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Taking New Zealand to the World

Hon Lianne Dalziel
Minister of Commerce, Minister for Small Business,
Minister of Women’s Affairs, MP for Christchurch East

22 November 2006 Speech notes
Embargoed until delivery: 9.30am Wednesday 22 November 2006
"Taking New Zealand to the World"

Opening address to 2006 Annual New Zealand Chamber of Commerce Inc Conference
Civic Suites 1&2
Wellington Town Hall
Wakefield Street
Wellington
9.15am

Good morning and thank you for inviting me to speak to you at this year’s Annual conference. I'd like to acknowledge the hosts Simon Arnold, Charles Finny, and the team at the Wellington Regional Chamber of Commerce, and to congratulate them on their 150th Anniversary. Well done on your outstanding contribution to the development of a strong business community in this region.

Once again, we are at that time when we look back and reflect on the year we have had. For me, I have completed my first year holding the small business portfolio and what a year it has been! Not coming from a business background, I have had to learn about the realities and challenges of owning and running a business, through the experience of your members and other SME operators from one end of the country to the other.

It is an opportunity I have relished, because, as I have commented before, there is an incredibly strong sense of optimism out there and what's more it is well-founded. I have also often quoted the expression that Tony Blair used when he spoke at the Auckland Chamber's 150th Anniversary, where he said we often forget how we are seen from the outside. He said New Zealand was seen as 'exciting and dynamic'.


I have taken that sense of excitement and dynamism with me as I have met with individual businesses and attended awards evenings. Awards evenings are great, because they enable a region or an industry to pat itself on the back and say well done. And yes it is ok to have winners, who have strived for and achieved that all-important standard of excellence. And that is another comment I have been making recently and which I will repeat here – there is too much negativity about business success for my liking. We worship our sporting heroes and admire our artistic and cultural icons, but what of the successful business men and women, who are the backbone of our economy and who provide us with the opportunity to participate in the economic, social and cultural life of the nation?

I think we should grow tall poppies, not knock them down, and government policy should provide the quality soil from which they grow. I know that Michael Barnett will accuse me of supplying the fertiliser, and as a politician that is probably my forte, but all jokes aside it is vital that government fosters a business environment that facilitates growth.

That leads me onto my other significant role as Minister of Commerce and the Quality Regulation Review. The Prime Minister gave me the task of taking a fresh look at regulatory frameworks and how they impact on business in my role as Minister of Commerce, and after 6 months on the task, I believe that some of the best results will be felt within the SME sector. I will talk about that shortly.

First, however, I want to pick up on the theme of your Conference 'Taking New Zealand to the World'.

I know that SMEs are not always seen as having a significant role in taking New Zealand to the world, but it is vital that they are not overlooked. Making up 96% of New Zealand firms, it is not their number, but their potential that makes them so important. They are sources of innovation and play a key role in the diffusion of new ideas and technologies.

Earlier this month, my colleague Trevor Mallard delivered a speech to the Wellington Regional Chamber of Commerce outlining the rationale behind the economic transformation agenda. He said that it is essentially an evolving blueprint for a future high-income, knowledge-based New Zealand economy that can deliver New Zealanders a great standard of living.

He reminded us that we need to draw on our own unique assets and characteristics to achieve this vision.

The government has outlined the five main areas of focus in implementing our economic transformation agenda. They are:

- Growing globally competitive firms;

- Developing a world-class infrastructure;

- Developing innovative and productive workplaces underpinned by high standards in education, skills and research;

- Environmental sustainability;

- And growing an internationally competitive city – Auckland.

I would like to focus on three of these themes, as I talk about the areas in which we can work in partnership to achieve sustained and sustainable growth.

The first is: Growing globally competitive firms

The government has recognised the importance of increasing the numbers of globally competitive firms in New Zealand and increasing the productivity of businesses in general. Under this heading, we have recently announced the results of the review of business assistance programmes so that we can ensure that they are achieving the desired results. The review of business taxation has put a variety of options on the table, but the ones I favour are those that focus on investment in R&D, innovation-related staff training and market development.

The Business Capability Partnership is developing a benchmarking tool that will enable firms to benchmark themselves against a large number of other firms. This will allow organisations such as the Chambers to help firms identify areas where they can enhance their performance, as well as motivating them to achieve business excellence. It will also enhance the ability of organisations that deliver capability-building programmes to bring about effective changes in their clients’ operation.

Of particular importance in the coming year will be the focus on building exporting capability. As you will be aware, 2007 has been specifically designated as Export Year, and a key focus will be raising the aspirations of firms to export and building an appreciation of the importance of being globally competitive.

While the number of SMEs in New Zealand is currently around 334,000, the number of those that export is small. In the last financial year, only 17 per cent of New Zealand businesses had export sales. Last year, the top 359 exporters generated 85 per cent of exports by value. By international standards, this means New Zealand’s economic fate is in the hands of a small number of companies.

Increasing globalisation means there will be even more opportunities for New Zealand businesses, and that does not just apply to the businesses that are doing the exporting. It also benefits those businesses that supply the exporters – most of which are SMEs – and despite being critical to the export sector are often forgotten.

