Hon Jim Anderton
Member of Parliament for Wigram
Progressive Leader
4th October 2011
Media speech

Learning to create, nurture and celebrate New Zealand’s culture of success

Opening address – Conference of the New Zealand Institute of Agricultural and Horticultural Science – Te Papa, Wellington

This afternoon I’m going to give my valedictory speech in parliament, so this will be my last speech as MP for Wigram before I sign off from parliament.

It’s appropriate that the topic is innovation in our primary industries, because I hope that one of the lasting changes we have made in New Zealand in the last ten years is to increase awareness of the importance of creating new value from the science and intellectual property associated with agriculture, horticulture, forestry and fishing.

If there is one thing that is going to make a difference to New Zealand’s future, it’s the potential for our agricultural and horticultural industries to create jobs and prosperity in the regions of New Zealand.

So I want to cover why it’s important to nurture our culture of success in these industries, what we need to do to unleash innovation, and what the obstacles are.

Over forty-seven years in politics I’ve been driven by the desire to make sure every New Zealander has the opportunity and security that a well-paid, satisfying job brings, that everyone has access to the essentials of a strong community - like health care and education, affordable quality housing and a decent standard of living in retirement.

If we want these things, then we need a strong economy capable of sustaining them. One that provides a future for young people in their own country, and one that leads us to be able to pay our way in the world.

But over the last four decades or so, our economy has been struggling to pay for what we want. We’ve been slipping behind the rest of the developed world.

There have been times - in the seventies, and especially the second half of the eighties and into the nineties, when we have really slipped badly behind. We occasionally kept pace, but didn’t even catch up during the last decade, when our economy grew in real terms by 36 per cent.

Through all this time our economy has changed considerably. In early 1950’s, wool made over up half of our entire exports earnings. Today it’s worth less than two cent. But though our markets and our exports have changed, we still haven’t created enough of the high value, high skill innovation-led businesses we need.

This is not because we are lazy. It’s not because we don’t work hard.

We work as many or more hours as any country. The problem is that we don’t have enough businesses in New Zealand that are making very large returns per employee. In most developed countries, companies that can make net revenue of a million dollars per employee are common. In New Zealand those figures are virtually unknown.

And the reason we don’t have enough high value, high skill businesses is that we don’t have enough investment in science and innovation to lift the productivity of our economy. Consider this: At the turn of the century, economists pointed out that the United States exported the same weight of goods in 2000 as it had exported in 1900. The value, however, had increased thousands of times.

The difference in value was created by science and innovation.

If we look around New Zealand at the sectors most likely to produce the breakthroughs capable of restoring the place we lost in the seventies, eighties and nineties among the world’s winning economies, then the clear place to expect success to come from is innovation in our primary industries.

Our agriculture is probably the most scientifically advanced of all our industries. Our primary industries’ sectors have the scale, sophistication and the underlying science advantage to be a springboard for much greater things.

When I was the minister responsible for our primary industries, I had scientists, and primary sector leaders all telling me we have amazing creativity in New Zealand. Our scientists have enormous potential to make a difference to the quality and value of our production.

It always takes more than one magic bullet. But science and innovation is a necessary part of the solution.

Innovation is crucial to every stage of our food industries and to the sustainability of our environment. Innovation is relevant to soil and to seeds, to varieties and breeds. It’s relevant to transport and energy inputs to the products served on plates and packages in the world’s consumer market places.

Innovation is vital to equipping our primary sector for an age when our climate is changing. Our agricultural excellence lies in our decades upon decades of investment in science. Over the years we have spent billions - tens of billions of dollars - on agricultural science. Yet there are huge potential gains still ahead.

Milk is an amazing product and scientists are just scraping the surface of its potential. A little over 100 years ago some very smart scientists worked out that oil was merely a bundle of hydrocarbons that could be ‘cracked’ in a myriad of ways. Their discoveries laid the foundations of the petrochemical industry.

