Friday, 02 March 2001 Media Statement

CRIs in strong position to repay taxpayers' investment

Crown Research Institutes are in a strong financial position to repay taxpayers' nine-year investment with a special dividend, says minister Pete Hodgson.

Mr Hodgson today released Treasury papers under the Official Information Act that outline the financial position of CRIs and some of the reasons for increasing their debt and extracting a special dividend from their cash reserves.

The papers say that "CRIs continue to maintain strong financial positions with high levels of surplus cash and low levels of debt, and therefore face weaker financial disciplines. Maintaining strong financial disciplines through eliminating surplus cash (either through appropriate investment or, if not, through return to the owner) and applying appropriate debt:equity levels, is important to ensure that CRIs continue to manage their businesses effectively."

Mr Hodgson said increasing investment by CRIs in their own proposals would give the CRI minister an undesirable level of influence over research programmes, as investments are subject to ministerial approval.

"It is an important principle of public science that decisions about funding particular research projects should not be made by politicians," said Mr Hodgson. "The Foundation for Research, Science and Technology is the independent, expert body that allocates public science funds in New Zealand. Neither I or any future science minister should start intruding on their job."

The papers say CRI cash balances are forecast to total more than $40 million each year over the next three years, while only three of the nine CRIs have any private sector debt. The total level of debt across CRIs is less than 4% of shareholder's funds. A 1996 Ernst & Young report concluded most CRIs could manage a debt ratio of up to 30%.

The exact amount and timing of the special dividend to be extracted from CRIs is yet to be decided. However the Government has decided the money should remain in New Zealand's innovation system through investment in a seed capital fund, to accelerate the development of the seed capital end of the national venture capital market.

ENDS

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