Anderton speech to Second Annual Manufacturing Summit

Industry & Regional Development Minister, Jim Anderton, addressed the second annual Manufacturing Summit in Auckland this morning.

A few years ago a scholar who deals with future trends looked at the world economy.

This person wrote about the changing reach of empires and the foundations they are built on.

A thousand years ago, he reflected, the most powerful person in the world was Genghis Khan.

His empire stretched from Hungary to Korea, and Siberia to Tibet.

It rested on military might.

A hundred years ago Queen Victoria ruled an empire that was substantially larger.

It covered 20 percent of the Earth's surface and a quarter of its people.

It was an empire built on manufacturing power.

Today, the most powerful person on earth is perhaps Bill Gates, the Microsoft founder.

His empire is global, and it is built on software.

We are in an age when ideas can reach further than ever before.

People who mis-read these developments believe the arrival of a new information age signals the obsolence of manufacturing.

Nothing could be more mistaken.

The manufacturing age has not passed.

We still need ships and cars, tables and chairs, clothes, containers, components and all manner of manufactured goods.

What has changed are the possibilities.

Changes in technology and the changing economic environment have opened up opportunities for New Zealand in new ways that were never really possible before.

As a country, we need to adapt to the changing conditions.

This morning I want to set out my views about the opportunities for manufacturing in New Zealand in these changing times.

And I will set out some of the steps the coalition government is taking to assist manufacturers to seize these opportunities.

New Zealand manufacturing has no competitive advantage in economies of scale or proximity to market.

We are, after all, a small and isolated country.

But while our isolation and small-scale present challenges, they are also strengths.

They make us more creative and innovative.

These are qualities that are more important than ever.

The future of New Zealand's manufacturing is in building on our natural creativity and innovation.

The innovation we need is symbolised in success stories such as:

-Formway's Life Chair. -Fisher and Paykel's dishwasher drawers. -Tait electronics.

We need more companies like these to succeed.

We are the lowest exporter of complex manufactured products in the developed world.

We import five times more of those products than we export.

The next lowest in the OECD is Greece - and it imports three times as much as it exports.

We simply have to export far more products based on the unique skills and creativity of New Zealanders.

Design creates the edge we need if we are going to sell our products on excellence, instead of trying to compete at the bottom on price.

To put into perspective what we need to look for, we need only think of Nokia.

Nokia used to be a forestry company.

Logs are a commodity, and at the moment they earn $70 per cubic metre.

Turn those logs into pre-built homes or furniture and they will earn thirty times as much - $3000 per cubic metre.

But Nokia became a manufacturer of cellphone handsets.

You can fit seven hundred of Nokia's thousand dollar phones in a cubic metre

$700,000, or $70??

The quality of life New Zealanders aspire to can't be produced by a low-cost, low-value, low-skill and low-rewards economy.

The average output of all New Zealand workers nationally is $60,000 - $70,000 per person.

The average added value output of a worker in a Christchurch electronic engineering firm is $250,000.

The average value added by a biotech worker in Taranaki? $1 million - each.

The good news is that we do have a growing number of manufacturing companies able to compete successfully in world markets.

The coalition government has a role in helping these companies to flourish.

An example of what we can do is New Zealand Fashion Week.

Last week New Zealanders celebrated our fashion industry.

We saw stunning examples of distinctively New Zealand creativity and talent on display.

Yet fashion week would probably not have come to the prominence it has without the government helping to unlock its potential.

NZ Fashion Week lifted off after the textile, clothing and footwear industry approached me in 2000.

It was obvious that New Zealand TCF manufacturing could not compete on cost alone in world markets.

The future is in high-value, high-skill, industry based on the creativity of New Zealanders.

Fashion Week is a way to promote it.

Industry New Zealand supported the idea of a Fashion Week to showcase our creativity. NZ Trade and Enterprise continues to support NZ Fashion Week.

It's an example of how the government can help to facilitate the emergence of high value new industry.

It's also an example to all our manufacturing industries.

It's not a matter of the government taking credit for it.

The credit rightly belongs with the brilliant creative designers whose products were on display.

It also rests with organisers, promoters and the industry.

What is different, is that the government is at the table playing our role as a partner.

There are many other ways the government works with industry.

You will have a presentation from NZTE later this morning on its role.

The very reason NZ Trade and Enterprise exists is to work closely with industry to unlock New Zealand's development potential.

It is there to work with you to develop job-rich, high value, high-skill exporting industries.

We are working to promote design-led innovation through the Design Task Force.

In the manufacturing sector NZTE is working closely with manufacturing sectors including: -textiles, clothing, footwear and carpets; -automotive components; -designer furniture; -advanced materials; -marine; -aviation engineering;

These sectors demonstrate the variety and potential of New Zealand manufacturing.

At the Knowledge Wave conference a couple of years ago I heard an American expert tell us we would never have an aerospace industry in New Zealand.

That very day I had come from launching a new aeroplane being built for export in Hamilton.

NZTE has contributed heavily toward the development of the Pacific Aerospace plane.

Our assistance has spanned research and market development grants as well as assistance with skills and training issues.

