Address to the New Zealand - Australia Investment Forum: “Open for Business”

This government's goal is to deliver greater prosperity, security and opportunities to all New Zealanders through sustainable economic development.

We have an aspirational goal of catching up to Australia's level of wealth by 2025. We are not deluding ourselves about how difficult this will be. It will require sustained and concerted action over a period of years and some hard decisions.

Attracting investment into New Zealand will be critical to achieving our goal, so at the outset let me commend the organisers of this conference for bringing together the people who can make that happen.

I particularly welcome those of you who are looking at New Zealand as an investment destination.

You've already heard this morning from the Hon Bill English about New Zealand being open for business and welcoming investment that will help increase New Zealand's productivity and create jobs.

In my role as Minister for Economic Development, I've been leading a stream of work specifically concerned with maximising the potential of New Zealand's established and emerging sectors which have the capability to drive increased economic growth.

What we've been calling our "Economic Growth Agenda" is an important part of our wider economic strategy. We're looking to do two things:

First, to address high priority cross-cutting issues which are critical to growth so we can make New Zealand a more attractive investment destination. Specifically, we're looking at R&D incentives, improving access to capital, and workforce capacity and skills.

Second, we're looking at how to assist high priority sectors to achieve their economic potential. We've been examining dairy, food, high value manufacturing and services and petroleum and minerals. It's not been the conventional wisdom of the past two decades to "pick winners" - but to us it makes good sense.

The economic growth agenda is our working plan as we encourage New Zealanders towards new economic opportunities. But to realise these opportunities we will need new capital.  We will need investors who can assist New Zealand firms to get closer to customers, competitors and suppliers. 

The government recognises that investment by overseas companies in New Zealand creates connections and opportunities to address challenges in target markets.

Today, I would like to talk about the future development of New Zealand's capital markets and new investment opportunities the economic growth agenda is encouraging, particularly in respect of the high priority sectors I've just identified.

Welcoming Capital

This government wants to see business in New Zealand succeed. We know that to achieve faster economic growth, we need increased levels of investment in our economy. So the government is exploring ways to deepen and develop New Zealand's capital markets.

The Capital Market Development Taskforce recently reported back on its lengthy consideration of New Zealand's capital markets and as a response the government has announced an action plan for advancing its recommendations. 

We know that New Zealand has the advantage for foreign investors of a highly stable political environment, with a strong and predictable legal system. Our strong respect for property rights makes us an attractive place to invest. 

By improving the quality of regulation, we want to increase investor confidence in our capital markets and New Zealand as a destination. Among the important work underway is a fundamental review of the Securities Act.

In addition to private capital, the government has the Seed Co-investment and Venture Investment Funds, which support the development of firms in the early stages of their lifecycle. The New Zealand Super Fund has also announced plans to further invest in New Zealand.

High Priority Sectors

As I said before, the government has spent considerable time in the past year examining specific sectors that we think could make a larger contribution to economic growth.

We have decided to prioritise and focus on industries with some combination of current or potentially high levels of productivity, a distinct competitive advantage, significant existing or potential scale, high rates of export growth and where government action has the best chance of success.

Let me take you through those industries, starting with the petroleum and minerals sector.

Petroleum and Minerals Sector

Since the government took office in late 2008, I have emphasised that New Zealand's natural resources such as oil, gas and minerals could make a far bigger contribution to our economy. There are some outstanding investment opportunities in these sectors.

Few people know that the oil and gas sector has been an excellent performer for New Zealand in the last few years. We've seen a number of exciting projects come onstream, such as the Tui and Maari oil fields and new gas fields at Kupe and Pohokura.

Oil is now a large export earner for New Zealand. In 2008, oil was New Zealand's third largest export earner at $2.8 billion, a 100% increase on the year before. This summer has seen the largest exploration programme ever undertaken in New Zealand. In fact New Zealand was ranked in the top 10 countries worldwide for petroleum exploration activity in 2009.

The Government believes that petroleum has the potential to drive a step change in New Zealand's economic performance. My officials have undertaken a study of 10 petroleum basins to establish estimated unproven resources that could reasonably be expected to exist.

Even when taking a conservative approach in estimating the volume of our potential petroleum resources, New Zealand has considerable petroleum potential that can deliver significant economic growth opportunities for New Zealand. 

The Government is progressing an action plan for maximising our petroleum potential, which includes looking at necessary adjustments to our regulatory, royalty and taxation arrangements for petroleum.

The Ministry of Economic Development recently commissioned an independent petroleum economics consultancy to undertake a review of New Zealand's petroleum regime. I am pleased to say that review concluded that New Zealand's petroleum regime is in good shape and already provides an attractive investment climate for potential investors.

However, they do recommend refinements to our current regime that would further promote exploration and production investment and ensure a fair and equitable return to the Crown from its petroleum estate. The Government will be considering those changes this year.

Currently New Zealand has a number of areas of petroleum acreage available for permit applications through a competitive tender process. In other words, we are looking for investors.

The offshore Northland basin lies to the west of the upper part of the North Island of New Zealand. This basin is contiguous with the hydrocarbon producing Taranaki Basin. It is highly prospective but under-explored.

The Reinga Basin is also prospective for oil and gas and some of it is highly prospective. Some 105,000 square kilometres over the basin are being offered by the Crown in six blocks which are immediately north-west of the Northland blocks on offer.

