24 May 2005 Media Statement

Budget 2004: Supporting sectors to succeed

Major projects enabling groups of New Zealand based businesses to take advantage of significant market opportunities will be supported in Budget 2004 with $26 million funding over four years, Minister of Economic Development, Jim Anderton said today.

"Sector based development initiatives will not only assist businesses to take up market opportunities, they will also improve access to investment, world-class technology, knowledge and skills that can fuel economic growth. In the medium term, these activities will help us increase the incomes of all New Zealanders," Progressive leader, Jim Anderton said.

"New Zealand Trade and Enterprise will continue to work with key sectors to expand opportunities for growth and maximise value. The sector focused development initiatives will help support projects that establish networks and relationships with leading global businesses," Jim Anderton said.

Part of the four year $500 million Growth and Innovation Budget Package, this sector focussed development programme includes $26 million over four years. That will be provided as $6 million in funding for each of 2004-05, 2005-06 and 2006-07, rising to $8 million in 2007-08, to support companies taking up significant international market opportunities.

"Budget 2004 takes a comprehensive approach to economic development, focussed on strengthening and deepening New Zealand's connections with the world economy. A broad based approach that focuses on moving key sectors up the value chain has the potential to be a significant part of such a strategy," Jim Anderton said.

ENDS

24 May 2004 Media Note
Budget 2004
Sector focussed development initiative

Portfolio

Economic, Industry and Regional Development

Description

This $26 million initiative will provide support for major projects aimed at enabling groups of NZ-based businesses to take advantage of significant market opportunities.

New Zealand Trade and Enterprise (NZTE) works with key sectors in the economy to expand opportunities for growth and to maximise value. The projects to be supported will be instrumental in generating the collaboration and scale required for NZ-based businesses and industries to establish new and improved positions in key global industries. The projects will also seek to establish the connections, networks and relationships necessary for NZ firms and industries to maximise their returns.

Details have yet to be finalised, but the money will enable NZTE to work with sectors to identify, understand and exploit market opportunities.

The funding will support a range of activities, the exact nature and mix of which will depend on the particular project, including:
- Facilitation services to bring key NZ businesses and organisations together
- Research and analysis on market opportunities for NZ sectors, sub-sectors, niches etc
- Identifying and developing relationships with key industry players and influencers
- Developing appropriate market development strategies – including undertaking feasibility studies
- Implementing the market development strategies (which may occur over one or more years) – including assisting with the costs of developing partnerships, alliances and other strategic relationships; establishing in-market representation; and, general marketing-related expenses etc.
- Establishment of in-market presence, alliances and other strategic relationships.

The particular projects will be developed and identified through NZTE’s process of engagement with particular sectors both in NZ and internationally, and would be facilitated by NZTE.

Rationale

NZ businesses generally are not strong at establishing effective connections with the global economy. A lack of effective international networks and relationships with relevant global players hampers NZ’s ability to access the knowledge, skills, technology and investment necessary to drive innovation and productivity improvements, and to enable firms to maximise returns.

NZ’s future economic development, however, will rely heavily on our ability to be more intimately connected with the global economy. This is not just about finding more customers for existing products – it is also about better understanding what customers and markets want. We can then use this understanding to ensure investments are properly targeted towards higher-value products and ideas that our customers want.

This initiative will foster new perspectives by actively encouraging firms to develop strategic relationships with leading global businesses offshore. The aim will be to develop projects involving a relatively small number of key NZ-based businesses, who are identified as those who can influence wider change within their industry or sector.

By encouraging highly visible successes through these projects, the benefits of adopting a more global mindset will be highlighted to a broader group of firms, encouraging them to take similar approaches to developing strategic relationships with leading global players.

How does the initiative contribute to GIF objectives?

The initiative is focussed on improving global connections, which are an important contributor to improved economic performance.

How does the initiative contribute to achieving the Government’s key goals?

The initiative, with its objectives in terms of increasing levels of global connectedness, contributes directly to the Government’s goal of growing an inclusive, innovative economy for the benefit of all.

Link to other initiatives/rest of GIF package

Both this and the international market development capability initiative were born out of NZTE’s recent review of global activities, which recommended putting more significant levels of resource into projects that encourage NZ firms to develop strategic commercial relationships with leading global businesses. Such relationships will enable NZ firms to maximise returns through securing the optimal positioning within relevant global industries.

Funding

$million (GST inclusive where applicable) 2004/05 2005/06 2006/07 2007/08 Out-years
Operating – new 6.0 6.0 6.0 8.0 8.0
Operating – redistributed Nil Nil Nil Nil
Capital - new
Capital - redistributed Nil Nil Nil Nil
Total 6.0 6.0 6.0 8.0 8.0

Questions and Answers

Why is the fund focussed on sectors rather than individual businesses?

The government takes a comprehensive approach to economic development. Most of NZTE's programmes focus on firms and the issues they have to deal with in order to realise their full potential - such as raising capital or managing rapid growth. But there are other issues that are common to a particular industry or group of firms and those are best addressed with a coordinated sectoral approach.

What is an example of a strategic development project?

A good example of this sort of project was the work done with the wood processing sector which led to the recent deal between Fletcher Forests and Zenia House. In this instance, NZTE worked with the New Zealand wood processing industry to promote New Zealand radiata pine to European users. As a result of meetings both in New Zealand and Denmark between Danish furniture makers, the Minister, representatives of NZTE and New Zealand's wood industry, a new range, the Northland range of timber, was developed and launched to be used in a special range of Zenia House furniture.

Other projects will come about more opportunistically as we react to particular opportunities that we become aware of from our connections worldwide. For example, the Dubai Palm project where individual NZ firms are likely to be too small to effectively tender for any of the work, but a cooperative tender involving a number of NZ businesses could succeed.

How will NZTE identify a strategic development project?

The projects will be identified through NZTE’s understanding of NZ industries (gained largely from working with key industry players and influencers) coupled with its first-hand understanding of the major worldwide opportunities for those industries through NZTE’s offshore network.

How will projects be prioritised?

Potential projects will be prioritised by NZTE according to the potential impact on NZ’s economic development that they demonstrate. This is in line with NZTE’s stated objective to focus its resource on areas demonstrating the highest potential for growth, and where returns on investment can be maximised.

How will businesses access the money?

This is a not a grant scheme. It is a fund to develop markets globally that will involve NZ businesses working together with NZTE on opportunities that stand to benefit the growth of those firms and the sectors they represent long term.

How will businesses benefit from a strategic development project?

When NZ businesses move higher up in global value chains (from commodity provider to the provider of value-added products and services) they are in a better position to extract or create maximum value. Improved global connections will also give NZ better access to investment, as well as the world-class technology, knowledge and skills that can fuel economic growth.

How is this different to what NZTE does now?

This activity is an extension of what NZTE does now. The aim is to ensure that NZ businesses are responding to real consumer demands and changing trends and NZTE’s activity reflects this to complement its work domestically.

How will this initiative be evaluated?

Success will be measured by the number and the value of the strategic relationships with offshore partners that are established. Ultimately we would hope to see an impact on the growth of NZ firms and industries through their success in participating in global industries. This will be evaluated over the longer term.

ENDS

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