very much embedded in the marketplace, yet no orthodox economic theory can explain the dramatic increase in our purchases of their services.
——
Lists of industries within the broad sectoral categories:
Professional, Scientific, Technical, Administrative and Support Services

• architectural services
• surveying and mapping services
• gardening services
• engineering design and consulting services
• computer system design and related services
• other specialised design services
• scientific research services
• scientific testing and analysis services
• veterinary services
• professional photographic services
• legal services
• accounting services
• advertising services
• market research and statistical services
• corporate head office management services
• management advice and related consulting services
• travel agency services
• employment services
• other administrative services
• building and other industrial cleaning services
• building pest control services
• packaging and labelling services

Information Media and Telecommunications

• newspaper publishing
• newspaper, periodical, book and directory publishing
• software publishing
• motion picture and video activities
• sound recording and music publishing
• radio broadcasting
• television broadcasting
• internet publishing and broadcasting
• telecommunications services
• internet service providers and web search portals
• data processing and web hosting services
• electronic information storage services
• libraries and archives
• other information services

Rental, Hiring and Real Estate Services

• real estate services
• property operators
• non-financial intangible assets (except copyrights) leasing
• video and other electronic media rental and hiring
• farm animal and bloodstock leasing
• motor vehicle and transport equipment rental and hiring
• other goods and equipment rental and hiring

Education and Training

• preschool education
• school education
• tertiary education
• adult, community and other education
• educational support services.

Pacific Media Centre Newsdesk

Timor-Leste President Francisco Guterres will make his first official overseas visit to Indonesia this week, reports Antara news agency.

President Guterres will be welcomed by President Joko Widodo at Bogor Presidential Palace, West Java, on Thursday, where the two of them will hold talks on strengthening bilateral relations.

“We see Timor-Leste as one of the closest neighbouring countries, so we have a close relation in the aspects of history, economic cooperation, as well as people to people contact,” Foreign Ministry spokesman Arrmanatha Nasir told journalists during a press briefing in Jakarta.

Francisco Guterres is chairman of the Fretilin Party, who won the presidential election in March 2017 with 57 percent of the votes from eight competing candidates. He succeeded the previous president, Taur Matan Ruak.

He had previously, and unsuccessfully, run for the presidency twice. Last year, with the backing of Timor-Leste’s founding father, Xanana Gusmao, he won decisively.

At his swearing in on 19 May 2017, Guterres pledged to assert Timor-Leste and its “principles and values” on the world stage, promoting peace, prosperity, environmental protection and the elimination of poverty, reports Antara.

-Partners-

Further, the country would pursue bilateral relationships of mutual respect, regardless of the size of each nation, he told The Guardian.

Potential cooperation
Indonesia sees Guterres’ visit as an opportunity to discuss potential cooperation that can be developed between the two countries, especially in infrastructure, energy, finance, banking, pharmaceuticals and tourism.

Some issues that Indonesia seeks to accomplish include cooperation related to taxes, investment protection and connectivity, reports Antara.

“We want to improve flight connectivity from Indonesia to Timor-Leste,” Nasir noted.

Sharing the island of Timor, the economy of Indonesia and Timo- Leste are very connected to each other.

Currently, nine Indonesian state-owned enterprises and hundreds of Indonesian companies are operating in Timor-Leste, investing about US$600 million in 18 projects there.

Also, both countries share a border market which sells a wide range of necessities, with a considerable turnover value.

“Indonesia is currently exploring cooperation to build a toll road in Timor-Leste, but I do not have the details yet,” Nasir added.

Article by AsiaPacificReport.nz