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Anderton: address to Primary Industries Summit

Hon Jim Anderton

Minister of Agriculture, Minister for Biosecurity
Minister of Fisheries, Minister of Forestry
Associate Minister of Health
Associate Minister for Tertiary Education

Progressive Leader

29 November 2007 Speech

Keynote address to 2020 Primary Industries Summit 2007, Christchurch Convention Centre

A few years ago, a parable became fashionable among management consultants - so fashionable that a big advertising company made an ad out of it. You might have seen the ad. It has a particular relevance to the primary industries.

It’s about geese. It’s about the lessons we can learn from geese: Geese fly in a “V” formation, and as each flaps its wings it creates an uplift for the birds behind. The effect nearly doubles the range that the flock can travel.

If a goose falls out of the formation, it experiences drag and falls back. It quickly rejoins the formation. When the goose in front of the “V” formation begins to tire, it rotates back in the formation and lets another goose fly up front.

The flock honks to encourage each other. And if a goose gets sick, two others drop out of formation and stay with it until it dies or it can fly again. Then, they catch up with the flock.

The lessons in the story intuitively make sense for leaders. They are lessons about the strength to care: That we can get where we are going faster if we co-operate.

We can’t do as well on our own as we can as part of a community with a common goal. Any community has complementary skills, capabilities and resources. We should take advantage of all of them.

We should celebrate our successes. And we all have a contribution to make, including a contribution from the community as a whole to help out in hard times. The story of geese is the story of what we have to accomplish within the primary sector:

Co-operation as a whole and within sub sectors of our primary industries in order to maximise our potential. We have to unleash the combined talents of New Zealanders. We should give ourselves a honk when we do well, and give our industrial innovators a honk to cheer them on.
And there is a role for government in accepting some of the burden as a partner with industry.

The single greatest, and single most urgent, issue facing us is the question of how we will lift the value of our production and strengthen our economy. And the lessons from geese tell us we will answer this question best if we work collaboratively. We all need to pitch in and play our part. The government will put its hand up. We’ll do our bit.

This summit is the starting point. It came out of a uniquely collaborative moment. Late last year, I invited primary sector leaders to my home (owned by you – Vogel House) in Lower Hutt. We got together for a discussion about what we needed to do to unlock our potential.

And we quickly realized that it was the first time in their lives that most of these leaders had been in the same room together. Many didn’t know each other; they’d never met. And yet, in sector after sector, the threats and opportunities facing our most important industries are the same.

Make no mistake, these are our most important industries. They earn sixty percent of our export revenue. Now, and for the forseeable future, only the primary sector will deliver the returns we need to build wealth in New Zealand.
If you care about New Zealand, you care about the strength of our primary industries. If you care about New Zealanders, you need the strength to do something about it.

This conference is the launching pad from which we can build that strength. The vision I am setting out is a vision of a long-term strategic position at the top of the value chain. And I am calling on us to assemble all our strength and our effort into that strategy.

There is no future for us in competing as the lowest cost country in the world. That’s simply a race to the bottom. We cannot hope to compete, and we do not want to compete, against countries that rely on exploitation of people and the exhaustion of their physical environment. We cannot hope to build long term wealth by simply hoping the sun shines, the rain falls and the grass grows. That is the route commodity cycles take you down.

If you have a long term strategic approach to sit at the top of the market, you are a price-setter, not a price-taker. You prosper in a good year and in a bad one. We need a long-term approach to building value and a long-term strategic position in high value niches.

My message to you is that the government is prepared to work as a partner with industry in achieving this vision. And there needs to be cooperation within the industry as well.
When we look around the primary sector, how many of us can identify examples where one small New Zealand player is trying to cut the throat of another? As with the geese, we can maximise our effectiveness by collaborating across industries.

Industries that collaborate can focus on the long-term, instead of competing among themselves to fight over the scraps left at the end of the value chain.
They can then be responsive to market conditions. They can capture for New Zealand more of the economic benefits of what we produce. They can build scale. They can own more of the value chain from processing and distribution right through to retailing.

The dairy industry is a good model for other sectors. Much of its recent success has been built on more than higher commodity prices. Fonterra is successful because it has one of the shortest supply chains in global agriculture today. Farmer owners have a stake in the value chain right through to the point of sale. That suits farmers and it suits New Zealand because it means higher commodity prices are not being skimmed off.

