Auditor-General concerned about Saudi deal

  • 04/08/2015
Foreign Minister Murray McCully's office released hundreds of documents covering the deal (AAP)
Foreign Minister Murray McCully's office released hundreds of documents covering the deal (AAP)

Auditor-General Lyn Provost wasn't happy about the Government's controversial decision to invest $11.5 million in a Saudi Arabian sheep farm, official documents show.

Foreign Minister Murray McCully's office today released hundreds of documents covering the deal, setting out the impact of the 2007 ban on the export of live sheep for slaughter on New Zealand's relationship with Saudi Arabia, and the attempts made to limit the damage.

The documents show the solution - investing in Saudi businessman Hmood Al Ali Al Khalaf's farm and turning it into an agrihub showcasing New Zealand equipment - was carefully considered and researched.

But in 2013, before any money was paid out, Ms Provost told ministers the business case they had presented raised more questions than answers.

"We consider the financial case to be weak... in our view there was insufficient information on the financial benefits accruing," she said.

Ms Provost wasn't sure about the legality of live sheep being sent to Saudi Arabia for breeding, although she noted "ministry staff have assured us the arrangement will meet the necessary legal requirements".

Mr Khalaf lost millions when exports were banned, and Foreign Minister Murray McCully has said New Zealand's relations with Saudi Arabia were "poisoned".

A free trade agreement was put on hold, and still hasn't been signed.

Mr McCully has said the deal struck with Mr Khalaf was made to defuse the diplomatic situation and to avoid the possibility of being sued for up to $30m.

Labour doesn't believe the legal threat existed, and the documents don't prove it one way or another because the Government's legal advice isn't included.

The documents show that the auditor-general's office was concerned about what it described as an "unusual" arrangement.

Papers show the final draft plan for setting up the agrihub and flying out 900 sheep for breeding was set out in 2013.

The cost breakdown shows $4m was committed to what is described as the Saudi-NZ Partnership.

Labour has accused the Government of making a $4m payment to Mr Khalaf, which it suggests was made to secure the free trade agreement.

It has described the payment as a bribe.

Prime Minister John Key, who is in the Cook Islands, says he stands by the deal and believes it was in New Zealand's best interests.

"It hasn't embarrassed the Government... I think most New Zealanders would say `get on with it'," he told reporters.

The documents were released under the Official Information Act, and many pages have been redacted.