To assist investor choices, the Government has committed significant resources to makegeo-scientific seismic data freely available to those considering bidding for permits. This data is a useful first step in assessing the potential of petroleum permits.

Let me also touch on our mineral potential. The government has recently conducted a stocktake of our mineral wealth. That document isn't public yet so I can't say too much about it. However, I will say that we are a lucky country. New Zealand is a mineral rich country with considerable untapped potential.

A conservative estimate of the value of New Zealand's onshore minerals, excluding lignite, is about $180 billion. We have over 350 years' supply of onshore iron sands at the current rate of mining, plus some of the world's largest offshore reserves.

Our offshore potential also includes seafloor gold and basemetals, phosphate, methane hydrates and other minerals. These are potentially worth many billions more.

It's worth remembering that mining currently uses just 40 square kilometres of land in New Zealand; less than 0.015 percent of New Zealand's total land area. The export value of that land is $175,000 per hectare. Dairy farming by comparison uses 20,000 square kilometres of land with an export value of only $3,500 per hectare. There is vast potential for more investment in this sector.

The Government's Crown Minerals Unit manages the Crown's oil, gas, coal and mineral resource on behalf of the Government. Please feel free to approach them to explore the large range of investment opportunities available in New Zealand's minerals and petroleum sectors.

I also shouldn't neglect New Zealand's renewable energy resources, which are well-recognised as world-class.

International investors could consider investment in geothermal, wind, tidal and clean energy, such as bio-fuels from algae, utilising our forest estate to create pre-cursor woody biomass, and bio-fuels from waste. Those technologies are well-advanced in this country.

Food and Dairy Sectors

New Zealand's processed foods and dairy sectors have significant growth potential based on historical performance and a comparison with similar countries. 

We already have a reputation for producing products and services that are safe, secure and sustainable.

The Government is backing this sector in a number of ways.

We're establishing a network of open access food development and commercialisation facilities across New Zealand.  This network will address critical gaps in our food and beverage industries by providing the infrastructure needed to develop new food and beverage ingredients and consumer products, enabling a high value food export industries to develop more rapidly.

We're also aiming to achieve greater penetration of offshore distribution systems. The government will be working with industry to determine how to support the development of distribution systems of scale, which will capture a more significant and higher value added share of markets in selected food categories and associated agribusiness services.

The government will also be taking action this year to remove particular regulatory roadblocks to water storage and irrigation in the Canterbury region. This will be in addition to the work already being carried out on progressing water storage infrastructure throughout the country.

The one resource we have in abundance compared to other countries is water. We're committed to ensuring that water storage and irrigation projects which meet environmental standards, and which are good economic propositions, can happen in a decent time frame.

Aquaculture presents a unique opportunity for investors in New Zealand.

New Zealand produces $390 million in revenues from 5700 ha of water.  There are 16,000 ha of marine space suitable for aquaculture where there is no current activity, and Investment New Zealand is working to deploy new projects in this space.

The Government will introduce legislation this year to change the regulations governing the aquaculture industry. This is an area where the current regulations are stifling all prospects of growth in the sector.

High Value Manufacturing and Services

New Zealand's high value manufacturing and services industries have vast potential for growth that is not limited by natural resource constraints.  

These industries include medical technologies, which could be a billion dollar industry within five years, precision instruments, niche electronics, GPS-related businesses, ICT, materials applications, software development and engineering services. 

They are built on skills and knowledge, creative thinking and the ability to combine different technologies to meet market needs, which are areas where New Zealand is often strong compared to other countries.

The Government's Venture Investment and Seed Co-investment Funds are helping to develop the markets for financing of early stage high potential firms and have already helped fund the growth of 84 firms. 

The Venture Investment fund managers and the Seed Co-investment angel investor partners provide a point of contact for other investors who want an entry into portfolios of high growth potential firms.

Single Economic Market

Let me finish by talking about the Australia/New Zealand Single Economic Market. New Zealand already has globally competitive firms in globally competitive sectors.

These reflect our competitive advantage in certain areas, and historical investment that cannot be replicated by others overnight.  These are also the areas of considerable potential for growth.

One of the ways to realise this potential is for firms to create scale through leveraging off the trans-Tasman market - which provides a much larger customer base.

Creating the conditions for this to happen is the goal of the Single Economic Market, which both governments have signed up to. We want to build on the CER agreement, described as one of the most comprehensive free trade agreements in the world.  

Stripping out regulatory costs that arise at the interface between the different jurisdictions is a key objective.  

As the Prime Minister said in his speech at the opening of the NZ Parliament this year, it should be as easy for a New Zealand company to do business in Palmerston, Northern Territory as easily as it is in Palmerston North, Manawatu.

This principle applies across the board, and most recently has been reflected in the agreement by the two Prime Ministers in August last year to better align trans-Tasman laws where this improves the competitiveness of NZ and Australian firms and markets. 

Led by my colleague the Minister of Commerce, outcomes are already being pursued in the areas of insolvency law, financial reporting policy, financial services policy, competition policy, business reporting, corporations law, personal property securities law, intellectual property law, and consumer policy.

Conclusion

Let me close by reiterating that the government's goal is to deliver greater prosperity, security, and opportunities to all New Zealanders through sustainable economic development. Trans-tasman investment will be a vital part of achieving that goal, but so will be the welcoming of world-wide capital and committed investors.

I hope today I've given you a flavour of the extraordinary potential in many sectors of the New Zealand economy, and I very much encourage of you start to exploring that potential.