On Newshub Nation: Simon Shepherd interviews Regional Economic Development Minister Shane Jones

• Regional Economic Development Minister Shane Jones said he takes responsibility for the mulching of $160,000 worth of seedlings destined for Ngati Hine Forestry Trust. He said while it was a slip up between the "advisers and the actual officials" he could not hide behind that. "If I want the upside of being government steward of the fund, then I’ve got to have the shoulders to cope with some of the downside".

• Mr Jones said there would be a significant announcement in the West Coast at the end of the month. He did not give specific details but said "they’ve got their own dairy company, and there’s a huge tourism opportunity, but to do that, we need to fix up infrastructure".

• He said there was potential new development being proposed in Taranaki which he referred to as the '8 Rivers project'. He said investors had asked the government to put feasibility money into the project - on which a decision had not been made. He was clear however that the Government would not be funding the project if it went ahead as it would cost "well over a billion dollars".

Simon Shepherd: He’s got $3 billion to spend in three years. And the so-called champion of the regions Shane Jones says he will use every cent. But will taxpayers get value for money? Just this week, it was revealed that the Ngati Hine Forestry Trust, which received money to plant 1.1 million seedlings had to give away or destroy the bulk of them. Regional Economic Development Minister Shane Jones joins me now. Good morning Minister. Thanks for your time.

Shane Jones: Kia ora.

Look, you’ve been criticised for giving too much money to Northland, and when we asked you about this earlier this year, you said the deal with Ngati Hine Forestry Trust was because they were the people who were ready. Were you misled by them?

Well, it comes to pass that there was a slip up between their advisers and the actual officials. But, look, I could hide behind that. The reality is I led the narrative around that forestry deal. I only recently learnt that some of the trees were mulched, and I thought, ‘Well, if I want the upside of being government steward of the fund, then I’ve got to have the shoulders to cope with some of the downside’, which is why I didn’t hide from the issue.

So, out of 1.1 million seedlings, 200,000 were planted. Is that good enough?

Yeah. No, no, no. In actual fact, the majority of them were planted. The government...

But not where they were supposed to.

Yeah, the government went ahead at the end of the year when there were no seedlings actually available, because we didn’t get cracking on this till well towards the planting season, and the majority of the seedlings were planted, just that they were planted in other JVs the Crown already had from years that have gone by. But, hey, 160,000 of them were mulched.

No, 400,000 were mulched.

No, $60,000 worth were mulched.

$160,000 worth were mulched. Yeah. Okay. So it seems that the MPI ordered the seedlings before the contract was signed. Does that mean that, at the beginning of this, you were rushing?

Well, the difficultly in this industry is that there were limited numbers of seedlings, and it also reflects the fact that the industry’s just starting to ramp up again. Millions of seedlings were destroyed four, five, six years ago when they made false assumptions about the strength of carbon pricing. So, unfortunately, the industry does have a bit of uncertainty, and we’ve gone back into the industry and we can’t completely escape that level of uncertainty. But I’m absolutely certain, going into the next year, that we won’t suffer this malady again.

Right. So have you put expectations in place that we’re not going to see this kind of slip up come next planting season?

Yep.

All right. Do you believe that this has turned into the “untidy scrum” that you were talking about at the beginning of the year? You said you didn’t want the PGF, Provincial Growth Fund, to be an untidy scrum. But how does that feel at the moment?

Well, you know, this is not eggshell territory. I just don’t think it’s possible to lead the government’s narrative by rehabilitating regions where there’s cases of egregious neglect and not take a few risks and be bold. I’m not going to wander around as a cautious steward. Unfortunately, we’re going to encounter situations where some imponderables or unseen things strike us. In the bigger scheme of things — although $160,000 is not to be sneezed at — in the bigger scheme of things, there’s a host of other very positive things happening.

Yeah. I appreciate that, but $160,000 is three times the average wage. Okay?

Yeah.

To put it into perspective, it’s what Dunedin got for its engineering hub. So, you know, it’s wasted money that could go elsewhere.

But, I mean, that money is now an impost against the JV partners, not just the Crown. This is in the context of a joint venture, and certain money is being spent in the pursuit of the joint venture. So Ngati Hine can expect to be a significant portion of that cost as well.

