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Anderton Speech biotechnology industry conference

Jim Anderton Speech Notes for address to biotechnology industry's annual conference in Wellington

Sector Taskforces Lead To Investments in Growth

I am delighted to be able to address you this morning, and I'd like to thank Bill Falconer for his introduction.

As you will be aware, Bill was Chairperson of the Biotechnology Taskforce which the Government established last year as part of the Growth and Innovation Framework. He and his taskforce colleagues put in a tremendous amount of effort and I want to thank them for that.

This afternoon my colleague Pete Hogdson will announce the government's response to that taskforce's report.

This morning, I want to talk to you about the Growth and Innovation Framework's wider context and to make a few announcements of my own.

Our framework is about tuning the economy for growth. The government is focusing on building the conditions for long-term sustainable economic growth in order to improve the living standards for all New Zealanders.

The government's vision for New Zealand is - a land where diversity is valued and reflected in our national identity - a great place to live, learn, work and do business - a birthplace of world-changing people and ideas, and - a place where people invest in the future

The GIF identifies innovation and knowledge as key drivers of growth, and seeks to increase innovation throughout the New Zealand economy by:

- getting good ideas to market

- developing skills and talent

- increasing our companies' global reach

- strengthening the foundations of the economy

This framework is about the whole economy. It is about supporting the ongoing growth of our traditional flagship sectors of agriculture, fishing, forestry and tourism.

And it is also about combining old and new strengths to extend the scope of our economic activity into the emerging high growth, high value sectors.

This is where the GIF sector taskforces come in. As well as the Biotechnology Taskforce, we also set up taskforces for two other sectors: information and communications technology and the creative industries. Creative industries, being such a diverse sector, got two taskforces, focusing on design and screen production respectively.

We did this because the world is undergoing the most rapid advances in science and technology we have yet seen. Whereas value once resided in land and physical capital, increasingly value also resides in intellectual property, in knowledge and ideas. If New Zealand is to improve its economic performance, we need to understand and be players in industries based on knowledge and ideas. You are all part of one of those industries.

Biotechnology, ICT's, Design and screen production are all about creating value from knowledge and ideas. This is one reason why we chose them.

Internationally, these sectors are growing significantly faster than the overall rate of economic growth. That's another very good reason for our involvement.

But the third and crucial reason is that strength in these sectors provides positive spin-offs for every other sector of the economy. The smart use of innovative technologies and improved processes developed in these sectors will be a driver of productivity improvements across the whole economy. They can transform our existing export sectors and will likely generate new export industries as well.

This can be seen in the way the ICT revolution has sparked change across all of business, with computer use, more efficient telecommunications, cell phones, electronic banking, the Internet, and e-commerce speeding processes in every sector.

- in the way biotechnology is helping our key primary export industries be more productive and by adding value to meat, dairy, horticulture and forestry products; and through the development of new diagnostics and therapeutics to enhance human health.

- And in the creative industries where success is seen not only in companies which have achieved significant growth and captured international markets through design innovation (such as Fisher & Paykel, Formway but also in the way film-making has enhanced New Zealand confidence about our place in the world, enhanced the way others see us and in so doing boosted tourism as well.

The taskforces were asked to focus on the actions needed to stimulate growth in their sector and provide spin-offs for other sectors.

They were charged with setting a vision, agreeing priorities and developing action plans for realising growth and improving international competitiveness.

The taskforces have now reported back to the government with valuable recommendations detailing actions that the industry and the government can take to assist them to achieve their growth targets.

I want to say that one very pleasing result of the taskforce process has been the way that all the Taskforces bought into the vision of an economically successful New Zealand. They saw the value in working together to achieve better lives for all of us. They contributed many hours of work that, in other circumstances, would have cost us millions of dollars in consultancy fees. We all owe them a debt of gratitude.

In many ways this is an aspirations game. Do we have the will to go for the kind of country we want? I think the GIF Taskforces have proved that, by working together, we do have the will and we can do it.

