Auckland airport

I have blogged on this earlier, but now its official, the government has blocked the sale of 40% of Auckland International Airport (AIAL) to the Canada Pension Plan Investment Board on the grounds that

"In this case we are not satisfied that the ‘benefit to New Zealand' criterion is met."

What is the "benefit to New Zealand" criteria? How could it ever be met? The newspaper report on the decision notes

Auckland airport shares fell 25 cents, or 11 per cent, to $2.10 in early sharemarket trading.

Auckland airport shareholders had approved the $3.60 a share bid from CPPIB, which would hold voting rights for just 24.9 per cent of Auckland airport's shares.

So the government is stopping people from selling their property at a price they are willing to accept. And they wipe off 11 per cent of the asset's value in doing so. One has to ask how this decision leads to an efficient outcome. Clearly the asset is not owned by those who value it most.

The visible hand in economics may have it right,

Ultimately I can’t help but feel this is the political decision of a government that is scared of being associated with “asset sales” coming into an election year, rather than a decision that has been based on any sound economic reasoning.