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Pete Hodgson's Speech On Economic Transformation

1pm, Friday 26 May 2000, Centennial Convention Centre, Palmerston North (public meeting).

Economic Transformations

It's a pleasure to be here. It's good to be in a place that defines itself as New Zealand's "knowledge city".

It's good to be in the company of two personal friends. One, Steve Maharey, in an earlier life was amongst the leaders in Palmerston North promoting the knowledge city idea. The other, Jill White, your Mayor, has the wisdom to help give effect to that idea.

Being from Dunedin I can't help pointing out that Palmerston North is not New Zealand's only knowledge city, but I'm sure you'll forgive me for that. As someone who spent six years here as a student, before settling in Dunedin, the similarities between the two are striking.

I've got several ministerial hats on today. I'm here as the Minister of Research, Science and Technology, but I'm also the Minister for Crown Research Institutes. Four of them have facilities around here - Landcare, Crop & Food, HortResearch and AgResearch. Add that lot to the university, the Dairy Research Institute and a number of other research associations and you realise this is not just a good place to learn science and technology, it's a place where you can have a career in it as well.

The value of that is kind of what I'm here to talk about. I've got a couple of other ministerial hats with me to make the point. Those are the ones that say Associate Minister for Economic Development and Associate Minister for Industry and Regional Development. The point is that this Government sees research, science and technology as the key drivers of economic growth in this country in the next several years.

In recent times the importance of R&D has become well understood amongst my political colleagues. As a group we're alert to its importance. We're alert to it because we see New Zealand as a nation in need of transformation.

That’s a bold aim. Transformation is not a word to be used lightly. But tinkering won't do.

Transformation means moving New Zealand beyond its traditional dependence on the primary industries for the generation of wealth. We are extremely good at primary production and processing. It is a vital part of our future and we continue to post remarkable productivity increases. But it’s not enough.

The knowledge economy is already a cliché, but the basic premise is sound: wealth is increasingly taking the form of knowledge rather than stuff. Some of that knowledge-not-stuff is being and will be derived from primary production, rather obviously. But a commodity-only economy is not sufficient.

So what is this Government’s vision for science and technology? Let me take a couple of minutes to paint you a picture.

It’s 2010 and New Zealand’s investment in research and development is at an all time high. Government investment has finally reached 0.8% of GDP and investment by the private sector has more than tripled from its level of 0.34% at the beginning of the decade.

We have successfully defended the Americas Cup through the decade. Our expertise in marine technology has reached such a level that many nations are contracting our research organisations to get access to some of the technologies that have been developed.

Our New Zealand researchers and technologists are strongly connected into the global community. We have overcome the limitations of our small research base by building a number of strategic bilateral relationships with key players.

An eminent New Zealand microbiologist has just been announced as the winner of the Nobel Prize for Science. She was awarded this for the ground-breaking research that resulted in the creation of an anti-cancer agent. This agent was derived from one of our unique native plants.

As a result of these and many other achievements by New Zealand scientists, technologists and innovators, science and technology have been embraced as the engines of health, wealth and prosperity by New Zealanders. We have, at last, developed a culture that values and rewards innovation.

Our economic thinking has changed. We are still keen on efficiency, on not wasting money, on reducing input costs.

But we are no longer obsessed with those issues. In particular we have matured to the point where we understand, as a society, that attention to input costs does not, by itself, deliver success.

We understand that risk taking is important. We understand that the occasional failure is not just okay, but necessary if we are to succeed. The tall poppy syndrome has been replaced by an acceptance and admiration of entrepreneurship.

We understand that partnerships, allegiances, alliances, collaborations have a role to play. We understand that strict attention to the competitive model, always, is myopic and silly.

We've even looked back at the origins of the word "compete" and found it comes from the Latin, competere. And we've realised that that means "to strive with" and not "to strive against", as people thought for most of the 1990s.

To make this vision a reality the Government needs to take action. We need to become a leader, a facilitator, a broker, a partner and an investor in New Zealand's innovation system.

My main job as science minister is to lift our public investment in research and development to 0.8% of GDP by 2010. We hope to be the Government for much of that time so you are welcome to monitor our progress carefully.

There are three areas I want to address as priorities for that increased investment.

First, we need greater levels of private sector involvement in research and development. In this area I intend to encourage partnerships between researchers and the private sector, by supporting the work of Technology New Zealand and by converting the results of academic and industrial research into value-added export opportunities.

Secondly, I want to unleash the creativity and imagination of researchers by better supporting New Zealand’s basic research. This is currently funded through the Marsden and New Economy Research funds. Building our international linkages will also be vital if we want to access the ever-growing global pool of knowledge.

Thirdly, I want to ensure that the range of activities undertaken in strategic research is maintained and in some areas increased, and to signal some changes that I hope will help us achieve our vision.

That first priority I mentioned was strengthening private sector R&D. Private sector investment is very low by international terms, about one quarter, or on a good day one third of the western world average.

The Government's commitment to raising public funding of R&D to 0.8% of GDP by 2010 should send a powerful leadership signal to the private sector. But to give business a more encouraging environment for investment we have some specific measures in mind. They include investigating R&D tax issues, reviewing the cost to small business of protecting intellectual property and, perhaps most immediately, strengthening Technology New Zealand.

Commercialising technology is hard, it's esoteric, it's expensive and it takes time. But the Government is examining the barriers that innovators face in getting development finance or seed capital, examining issues around capacity building, and so on. We're determined to support business investment in R&D, rather than just complain about the lack of it.

