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Ramping up the regions - new economic policy

4 April 2007 Speech Notes

Embargoed until:12.30pm

Ramping up the regions - new economic policy

Speech to the launch of Regional Economic Development Policy Changes, West Foyer, Beehive, Wellington

Thank you for coming today to hear about our final decisions on changes to regional economic development policy.

Before I get to the detail, I would like to sketch out the government’s thinking about economic development, and the role of the regions in that process.

We have come a long way from the purity of thought and deed that dominated government thinking in the 1990’s. That thinking saw no, or negative, value in governments engaging in developing industries or regions or the economy as a whole. I use the word "engaging" carefully and deliberately.

Governments should not try to develop industries or regions. However, the experiences of the rest of the world was that while we stood back and watched and waited for the wonders of the market to unfold, other governments got engaged.

They recognised that the world is changing rapidly, and those that didn’t embrace change and that didn't get organised to take advantage of it got left behind.

They recognised that progress meant developing the skills, nurturing the creative potential of research and development, providing the infrastructure and breaking down the barriers to collaboration that all link up to grow firms and industries and regions together, not separately.

So someone has to do the linking up, and someone has to provide the resource to enable the linking up to take place.

That is where we started in 2000. We effectively had no regional development policies or programmes in place. To fill that gap the government established the Regional Partnership Programme to provide for regional economic strategy development and for capability building.

That programme has been effective, and most regions now think development and think strategically. They recognise the value too of working collaboratively at the regional level, involving local government, business and industry, research providers to name but a few. It is time to step up to the next level. That next level is implementation.

The Regional Partnership Programme, under the changes I am announcing today, is evolving into the Regional Strategy Fund and the Enterprising Partnership Fund.

A second strand in our thinking has been a recognition that despite globalisation, different countries have taken vastly different development paths, building on their own unique national economic identities, using their special endowments and aptitudes, and discovering and mastering new fields of competitive advantage.

Just as countries have special strengths, so do regions.

The result is that we need to empower regions to realise their potential, but the questions that need to be addressed first are the degree of fragmentation that is sensible, and the time horizon over which we seek to capture strategic benefits.

Our review of existing regional development programmes suggested that perhaps we had fragmented too much, and invested against too short a time horizon.

These four things then shape the new approach I am announcing today: learning from others; banking the gains of the last six years and moving on to the next frontier; consolidating the number of regions and extending the time horizon for development investment.

We are reshaping regional economic development policy after six years because the environment our industries and firms are working in has changed substantially - we've had strong growth in the regions that used to be lagging behind, and we've had strong growth in employment.

It is all part of the work to lift living standards and our prosperity by transforming our country into an economy that is innovative, export led and high wage.

In regional terms it is vital that we build on successes to date, and also re-align programmes with the overall goal of increasing New Zealand's competitiveness.

Much of this work turns on the need for collaboration and coordination at the regional level - inside regions but also between regions - to ensure we get the most out of the skills and resources available.

This means developing strategies that take the "whole of region" approach, engaging all the relevant councils, Maori communities and key industry, education, training and research organisations and government agencies that all feed into and affect economic development.

Already regions - like Wellington are taking this approach on board and recognising the need to involve all the key players.
The changes to regional economic development policy I am announcing today reflect this and they also reflect a growing understanding of where the government can add value in regional economic development.

We know that the key drivers of economic growth are innovation, entrepreneurship, skills and infrastructure.

The challenge at the regional level is to unpick these, diagnose the specific critical issues in your region that you need to work on, agree on priorities and then identify what specific actions you can undertake to achieve success.

The importance of scale in this work is obvious and this has driven our government’s decision to move towards supporting fourteen larger regions instead of 26 under the old model.

Within those fourteen larger regions, the challenge is to develop and implement regional strategies that will improve the business environment with a sharp focus on increasing the numbers of internationally competitive firms.

Where possible central government agencies will also align their regional work to support those regional development goals.

The regional strategy has to have good across-the-board buy-in and strong commitments and the resources to put it into action and deliver.

That is where our new policy comes in.

As I said earlier, the government will create a new fund called the Regional Strategy Fund.

Under this fund each of the 14 regions will be eligible for up to $750,000 over three years to develop strategies that will deliver practical results in terms of the development and retention of globally competitive firms.

The funding will support strategy development and also activities or projects that flow out of that strategy.

New Zealand Trade and Enterprise will be working with regions to help this work. It is vital that key players within a region are identified, engaged with and committed to the strategy.

Key industries must also be involved to ensure these strategies reflect and raise the aspirations of businesses within regions.

The new Regional Strategy Fund is focused on outcomes in a medium to long term sense rather than less important short-term projects.

The government also recognises we must continue to consider the importance of geographically located groupings of competitiveness, from where we can grow internationally competitive firms and sectors.

We have seen this already through the more than 20 Major Regional Initiatives that government has co-funded.

Across a range of industries and regions these MRIs have catalysed relationships between business, other regional stakeholders and NZTE. Projects have been developed that will take those industries forward and strengthen those regional economies.

As I signalled in August, the government wants to build on the success of projects like this while at the same time honing in on the need for initiatives to have more than just a regional impact.

This recognises that while some regions and industries have been leading the way in thinking about projects with the potential to transform their regions, government does need to be targeted and focused in its economic development initiatives.

With this in mind, the Enterprising Partnerships Fund will replace the Major Regional Initiatives fund.

It will be a contestable fund for nationally and internationally significant initiatives.

Funding will be approximately $9 million this financial year, $10.5 million in each of the following two years and $11.5 million a year after that.

Under the Enterprising Partnerships Fund there will be better opportunities for regions to undertake large, transformational projects that can contribute to New Zealand's growth.

As part of the regional policy changes, we are also targeting Auckland, in recognition of the need to develop our largest city into a global, world-class city that will help New Zealand's economic growth.

To recognise this, $1 million a year will be set aside for the next three years for Auckland specific projects in addition to the two new funds.

Detailed criteria for the new funds will be finalised and announced in the next few months, with the new programmes opening from July 1.

Before I finish I would like to acknowledge the input from a wide range of people into this policy development, in particular Local Government New Zealand and the Economic Development Association of New Zealand who have provided a valuable perspective on behalf of their members.

In closing I reiterate that these changes aim to build on what has already been achieved. We do not envisage or want regions to start again from scratch. We want regions to seek out opportunities based on refining and enhancing what is in place now.

We want regions to also focus on collaboration and targeting your regional strengths and resources, while ensuring that all the key players in your region are connected in, and on board for the ride.

Thank you


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