Thank you Mr Chair.  I am pleased to report to the Committee that this year’s Budget includes a long- overdue and significant five-year funding boost for Vote: Foreign Affairs and Trade.

 

This will enable the Ministry of Foreign Affairs and Trade to respond to a more complex and challenging global environment.  It will better enable the Ministry to exploit economic opportunities for New Zealand, in both emerging markets and with traditional partners.

 

Before responding to your questions, it is important to outline why this ‘seismic shift’ in our international effort is not only desirable, but essential.

 

Firstly, the funding boost must be seen in the context of the cutbacks suffered in the late 1980s and early 90s when, in just a few years, the Ministry’s funding declined in real terms by more than 30 percent.

 

Posts were closed in Athens, Bahrain, Lima, Vienna and Harare.  Smaller posts in Adelaide, Chicago, Dallas, Osaka, Perth, San Francisco and Toronto were also closed. Not one of them has been reopened.

 

Staff numbers fell by around 100 between 1989 and 1991, and were built up only gradually after that. Even now, Foreign Affairs has fewer staff than it did in 1989 – about 610, compared with around 630 back then.

 

That’s despite the world being a much more complex and competitive place than it was 20 years ago.

 

The Ministry – and by extension New Zealand’s ability to pursue its interests overseas – has never recovered from those cutbacks.

 

Even though Foreign Affairs has been creative in maintaining its core capability, it is well behind where New Zealand needs it to be in several key areas.

 

Diplomacy is a people-based business.  We can only be successful if we have well-trained people on the ground in foreign capitals, building contacts and knowledge, and lobbying for New Zealand.  Equally, those people need adequate policy and logistical support back home.

 

We have just over 600 diplomats and support staff to maintain our foreign affairs and trade relationships.  About 200 – a third of the total – staff our 50 overseas missions.

 

That’s a very small resource, especially when you consider our increasing responsibilities in the Pacific; our rapidly growing interests in Asia; the global reach of our trading interests, and the need to influence multilateral decisions that impact on our national interests.

 

It’s a resource that allows us to only manage the relationships we have now.  It does not allow us to do anything better; to exploit emerging opportunities, or to take on new challenges.

 

To do these things, we need greater depth and expertise in the foreign service.

 

The importance of prudent investment of taxpayers’ funds in the foreign service has been recognised by other countries of a similar size and outlook to New Zealand.

 

Our foreign ministry has considerably fewer staff and a much smaller budget than its counterparts in Ireland, Singapore, or Norway, all of which have similar populations to New Zealand.

 

Ireland, for example, has twice as many foreign affairs staff as we do.

 

All these countries have a significantly greater international presence than New Zealand, even though they have smaller and less demanding immediate neighbourhoods and, arguably, less expansive trading interests. And they seem to be prospering.

 

About a quarter of our overseas posts have just two New Zealand staff, who are expected to manage complex relationships covering trade, government-to-government relations, New Zealanders in distress, official visits, and so on. 

 

Some of these small posts are in major centres where there is a very high workload – for instance, Tehran, Shanghai and Buenos Aires.  Others are in particularly challenging environments, especially in the Pacific and the Middle East.

 

You cannot hope to manage every aspect of a relationship in these places with only two seconded New Zealand officers.

 

We are lightly covered in Australia, which is our closest friend, our biggest trading partner, and home to many expatriate New Zealanders.

 

We have no on-the-ground representation in the Nordic states, which have similar outlooks to New Zealand on a raft of foreign policy and other areas, and offer good prospects for New Zealand businesses. 

 

We have minimal representation in the Middle East – a key region in world affairs and an area where we have major trading interests.

 

Plugging the most obvious gaps in our on-the-ground representation is a matter of some urgency.  That is why back in April I announced the opening of diplomatic posts in Brisbane and Sweden, and the reinstatement of an MFAT presence in Melbourne.

 

I’m pleased to say that the new posts will be operational in a week or two, with Heads of Mission in place, and working to advance New Zealand interests.

 

Foreign Affairs in Wellington is thinly staffed and this, too, is a cause for concern.  Vital relationships are commonly managed by just one or two people.

 

For example just one desk officer manages the New Zealand end of our relationship with Korea. The same applies to India – which is rapidly emerging as one of the world’s biggest economies – as well as four other bilateral relationships.

 

Foreign Affairs has taken all the steps it can be expected to with the resources it has.

 

For instance, some geographical divisions have been amalgamated to make better use of staff.

 

Working relationships between NZAID and the wider Ministry have been strengthened so there are more synergies between aid and foreign policy.

 

Computer and other networks are being kept going to the very end of their life expectancies and then some.

 

My predecessor arranged a welcome funding package in 2003 that has allowed operational capability to be maintained until now.  But efficiency gains and short-term funding top-ups are not enough.

 

That is why the step change package includes a sizeable increase in capital funding of $98 million over five years.

 

Foreign Affairs is doing the job expected of it, but it is working at the outer limit of what is possible.  It is running just to stand still, and of course the world is not standing still.

 

The funding increases announced in the Budget are long overdue.  They will better equip the Ministry to meet global challenges that must be confronted and overcome if New Zealand is to remain a prosperous and competitive country, in a stable region, in a peaceful and sustainable world.

 

Finally a few words about NZAID.

 

We are now in the second year of a four-year growth path for New Zealand’s aid programme, which will better enable us to meet development challenges, primarily in the Pacific region but also in other areas of importance to us.

 

ODA expenditure is on track to reach 0.35 per cent of Gross National Income by 2010/11 – a significant improvement on any ratio achieved by New Zealand since the 1970s.

 

Next week I will be launching our new Pacific Strategy.

 

The Pacific remains New Zealand’s main development focus, accounting for 70 per cent of our bilateral aid, and over 50 per cent of our total aid.

 

This is allowing us to make a sustainable impact on improving health and education in the Pacific; to address infrastructure gaps and promote economic growth, and to improve governance and leadership.

 

NZAID is a young agency.  Since it started in 2002, it has undergone major growth in order to manage our growing aid programme.  This has had some consequences, as shown in the audit rating it received last year around contract management.

 

I am confident that the agency is lifting its performance in this area through its two-year Control Environment Strengthening Programme.

 

It is clear that NZAID continues to develop an excellent international reputation as a focused, intelligent and trusted development partner.

 

I now welcome the opportunity to discuss the Ministry of Foreign Affairs and Trade’s estimates for 2008/2009 with you.