DOMINION'S CREDIT

Evening Post, Volume CXVIII, Issue 100, 25 October 1934, Page 15

DOMINION'S CREDIT

ADVERSELY

AEEECTED

OVERSEAS COMMENT

"We havo received disturbing evidence of the unenviable reputation which New Zealand enjoys in other countries as (he home of unsound, often unscrupulous, company promotion. Possibly New Zealand is no worse in this respect than many other countries; nevertheless, its reputation should be a cause for concern. Scathing criticism of New Zealand companies, headed by contemptuous captions, are common in tho Australian Press," states the Company Promotion Commission, in concluding its report.

After referring to specific instances, of criticism, the Commission proceeds: "In some cases overseas criticism may be extravagant and might apply equally well to local companies, but the findings in this report will have demonstrated that such criticisms are substantially justified by tho 'operations o£j many companies. The above conditions may havo many bearings. Many companies are honest, well-conceived within the limitations of the methods of finance and scheme of control adopted, and efficiently managed. Such companies arc likely to suffer equally with thoso against which criticism is justifiable. They are likely to benefit from and should welcome legislation preventing unwise practices or legalised exploitation. In addition, companies promoted in New Zealand and seeking to raise capital in other countries arc likely to suffer even though they may be operating in an cutirely different type of business on well-established and orthodox lines; for they have the taiut of origin in a country whose reputation lias been besmirched by less scrupulous financiers. "Further, the general credit ot ISicw Zealand may be impaired because (a) it has been represented by some salesmen that the New Zealand Government supports laud-utilisation companies by guarantees, inspection, or appointment of trustees. Hence tho New Zealand Government is likely to share in the blamo where companies fail; (b) conversely, the New Zealand Government may be blamed for failure because it has not exercised regulatory supervision. Such a view may be unreasonalflo and illogical, but it may be potent nevertheless; (c) it may be considered that, in the event of failure on a large scale, a financial crisis may develop which will embarrass the Government because the amounts involved are very largo. "Obviously the,reaction on New Zealand's credit will be closely conditioned by the commercial success or failure of tho plantations, when they reach maturity. We are not competent to pass judgment on tho commercial prospect of 'existing land-utilisation projects, and have :io comment to maTco under this head; but wo would draw attention to the fact that political as well as financial questions may be involved. In tho event of failure to operate plantations with profit, there h something moro than a remote possibility that pressure will be brought to bear on the Government by bondholders. In circumstances the presence of a jarge number of bondholders domiciled in other countries may prove an additional source of embarrassment to tho Govern-

meat. "Wo have no recommendation to make having a special bearing, on this question; but it is intimately boundup with the problems involved in putting the financial schemes and schemes of control of land-utilisation companies ;md investment trusts on a satisfactory basis. Consideration of tho manner in which the operations of companies of the above types may affect the credit of Now Zealand in other countries strengthens the case for applying the remedial measures we have outlined.