PETE HODGSON* warns that the greater the surpluses of crown research institutes, the greater the danger of political interference.
Crown research institutes (CRIs) have existed for nine years, in which time they have been able to establish themselves as robust businesses.
They have reconfigured their assets, co-located with universities, developed links with commerce and built their science capacity impressively.
Allowing the CRIs to retain and re-invest all their earnings was designed to help them establish themselves and grow. Now the Government wants to re-gear their balance sheets by taking out a special dividend and increasing debt. Why?
Doug Edmeades (Business Herald, February 26) accuses the Government of planning to extract a "pound of flesh" from the CRIs.
He sympathises with scientists who want to retain control of "what they would regard as their hard-earned dollars." He misses the point.
Most CRIs are now in strong financial positions with very low levels of debt. Several have unused cash surpluses. These surpluses are expected to grow, totalling more than $40 million a year over the next three years.
An Ernst & Young report in 1996 concluded that most CRIs could manage a gearing ratio of up to 30 per cent. At present it is less than 4 per cent and falling.
It is an established principle of modern business management that a reasonable level of debt imposes a healthy financial discipline. The need to service debt helps to force managers to keep a vigilant eye on revenue.
Debt is also cheaper than equity, so a mixture of the two is generally likely to be the most efficient way to fund a business.
Moreover, the greater the cash surplus, the more likely it will be that a CRI will become its own science purchaser. In effect that means that I, as their minister, get to decide what research is or isn't undertaken.
That is an untenable position I don't intend to get into.
Our science effort must be determined by an independently implemented strategy through the Foundation for Research, Science and Technology. Politicians should be kept at a distance.
But Dr Edmeades' fundamental complaint is with the very notion of CRIs as businesses - the "commercialisation" of public science. He suggests CRI profits are somehow bogus, given that much of their income comes from publicly funded research grants.
In short, he is inviting me to reverse the 1992 reforms. I am not going to oblige, because I think the last thing New Zealand's science sector needs right now is another dose of uncertainty and upheaval.
The old DSIR had a proud history. But nine years after the restructuring of public science, few want to see it revived.
Excellent science is done at our CRIs, ranging from "pure" or "blue-skies" to "applied" or "strategic" research that often has commercial value. The latter has long been a strength of NZ science, particularly in the primary sector biologies.
Dr Edmeades claims that most scientists he knows are "deeply cynical of the commercial model they are obliged to work under." He says most are "enthusiastic about applying their skills to bring innovation and added value to the economy."
He fails to acknowledge that bringing New Zealand's science closer to New Zealand's economy is why CRIs were established.
In my view they have succeeded admirably.
* Pete Hodgson is Minister of Research, Science and Technology, as well as Minister for Crown Research Institutes.
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