Government acts to calm fears of industrial exodus

The Government was yesterday scrambling to soothe fears among unions and employers that manufacturing plants and jobs are moving to low-cost countries.

The catalyst has been this week's announcement that Wellington manufacturer Interlock had advanced plans to close down, with the loss of 270 jobs, and manufacture in China.

John Walley, of the Canterbury Manufacturers' Association, said the Interlock withdrawal shared many characteristics with the pullout of Electrolux from Christchurch.

"Foreign ownership, foreign decision-making, operational rationalisation and significant price pressure [has been] brought on by globalisation.

"The Government rush to implement preferential trade agreements with Asia is driven by the desire to open markets to the primary sector," he said.

Walley noted that the Government was making it tougher for manufacturers by increasing costs via measures to increase holidays, pregnancy leave and minimum wages.

"The impact of these changes sits most heavily on small, locally owned manufacturing companies.

"Without any clear policy support for manufacturing, the conclusion must be that the Government has little interest in growth for the high-value manufacturing sector."

Walley called for assistance with depreciation rules and research and development.

Primary producers had been largely insulated from the steep rise in the New Zealand dollar against the United States and Australian currencies, but manufacturers had little protection, he said.

Economic Development Minister Jim Anderton said preparation had begun for a national manufacturing strategic planning conference this year, as called for by the Engineers Union.

The transformation of manufacturing into a high-skill, high-value, competitive sector was under way, he said. A national strategy would be developed in consultation with employers and unions.

Meanwhile, Trade Negotiations Minister Jim Sutton said the Government would look after manufacturers' interests when free-trade deals were negotiated.

But New Zealanders would never have a First-World standard of living if manufacturers concentrated only on the domestic market.

"We have to trade internationally to achieve the scale and specialisation required to support the living standards to which we aspire."

But that did not mean the country had to be reckless.

"There will always be people able to produce some things more cheaply than us. But we have a competitive advantage in several areas and we need to work to enhance those."

The Government is negotiating a free-trade agreement with China, which is being cited as the most serious threat to local manufacturers because it would mean removing import tariffs that protect locally made goods.

Sutton said concerns that globalisation and more trade deals would damage the country were unfounded.

"But manufacturers - like other producers - can't stand still. They have to innovate."

The Government would help them with grants to fund research projects, and had already given the textile, clothing and footwear industry more than $3 million.

Successful manufacturers invested in research and development and constantly produced new products and new ways of doing things.

"This tends to keep them in that part of the market where price is not so important," Sutton said.

Anderton cited high-tech manufacturers Whispertech and Navman as two companies that had grants to help manufacturing stay in New Zealand.

The Northern Employers and Manufacturers Association welcomed the summit announcement.

Chief executive Alasdair Thompson said manufacturing provided most of the jobs in the country and the local environment had to be conducive to establishing plants and growth.

The association was developing a manifesto for manufacturing and saw a summit as an opportunity to identify policy priorities.

"We know the Resource Management Act, product legislation such as HSNO [Hazardous Substances and New Organisms], rules for depreciation and expensing R&D, free trade agreements are all important issues to manufacturers and their employees."

He also called for lower company tax and an improvement to the business investment environment.

But Thompson noted that the move to manufacture overseas was not all one way. Australia's HMG plant in Sydney was shifting to Manukau, helped by the city council fast-tracking RMA procedures.

Listed manufacturer Skellmax, which reported its result on Wednesday, said it was shifting its Flomax vacuum pump factory in Auckland to China with the loss of about half its 43 jobs.

The company said the move would enhance profitability and enable it to increase market share in industrial and dairy markets.

But Skellmax also said it was increasing the capacity of its dairy rubber manufacturing plant in Christchurch 30 per cent.

- NZPA