Fonterra built its strength by building critical mass and global connectivity. I believe it’s a model for other primary industries:
• Moving up the value chain and beyond the Sunday night telephone auction.
• More connected with consumers in the market place.
• More of a stake for producers in getting their products onto supermarket shelves around the world.

The NZWood campaign is another good model. There, an industry that has been somewhat fractious in the past, has come together to fund a campaign that promotes the advantages of wood. NZWood is about expanding the high value market for New Zealand producers. It’s funded partly by the industry in collaboration across many businesses, and partly by the government in partnership with industry.

Collaboration improves our ability to respond to changing consumer demand and changing global supply chains. One other way to be more responsive is to ensure we have an understanding of trends and the demands that come with them.

Today we’re adding to business understanding of the operating environment.
MAF is releasing a new publication, called “Future Focus.” It identifies opportunities and risks facing primary industries over the next ten or fifteen years. The project identified six key drivers of change:

First, technological advances - expansion in ICT, accelerated use of automation, advances in health that increase life expectancy and emerging eco technologies.

Second, the report identifies demographic shifts as an important cause of change. We’re getting older and more urbanised (and some days, don’t we feel it!). The global population will increase by one and a half billion by 2020. There’ll be increased demand for food; the composition of households will change; and the types of food consumed by more affluent and aging markets will change.

Third, issues of water quality will, in the report’s words, “cast a long shadow over the global future.” Water will become more valuable. Global trade will be disrupted by conflicts over water, and profitability in some locations will be affected. Just think how Australia is affected by supply and demand for water, both as a competitor for our products, and as our major market.

Fourth, the report identifies geopolitical power shifts. Countries like China and India are becoming much more economically influential. Multilateral trading systems, such as Doha, are being superceded by regional blocs.

A fifth significant long term cause of change is long term energy cost and supply. Fossil fuels are getting more expensive; emissions need to be mitigated; globally there is a huge push for biofuel alternatives. Here at home the government is looking for biofuels to make up 3.4 percent of our fuel sales by 2012.

The sixth very significant driver of change ahead for our primary industries is global warming, climate change and extreme weather. As the document points out, there is no longer serious scientific debate about human-induced global warming. In any case, there are strong political and commercial reasons to respond.

The Intergovernmental Panel on Climate Change report this year shows climate change is going on, regardless of what action we take now. Therefore we will have to adapt, and it is essential to mitigate the intensity of change as much as possible.

That’s why the government introduced the Emissions Trading Scheme, designed to reduce our emissions. And, meanwhile, there are exciting business opportunities within our reach.

The government will invest $175 million over the next five years to help our land-based industries build capability to seize the opportunities and manage risks of climate change.

This is the largest package of sustainable land management measures ever developed in New Zealand.

When I started out by saying we all need to collaborate, and we all need to pitch in, I meant the government would play its part too. I am announcing today that a million dollars has been made available to fund greenhouse gas footprinting work over projects covering around two thirds of all our primary exports.

A further half a million dollars will be made available for other sectors in July next year. By then we will have three sectors already completed: Dairy, wine and kiwifruit.
Calculating our greenhouse gas footprint from the farm all the way through to the export destination - and even further - will be a world first. When we are confronted in our markets with questions about our environmental performance, we will have precise facts to respond with.

As the most isolated country in the world, this is a crucial issue for us.
In forestry, for example, we will have a footprint for the whole chain, from the seed through to an office building and through to waste. It will even look at biofuel production from the waste.

Climate change heightens the importance of our research, science and technology. And in the area of innovation and research, science and technology, the government is putting its hand up as never before to play our role.

Our knowledge investments - in innovation, in research, in science and in technology are the heart of our competitive advantage in a high value strategy.

I think most New Zealanders struggle to grasp the sophistication of our primary sector. They think there can’t be much scientific about catching a fish or cutting down a tree.

Our primary industries in reality are our most science-based, our most research and development-based, and our most innovative industries. There is as much science in landing a fresh gold kiwifruit or lamb chop in a foreign supermarket as there is in a cellphone.

