Mobilisation of capital

Press, 23 October 1980, Page 1

Mobilisation of capital

The Cabinet Economic Committee believed the merger was likely to be ■ economically advantageous to New Zealand, said Mr Muldoon. One of the points to take; into account, he said, was. .that if New Zealand was to have a closer economic;- relationship with Australia, ' New Zealand must have , some very big enterprises. " - , “The other thing to be borne > in mind is that this country must have organisations which can mobilise New Zealand capital for participation in major -projects ahead,” Mr Muldoon said. . . . -Mr Muldoon summed up his reaction to. the merger by. describing it as a “more efficient mobilisa- < tioh of New Zealand' capital.’’ • “There are a Jot of people .-in New '.Zealand who. are: wedded ;. to .the idea of small enterprises?’ . Mr Muldoon-said? addings ':

"But small enterprises thrive when big enter-* prises are doing well.” There was a contrary view f?om the Government member of Parliament for Horowhenua (Mr G. W. F. Thompson). He said the merger could threaten the public inter’est.. . . . “The New Zealand economy . has developed with the emphasis on small and medium-size businesses and competition from many units. The absorpof units through a merger and a take-over can lead to monopoly situations and the public interest could be threatened.” . Mr Rowling said he was alarmed about the implication of the merger. He >said that the combined new grouping would be the biggest company in New;Zealand and would be so big it would be able to tell the Government what to do. ■ I -■ ; . ■ ■■ i

It apparently had the approval of the Commerce Commission, but he could not understand how that! came about. This was Government policy coming about with a vengeance. Big companies got bigger while smaller ones went to the wall. Mr Rowling said he did not agree that the companies had to merge so that they had the capital support. to compete with overseas companies for large projects. That could be achieved by coni sortiums or joint ventures, The Government had made the merger possible by selling the public shares in Tasman last year. Since then, Fletchers and Challenge had made S2O million in capital gains

Mr Beetham described the merger as a further step in the destruction of competitive private enterprise in New Zealand and one which would lead to industrial chaos. It meant that New Zealand was approaching a similar industrial structure to that which developed in the corporate states in the 19305, which would not only control a large segment of the New Zealand economy, but would have a near monopoly control over this country’s credit facilities, said ■Mr Beetham. Much of the control and direction of the country would effectively be put into the hands of a small group of people and the merger would deny a growing number of individual New Zealanders control over the country’s producing assets. "It is potentially the most dangerous economic move in New Zealand,’’ Mr Beetham said.

"The concentration of corporate power will stimulate an equal concentration of trade-union power, with the potential for industrial chaos. “The fact that such a merger could take place is final evidence that the Commerce Commission is a toothless tiger,” he said.

Mr Knox said the new company had given him a guarantee that no jobs would be- lost by. the merger. ■

After speaking to the new management, Mr Knox said, he had received a clear message that jobs for existing workers would be retained, and that new openings would become available. “I have been assured by Fletchers that there will be no redundancies or layoffs. But we will be giving further study to the position, We must be certain that full employment is maintained," Mr Knox said.

Fletchers had informed him that the new corporation would be wholly New Zealand-owned. That was what the F.O.L. had been saying should be the situation for New Zealand industry. The New Zealand Chambers of Commerce have asked that the plight of "smaller businessess” not be lost sight of amidst "all the euphoria” of the merger. Speaking from Wellington last evening, the executive vice-president of the chambers, Mr A. R. Simm, described the merger as "exciting news for New Zealand and for overseas investment.” However, it should be remembered that the smaller businesses are the ones that do the nuts and bolts operations, he said. His organisation was concerned that the Government had lost all sight of the plight of the smaller businesses, the private companies of good, • average size. “They’ are still suffering from the raiding of. their cash resource by taxation on illusory profit

and by the inroads of inflation,” he said.

The merger as such could give private enterprise a bad name, said the acting president of Federated Farmers (Mr Storey) in Wellington yesterday. He said the sheer size of the accumulated assets of the.; proposed group would make a nonsense of the philosophy of competition inherent in the private enterprise concept. The federation had three major objections to the merger.

One was the way in which a major conglomerate of that size would remove the competition spirit from a country which had come to depend on competition for survival. This decision could mean that other companies might group in a defensive position also for survival.

The second objection was that the nature of the main operation would not- help the farming industry form a land usage point of view. Forestry would inevitably take precedence, leaving more productive land users without the necessary resource. The third objection was the siphoning of resources from within the group to forestry and secondary industries which would naturally follow a move such as the proposed merger. Which . ever way he looked at it would mean major resources moving away from agriculture. “This proposed merger is a major test of the effectiveness of the Commerce Act”

Details of take-over, Page 18