Opinion: This is not how NZ does business

It wasn't corruption – but something got corrupted.

Source: 1 NEWS

The Auditor-General’s long-awaited investigation into the shabby Saudi sheep deal spared Foreign Minister Murray McCully’s scalp.

It cleared him of corruption – something he was actually never accused of.

McCully’s pockets were never lined in this deal – but it’s that straw-man defence that has allowed him to cling to his job.

The money ($11.5m in sheep and services, bought by the New Zealand taxpayer) went to a Saudi billionaire – to grease the wheels for a failing free trade deal with the Gulf States.

AG Lyn Provost’s painstaking inquiry throws much light on this shadowy affair. And both Mr McCully and his Foreign Affairs officials come up short of good governance standards.

The government has been criticised for the multi-million dollar deal which sparked a year-long investigation. Source: 1 NEWS

To summarise, she criticised the decision-making process. There were “significant short-comings”.

Not least, that a Cabinet paper didn’t make clear that the desert farm (“agrihub”) they were stumping up for would be owned by a private investor. 

And she was puzzled as to how officials arrived at the $11.5m figure – criticising a lack of cost analysis.  Surprising for a Government that prides itself on prudence and an insistence that the ‘numbers stack up’ in any financial transaction involving taxpayers' money.

Ministers were led to believe this would appease aggrieved investor Hamood Al Khalaf, who was threatening legal action over a ban on live sheep exports.

According to the Cabinet paper he thought he was due compensation of $24m. Critically, Ms Provost found his claim was presented to Cabinet without assessing its validity. 

And she doesn’t believe Mr McCully properly justified the spending: “the contract’s benefits to New Zealand were unclear”.

The Foreign Minister says the Government did its best on what was a very difficult and lengthy process. Source: 1 NEWS

Those benefits have yet to be realised. The stalled free trade deal is, as yet, unsigned  - more than three years after the Saudi sheep deal was done.

Most of the lambs (born of 900 pregnant sheep flown to the Middle East) expired in the desert sun.

But the most damning criticism levelled by the AG is expressed in the mildest of terms.

“I was surprised that it was decided to use a contract with a private individual’s business interests to resolve a diplomatic issue between governments.”

In other words, this is not the way New Zealand does things. Actually, it’s not how anyone should arrive at a trade agreement.

This curious little deal is straight from an episode of House of Cards.

The World Bank just ranked NZ as the best place to do business, toppling Singapore from its 10-year reign.  By way of comparison, Saudi Arabia is ranked 94th out of 189.

New Zealand perennially sits in the ranks of Transparency International’s least corrupt nations. Saudi comes in at 48th – and the report notes that transparency over that government’s budget is “scant to none”.

The Kingdom is struggling to shake off its oil dependence.  Its central bank is propping up the economy and a budget deficit of $87billion is expected this year.

And the slump will worsen with the Paris climate change agreement taking effect from today.

Western populations are also starting to feel unease about their countries’ bilateral relations with Saudi Arabia. Its air force is raining down bombs on Yemen, targeting rebels but killing civilians in their thousands. 

The death penalty is used extensively – publicly, and brutally.  Women and the Shia minority are discriminated against with limited access to jobs and government services and, as the economy tanks, authorities have rounded up and deported foreign migrants to free up jobs.

Of course, the sheer economics are that Saudi is still the biggest trading player in the Middle East. And NZ needs the ruling Royal family on board before the other Gulf States sign up to a deal.

But what’s the price? The Auditor General notes early in her report that she has seen an increase in accusations of bribery and corruption – and the only foil to that is an open and transparent public service.

New Zealand has now shown it is prepared to make unorthodox compromises in the shadows – so what will the next potential trading partner ask for?