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Minerals & Mining Conference dinner - Jim Anderton

Hon Jim Anderton
29 October 2000 Speech Notes

Embargoed until: 7:00PM Sunday, 29 October 2000

Govt champions high-value export industries

Address to the 2000 New Zealand Minerals & Mining Conference dinner

Duxton Hotel, Wellington

7:00PM Sunday, 29 October 2000

I would like to start out by acknowledging the importance of the minerals and mining industry to our economy.

As the Minister for industry and regional development, I particularly want to single out the impact of the mining industry in regional New Zealand. It contributes more than a billion dollars annually to the New Zealand economy. Last year, more than $300 million of minerals were exported from New Zealand.

That is a very significant level of economic activity. It means many thousands of jobs depend on the success and development of the industry. Not only jobs for those directly employed by the industry – but also downstream jobs in communities generated by the economic activity of the mining industry.

Most of those jobs are in struggling regions of New Zealand, where the wealth is needed the most.

As everyone here knows, these are not the easiest of times for the minerals industry. Globally it faces low commodity prices. That in turn has led to comparatively low levels of exploration activity – even though New Zealand is generally a low-cost region for exploration.

The problem of getting through periods when commodity prices are low is one your industry shares with most other New Zealand industries.

In the global commodities market, New Zealand is always going to be a price-taker. And for more than a generation commodity prices overall have been falling.

For all of that time it has been more and more important for us to develop new industries based on the skill and expertise of New Zealanders.

It's something we have largely failed to do. I'm not going to go into a finger-pointing exercise right now. It is more important to recognise and accept that we have too few high-value exporting firms and industries, and we need to do something about it.

Thirty years ago, both New Zealand and Taiwan exported about a billion dollars a year of largely commodity products. We now export about 30 billion dollars worth, Taiwan exports $120 billion.

Right now New Zealand is the lowest exporter of complex manufactured products in the OECD. The proportion of our exports made up of complex manufactured products is similar to those of other developed countries twenty-five years ago.

We import five times as much high-technology production as we export. Even Greece, which is the next worst of all developed countries, imports a little over three times the value of its hi-tech exports.

If we want rising incomes and more good jobs then we must produce more – far more – products and services that depend on the skill, imagination and creativity of New Zealanders.

I want to stress to you tonight that the Labour-Alliance Coalition is committed to building partnerships with industry. Partnerships aimed at transforming the economy. Developing new, job-rich, high-value, high-skill industries.

Mining is an extraction-based industry. So how does it fit with the Government's emphasis on building partnerships with business to create advantages based on the skill and creativity of New Zealanders?

There are two important ways the mining industry contributes to a knowledge-based future.

The first is in the skill of the mining and minerals exploration process itself.

The process of extraction is a knowledge-based activity.

People talk about 'the new economy versus the old economy'. But while the process of extracting minerals from the ground can be seen as an 'old economy' activity, the innovation, skill and ingenuity required to locate minerals, extract them efficiently and then market them is 'new economy'. The geological science involved is as advanced, complex and useful as any commercially applied branch of science.

Nevertheless, commodity based industries will always have to compete with other producers of an undifferentiated product. The global market will be unpredictable, and producers will often be price-takers.

Our aim should be to sell something unique and differentiated from the output of other countries. The minerals themselves are the same as those of other countries. The process of finding them and pulling them out is one area where we will always have an opportunity to develop.

Can we provide the best geologists and engineers in the world? There is evidence to suggest we can: Ernest Rutherford was a New Zealander. William Pickering of the Jet Propulsion Laboratory. Bruce McLaren. Bruce Farr. CWF Hamilton. Just last month a New Zealand chemist, Alan MacDiarmid won the Nobel Prize.

We have to look to develop our scientific capacity, as well as our capacity to produce raw materials. Our economy greatly needs to develop world-class scientific and technical expertise in many more industries.

The other way the mining and minerals industry can develop as a spring-board for high-value, high-skill industry is in the processing of the extracted products.

It is no longer enough to export bales of wool, frozen meat carcasses or container loads of dairy fat. It is no longer good enough for our forestry industry simply to grow trees and export raw logs.

The challenge for all of those industries is to export high-value processed products.
We have to develop world-class processing capability, in turning logs into paper, furniture, housing and other high-value wood products.