New Zealand scientists like Professor Allan MacDiarmid have followed in their footsteps. His best known research was the discovery and development of conductive polymers – plastic materials that conduct electricity. He collaborated with a Japanese chemist and an American physicist in this research. The three of them shared the 2000 Nobel Prize in Chemistry for this work.

I have no doubt that some very smart scientists will also find ways to crack milk in a myriad of elements and lay the foundations of entirely new biotech industries. There are already exciting business opportunities in fields that use milk as an ingredient, able to be sold for as much as US$4000 a tonne.

Nutriceuticals can sell for even more.

I visited the Tatua Dairy Company where they extract a protein supplement from milk and sell small vials of the extract for thousands of dollars each, to hospital intensive care units around the world to strengthen the immune system of critical care patients

So the opportunities are huge, but that doesn’t mean it’s easy to exploit them.

Everywhere you look around the world where economies have been successfully transformed to the benefit of their people and their communities, the pattern has been the same.

It has been, without exception, where the Government has worked alongside industry.

Yet - uncomfortable as it is for many people - especially in business - support for innovation has become a fault line between differing political philosophies.

Supporting more innovation in our economy is a matter of making some hard choices. The current government wiped out a two billion public-private partnership in scientific research as soon as it got elected.

A tax credit for research and development worth a billion dollars over three years was cancelled. (That would have been the largest business tax reduction in our history.) All this took place without much of a squeak - specifically from the business community itself.

Let me give you an example of the difference a commitment to innovation can make:

When we launched the Fast Forward Research Fund in 2008 we invited some graduate students from Massey University. One of the science postgrads who spoke that day was off to the UK to take up a scholarship, and he made an announcement that no one present knew he was going to make: he said the launch of that fund and its potential to finance brilliant, game-changing science in New Zealand had made him change his mind. He said that when he finished his course in the UK he no longer believed his only chance for a science career would be overseas; He would come back to New Zealand to give it a go. The long term investment we were to make gave him confidence about a future here, he said.

There will always be brilliant young New Zealanders who go overseas to develop their skills. Alan MacDiarmid was one; Lord Rutherford was another.

Rutherford, the father of atom splitting, once told one of his Cambridge professors who had reminded him now lucky he was to be studying at such a prestigious and well-endowed university that: “It’s true that in New Zealand we do not have much money, so we have to think!”.

New Zealand has a proud history of success in scientific innovation.

• William H Pickering was a deep space pioneer who footed it on the world stage of global change. • Colin Murdock was the Timaru chemist who invented the hypodermic syringe and the tranquillizer dart gun together with another 140 world patents. • Dr Fred Hollows (now claimed by the Aussies) revolutionized global eye care. • Gallagher Industries electric farm fences. • Fisher & Paykel Health Care ventilator machines. • Vitamin C extract from kiwifruit. • Fonterra currently has over 600 patents and patent applications to protect their intellectual property. Recent innovations now in commercial production with world-leading food companies include milk protein concentrates and it is also engaging in post farm gate-research in the areas of nutrition, food structure, manufacturing and supply chain processes. • Tait Electronics radio phone systems. • Humping & Hollowing wasteland worth only $200 per hectare on the West Coast to create pristine dairy farms worth $25,000 per hectare. • And finally, Doug Avery, who stopped bullying the drought ridden land of Marlborough and started to use the power of natural forces to farm smarter. He has led the way to match the growth curve for pasture to the demand curve and brought about a revolution of legume use to revitalise the production of nitrogen in the soil.

His research has not only increased production levels and value from previously regarded impossibly unproductive land but he also uncovered a way to increase the carbon content of soil to the point where a 1% increase across the agricultural world would neutralize carbon emission problems.

These New Zealanders are smart. They are the foundation stones on which we can build a high quality, successful and sustainable economy and society. But we need to invest in them and do it quickly.

