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Address to BOP Export Institute AGM - Hodgson

Thursday 17 August 2000 Speech Notes

Embargoed until delivery: 8.00pm, Mills Reef Winery, Bethlehem, Bay of Plenty


Address to Bay of Plenty Export Institute AGM

Ladies and Gentlemen,

Thanks for the opportunity to talk to you this evening. It's good to be able to talk directly with exporters about the issues you face. It's good to learn about your successes, your difficulties and your ideas for the future. And I think a top-class winery is a great place to talk about exporting, given the outstanding export success of the wine industry.

Export success is something to celebrate because New Zealand needs as much as it can get. We haven't paid our way in the world for quite a while, as our balance of payments deficit testifies. We need a stronger, bigger economy. Economic growth is essential, and export growth has to lead the way.

In a couple of minutes I want to talk about economic growth through economic transformation. But first I want to take the chance to congratulate some local export winners. NZ Hydroponics Ltd and Possum Down Ltd won your institute's recent annual exporter of the year awards. Two Tauranga companies, Team Horticulture Limited and Majacraft Limited, are finalists in this year’s Trade New Zealand National Export Awards. I think people from three of those companies are here tonight. Well done, and thank you. New Zealand needs more businesses with your kind of drive and initiative.

I also want to acknowledge the energy and initiative of this regional division of the Export Institute. Exporters need a voice in the public and economic policy debate. The Government needs to hear your ideas. Personally I'm grateful when people offer me their solutions, not just their problems. I think your Institute is doing that.

The success of a company like Team Horticulture shows that primary production is vital to the New Zealand economy. We need to keep that up. But we also need to do a great deal more if we want to secure the standard of living New Zealanders expect.

This Government has set itself the goal of transforming this country's economy. That means building on our primary production strengths and moving into more value-added and knowledge-based production.

Transformation also means a greater emphasis on exports and the internationalisation of our economy. It means helping New Zealand business launch itself onto the global stage. That's why this Government is committed to a more positive, hands-on role in providing assistance to New Zealand businesses.

This commitment is producing a range of policy initiatives to stimulate the high-value, innovation-based end of the economy. Some new programmes are already being be delivered through Trade New Zealand and Industry New Zealand, with more to come.

For example, we introduced three new initiatives in our first Budget in June.

The e-commerce strategy, run through Trade NZ will help exporters make the most of e-commerce. It's particularly about business-to-business trade for exporters. It's about helping small and medium sized companies gain access to the global economy through trading online.

The beauty of it is that the world is suddenly a smaller place on the internet. It doesn't matter if your trading partners have never heard of the Bay of Plenty. They can find you and you can find them. All that matters is the quality of your product and your ability to deliver.

The Budget also included an increased commitment to promoting New Zealand as an investment destination. We've nearly tripled funding for Trade New Zealand's foreign direct investment activities.

We've got a new, proactive strategy to attract overseas investors. And we don't want them just to buy existing New Zealand businesses, as so many have done in the past decade. We're looking for investment that creates new businesses. The right kind of foreign direct investment can do that, and often provide new market access, new technology and management expertise as well.

The third initiative I'll mention is the investment of $3.5 million in an international marketing strategy for the education sector. With effective development, that sector could double its annual foreign exchange earnings to over $1 billion in over five years.

So there's three quick examples of things we got into our first Budget.

We've heard exporters' concerns at the lack of Government-backed export credit guarantee, financing and bonding facilities. It's a complex issue. Because there are a number of private sector solutions around already, we've been working to identify the nature of any market failure and how it can be addressed.

We've consulted widely in the export sector and the banking/finance industry, as some of you will be aware. We're a bit unhappy about the time it's all taking, but equally we're determined to do it right. Expect some decisions in weeks, not months.

That's a specific export assistance measure, but there is of course a bigger picture. The opportunities for New Zealand to grow are enormous, but we are a nation of small businesses. Our challenge is in many ways one of capability rather than opportunity.

I'm talking about stuff like skills, access to capital, the strength of our innovation system, access to new technology, management expertise, infrastructure and the extent to which we have an export culture.

Our approach is to look for opportunities to increase the capability of New Zealand incorporated through partnerships with Government. That's why we have an industry and regional development strategy. That's why we're investing in a wide range of programmes to strengthen the arms of entrepreneurs.

My colleague Jim Anderton launched three such programmes last month.

The Enterprise Awards Scheme offers financial support to innovative entrepreneurs and small business owners, including exporters, to help them test and develop concepts with strong growth potential.

The Regional Partnerships Programme will help fund major regional initiatives to strengthen regional economies.

And the Investment Ready Scheme is designed to give innovative small businesses and entrepreneurs a better chance of raising finance in the early stages of development.

We're also looking at ways of improving access to expertise and capital for small and medium sized businesses. Programmes to do that are on the drawing board for Industry New Zealand.

They're likely to include one called Industry Specialist Support, which will help firms with high growth possibilities to realise their potential. It's likely to give access to specialists contracted by Industry New Zealand, and probably grants to help firms employ their own advisers. The difference from what we've got now is that existing advisory services typically target small, struggling firms rather than those with high growth potential.

Strategic Investment Support Services is another programme under development. The aim there is to identify major New Zealand internal investment opportunities, in a sort of domestic complement to our efforts to attract overseas investment. It will improve the Government's interaction with New Zealand businesses making significant investment decisions on matters such as location and expansion. Another grants programme will support feasibility studies and significant new investment projects.

We also plan to support an Angel Network, which will provide network forums and a database of investors and investment opportunities. The network would generally aim to match up small to medium businesses and investors seeking investments of around $50,000 to $500,000

Now there's a bigger issue behind all this and that's the kind of economy we have. How do we move into this new, knowledge-based, high-tech economy we keep talking about?

Here's a start. We've increased the total public investment in research, science and technology this year by almost $44 million. Total Government expenditure is up by less than 5 percent, but R&D expenditure is up by more than 10 percent. As Science Minister I'm proud of that. Investing in R&D is what smart economies do.

The thick end of that money goes into the largest ever increase in Government support for private sector R&D. We need to support private sector R&D because frankly there isn't enough of it going on. So there is a new grants scheme for it, and more money for the business assistance schemes already run by Technology New Zealand.

Yes, we did say before the election that we would enable a 100% write-off of R&D spending for tax purposes in the year of investment. No, we haven't done that. We created the grants scheme instead, as a more certain way to turn taxpayer dollars into actual research and development.

Some of you won't agree with that. Some will. Either way, we're still looking at whether tax breaks can be engineered to avoid a black hole in the revenue base. That comes with no promises, except a promise to keep working on it. It is a live issue. In the meantime you might like to acknowledge that a $12 million grants scheme is not to be sneezed at. In fact the increase in assistance to private sector R&D investment is the largest in this country's history, easily.

I want to leave it there. But please hear this. You have got a Government that understands the importance of business and especially the importance of exporting. Our commitment to the idea of partnership with business is real. So now I'll stop speaking and we'll start talking.

Thank you.

ENDS

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