Technology New Zealand deserves more support from Government. Spending in this scheme in past years has increased and credit needs to go to the previous government for that. But it has not increased significantly and this Government is committed to seeing that happen.

Government involvement is not just simply about pouring money into the system. There is a need to help firms to make connections with overseas markets, with universities and CRIs and with other firms with similar or complementary interests. That’s why we talk in our industry policy about the development of regional clusters.

That’s why a few weeks ago the Government announced an incubator support programme, designed to oil the wheels of the many incubator or innovation centre initiatives springing up around the country.

The second priority I mentioned is the need to expand New Zealand’s knowledge base. A critical part of this process is to build a solid science and technology human capital resource. Innovation is much more about human capital than financial capital.

The sciences no longer automatically attract our best young people as they move through the education system. Nor does New Zealand hold a strong enough attraction for the brightest of our scientists, who leave in ever-increasing numbers for better positions overseas. But there is nothing inevitable about either of these facts. There are things the Government can and will do.

Increasing the recruitment and retention of talent for science must begin with the education system. In schools we aim to increase the number of teachers of mathematics, science and technology by offering bonded scholarships for these teachers.

In the tertiary sector we will be negotiating adjustments to the funding model to cultivate centres of scientific and technological excellence. This is work that my colleague Steve Maharey and I have before us. We will also use scholarships to attract and retain postgraduates in research areas where there are skill shortages.

Scientists need to know that the Government recognises the importance of basic research as the serendipitous source of the truly new. It underpins the integrity and progress of society. Our approach to tertiary education acknowledges the universities’ vital role, with a continued commitment to funding research as part of teaching.

Let me tell you now about the New Economy Research Fund. It's not our idea. It came out of the Ministry of Research, Science and Technology under the previous Government.

The New Economy Research Fund unleashes the creativity of scientists to do some out-of-the box thinking about how tomorrow's wealth will be created differently from today's.

In a nutshell this fund recognises that the world has changed, that some forms of knowledge are being created differently. Technologies and disciplines now exist where basic research can lead to a new product, process or understanding quickly, not slowly.

The fund recognises that the traditional linear model of basic research, leading to strategic research, leading to pre-commercial development, leading to commercial application, is now in some areas a bit "old hat". It recognises that the linear model is a bit anachronistic, and that the assumption that lead times must be long does not necessarily apply.

Successful projects in the inaugural funding round announced a few weeks ago included research exploring vaccines to prevent Alzheimer’s disease and asthma; research focused on creating the next generation of communications technologies; research exploring opportunities for smaller, smarter electronics; and innovative electronic-based learning techniques.

A striking result from the bidding process was the sheer number of bids that came in. There were more than 200 applications for funding from the New Economy Research Fund, totalling $100 million. With just $11 million available there were many good ideas that did not get funded. So this Government is committed to increasing the New Economy Research Fund over time.

The Marsden Fund supports the curiosity of creative individuals who want to understand why and how things work in our natural, physical, social or cultural world.

One example of a recent Marsden-sponsored breakthrough is work done by a team of Auckland-based researchers. These scientists are taking us a step closer towards confirming the existence of a mystery homing sense in rainbow trout. Another example is an early learning research project at Otago University that's challenging some basic assumptions about infant learning and memory.

This is the kind of work that simply expands our understanding of the world, exercising the uniquely human power of explanation. We need it. So this government is committed to growing the Marsden fund over time as well.

The third investment priority I mentioned is strategic research. This is the most important part of the Government’s investment, for the simple reason that it is the largest. Most strategic research in New Zealand is undertaken by Crown Research Institutes.

The Foresight Project, begun under the previous Government, has produced a potentially significant redirection of research, particularly in the Crown Research Institutes. Existing research has been redirected into the New Economy Research Fund for future years. Other public good science funding will be realigned with a new set of targets making its purpose more transparent. We'll be revealing more about that in the Budget.

But we still need to improve evaluation of strategic research. The quality of the research is not in question. But we need to be clearer about what, for all these hundreds of millions of dollars, the taxpayer is buying. That doesn't mean a crude cost-benefit analysis, it means evaluation of the strategic outcome for New Zealand, rather than just the scientific outcome.

I want to close by telling you something about a new group of smart people we're getting together to help the Government figure out how to make the knowledge economy happen. We call it the Science and Innovation Advisory Council. Cabinet is due to approve the membership on Monday. We'll announce it next month. Over 300 people were nominated. We went through all the CVs and there were some stunners – lots of them. New Zealand has talent, believe me.

The idea of the council went down pretty well with science and technology people during the election campaign last year. The Beehive door has been closed to advice from that quarter for so long that there's obvious relief at its opening. We've chosen the door to the Prime Minister's office for the simple reason that it is the surest route to results.

Take note of the word "innovation" in the council's title. We're not after a committee made up entirely of eminent scientists. We want original and creative thinkers, be they scientists or not. We want people who understand what drives innovation in New Zealand and what gets in the way. I think we've got them and I think they'll help this Government make a difference.

Let me summarise now and draw some conclusions.

First, New Zealanders are by nature free and lateral thinkers, capable of getting new knowledge our of existing information and able to improvise and to roll back frontiers.

Second, our innovation system needs strengthening. Interactions must increase, entrepreneurial thinking needs to be facilitated and cherished.

Third, the future is knowledge, the capital formation of the future is human capital formation, and the property of the future is intellectual property.

Finally, this Government is different. We see the need for economic transformation, we know the place of collaboration and we understand that the key driver of the new economy is innovation.

Thanks for your attention.

© Scoop Media

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