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    Essential Information on an Essential Issue

    Letter No.120

    17 March, 2000

    The Jobs Machine

  • New Ministry of Economic Development
  • Jim Anderton — An Era of Partnership
  • Voices on the Jobs Machine

  • "We're setting up a jobs machine. The test of our success will be our achievements in creating new jobs, developing new industries and reversing the cycle of decline in regional areas of New Zealand.

    "Both the Alliance and Labour place a heavy emphasis on a partnership-based approach to economic development. Our aim is to reduce unemployment, boost skills to ensure New Zealand generates high-quality jobs, reduce the current account deficit and close the gaps between Maori and pakeha, between rich and poor and between regional areas ..."
    Jim Anderton, Minister of Economic Development

    scottandeton.gif - 7637 Bytes

    "Anderton's Ministry of Economic Development and its investment arm, Industry New Zealand, are directed not to markets but to "needs". Industry NZ's job, for example, is to "work in partnership with the private sector, local authorities, Maori economic entities and community groups to meet economic, environmental and social needs at national, regional and local levels."

    "That is four sets of partners, three sets of needs and three levels. It is going to be hard for the agency to focus on the country's overriding need a wider range of products that can compete with the best in world markets. Only with those products can we begin to pay for our living standard, improve the external accounts, attract more investment and earn rising incomes for all..."
    editorial, New Zealand Herald 1 March 2000

    "The trouble will be, as always, capture. Bureaucrats' specialty is to make policy, not business decisions. Politicians' specialty is votes, although decisions on where assistance is to go is to be kept out of the hands of elected officials. And the business people who serve on Industry New Zealand will have their own agendas and priorities. How those problems are to be avoided is yet to be made clear..."
    editorial, National Business Review, 3 March 2000

    It's been Jim Anderton's month as he unveiled the structure and vision behind his new Ministry of Economic Development. Anderton's plans are the most pro-active government intervention on job creation since the work schemes of the 1980s. He says he is willing to be judged on the scheme's progress in making inroads into the 200,000 people who are out-of-work. His target: New Zealand needs about a 100 successful new industries established " all regions, and particularly those areas that have been in decline under the previous government."

  • Details of the new programme remain sketchy, although Finance Minister Michael Cullen says the government has pledged an annual $100m to the new programme by 2002. This year, the expenditure will probably be about $35m-$40m.

  • A new Crown agency, Industry New Zealand, will be set up to deliver a range of industry and regional development programmes, including funding new and expanding ventures. An establishment unit is presently setting criteria for funding the initiatives, and will report to Cabinet this week. Advisers expect the funding options to include loans and direct grants, as well as start-up capital and encouragement for businesses to do research and development.

  • The Ministry of Commerce is already using the name Ministry of Economic Development. In addition to the responsibilities currently performed by Commerce, the new ministry will provide policy advice and direction in industry and regional development and on other matters relevant to economic development.

  • Industry New Zealand's brief is "to work in partnership with the private sector, local authorities, Maori economic entities and community groups to meet economic, environmental and social needs at national, regional and local levels".

    Anderton: "We want to provide better access to expert advice and professional expertise. Many potentially successful ventures fail only for a lack of marketing, managerial or technical expertise. Assistance could take the form of bringing together young apprentices or trainees with businesses offering the opportunity to harness their skills.

    "The new approach will be flexible and dynamic. If it works well, we will do more of it. If it doesn't work, we'll stop doing it..."

  • Who will run the new organisations?
    — Industry New Zealand will be set up as a Crown agency and will be functioning by the middle of the year. Legislation will be changed to enable Industry New Zealand to operate under its own board drawn primarily, though not exclusively, from the private sector. It is this board, and not Ministers, who will be deciding which projects will receive help.
    — The existing Secretary of Commerce, Paul Carpinter, will retain that title for the time being as well as becoming the Chief Executive of the Ministry of Economic Development. Paul Carpinter is a former Treasury official and economic adviser to politicians as diverse as Jim Bolger and Bill Rowling. (The Dominion notes that Labour leader Helen Clark had put Carpinter's future in the Public Service in doubt when she questioned the ideological leanings of the bureaucrats running several departments, including the Commerce ministry).
    — At the moment, Commerce reports to six different Ministers. As the new Ministry of Economic Development it will continue to report to those Ministers on their policy issues. For example, the Ministry will continue to report to Commerce Minister Paul Swain on commerce issues.
    — Other Ministers involved: Pete Hodgson, Phillida Bunkle and Parekura Horomia are all Associate Ministers of Economic Development and Alliance list MP John Wright is the Parliamentary Undersecretary for Economic Development.

  • Will there be job losses in the restructuring of the Commerce Ministry? Anderton says there'll be changes as the ministry expands to fulfil its new functions, but not necessarily job losses: "The policy role of some people will change. Some staff may transfer across to Industry New Zealand."

  • Anderton says that the transformation of the Ministry of Commerce into the new organisation was the lowest-cost option: "We are not going to waste time or money re-inventing a whole new department..." Detailed budgets on how much the restructuring will cost have not yet been completed ... but in line with the new-look frugal approach to government services, Anderton affirms that the government will not fund a substantial re-branding exercise for the new ministry.

    The cost of the change has been budgeted at $96,000. Tenders have been called to design a logo for the new ministry at an estimated cost of up to $20,000. As well, the ministry website will be re-designed ($15,000), new signs created ($27,000) and templates for letterhead, business cards and other stationery ordered ($24,000). This compares very favorably to the costs to government for the two name changes to the Child, Youth and Family agency (estimated cost $116,650) ... and the more than $1m spent on "re-branding" Work and Income NZ.

