WELLINGTON - A New Zealand business leader said the country needs to set clear, consistent rules for foreign investment in light of a stalled Chinese bid to buy a group of North Island dairy farms.

New Zealand International Business Forum (NZIBF) chairman Sir Graeme Harrison said Friday that the controversy over the bid by Shanghai Pengxin to buy the 16 Crafar Farms was "a bit of an unfortunate mis-step."

In February, the High Court in Wellington instructed New Zealand's Overseas Investment Office to reconsider its recommendation to the government to approve the Shanghai Pengxin purchase after an earlier recommendation was challenged by a consortium opposed to foreign ownership.

Harrison told Xinhua that New Zealand's agriculture sector had a history of cooperative ownership and regulation that had resulted in "an ambivalence towards foreign investment."

"It just gets very sensitive and emotional when it comes to land, so there's got to be clear and transparent rules," Harrison said in a phone interview.

The NZIBF, a group of leaders from the country's largest internationally focused businesses and the major business associations has warned the government that the disrupted Shanghai Pengxin purchase of the Crafar Farms has created uncertainty for foreign investors considering projects in New Zealand.

With an economy so dependent on "farm trade," New Zealand needed foreign investment to develop agriculture because it lacked access to capital markets and a long-term attitude among domestic investors, said Harrison.

"We've got a highly volatile currency and it's very difficult to place primary industry companies on the stock exchange because they're seen to be highly volatile companies," he said.

"We do not have a mature attitude to dividend policies and primary sector investment. People have to get used to the idea of consistent dividend flows.

"New Zealanders aren't prepared to invest and take the long- term attitude to those investments."

Harrison founded meat processing firm ANZCO Foods in 1984 and developed the company into New Zealand's fifth largest exporter with investment from Japanese partners Itoham Food Inc and Nippon Suisan Kaisha Ltd.

He said suspicion of foreign investment was a "cyclical" phenomenon from which Japanese investors suffered in the 1980s.

Harrison pointed out that large sections of New Zealand's wine and forestry estates were already in foreign ownership.

"New Zealand is welcoming to overseas investment. Let's keep being welcoming and let's make sure the rules are consistent and transparent.

"The reality is that offshore investors are long-term investors. They're looking for dividend flow and the long-term capital gain."

Harrison was optimistic that issues regarding the New Zealand- China Free Trade Agreement, which came into force in 2008, would resolve themselves.

"Over time we will be able to establish a very good two-way trade between our countries. One cannot look at these issues from a legalistic point of view...it's a process of building relationships and knowing that eventually the opportunities will come," he said.

Shanghai Pengxin's bid for the Crafar Farms was challenged in the High Court by the Crafar Farms Independent Purchasers Group (CFIPG), comprising Maori trusts and New Zealand businessman Sir Michael Fay.

Shanghai Pengxin had its reported bid of NZ$210 million ($174.07 million) accepted by the Crafar Farms receivers, ahead of a CFIPG offer of NZ$171.5 million.

The CFIPG challenged the government's approval of the Shanghai Pengxin purchase on the grounds that the government had failed to properly assess the economic benefits of the bid under New Zealand 's Overseas Investment Act 2005.

However, in a judgment spanning the New Zealand-China Free Trade Agreement and a host of other issues, Justice Miller, at the High Court in Wellington, issued a ruling, setting aside the government consent.

But he also said that the Chinese-owned Milk New Zealand Holdings Limited, a subsidiary of Shanghai Pengxin Group Co. Limited, could still be approved as the purchaser of the farms when the bid was reconsidered by the Overseas Investment Office and the government.