All of the taskforces, particularly ICT, came up with ambitious goals. These are entrepreneurial goals. The ICT taskforce, and in indeed all the other taskforces including Biotech, assure us that the growth goals are achievable, given the right conditions.

And facilitating the "right conditions" is where the government comes in. The growth and innovation framework is all about achieving the right conditions. Part of this is about tuning our processes and institutions to be more supportive of high-tech high growth companies. This, for example, is what the work of the Tertiary Education Commission is all about, and what the merger of Trade NZ and Industry NZ to form New Zealand Trade and Enterprise is all about. There are many other examples, from funding of research consortia to the biotechnology strategy, and so on.

Interestingly, as far as the right conditions are concerned, some common themes emerged from all four taskforces. These themes are not just about the specific sectors, but apply to the needs of all business in a rapidly changing globalised world.

All the taskforces saw the need for:

* strengthened networks within their sectors and between their sectors and other parties, such as the government and education providers, and better linkages nationally and internationally;

* the adoption of a global perspective, and the need to arm managers with the commercial and marketing skills needed to "go global";

*enhancing public awareness of the industry sectors, their contribution to economic growth, and the opportunities they provide;

* educating and upskilling the workforce to fill the jobs that currently exist and those that will be created in the future, as well as researching future skills requirements and their supply;

* improving the evaluation mechanisms in our economy, by improving the alignment and timeliness of statistics; and

* modifying tax laws for simplicity and transparency in the tax system and compliance regulations to enable easier access to finance.

Today I want to announce some new initiatives in response to these common themes.

Because we wanted to be able to start the ball rolling in this financial year, the government set aside in the 2003 Budget $110 million over four years to be used for implementing the taskforce recommendations, with $15 million available this financial year.

· More science and technology students are crucial to our future. To this end we are allocating an extra $8 million over the next four years to increase support for the implementation of the technology curriculum in the senior secondary school. This funding will have the aim of increasing participation in and the quality of technology education, and boosting the number of students pursuing further study at the tertiary level or in the workplace. A key emphasis is to increase teacher capability to deliver a wider range of technology subjects to higher levels, especially in ICT, biotechnology, electronics and control technology.

· There will be two new tertiary level initiatives. $11.55 million over 4 years has been allocated to develop enterprise training for emerging industries. This will assist development of a stronger relationship between the emerging GIF sectors and the tertiary education sector, and will act as a model for other sectors to utilise. It will enable the sectors to get together with tertiary education providers to make sure the skill development process best supports them. We have also allocated $10 million over 4 years to an Entrepreneurship and Knowledge Transfer initiative. This is designed to assist the GIF sectors to develop commercial and entrepreneurial skills. Tertiary education courses will be developed focusing on areas such as building management and leadership capabilities in the areas of technology adoption and commercialisation, developing strategic relationships and coping with the demands of rapid international growth. None of this can be done without strong input from industry.

· As many of you will be aware, building a Next Generation Internet - or NGI advanced network - is seen as crucial if New Zealand is to maintain and build its scientific base and capability, and support the continued development of high technology industries. To speed this work $200,000 has been allocated this year to the Ministry of Research, Science and Technology to develop a robust business case for an advanced internet based research network, including analysis of economic impacts of different implementation options.

· In an economy where research and development and innovation are of increasing importance, we need better information about how we are doing in these activities. To this end we are allocating $2.6 million to capture valuable information about Research and Development expenditure, identify factors limiting innovative capability and produce a complete set of official productivity statistics.

Several taskforces made recommendations regarding tax and regulations. Two of these are already addressed in the Business Law Reform Bill currently before the Commerce Select committee. The others are the subject of existing tax policy work by Treasury and Inland Revenue, who will be reporting to the Minister of Finance by December this year. In addition, work is already underway on share options, the tax treatment of patents, and the carry forward of tax losses.