We need to harness our talent, and when our talented New Zealanders go out into the world, we need to be better at using connections to them, and the trails they have blazed. I often tell the story of visiting Singapore and meeting the economic development minister there. He said to me, ‘you are lucky in New Zealand because you have so much creative talent. “Singapore is a disciplined society”, he told me. Our people are used to being well organised and following instructions. But how do you order someone to be creative and innovative?” When we want that kind of creativity, we have to import it from you, in New Zealand.’

But we need more than just talent. We also need a culture that embeds innovation into the boardroom, and into the soul of innovative, large scale companies based here. In other words we need to be able to commercialise it!

It’s too easy to let our focus drift elsewhere.

Take the example of government plans to sell our state owned power companies and other assets. For much of the last twenty-five years there has been a relentless campaign by sector groups like the business roundtable to persuade us to sell these assets. But we have lacked a similar campaign to create new businesses of the same scale and sophistication based on our innovation and science. We are not going to ever fix the New Zealand economy by simply changing the ownership model for SOEs. And anyway, was Kiwibank such a bad idea?

And so we need a culture of creativity and success that celebrates and inspires the creation of new industry.

Compare our largest and most successful company, Fonterra, to a business like the German engineering company Siemens. It started exporting about the same time as New Zealand sent its first frozen meat shipment to the United Kingdom in the late nineteenth century. Today it operates in 190 countries with over 400,000 staff and revenues not immeasurably less than New Zealand’s entire GDP.

Eighty per cent of its sales, three quarters of its plant and two thirds of its workforce are outside its German homeland.

None of our companies are even slightly as global in scope and integration as such European leaders.

If we want to succeed as innovators, we have to have global companies as well. This means being open to some of our industries operating in other countries.

Take the example of all the Heineken beer being poured in New Zealand as a result of that company’s world cup sponsorship.

When someone goes to a World Cup game in New Zealand and buys a Heineken, it has been bottled here, with kiwi water, from hops grown here, and its poured here by a Kiwi waiter. But someone in Germany clips the ticket.

We need to move more of our focus to owning high value IP, rather than owning just the lower value ingredients and services associated with a manufactured product.

The alternative to a high value economy competing on good ideas is a low skill, low wage economy that competes on price and exports low value commodities – wool bales instead of high quality garments, logs instead of high quality furniture or pre-built houses..

And while a low value commodity based economy like that might offer some returns to a few, it cannot deliver enough for the majority of New Zealanders.

We are remote and isolated from world markets in New Zealand and that has meant we have both the freedom and necessity to try things out.

Necessity has driven a lot of innovation. The willingness to give things a go is embedded in our world view. Our predecessors could not just phone ‘head office’ for instructions on what to do!

Bill Hamilton was just twelve years old in 1911 when he built a water wheel that drove a small generator, which lit the family home. He was an engineer who started to design earthmoving equipment for constructing farm dams, flood protection works and the like. To get around his projects he had to take a boat, and he got frustrated with the way the propeller was always getting knocked off by shallow, stony South Island rivers. So he designed a jet engine, known now as the Hamilton Jet. Today the company bearing his name competes against companies like Rolls Royce for contracts for jetboat engines powering ferries around the world.

Before him, another pioneer was William Saltau Davidson. Most New Zealanders have never heard of Davidson, but he did more to shape our economic destiny through the last century than just about anyone. He sent the first shipment of refrigerated meat to London. This was in 1882, at a time when most people said you couldn’t keep meat, butter or cheese cold all the way through the equator to the other side of the world. They said we would only ever export wool from New Zealand. “New Zealand will never export meat, butter or cheese,” the doubters said.

If that tone of cynicism rings a bell, it’s because we still hear plenty of people today telling us what New Zealand can’t do.

But Davidson, like Hamilton, proved the doubters and the nay-sayers wrong. They proved that as a country it’s wrong to focus on what we can’t do and right to focus on what we can:

We can be innovative. And we are.
We can be world class. And we are.
We can use science and innovation to create prosperity. And we do. And we need to celebrate it.
Every day – whether we win the Rugby World Cup or not

ENDS

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