The reward for the Government in championing high-value industry is that more jobs and rising incomes will result for New Zealanders.

The same logic applies to the mining and minerals industry. I've already said we need to develop the best mining and minerals exploration technology anywhere in the world. We also need to develop world-class minerals processing capability.

Just as the export of raw logs is an economic failure, so too is the export of unprocessed minerals.

I am tired of hearing people say that we will never have world class capability in heavy industry, as Japan and some of the leading European nations have. Japan, England, Italy – all of them produce leading engineers and very high quality processed goods using minerals extracted in other countries. None of them have a strong minerals base of their own.

Our future lies in adding another step to extraction and export. The future of New Zealand lies in extracting, processing and exporting.

I acknowledge that there is considerable expertise in this area already within the industry.

And I acknowledge the recent successes of the industry. The millionth ounce of gold from Waihi was poured this month. Production has expanded at both of our major gold mines, Macraes Flat Mine and Martha Hill. Coal production is up.

So there are real innovators in this industry

The point is, however, that it will never be enough. We will always need to do better.

The Ministry of Economic Development has been established to assist the development of industry. It has been created to ensure the Government does its bit in a partnership.

I have a challenge for the minerals and mining industry: If there is anything that the Government should be doing to smoothe the development of the industry in a balanced way, you should contact me. As both the Deputy Prime Minister and as the Minister for Economic Development I am determined to see Government and industry work in partnership to clear the roadblocks in the way of sustainable development.

Already I know of some examples. There have been concerns about too rigid application of the Conservation Act, for example, and Ministerial colleagues are working on that issue. Of course no one thinks we should blow up Mt Cook to get at resources beneath it. But nor does the Government want to turn vast tracks of land into a museum. We can do better than that. The key is balanced development.

You can be assured that export businesses and industries that have the greatest potential to grow have a champion in this Government.

I have a commitment to working in partnership with industry. To ensuring that the Government plays its role in facilitating the expansion and success of exporting industries.

New Zealand businesses owe it to themselves to grow. With a domestic market of just 3.8 million, the big opportunities lie in markets overseas. If New Zealand is to develop the jobs and rising incomes we need, then businesses based in New Zealand have to be exporting successfully.

On the plus side we have a lot going for us.

We have a stable, democratic government. That puts us far ahead of many parts of the world to begin with. We have a solid infrastructure of roads, ports, clean water. We have a competent education system. New Zealanders are quick to adapt to, and use, new technology. We have significant natural resources and an exciting natural environment.

We have a cheap cost structure. That is the upside to low income levels, and the low value of our currency. Low cost helps to give our manufacturers and exporters an edge. Eventually, however, we have to compete by providing better value, and having better ideas, not cheap labour. But we have to start from where we are.

The giant international sharebroker and investment banker Merrill Lynch recently published a study. It looked at qualities such as the supply of capital, the education and skills of the people, the availability of technology. How free from corruption are the politicians and government bureaucracy. They looked at the social structure of countries and deducted points where they found wide inequality.

They ranked New Zealand seventh in the world. Not a bad place to start. So there is a solid base to build from.

New Zealanders simply have to have more self-belief.

Israeli entrepreneur – US partner of hi-tech Christchurch company – fourteen weeks testing reduced to four weeks.

New Zealand is a land of innovators and creative thinkers.

Last Tuesday the Government met with almost a hundred business leaders to discuss how Government and business can work together to make our economy work better.

We discussed research and development, education, taxation, investment, exporting, immigration and new hi-tech directions. The positive response from business will help the process of building a more innovative and knowledge-driven economy.

What personally impressed me was the constructive ideas and debate that the Forum created. It showed that there is tremendous goodwill and a strong resolve from business to improving New Zealand's performance, both economically and socially. And a strong desire to work with Government to make this happen.

It's a long-term job. We need more than just nine months or even three years to transform the economy. The economy has not run down in the last twelve months. It has been in decline for thirty years. It's now in transition and the challenge is to give it forward momentum.

The important point is that the era of hands-off is over. The time when the Government stood on the sidelines and hoped problems would solve themselves has ended. It did not work.

I look forward to working with you, and talking to you tonight about the opportunities we have to make progress together as partners in Enterprise New Zealand.


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