The taskforce process was the first stage of engagement with the GIF sectors and marks a significant milestone in government and industry partnering to achieve New Zealand's economic goals.

Stage two of this engagement is the government response to the taskforce recommendations, and stage three will be implementation, which in effect, starts today.

As I said, Pete Hodgson will be talking to you today about the specific response to the Biotechnology taskforce. We will also be making announcements about design, ICT and screen production in the coming weeks.

The taskforce reports have provided us ? government and industry ? with an invaluable roadmap to grow the GIF sectors and form active economic development policies. The government is committed to supporting the growth of these sectors and wants to continue to strengthen the partnership.

To conclude, I want to re-iterate that the taskforces are only one part of the growth and innovation framework. But if the taskforces have shown us one thing, it is that we have people in New Zealand with vision and ambition to reach for the highest levels of achievement. But in order for the goals to be achieved, we all have to play our part, from parents encouraging their kids to keep on with science and maths, to celebrating our many innovative individuals and companies that are providing us with new paths to the future.

Media Fact Sheets

Cross Sector Initiative: Tertiary Education Initiatives

All of the GIF Taskforces noted the importance of education to their sector's future success. They recognised that their competitive advantages were based on the knowledge, creativity and entrepreneurship of individuals and the teams that they formed. The development of a healthy and "industry-connected" education system was therefore considered critical to the provision and development of their future skills and talent requirements.

Two key themes emerged across the Taskforce reports with respect to tertiary education and training. These were:

1. The need to develop an engaged and responsive tertiary sector ? wherein emerging sectors such as those represented by the taskforces could readily engage with tertiary training organisations to help ensure: · an appropriate number of graduates are produced to meet the needs of industry; · the graduates' skill levels are relevant to match the rapidly changing needs of these sectors; · the production of graduates is timely with respect to the needs of business [Note: that this is particularly important in the taskforce sectors given the long lead time needed to train students to the post-graduate level required in many of these areas]; and

· graduates have more awareness of career options and pathways within these sectors. 2. The importance of an entrepreneurial culture and a greater degree of commercial astuteness were deemed important at all levels, including the: · overall "roundedness" of the training that graduates receive in the disciplines underpinning the GIF focus areas; · approach, and pro-activeness, that public tertiary providers take to transferring new knowledge and technologies through to the private sector; and · life-long learning and development of key decision-makers within these sectors to cope with the demands of rapid growth in an international environment. The tertiary sector is currently undertaking tertiary education reforms that are focused on improving linkages and industry relevance. The Taskforce reports indicate a need for capability building within the tertiary sector in order to enhance responsiveness to the GIF sectors. This would enable the sectors to make the most of the opportunities provided by the tertiary reforms and its more "mainstream" funding and policy mechanisms (such as Charter & Profile negotiations, Performance-based Research Fund, Industry Training Fund, etc).

The Tertiary Education Commission (TEC) is developing two initiatives to specifically help build the capability of the tertiary system in response to the Taskforces' issues.

The first is entitled Enterprise Training for Emerging Industries ($11.55m over four years). This will be a pilot initiative to build stronger relationships between the GIF sectors and the tertiary education sector. The pilots will develop different models through which the GIF sectors can better engage with tertiary education providers in order to develop a shared approach to setting and implementing industry-relevant education agendas.

The second initiative, Entrepreneurship & Knowledge Transfer ($10m over four years) is specifically targeted at addressing a lack of commercial and entrepreneurial skills among graduates and existing decision-makers in business. All of the Taskforces identified this knowledge gap as a major barrier to growth.

Cost: $26.05 million over four years.

Contact: Craig Grant, Principal Advisor, Tertiary Education Commission, (04) 462 5218

Cross-Sector Initiative ? Statistics

Two of the taskforce reports stressed the importance of quality and timely information about the New Zealand economy.

The Hon Pete Hodgson, Minister for Research, Science and Technology, will today announce specific statistics initiatives for the biotechnology sector. Statistics initiatives for the ICT sector will be announced later this month.

