11 July 2006

Developing the marine industry potential

Speech to marine industry conference, Rotorua

Thank you for the invitation to talk to you today. The marine industry illustrates the way New Zealand’s pioneering spirit can be transformed into leading edge developments and applications that are recognised and desired by customers and boaties around the world.

The recreational and commercial marine sectors earned about $1.8 billion in the year to March, 2005. Your industry has a high proportion of small operators and also companies which have moved beyond the local market -- for example Stabicraft and Rayglass -- that are experiencing strong demand.

Marine industry exports of recreational boats, products and services totalled $535 million last year. From power trailer boats and kayaks, to racing yachts and super yachts, the marine industry is proving its worth to New Zealand’s economy.

It's also encouraging that your industry wants to do more, with a goal of doubling turnover to more than $3 billion by 2020. This certainly demonstrates the continued ambition of those involved with the marine sector.

And it’s a goal worth highlighting as New Zealand looks to transform its economy into a high income, knowledge based market economy that is both innovative and creative - and that builds on some of our natural strengths.

The government has made economic transformation one of its top three priorities for this term in office, building on the work that has already gone on through the growth and innovation framework.

It is indisputable that good progress has been made on economic issues in recent years.

Over the last six years we have posted GDP growth consistently ahead of the OECD average.

Our gross domestic product grew by over 25 per cent in the six years to March 2005, and it has grown further since then.

Put another way, 20 cents of every dollar that is generated from our economy comes out of the growth that has been achieved in only the last six years, compared with the 80 cents from investment and development over 160 years.

We have achieved the lowest unemployment rate in the OECD.

This years Budget has shown that we do acknowledge more needs to be done and our government is working to address the outstanding issues as we move ahead.

We've committed more funding to address skills shortages through a continued expansion of Modern Apprenticeships, industry training and quality tertiary education that is relevant to our country's needs.

We've addressed the broadband issue, and we're also attacking the serious roading infrastructure problems through Budget 2006 and the biggest road building programme ever seen.

We recognise that Auckland as our biggest economic engine room needs to get ahead in order to become a truly competitive international city.

We also know that more needs to be done to deepen our capital markets - hence the $60 million boost to the government's Venture Investment Fund.

The expansion will provide further help for young New Zealand firms with high growth potential to enable them to develop into internationally competitive businesses.

A $64.2 million increase in market development assistance for New Zealand firms trying to crack key markets overseas is also an important budget initiative in the lead up to Export Year 2007.

We recognise this is work in progress - we need to constantly think of ways to adapt and build on our successes so far, if we are to secure New Zealand’s future prosperity and raise our living standards.

We need more firms which can compete with the best of them on the international stage, and which can grab the attention of world markets.

Firms need to be at the forefront of international best practice in areas such as technology and marketing, for example, and they need to be more innovative and able to capture the benefits from innovation.

We need firms that have highly skilled workforces and capable managers, and that can realise economies of scale through collaboration and exporting.

Being globally competitive means not just focusing on costs and efficiency but also on differentiation to command a price premium. It also means focussing on innovating to add value – not just in products but in the process, marketing and organisation.

Firms may also gain an advantage by using their small size to be nimble at quick turn around, at small production lines and at flexible market settings. Becoming more integrated internationally via exporting, collaboration and investment is also important.

Economic transformation is not a one-off process. It is about ensuring that the New Zealand economy is able to continuously adapt to changing circumstances.

Firms also have to take responsibility for the vast majority of this process, with government support and input and a solid commitment from us to work alongside you to achieve our common goal of an export-led high value New Zealand economy.

The government and the marine industry are already engaging productively.
We have helped to catalyse the development of airport land at Hobsonville into a national super yacht construction precinct. Two companies are now located on site and several others are planning to follow.

A strong commitment to international marketing has also been retained - and the expansion of the market development assistance scheme in the budget reflects this. Through other government grants totalling $380,000, we have also assisted more than 40 companies to present themselves in international forums and trade fairs.

New Zealand Trade and Enterprise has completed the market research and is developing the business case for a consortium of marine companies to collaborate in the development of a Marine Centre servicing the developing United Arab Emirates market.

This proposed project is focussed on clustering the capabilities of a number of New Zealand boat builders and component suppliers. The idea is to develop a marine presence of sufficient scale that is competitive with larger international suppliers from Europe and America.

A further project being undertaken this year will research the potential to develop a New Zealand refit centre in Europe.

The idea is to leverage the developed kitset capabilities of New Zealand companies to provide marine interiors, motor replacements and full upgrades of navigational equipment. Again this represents a new model that requires New Zealand companies to collaborate in order to develop scale and depth for credibility in the market.

There will be good opportunities to highlight the strength of our marine
industry and other high-growth sectors at next year's America's Cup
regatta in Valencia.

There are 11 challengers racing for the opportunity to challenge and no doubt you are aware that following the last regattas, Emirates Team New Zealand ranks as the top
challenger.

The Americas Cup campaign exemplifies the "real" capability of New Zealand when we combine technology, technical skill and focused leadership. It helps paint a very clear picture of a country that has an international reputation for technical performance in the construction of superyachts, high performance sailing, inshore fishing and pleasure craft along with a developing reputation in performance cruisers.

The Cup regattas will attract a keen following from many corporate leaders and decision-makers throughout Europe and media coverage will also be extensive - and believe me, we do intend to use this major sailing event to highlight tourism and trade opportunities.

New Zealand Trade and Enterprise and Tourism New Zealand are planning an events programme highlighting New Zealand's capability in the marine, food and beverage, and specialized manufacturing sectors. There will also be other initiatives such as a corporate hosting programme at NZTE's hospitality facility within in the team's base, and a communications and publicity programme focusing on the New Zealand companies supplying equipment and services to the team.

While these projects and activities are good examples of how the government can help the industry to grow, there are challenges ahead.

Currently the marine industry is working to develop a coherent growth strategy, which is requiring executives to learn new leadership and governance skills.

There also appears to be a need for company managers and owners to improve their marketing and sales skills to develop the capability required to successfully compete in the international market.

Mastering these challenges is one step on the path to growth. As I've said this is not about the government working alone - business has to take ownership as well. That's why I’m interested to hear how you think the government can assist you to overcome them and help guide you towards your targets.

As it stands now, the sector is in a good position to contribute to New Zealand’s economic transformation. I look forward to working towards this important goal with your industry in the future.

ENDS

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