Hon Trevor Mallard
Minister for Economic Development

4 October 2006 Speech notes

How the regions can help transform the economy

Breakfast meeting with Nelson business leaders, Nelson Yacht Club, Nelson

Thank you for the invitation to speak to you today. It's good to be back in Nelson.

I believe that all of us here today have a great interest in seeing New Zealand maintain and develop a prosperous economy. It's good for business but it's also good for individuals and communities who need a high value, high wage economy if they want to see their living standards rise.

Local communities and businesses, and the regions they support and rely on, have as much a role in achieving this as central government does.

I am sure that you will all have heard about the government’s economic transformation agenda and our commitment to build an economy that is export-led, innovative and high value.

The purpose of my speech this morning is to provide an overview of where the government’s economic transformation work is at and to outline the important role that regions can play.

Economic prosperity must be underpinned by an open and flexible economy that is responsive to change and able to capitalize on new opportunities and challenges. With a strong economic base, the quality of life that New Zealanders currently enjoy and take for granted will be sustainable.

By grasping the opportunities that can be achieved through economic transformation, New Zealand can look forward to a much rosier future.

At one level it is a matter of creating high value products in traditional as well as in new industries. At another level it means engaging with the global economy as effectively as possible.

Some impressive examples of this here in Nelson and Marlborough are Sealord Fisheries and Oyster Bay wines. The Wakatu Incorporation is another example of a locally based company exporting food and wine, as well as being involved in tourism ventures.

Economic transformation involves identifying and removing barriers to productivity and innovation that may hold New Zealand back compared to advances elsewhere in the world. And all this has to occur in a sustainable way that recognises that physical resources must be conserved.

We do have skills, creativity, knowledge and innovation in New Zealand, on top of our stock of physical resources. But what we need to do is make sure we are also well connected to export markets and international customers so we have the solid foundations for significant growth in goods and services.

There are barriers of size and distance but these are not insurmountable if we get the international connections right.

One part of the economic transformation agenda is directed at growing more globally competitive firms. The government is addressing this through programmes such as the market development assistance scheme.
There's also a review of business assistance programmes underway to align them with the market opportunities so that we set the targets for firm growth beyond the limits of the domestic market.

We also have the highly successful Beachhead programme, which provides a range of services to accelerate market entry and international business growth. The programme links New Zealand companies into global connections and supports them as they establish and expand offshore operations.

The government's Venture Investment Fund and Seed Co-Investment Fund are aimed at helping young innovative start-ups with high growth potential. These are another important tool in the policy mix to help individual firms, along with the government's incubator programme.

World class infrastructure is another part of the economic transformation work. There's been significant investment in roading and rail, plus work on developing a sustainable energy system, and also broadband developments that are beginning to come into play now.

The economic transformation work of course involves the regions as well - regional actors can be the cement that connects national level objectives with local conditions and opportunities.

The macro or policy settings are important and also being addressed – for example the current business tax review, and the review of business regulation to reduce compliance costs.

All these areas will impact on how we can make small business more prosperous, and how we can unlock the growth potential of our key sectors and regions.

2007 is to be specially designated "Export Year". The Export Year concept will support the government's economic transformation agenda and in particular activities aimed at growing more globally competitive firms.

Private sector support is crucial if Export Year is to materially improve New Zealand's export performance. The private sector has been involved from an early stage in the planning and development of initiatives for this year. In addition, Ken Stevens of Glidepath Ltd has been appointed Business Champion for Export Year 2007. Ken's extensive export experience, profile and business network is already proving beneficial.

More broadly, we acknowledge that there is still further work to occur in ensuring that the education system is providing businesses with the skills they need. The Labour-led government has invested significantly in industry training and that investment will continue.

Research and development also needs to be closely linked to the needs new businesses have in order to compete globally.

At the regional level, the government's Regional Partnerships Programme which is run by New Zealand Trade and Enterprise has been a key mechanism for regional economic development since 2000. Under this programme, all regions have formulated regional economic development strategies and most have participated in Major Regional Initiatives.

While Major Regional Initiatives have been instrumental they are only part of the picture. The government understands that wider strategic collaboration and sufficient scale are the key for both national and regional economic development.

Consequently, I recently announced that the government is refreshing the regional economic development policy to build on the successes of the Regional Partnerships Programme, and to link regional development with our national economic development goals.

I think the original system based on 26 regional partnerships is too many for a country the size of New Zealand and may even hold some regions back through lack of scale and insufficient breadth of resources.

Instead, I think having around 14 regions is more appropriate and in many cases this could coincide with existing regional council boundaries.

Why do I think scale is so important? It’s simple - one only has to appreciate the size, the associated economies of scale and the scope of collaboration that occurs within the regions of our major competitors. New Zealand has to learn from this experience in order to compete successfully. Critical mass is just that – critical!

You may be wondering what the implications are for the regions of Nelson, Tasman and Marlborough. Let me first say that it is not the government’s intention to dictate to regions how they should work together. We understand the value of your experience in these areas and we want to build upon the successful relationships that have already been established.

Yet I believe that a case could be made for Nelson, Tasman and Marlborough to act as one region. This would not stop local development occurring in response to unique issues in Nelson, Tasman or Marlborough.

It does, however, recognise that greater impact can be achieved through collaboration.

You will already be familiar with the successful cross-regional collaboration that has occurred in respect of the Classic New Zealand Wine Trail that links up our wine-making regions from the Hawke's Bay to Marlborough. I suspect that there could be many more possibilities in this vein – integrating various regional specialities into a multidimensional approach beyond what any individual region could offer alone.

To encourage the greater scale and collaboration that I think is vital for future Major Regional Initiatives, I am looking to introduce an element of contestability into the process. High quality projects with a focus on deriving dividends at both the regional and national levels are essential.

Only a few weeks ago I was speaking to the New Zealand Aquaculture Council conference here in Nelson for the launch of the Aquaculture Strategy. It is a prime example of an emerging industry that would have achieved limited success without intense collaboration between the industry itself, the community and central and local government.

Aquaculture represents an example of innovation and productivity that will lead to greater, high value exports and shows us what economic transformation looks like ‘on the ground’. It is based on the development of a new, high value fish species, new technologies and processes, as well as new value-added products and diversified markets.

Finally, I want to acknowledge the important work undertaken by all involved in the regional communities and it's important to build on so that economic transformation can produce greater benefits for the regional and national economies alike.

With strategic collaboration and effective scale, regional economies can transcend traditional limitations and forge New Zealand’s future prosperity.

Thank you.

ENDS

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