  • Ruth Laugesen of the Sunday Star Times reports that Anderton has apparently lined up a top Australian bureaucrat to lead efforts to encourage Australian-based companies to relocate across the Tasman.

    Anderton: "Australia has a permanent plan to capture companies from this country, and I'm about to capture some back from them. There's no level playing field, there's no free market. There are countries burrowing away at every other country, trying to filch things..."

    Rick Hart, who until recently was poaching NZ companies for the Victorian state government, is understood to have been advising the coalition government on details of Victoria's industry development policy. The Victorian agency has been the focus of NZ anger for its successful luring of Hawke's Bay tomato paste manufacturer Cedenco in 1996, and more recent attempts to get Heinz-Wattie to relocate.

    Hart is himself on the job market after a change of state government in Victoria. He was secretary of the Department of State Development under premier Jeff Kennett, and he quit his job in October when Kennett lost the election.

    Australian Regional Development Summit. Meanwhile, the Australians have also recently been embarking on their own regional development programme, also led by their deputy Prime Minister, John Anderson. A Regional Australia Summit was convened last October at Parliament House in response " to the profound adjustment and challenges facing regional Australia". At the conference, over 280 delegates discussed and put forward 247 recommendations on the summit themes. The Australian deputy PM has since established a Regional Australia Steering Committee to develop a plan for implementing outcomes from the summit.

  • One of the keynote speakers at the Regional Australia Summit was Bernard Hugonnier, Director of the Territorial Development Service for the Paris-based OECD, who spoke on "Regional Development Tendencies in OECD Countries". Hugonnier reports that past experience in OECD countries shows that a number of regional development practices have been inefficient or that they have produced negative side effects.

    Examples: massive transfer policies to regions that have led to market distortions; mismanagement of infrastructure projects which have often reinforced highly urbanised areas while accelerating the decline of other areas which have no access to the resources; investments that have been overlooked in intangible and training services that can improve the employability of the workforce; top/down governance systems that have stifled local and regional initiatives.

    Hugonnier: "In a nutshell, intensive redistribution between wealthy regions and lagging region has often not helped the latter and subsidies to firms, whether high tech or not, have not done better..."

  • Hugonnier also reports that one of the most usual criticisms made of regional policies is that they have a limited impact on employment or that no empirical evidence is available on the matter.

    Hugonnier: "This questionable success, for example in the case of the EU structural funds policy, has almost everywhere led to redefinition of regional programmes and regional aid. In particular, it is increasingly recognised that, in addition to macroeconomic procedures and structural reform, further action is needed if unemployment is to be cut in less developed or outlying regions."

    Hugonnier argues that critical components of a regional development strategy involve consolidating and improving local infrastructure, and creating a more favourable environment for small businesses, which are major job creators. He also reinforces the `partnership' theme of regional development, saying that an emerging role for the central government "... is to provide the frameworks for partnerships and decentralised programme management and design."

    Bernard Hugonnier's paper, and papers from other keynote speakers to the conference are available from the Regional Australia Summit website at

    Sources The Independent 16 February 2000 "Roadkill to Damascus: possums inspire new policy" by Bob Edlin; Press Release NZ Government 29 February 2000 "Coalition Govt launches its `jobs machine'" Jim Anderton; Press Release NZ Council of Trade Unions 29 February 2000 "Economic Development Ministry Crucial. say unions" Ross Wilson; Press Release United Party 29 February 2000 "United gives cautious welcome to Anderton's plans" Peter Dunne; Press Release Libertarianz 29 February 2000 "Perigo opposes Anderton's Pork Barrel" Lindsay Perigo; Press Release Green Party 29 February 2000 "Greens welcome Ministry of Commerce transformation" Rod Donald; Press Release ACT 29 February 2000 "Government package regional cronyism" Owen Jennings; Press Release Manufacturers Federation 29 February 2000 "A fresh approach is welcome" Simon Carlaw; Press Release Ministry of Commerce 29 February 2000 "Ministry welcomes new challenges" Paul Carpinter; Press Release National Party 29 February 2000 "After all the promises, we're none the wiser" Max Bradford; The Dominion 1 March 2000 "Anderton unveils `ministry of jobs" by Nick Venter; "Carpinter survives to head new ministry"; New Zealand Herald Business wary of Anderton's plan" and "Between the Lines" by Brian Fallow; "Anderton's plan for the economy" (editorial); The Daily News 1 March 2000 "Anderton launches ministry of jobs" by Nick Venter; "Trundle delighted by promise of help for regions" by Aidan Rodley; The Dominion 2 March 2000 "Beehive Briefing"; "Burning Issues barely glow in torpid House" by Jane Clifton; The Daily News 2 March 2000 "Anderton evasive on job numbers" by NZPA; National Business Review 3 March 2000 "Anderton start-up doomed to fail" by Owen McShane; "Feel-good ministry wins back business" editorial; "It's business as usual at freshly renamed Ministry of Silly Walks" by Richard Harman; New Zealand Herald 5 March 2000 "What's in a name? Thousands" by Eugene Bingham; "Support key factor in rebuilding economy" comment by Paul Chalmers; "Patch-up plan shows leaks" comment by David Bedggood; Sunday Star Times 5 March 2000 "Company poacher swaps sides" by Ruth Laugesen; The Independent 15 March 2000 "Now lets see some detail" by Garham Boult; "We must harness Kiwi creativity" by Jim Anderton; Press Release Act New Zealand 10 March 2000 "$100 million no substitute for capitalism" Rodney Hide; New Zealand Herald 17 March 2000 "Far North potential `goldmine'" by Tony Gee.

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