Tough yardstick for Trade NZ

By Yoke Har Lee

Getting a $14 return on each dollar spent on investment promotion: that's the magic number Gary Langford of the New Zealand Trade Development Board (Trade NZ) has to work on as he balances his books.

It is a dilemma. The investment promotion budget available to Trade NZ has not grown and, on top of that, investment promotion often does not pay dividends right away.

In most cases, the lag time between an investor making a decision can be three years or more from the time he is first exposed to the opportunity.

Mr Langford, the director of Invest New Zealand, Trade NZ's investment promotion arm, is optimistic, though.

"We have said that we will give a net return of $14 for every dollar - that's our internal view. Over a five-year period, we would like to make a significant impact, with hundreds of millions being returned over that period."

What he sees as an effective and powerful mechanism is the highly focused Special Investment Programme (SIP).

Under SIP, red-carpet treatment is being awarded to potential investors, specifically the high-net-worth companies. The budget for the programme is $1.3 million over two years.

"We have done 38 [candidates] so far, Mr Langford said. "We had 70 nominated and were asked to do 50 by June. The fund will be fully committed by the time it is up. The funding finishes in June; whether we will continue to receive the funding is yet to be seen. But we would like to have it built into our funding for the future."

Trade NZ has been able to capitalise on major events such as the Asia-Pacific Economic Cooperation leaders' summit and the America's Cup.

"The America's Cup, particularly, has been fantastic for bringing through a number of powerful people in organisations who would normally not come."

In the Millennium Cup for superyacht owners, Trade NZ has worked with the marine exporters' group Marex to identify potential investors and invite them to take time out to look at investment opportunities.

Next will be the Sydney Olympics, which Trade NZ hopes to use to promote New Zealand investments.

Whether New Zealand's policy environment is conducive to foreign investments remains a topic of debate. Mr Langford is less inclined to think that incentives are a priority.

"Just about every country in the world uses incentives. But most of those who use them tend to say, 'Don't get involved. We wished we didn't have to utilise them'," he said.

He reckons that incentives are not what drives the primary business investment process.

"I am not making a comment on what the Government policy should be. What I am saying is that incentives are not that critical to decision-making. What's more important is getting the macro policy settings right - having a holistic approach to the policies rather than having incentives which could be masking other policy inefficiencies."

Trade NZ appears to willing to back winners, although the Shipley Government was averse to what it calls "picking winners."

Mr Langford, who undertook wide consultations after he moved into his job last year, made it a point to canvass private sector views on broad issues.

Industry observers say that until last year Trade NZ had a nebulous role in promoting foreign direct investments. Its primary function was to help New Zealand earn export dollars.

The SIP gave it a mandate and a budget to have a more targeted approach.

Mr Langford said: "We have been asking various people whether we should be picking industries to bring to New Zealand.

"People seem to be reasonably happy for us to do that, in conjunction with the Economic Development Agencies. But they felt it should not be in too many [areas]."

He reckons that choosing selected industries has got to be done in the context of what each region's comparative advantages are.

"In the South, for instance, it might be a big forestry investment region. With the case of Motorola, realistically it was going to narrow down to Auckland or Christchurch - to where the infrastructures would drive the industries."

In the Waikato, for instance, the biotechnology sector seemed logical with the involvement of AgResearch, Tainui and the Hamilton City Council in developing its science park.

Mr Langford said the danger was in spreading resources too thinly.

He said the drive towards high-tech industries was an obvious initiative to pursue.

Besides the high-tech area, New Zealand had to work on attracting industries that added value to resources, tapping more of the multibillion-dollar education services market.