Two additional statistics initiatives will cross over all of the sectors. These will enable the government to provide deeper information about the impact of Growth and Innovation Framework policies; the value they are adding and the comparison with similar policies developed and implemented in other jurisdictions. The initiatives are:

· a revised research and development expenditure survey and new standalone innovation survey ($2.061 million); and · a first complete set of official productivity statistics ($0.550 million).

The methodology behind the current R&D expenditure survey has not been reviewed since 1990. It no longer adequately reflects the changing nature of the economy and the increasing number of New Zealand firms carrying out R&D. The new survey will use a revised methodology and will provide the following information on a biennial scale: 1) Expenditure on R&D; 2) Sources of funding on R&D; and 3) Personnel involved in R&D.

MED's Business Practices and Performance Survey included an innovation module for the first time in 2001. This helped to identify and quantify a much wider range of innovation activities being carried out in firms. The new standalone innovation survey is required to enhance the information gained through the initial innovation module. The new standalone survey will provide the following information on an annual basis: 1) rate and characteristics of innovative activity in businesses; 2) factors limiting innovative activity; and 3) expenditure on innovation.

The first surveys for the new revised R&D expenditure survey and the new Innovation survey will be undertaken in the 2004/05 financial year.

New Zealand does not currently have a set of official productivity statistics. Productivity is a key indicator for the Growth and Innovation Framework. The methodology for the new productivity statistics will be based on that recommended in the recently published OECD manual, "Measuring Productivity" and the following information will be provided: 1) Labour Productivity; 2) Capital Productivity; and 3) Multifactor Productivity. The first annual productivity statistics will be ready for release in the 2005/06 financial year.

Total cost: $2.6 million over four years.

Contact: Tom Woodhouse, Manager Enterprise Accounts Statistics, Statistics New Zealand, (03) 964 8830

Cross-Sector Initiative ? Tax and Compliance Regulations

Several taskforces called for tax laws and compliance regulations that enable greater access to finance and global connections, thereby helping to retain and attract key talent and removing barriers to rapid growth.

There was a call for simplicity and transparency in the tax area as well as for changes that would assist in facilitating the rapid growth of New Zealand-based companies. These tax issues are in fact experienced by many growing businesses and are not limited to just the taskforce sectors.

The taskforces proposed several different options, including limited liability partnerships that would allow flow-through treatment to investors, the tax treatment of employee share options and rules regarding the carrying forward of tax losses.

Tax policy work on access to finance is well underway. This work programme has a strong growth and innovation focus and already incorporates analysis of many of the taskforce recommendations concerning access to capital. The programme acknowledges the importance of small growing businesses having adequate access to finance and the role that tax may play as an impediment to that access.

Inland Revenue, Ministry of Economic Development and Treasury officials are also investigating whether limited liability partnerships, that would allow flow through treatment to investors, are appropriate for the New Zealand context. Work is also underway on the tax treatment of share options and patents and the carry forward of tax losses. The recent changes to the tax treatment of research and development are being evaluated to ensure the rules are working as intended.

The Business Law Reform Bill, due to be passed into law by April 2004, proposes to relax the restrictions that constrain the offer of options to employees and 'qualified investors'. The Bill:

· includes new exemptions from prospectus requirements for wealthy and experienced investors, people who are experienced in the industry to which the securities relate and all employee superannuation schemes, whatever their size. · extends the exemption for close business associates and relatives of the issuer to close business associates and relatives of company directors; and · allows people to provide advertisements that seek expressions of interest on the offer, without an offer being produced. This allows small and medium enterprises to assess the level of public support for proposed issues of securities before incurring the expense of preparing the prescribed disclosure documents.

Other than the Business Law Reform Bill, the government has not yet committed to any definite changes to existing laws. At this stage of the policy development process, the fiscal costs associated with any modifications to tax laws have yet to be fully evaluated. Inland Revenue and Treasury officials are due to report back to the Minister of Finance by December this year on the tax policy work programme.