We are continuing to work closely on the one billion dollar-a-year aviation engineering industry.

NZTE is working closely with the marine industry on issues as diverse as skills development, a new research centre, innovation awards, and export development beachhead projects.

It's completing studies on the issues related to the future of the automotive component industry - worth $330 million a year in exports at the moment.

We are working with the designer furniture industry.

Currently it exports about $70-million a year.

The Wood Processing Strategy was a partnership with industry that looked at the opportunities for wood-processing.

It focused on job creation and investment in Northland and the East Coast.

If we can process more of our wood here in New Zealand, and work in partnership with international distributors, then the wood industry is potentially New Zealand's largest export industry.

These are just a few examples.

The manufacturing industry is so broad and diverse that the coalition government's industry development is aimed at sectors with high growth potential.

There are many government activities that are, however, important for the whole manufacturing sector.

I would like to briefly mention skills, transport, energy and infrastructure.

Skills shortages are one of the most common problems faced by the manufacturing sector.

I find that a little ironic.

When I came into government I used to be asked 'where are the jobs?'

Now I'm asked 'where are the skills?'

The coalition government has directed the Tertiary Education Commission (TEC) to develop strategies for solving skills shortages.

It has to better align courses offered with skills shortages.

Industry Training Organisations (ITOs) are now charged with developing strategies to provide for the skill needs of their industries.

The Modern Apprenticeships programme has been a very successful response.

Modern Apprenticeships are now available in 28 industries.

The programme is available to a young people aged 16 to 21.

By June next year, there will be a total of 6,500 new Modern Apprenticeships in place.

The quality of New Zealand's infrastructure has been identified as another serious impediment to the growth of manufacturing.

We are suffering the effects of years of under-investment.

In July, the coalition government began a stock-take of transport and energy networks.

Transport is the largest single constraint to business growth, followed by energy.

The stock-take will help to assess the highest priorities for investment.

Infrastructutural planning will only be possible once we have this basic information.

Transport is an obvious problem here in Auckland.

It is no less of a very serious issue in places like the East Coast and Northland - though for different reasons.

The NZ Transport Strategy will relieve the pressure through an integrated approach.

For the first time funds are available for regional development.

The electricity price and supply problems this year were another blow to business - and especially to manufacturing.

The coalition government has set up a new Electricity Commission to secure reserve generation.

It will ensure our electricity needs can be met even in very dry years without power savings campaigns.

It is designed to deliver long-term electricity supply security.

All of these steps will make a difference in important ways to the growth of the sector.

It is possible that the greatest constraints on our businesses are none of these however.

The greatest constraints are our own attitudes.

We need to celebrate innovation and success.

We need to believe in New Zealanders and in our ability to succeed.

Above all, we need to make New Zealand the right place in every way.

We can learn a bit from a company like Navman.

Last year it was made Trade New Zealand's Supreme Exporter of 2002 and New Zealand's Hi- Tech Company of the year.

It is a world leader in marine navigation products and one of our fastest growing companies.

In June, 70 per cent of Navman was sold out to one of the world's largest marine companies, Brunswick Corporation.

Critics were quick to say, 'there goes another great company, lost to New Zealand.'

They lamented that Navman was going overseas for capital, instead of looking to raise it on the New Zealand share market.

But in fact the Brunswick deal was an important step on Navman's path.

In the eyes of the company's chief executive, it is on the way to becoming a world scale company.

Since the company started out in 1987, it has been global.

On day one it manufactured in Singapore for a customer in the United States.

Today it remains a global company with units in China, Australia, Christchurch and Auckland.

The activities it carries out in New Zealand - where it has eighty percent of its operations: are not based here out of sentimentality.

They're here because this is the right place for them.

As Navman grows, it is going to keep carrying out its activities in the best place. That is how it grows.

The challenge for New Zealand is not to stop Navman from growing, or to stop it changing ownership.

The challenge for New Zealand is to be the right place for the company to base its activities.

Our creativity and innovation are important.

So too are our exchange rate, our regulatory environment, our resource management laws, our tax rates and a pool of skilled workers.

If we truly believe in New Zealand, then we must believe that New Zealand really is capable of attracting and retaining much of Navman's business operations: on merit, not out of sentiment.

We won't be the right place for everything it does.

Nor will we win opportunities as of right when our companies grow.

We will win them on merit.

If we want to grow world class companies then we have to be world class as a base for high value, creative businesses.

We don't have everything right at the moment.

But we are making considerable progress in the highest priority areas.

I truly believe New Zealand can be the best place for world class manufacturing businesses.

A few months ago I picked up a copy of the Dominion Post.

It included interviews with the winners of the Wellington region's Gold Awards for business excellence.

One of the winners was a manufacturing company called Fraser Engineering.

They were asked: 'what is the best thing government could do for business?'

Tax? Red tape? Employment laws? Kyoto? No.

The best thing this government could do for business, according to this comment in the Dominion was: 'Keep Jim Anderton as Minister for Economic Development.'

I'm pleased to announce that on this score, at least, the coalition government is happy to help.

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