We need to renew our commitment. R&D is a time-hungry process and under-investment only becomes apparent after it’s too late. Over the last two decades New Zealand has been able to capitalise on half a century of investment in scientific research and development in our primary industries, which has put us at the leading edge of global endeavour in many fields.

But in recent years the contribution, particularly by industry, and even by the Government, to extending expertise in scientific research and skills development, in the primary industries has been falling in real terms. At the same time, many of our competitors have been making much greater investments. We risk losing our hard-earned competitive edge.

I am pleased to say today that the government is willing to make science, skills and innovation in the food and pastoral industries a significant priority for next year’s Budget. We are prepared to make a step change in investment. However, this increase in investment will need to be matched by an equal commitment from industry.

Today I would like to challenge the food and pastoral industries present to consider a step change in your investments in science and innovation, in skills and professional development, and in the infrastructure that underpins success in your industries.
There are considerable opportunities. Biotechnology, for example, promises a pathway to improve production with fewer inputs such as fertiliser. Biochar shows potential for production from wood and forestry residues. In aquaculture, work on diversification into farming new species like hapuka is being pioneered.

The government invested very heavily in this year’s Budget in research and development, as well as other initiatives such as Pastoral 21. And I expect that over the next four years the primary sector will claim the largest share of tax credits worth $630 million.

This investment is about building capacity. We need to look at building companies with the potential to develop world scale.

Nokia is a good example of such a company. It was grown in Finland - a country with a population not dissimilar to ours – and is a highly-global and high-technology company.

Realistically, the only potential examples from New Zealand of that sort of scale in the foreseeable future are in our primary industries.

However, there is another key element to future success - we need skills in our primary sector. We need to encourage our best and brightest kids to put their hands up. If we want to attract them, we need to offer an exciting future in our primary sectors.

New Zealand badly needs to lift its game in terms of skills and training. During the 1990s we adopted a ‘bums on seats’ model for education that promised that the market would deliver what the market needed. Well the market did not deliver and we trained too many people in fashionable industries and too few in the industries that really matter to New Zealand – like the ones represented at this Summit.

I want to pay tribute to my colleague Finance Minister Michael Cullen who has overseen a major reform of the tertiary education system, so resources and curriculum are directed toward the needs of the economy.

This is interventionist, it is pragmatic, and it would not have been done under any other political leadership. Few people would argue against this model being a better way to run our education system. It is just another example of where the Government can play a supportive role in partnership with industry.

The framework is now in place. It’s over to the industry to come up with a clear idea of the skills and labour force it needs. This is an opportunity to plan and invest for New Zealand’s future.

I believe the primary industries need to develop a culture of training and professional development. Some parts of the primary industry have been dismissive of the role of training and professional development. It has almost been seen as a waste of time. But our primary industries are multi billion dollar businesses, from the individual farm up to Fonterra.

We need to give strong support to increased investment in the management and work skills. More skilled management and a more skilled workforce delivers higher value production and therefore higher returns.

In every region, there are opportunities for young people, especially in the primary industries. The challenge now is no longer to find a job for them. The challenge is to entice skilled young men and women to see their future in our primary industries.

On Tuesday night I had the privilege of meeting a group of young executives in the Inspired Futures project that is a spin off from this Summit. They have been identified as young leaders with the potential to develop into primary sector leaders of tomorrow. Yesterday they were joined here at the Summit by twenty agricultural university students who are focusing their learning on subjects that support the future of our primary industries. It is inspiring to see that potential here.

Today I am asking today’s leaders to have the vision to develop our globally connected and strong primary industry sector in New Zealand.

There are opportunities for us in many areas. In branding ourselves as sustainable, in emission mitigation technologies, in innovative foods that meet the demands of changing populations in our export markets.

Our future success in capturing those opportunities will be built through a partnership across your individual sectors. It will be built by working in partnership with government to unlock the barriers. It will be built by following a high value strategy that meets challenges like climate change, and unleashes our research and scientific advantages.

If we care about a stronger New Zealand, then this summit must been seen as only the starting point. As with the geese I talked about at the start, we all fly much further when we can utilise each other’s uplift, strength and talents. I look forward to hearing more ideas about how we will do that today.


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