You’re the custodian of $3 billion. Okay? And you’re not going to walk around on eggshells. So does that mean that we are going to see some money lost in risky situations?

Well, I think there are some criticisms that…In fact, the Herald described me as being too glib for my own good. I mean the reality is if we’re going to reintegrate regional economic development and marry it to central government funding, I’ve felt right from the beginning, it’s needed quite a strong publicist, largely because there’s still a lot of Doubting Thomas’ out there. But that capacity for publicity has to be measured by strength of probity as well.

So that’s a yes. You didn’t answer the question just then. There is going to be a chance of more money going this way.

Look, I can’t guarantee that some of the projects won’t fully deliver, but if I was sort of like my opposition member Mr Goldsmith the teeth grinder, nothing would ever get done.

Let’s just look at an announcement you made this week. A $4.8 million loan to a company called Oceania Marine in Whangarei for a boat-lifting operation. They refit super yachts and other kinds of boats. They’re a private company. Why couldn’t they have got it from a private lender?

Yeah, so that proposal’s been around for a good four or five years. They’ve exhausted every avenue. If we want to actually grow firms into areas where there is a great market, there will be an opportunity for new apprentices, new jobs. The fund, when Cabinet established the fund, had enough scope to put money where the recipients have genuine hurt money in there, and we’re meeting a market failure example.

Right. So it wasn’t a good investment that private lenders wouldn’t touch it. Why should the taxpayer touch it? We might lose that money that we’re talking about.

I mean, you’re really talking about the inadequacies of our banking system. We have a banking system, and I don’t want to go on a rant again about Aussie banks, but we do have a banking system that is inordinately cautious and will not take risks unless it’s on housing. And there are a host of firms that just do not have the ability to bring the necessary level of collateral that suits the Aussie-owned banks. So this is another avenue.

So we’re willing to take the risk. What is the return for the taxpayer? What is the interest rate on the loan?

Well, look, all of these loans, they’ll be entered into on the basis of agreed commercial terms. They’re not grants. They’re not grants.

I understand that.

Yeah, so I couldn’t give you the exact details of that $4.8 million commercial set of terms, but we’ve got some significant commercial negotiators who’ll advance that.

Yeah, sure. So these firms are going to get a lower interest rate than they could get in the private sector.

So, the— I just want us to step back for a moment. Why are we doing any of this? We’re doing it because the market’s not delivering a solution. We’re doing that one in particular because, for the last five or six years, they hammered on the door of the last government. Cabinet has endorsed us putting money into enterprises that’s going to have a transformational effect. In Whangarei and Northland it has got such extraordinarily negative statistics and socioeconomic outcomes — I’ve got not a slither of doubt it’s the right thing to do.

Is it the right thing to do because you want to move the port to Whangarei?

Yeah, well, I’ve never heard—

It’s part of the infrastructure.

I’ve never heard that, but I’m not feeling the love from Phil Goff.

Okay. When you set the fund up, you identified six surge areas, which are the areas that were most in need, I’m guessing, by that. $300 million has been spent on four of them, like Northland, but also Tairawhiti and Manawatu. But two of them — West Coast and Hawke’s Bay — have just got $10 million between them. Are you leaving those out?

So, the West Coast, Tai Potini, we’re heading down there with the Prime Minister at the end of this month, and there’ll be some significant announcements made down there.

Like what? Give us an example.

No, look, look. For fear of offending the mayors down there and starting strife amongst them, I’ll just taihoa on that. But obviously the areas down there, there’s some legacy industry of mining. They’ve got their own dairy company, and there’s a huge tourism opportunity, but to do that, we need to fix up infrastructure. So I just beg your acquiescence. Taihoa.

Taihoa. But it sounds like roads and infrastructure. One of the regions that’s going to need help is Taranaki, since you decided to have the ban on offshore gas and oil exploration down there. So what have you done for Taranaki since you¬— since that ban came in?

There’s a substantial proposal called the ‘8 Rivers’, which is being currently hawked around. The Taranaki—

Under the Provincial Growth Fund?

