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O'Connor dials back PGP criticism after review

O'Connor dials back PGP criticism as review finds them 'worthwhile'

By Paul McBeth

Aug. 21 (BusinessDesk) - Agriculture Minister Damien O'Connor has changed his tune on primary growth partnerships after a review into the initiative found them "a worthwhile public investment".

The minister ordered the review of the previous administration's co-investment programme with private enterprise, calling it a "slush fund" that paid for research and development that should have been part of normal business for a company. Former Banking Ombudsman Deborah Battell completed her review on May 31, saying the programme's benefits are coming a little later than expected.

"Taking into account the financial and non-financial benefits already achieved, the likelihood of substantial future benefits and the firm and wider industry transformations taking place, the PGP has been, will be and can continue to be a worthwhile public investment," Battell said in her report. Primary sector industries "need continued incentives so that they do not revert, focus on the present or take the easier option of undertaking more limited, firm-focused R&D, losing the benefits of collaboration and effective sector-wide transformation."

O'Connor ordered the review in November, acknowledging his vocal criticism of PGPs while in opposition, and noting the programme's improvement since it was set up in 2010.

The PGP initiative will now form part of a new $40 million a year funding mechanism for the Ministry for Primary Industries merging with the sustainable farming fund to create the sustainable food and fibre futures.

"SFF Futures provides a single gateway for farmers and growers to apply for investment in a greater range of projects that deliver economic, environmental and social benefits that flow through to all Kiwis," O'Connor said in a statement. "Targeted funding rounds may include projects focusing on specific outcomes such as climate change or the environment."

Little detail was provided on the new mechanism, which will open in October. Applications are expected to focus on demonstrating or delivering economic, social, cultural and environmental benefits; placing a priority on value over volume; and incorporating collaboration and information sharing.

O'Connor had already secured a small boost for the sustainable farming fund before today's announcement, saying smaller projects delivered what people wanted and needed.

In contrast, the PGP sought to boost productivity, value and profitability in the primary sector; build long-term economic growth and sustainability; and encourage greater private R&D investment.

Battell said the programme could still achieve its goal of transformation by taking "a strategic and proactive approach, especially to attracting new programmes of a significant size" and working with industry to develop those goals.

"But proposals should remain industry-led, avoiding the temptation for government to pick winners: current programmes have shown that industry can be ahead of government, even without specific targeting, and that step changes will happen when firms have a commercial incentive and 'skin in the game'," she said.

Among Battell's recommendations included consideration of a "PGP-lite" model for smaller investments to reduce the compliance burden and streamline the application and reporting processes.

MPI hasn't figured out how the SFF Futures programme will work.

The PGP review was released while O'Connor was at a farm in Hamilton announcing a new five-year, $29.7 million PGP programme with Dairy Goat Cooperative to develop a domestic goat milk infant formula industry. The goat milk programme was one of nine business cases in the pipeline before Battell was commissioned.

(BusinessDesk)

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