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Dalziel: NZ Co-operatives Association AGM

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

24 November 2006 Speech Notes

NZ Co-operatives Association AGM

Speech to the NZ Co-operatives Association AGM
Copthorne Commodore Hotel

Good afternoon. I was pleased to be invited to speak at this, your 24th AGM.

I would like to begin by acknowledging your outgoing chairperson, Alex Wright, and executive director Ian Reid, both of whom I understand are retiring from the Association. Organisations such as yours rely on the hard work and dedication of people such as these so I am sure their efforts on your behalf have been greatly appreciated. I have been pleased to meet your newly appointed executive director, Ramsey Margolis and look forward to meeting the incoming chair and directors.

In my comments today, I plan to run through some matters you have raised with me and I also want to tell you about some new initiatives that I would welcome some feedback on.

Co-operatives have a long and proud history in New Zealand. In fact, they were one of the first business structures to bring together individuals with common interests and values and were intended to benefit their members through principles such as fairness in trade.

The long established principles of co-operation, those notions of self-help, self-responsibility, democracy, equality, equity and solidarity are as important today as when the co-operative principles were first developed.

I was interested to read your note on the “Forum for a Responsible Globalisation” recently held in Lyon, France. It tells an interesting story about where New Zealand co-operatives stand internationally.

At that forum the International Co-operative Alliance (ICA) released its first report, listing the major global co-operatives and mutually owned businesses. I note that the report is being treated as ‘provisional’ as it is the first such report to be issued.

Nevertheless, what the report shows is that the co-operative and mutual sector is much larger than many people may have thought. On 2004 figures (the latest available comprehensive data), around 1 trillion USD – that's 1000 billion USD or 1.5 trillion NZD – it's a big number no matter how you say it – so 1 trillion USD in aggregate is generated by the ‘top 300’ co-operative and mutual firms on a global basis. This equates to the size of the 10th largest economy in the world. To put this point into perspective, Canada was 9th largest with a GDP of US$979 billion based on World Bank figures.

So, how does New Zealand fare?

* There are six Kiwi co-operative and mutual businesses that made the Global 300 list. They are:

at 24th: Fonterra Co-operative Group (NZ’s largest commercial business);
at 116th: Foodstuffs (Auckland) Ltd (wholesale grocery);
at 153rd: PPCS Ltd (meat processing and marketing);
at 175th: Foodstuffs (South Island) Ltd (wholesale grocery);
at 177th: Foodstuffs (Wellington) Co-operative Society Ltd (wholesale grocery);
and, at 260th Alliance Group Ltd (meat processing and marketing).]

By comparison, Australia had two co-operatives in the Global 300 list.

* Based on total turnover New Zealand ranked 16th on the Global 300 list at USD$14.9 billion annually. France, Japan, and the USA were first, second and third. Australia came 24th.

* Of the countries with the most co-operative and mutual businesses in the Global 300 list New Zealand ranked 11th. The USA, France and Germany being first, second and third. Australia is 20th.

* Of the countries with the largest percentage of GDP coming from Global 300 turnover New Zealand ranked 2nd. Finland was first and Switzerland third.

* Relative to population, New Zealand ranks 2nd, behind Finland, in countries with the highest concentration of Global 300 co-operatives.

By any standards this is impressive stuff and something New Zealand co-operatives and mutuals should be proud of – an example perhaps that the truly egalitarian nature of the Kiwi spirit is alive and well.

I believe that bringing community and social values to business is important, and the ICA report has identified the benefit this brings to the New Zealand economy.

Last time I spoke at your AGM, which was 3 years ago, I talked about a joint project between the Ministry of Economic Development and the Co-operatives Association to put information about the origins, key features and registration requirements of co-operatives on MED’s website. I am pleased to report back that the result of the initiative is still on MED’s website and remains a valuable educational tool.

I also mentioned my keen interest in hearing your thoughts and ideas on whether the Co-operative Companies Act 1996 could be improved. I am glad that so far no major concerns have been identified on that front.

But one thing that has resulted from my discussions with you is how the adoption of the International Financial Reporting Standards would affect co-operatives.

After further work on this by my officials, the Business Law Reform Bill that was passed in Parliament last week contains a section that empowers the Accounting Standards Review Board to make an exemption from a NZIFRS standard in exceptional circumstances. I should say however that this was not a legislative power that the ASRB sought and therefore I expect that it will only be granted in highly exceptional circumstances. The exemption-making power has a high threshold, namely whether compliance would result in financial statements which would be “misleading in a material way”. Whether Co-operative companies as a class would meet that threshold is therefore entirely a matter for the ASRB.

Another area of interest for some of you is the discussion paper I recently released about Mutuals’ Governance. While the Co-operative Companies Act is not covered by this paper, other mutual forms are. This will affect only some of you here today, but I if you are interested, take a look at the paper on the MED website and make a submission. I remind you that the closing date for submissions on this topic is today week – December the 1st, although I am told that as long as you have your submission in before Christmas it will be considered.

From the government’s perspective there is a real appreciation of the importance of the co-operative and mutual form. So while the co-operatives legislation is working well, it seems that mutuals' legislation lacks consistent and effective baseline governance rules. In presenting the options in the mutuals governance discussion paper, I am not looking to merely impose Companies Act type requirements – as has been done in some other jurisdictions – but rather to enhance the strengths the mutual form already provides, noting its inherent difference to the company corporate form.

The mutuals governance discussion paper forms part of a total of 9 discussion papers I have released as part of the Review of Financial Products and Providers. The review covers areas such as insurance, superannuation, collective investment schemes and non-bank deposit-takers. These other papers will also be of interest to some of you, and I am very interested in hearing how the options for reform fit or do not fit with your legal form, business model and particular product offerings.

I have been pleased with both the detail and the process involved in the Review of Financial Products and Providers. The Ministry established individual advisory groups made up of people with industry expertise and knowledge, who have provided invaluable insights and ideas and contributed significantly to developing the policy proposals in the discussion papers.

In my view, this is best practice in action and in the context of the Quality Regulation Review I am also leading, it is how Regulatory Impact Analysis is supposed to work - identifying problems, objectives, options, and looking at their cost/benefit risks and opportunities with people who have “hands on” experience and operational expertise with the products, markets and the industry concerned.

Looking forward, I wish to assure you that the government is a strong supporter of co-operatives, however there is little the government can do to promote the co-operative form that you cannot do yourselves – much more effectively. I believe the government's role is best focused on ensuring that New Zealand remains a place where co-operatives can flourish.

There is a growing public sentiment in what could be the “co-operative advantage” as the new competitive advantage. I think in the same way that the imperative of sustainability has been drawn into sharp relief by the reality of climate change, there may be a matching shift in the preferred corporate form that sustains our increasingly limited resources.

Whatever the motive, it is clear that co-operatives are doing well in New Zealand and New Zealand co-operatives are doing well in the world. I am sure that will long continue to be the case.


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