Export Year will provide a focus on New Zealand exporters, both in terms of raising their profile and also underlining their vital importance to a sustainable economy. More importantly, it will provide an opportunity for business-to-business and business-to-government collaboration, so we may jointly achieve the goal of increasing our long-term export performance.

The second theme is: Developing a world-class infrastructure
When I took on this portfolio, I developed a set of priorities around which my officials have structured their work.

Featuring strongly on my list was a desire to enhance and maintain a quality regulatory environment that eliminates unnecessary compliance costs and minimises necessary compliance costs.

I was therefore very pleased when the Prime Minister invited me to lead a review of regulatory frameworks, which I announced as the Quality Regulation Review in May this year. I wish to reiterate a point that I have made throughout this process – and that is we were not starting from a zero base. The Ministerial Panel on Compliance Costs had addressed many of the concerns raised by business during our first term in office and, of course, the World Bank ranking for ease of doing business sees New Zealand as second only to Singapore out of 175 economies.

The first Milestone report was released on 31 October, and confirms that our regulatory environment is pretty good, but it can be better. We have received a great deal of input from business, and as a result of this feedback, I am confident that we can look to make tangible improvements for business, particularly where different regulatory frameworks have overlapping application or more than one regulator has jurisdiction.

This review is also addressing issues identified through interviews with businesses in targeted sectors - retail, wine, hospitality, and horticulture – and I have promoted this review throughout the country, with focus groups so that businesses have been able to tell me directly about the issues they are facing.

I have personally been to Auckland, North Shore, Hawke's Bay, Hamilton, New Plymouth, Christchurch, Timaru, Dunedin and Invercargill – and Trevor Mallard stood in for me in Gisborne.

Can I take this opportunity to thank the individual Chambers of Commerce that were instrumental in helping set up these focus groups. Small business owners and operators are busy people and the support of the Chambers has been extremely valuable.

The information that has come through from the sectors has been of the highest quality, but I have found the personal engagement extremely important in terms of hearing people's real life experiences and sometimes being at a loss to explain why, if compliance is the desired outcome, regulators cannot give simple advice at the outset – especially when asked.

As you would imagine, some themes have emerged. However, we haven't got to the point where specific proposals can be put to Cabinet, largely because there is a need for some departments to think a little more laterally about how regulatory frameworks are 'framed' – and by that I mean the structure – and how they are enforced. With that in mind, Cabinet has directed government departments to report back to Ministers by the end of the year on workable solutions to:

- remove duplicated or overlapping regulatory requirements;

- provide tailored information on regulatory requirements to meet the needs of business;

- design "safe harbours", so that if certain conditions are met firms are deemed to comply with the law; and

- require more rigorous risk analysis when developing and enforcing laws.

This should signal to you how seriously the government is approaching this issue and as I said at the outset, you will see how SMEs in particular will benefit from this approach.

Another part of this work involves strengthening the regulatory impact analysis system for government departments proposing new regulation and legislation, which will come into force from April next year.
There are several aspects of the proposals, but they include the requirement that future discussion papers will contain draft Regulatory Impact Statements, which means business will be able to have real input into the cost-benefit analysis they contain. And the Regulatory Impact Analysis Unit within MED will have the power to send Regulatory Impact Statements back to departments if they do not meet the required standard.

The Cabinet Paper also reports on progress towards the implementation of a Business Cost Calculator, adapted from the Australian model, which was itself adapted from the Dutch Standard Cost Model. This will be implemented for a two-year trial, and will help define explicitly the costs imposed on business by regulatory frameworks, which will assist in the overall cost-benefit analysis.

I should mention in this context that officials are due to report next year on the establishment of a stand-alone group of business, unions, academics and officials to monitor on-going compliance costs and the cumulative effect of regulations.

As I said before though the pleasing thing about the first milestone report is that the review confirms that New Zealand's regulatory environment is in good shape; but that there is room for improvement, particularly in how people and businesses are made aware of the regulatory requirements and how regulation is enforced. We have had a clear message from business that one-size does not fit all, especially when the issue is one of assessing the interest that is being protected and the degree of risk that is posed.

The final economic transformation theme I wish to touch on today is Environmental Sustainability.

Sustainability is rapidly becoming more than a buzz-word. It is inevitable that future economic policy on a global scale will have to take into account environmental impacts. This realisation is becoming increasingly apparent, as the profile of the climate change dilemma grows.

The government recognises that climate change is a long-term strategic issue for New Zealand within the broader context of economic transformation, with the Prime Minister signaling that it is time to be bold on climate change.

New Zealand is in a unique position to lead the world in the quest for sustainability. We have a population size in which it is possible to engender a change in behaviour towards sustainability.

In addition the nimble nature of SMEs means that New Zealand can hold the inside track when it comes to adapting business practices and developing products to be more energy efficient and developing techniques that will reduce greenhouse gas emissions. I don't believe we have to choose between averting climate change on the one hand or promoting growth and development on the other. In fact as a small trading nation at considerable distance from our markets, we don't have the luxury of choice. We must turn this challenge into our competitive advantage.

On that note, thank you again for inviting me back to speak at your Conference. I remain indebted to all the individual Chambers for opening your doors to me and enabling me to engage with your members directly.

I feel that we have developed a true partnership, based on mutual respect. We may not see eye to eye on everything, but I believe we have worked well together and I look forward to the year ahead.


ENDS

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