Contact: Tax Issues - David Carrigan, Inland Revenue Department, (04) 474 7146

Regulatory Issues ? Kirstie Hewlett, Ministry of Economic Development, (04) 474 2887

Cross-Sector Initiative ? Business Case for Advanced Internet Based Research Network

Film, ICT, and Biotech taskforces all make reference to either broadband requirements or research network requirements. Modern research is increasingly reliant on high speed IT connection both between domestic collaborators and internationally. Much of the infrastructure is already in place but is made inaccessible to researchers by the prevailing telecommunications companies' business models.

A common issue is the need for coordinated action to put in place an ICT Infrastructure ? in particular affordable access to high speed (gigabit) internet connections between participants in the research, education and innovation communities.

A specific initiative to build a business case for an Advanced Network which positively affects the biotechnology sector will be announced today at the Biotenz conference when the Hon Pete Hodgson, Minister for Research, Science and Technology, announces the government response to the biotechnology taskforce.

A Next Generation Internet network will underpin the work within the biotech sector and help lead the sector into the future.

New Zealand's leading bioinformatics researchers have stated that their research is increasingly reliant on large high speed ICT connections between domestic and international collaborators and is being driven by multi-disciplinary teams accessing and manipulating data on an unprecedented scale.

Internationally researchers and scientists are working in a complex global environment and are becoming more dependent upon ICT. There are fundamental scientific discoveries emerging as a result of this set of circumstances.

Funding from the Government's Growth and Innovation Framework ? led by the Ministry of Research, Science and Technology with the active involvement of the Ministry for Economic Development, Tertiary Education Commission, New Zealand Trade and Enterprise, and Treasury ? will establish a business case to explore the impact of an Advanced Network for the research, education, and innovation sectors.

Cost: $0.2 million for year 2003/2004.

Contact: Andrew Kibblewhite, General Manager, Strategic Development, Ministry of Research, Science and Technology, (04) 917 2919

Increased Support for the Technology/Hangarau Curriculum in the Senior Secondary School

The Taskforces (particularly ICT) identified the need for more secondary students to be informed about and prepared for tertiary study and careers in GIF priority technology areas. This includes a focus on innovation and entrepreneurship. The government has decided to address these concerns by providing additional support for the implementation of the secondary schools technology curriculum with the aims of:

· Increasing secondary school student participation in technology/hangarau education and flow on into tertiary technology related courses. · Raising the quality and effectiveness of senior secondary school/wharekura technology/hangarau courses, including enhanced teacher capability · Improving alignment between secondary and tertiary technology education and alignment with business/industry needs

Developed in the mid 1990s for years 1-10, this curriculum is now being introduced to senior schools and is being rolled out as part of the NCEA framework. It aims to develop:

· technological knowledge and understanding · technological capability · understanding and awareness of the relationship between technology and society through study in up to seven technological areas: · biotechnology · electronics and control technology · food technology · information and communications technology · materials technology · production and process technology · structures and mechanisms

Design, drawing and graphics are also integral to the curriculum

Under this initiative, centres of excellence be will be identified and expanded through the establishment of an on-line Community of Learning in Technology (CoLiT). This is designed to increase teacher capability to deliver effective technology/hangarau education and improve student participation, engagement and results.

The Community would consist of classroom teachers, pre-service and in-service educators (including teachers of hangarau in wharekura), tertiary technologists, technology researchers, technology experts in industries and Crown Research Institutes.

This initial phase of the project would be to establish a Community of Learning in Technology through consultation and collaboration. based in an electronic environment. With the broadband initiative, this provides the most effective and efficient means of teacher engagement and allows for professional discourse.

Agencies Involved

Ministry of Education (and NZQA)

Timeline

Programme will commence in year 2003/04. Specific timings will be provided in regular progress reports to Ministers on the education initiatives.

Total Cost (over 4 years)

$8.000 million


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