No, no, no. But, well, it’s been identified as an example as to whether or not— what can the government do to facilitate the arrival of large, new investors? Now, we did announce a small sum of money for a timber mill and funnily enough, that was built on a JV with a Chinese forestry company, which is good, I think, in terms of what—

So $1.8 billion for the timber mill, $950,000 for plans for to scope out a hydrogen plant, but all the rest so far has been spent on or earmarked for Taranaki walking tracks and rebuilding the cathedral. These are not really job creation schemes, are they?

Yeah, but we’ve got to meet halfway. I’ve said to the stakeholders, the prime minister has said to the civic leaders, ‘meet us halfway’. And they’ve beavering away on different ideas. They’ve raised the idea with the government and with me about would we put in some feasibility money to see whether or not the 8 Rivers energy and industry development kaupapa could go ahead. We haven’t made a decision on that yet.

8 Rivers? What is 8 Rivers, then?

Well, basically, it’s a group of investors that are seeking to create, in Taranaki — I don’t want to say too much about it — but a new development that would create hydrogen and create an output of urea.

And what would that industry be worth if you got it up and running?

Well, we certainly wouldn’t be funding it. But the cost of such a development would be well over a billion dollars.

Which brings me to the next point. You told us there were a number of large private sector firms who want to partner with the PGF on big projects — this could possibly be one of them — but you need a new unit to manage that. Have you set that up yet?

Yeah, we have a dedicated unit within MBIE. Look, we could have emulated the experience of the irrigation company, of Callaghan, of the VIF fund, but this was something that we decided that every decision we make, the government would take a great deal of care in announcing and trumpeting, because we do want the fund to have a transformational impact in the regions.

Sure. Would you take equity— Would the taxpayer take equity in these major projects? Are these private-public partnerships (PPPs)?

We haven’t had any substantial projects of the sort I’ve just referred to, so it’d be too early to say if that would be the case. At the moment, the largest single amounts of money in terms of allocations have obviously, gone to the Tairawhiti for the roads. And why are we doing that? Well, I think tertiary and secondary investors, they’ll follow if we can tart up the infrastructure in some of our regions. You might say, ‘Why isn’t it already happened?’ Well, the reality is it isn’t , so we’re going to do it through the fund.

So the sort of ‘think big’ kind of project that you’re talking about —8 Rivers — is this what we’re going to see a lot of PGF money spent on? Are those the sort of visionary projects? Because at the moment, you’ve got a lot of proposals around the place, and you’re throwing things up against the wall to see what sticks.

Yeah, so the 8 Rivers project has been hawked around the Taranaki stakeholders and civic leaders. I understand they’re coming to see the government about it. But we have made no decision on that particular proposal. But I would say, it’s a monumental proposal.

Has the PGF turned out as you expected? Is it cohesive enough?

Yeah, I think so. I mean, each region has its own needs. We don’t have a vanilla formula. Each region is stuck with certain legacy assets. I’ve avoided encouraging or attracting too many cycleways. But the reality is just because you see diversity in different regions, we shouldn’t get hot and bothered that it looks too diverse to be coherent.

What’s your measure of success?

Well, going forward, without a doubt, we certainly want to see the job transition take place, because, you know, part of the backdrop of this is, obviously, the future of work. We actually want to see businesses and sectors go up the value curve, which is why the forestry announcement the other day was very, very positive.

Sure.

And thirdly, we are going to try and use the fund to strengthen the underlying infrastructure so that transformational things do happen in areas that have suffered neglect.

So you’re going to report about? Are we going to have a report back after a year? Will you have spent a billion dollars by then?

Well, quite a bit of the dough of the billion dollar fund has been allocated to the trees. So to the programmes that will be run by Te Uru Rakau, the forestry agency. But we’ll certainly be having report backs. Yes.

And will you commit to spending $3 billion over three years?

Yeah, so what I said recently, on the road, is that the government is committed to the allocation of the $3 billion fund, and it’s my expectation not a cent will be looking for a home. But at the end of the day, I’m one decision-maker. There’s three other ministers.

One quick question — will most of that $3 billion be allocated in election year?

No, no, we’re going to stagger it. So it’s a very tidy allocation process. And there might be some serendipity in 2020, but we’ll wait and see.

Shane Jones, thank you very much for your time this morning.

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