Year of the investing dragon

Press, 30 December 1988, Page 4

Year of the investing dragon

By

CHRISTOPHER MOORE

Christchurch will remember 1988 as the year of the investing dragon. Dragons are highly auspicious creatures for investors. The Year of the Dragon is an ideal time to speculate, invest and make money. Many Asian interests, especially Japanese investors, took full advantage of the good omens. Land in Hawaii, resorts in Queensland, cattle ranching in the outback and hotels in Sydney fell with regular monotony as the dragon spread its wings. Then came New Zealand’s turn. In April, Christchurch’s George Hotel was bought by a Japanese group. The neighbouring Park Terrace could also become the focus for further intensive development. Later in the year, another Japanese company bought the Clarendon Towers for $3B million, a bargain given the earlier valuation of the property at $55 million. As the year passed, the Asian investments continued. There were suggestions that Japanese interests were considering buying a local golf course to cater for the Japanese obsession with the game. In one of the latest developments, feasibility studies are understood to be continuing into a proposed $4OO million Japanese tourist development at Crail Bay, near Picton, providing for Japanese tourists travelling between Rotorua and the Southern Lakes.

The buying trip could continue during the next 12 months. There are now indications Japanese interests want to establish a large souvenir shop in Christchurch. The possibility of a future joint venture to establish a new airport on

the West Coast is not being discounted.

There have been suggestions that Japanese interests could also be interested in buying the Tourist Hotel Corporation. Another area for further Asian involvement is in reverse exports. A Japanese manufacturer of tomato paste, juice and ketchup recently announced the construction of a SNZ3I million factory in California, processing locally grown products for export to Japan. New Zealand experts see this as a viable investment. Rumours continue to circulate, but it is certain that the Dragon will continue to be financially skittish during 1989, as investors continue to mop up a surplus of finance. Gaining an accurate indication of the extent of Asian and Japanese investment in Canterbury is like opening a series of Chinese puzzle boxes.

Astute, extremely well-informed about New Zealand and the New Zealand marketplace, brilliantly ruthless, Asian business interests prefer to work discreetly and out of the media and public eye. No doubt the Japanese have timed their moves extremely well. To understand the strategy is to experience the tightly interwoven, clannish atmosphere of Japanese public and commercial life.

The dynamics of power in Japan are controlled by four main groups. There are the bureaucrats, and the Zaibatsu, or the 15 giant corporations including Mitsubishi, Jitachi and Sumitomo which run business empires, and a myriad of smaller offshoots. The third group is specialist academics. One of these, political scien-

tist Professor Seizaburo Sato, a former Prime Ministerial adviser, visited Christchurch in 1988, when he predicted increased Japanese investment in the tourist, fishing and agricultural industries.

The fourth group in the power structure is made up of the politicians, elected representatives in a volatile political environment which continues to see dramatic shifts in loyalties and interests. Taken as a whole, this structure provides an invisible international net of contacts, interests and a unique ability to pool information from a variety of sources.

Even the Japanese press is used occasionally to glean inside knowledge.

To outsiders, this small world remains isolated and enigmatic. Neville Bennett, a senior lecturer in history at the University of Canterbury and an experienced Japan watcher, believes that Japan’s investment in the tourist industry is part of a co-ordinated plan. “Japan has a massive budget surplus. Part of the scheme to correct this is through a campaign to encourage Japanese to spend more abroad.

Encouraged by the Japanese Government, Japanese business has responded. “The Japanese visitor to New Zealand will buy the package holiday from a Tokyo agent. “He or she would fly to New Zealand on a Japanese jet, to stay at a Japanese-owned hotel, play golf on a Japanese-owned golf course, travel on a Japanese-owned bus and buy gifts at a Japanese-owned shop.

“Indications are that this process is advancing very rapidly.” Tourism

would become a totally insulated experience for a Japanese visitor while New Zealand would receive very little in direct benefits, he said.

“Profits would be totally concentrated.”

Local reaction to the Japanese connection in Canterbury varies. While some believe that the region will gain long-term benefits from a closer Japanese involvement with the tourist industry, others claim there will be very few direct benefits to New Zealand from investments believed to have been prompted by economic self-interest rather than a spirit of co-operation. A Christchurch real-estate agent, Kent Prier, believes that the over-all level of Asian rim investment in Christchurch and the surrounding region is comparatively small. He believes the region is in an ideal position to benefit from a continuing Asian interest in financial investment. "There is a definite potential. Those individuals and companies who do their research properly — and considerable research is required — will benefit,” he said. Potential investors from Asian-rim countries outside Japan fall into three categories.

Refugees from Indo-China are continuing to show the ability to establish themselves quickly and efficiently in their adopted countries, most becoming involved in smaller commercial enterprises. The second grouping are business people qualifying under Government regulations to enter New Zealand. They must have sufficient funds to buy a home and $200,000 to spare, and are in a position to establish a business.

After four years they will be eligible for New Zealand citizenship. According to Kent Prier, this sector represents the largest single source of potential investors. Several New Zealand companies, including international accountancy firms, are already combining with Asian interests to provide packages for these potential migrants. The third group of investors will probably never visit New Zealand. The country will simply remain a name on the map or in the investment portfolio for individuals who are not only extremely wealthy but exceedingly cautious about how and where they invest their money. For a wealthy Hong Kong Chinese, a property or investment in Christchurch or Sydney can represent an insurance policy for when the British relinquish control of Hong Kong to China in 1997. Hong Kong currently provides 14 per cent of New Zealand’s annual migrant intake.

Indications are that the Singaporean, Taiwanese and Hong Kong investor is looking for both residential and topquality, well-leased commercial property. Kent Prier believes that Christchurch’s environment, way of life and low establishment costs hold considerable attraction. Bill Bruce, of the New Zealand Commerce and Industry office in Taipei, believes that Canterbury has definitely been targeted as a region suitable for Asian investment. He describes most of the Taiwanese and Hong Kong interests as individual rather than corporate interests. Investment levels Canterbury had seen during the last 12 months could be the “tip of the iceberg,” he said.