NZ Herald editorial: First round of regional grants look suitably cautious

Editorial

The Government went to Gisborne last Friday to announce the first projects it will finance from a regional development fund of $1 billion a year. It will provide $2.3 million to redevelop Gisborne's inner harbour, $1 million to commemorate Cooks' first encounters with Maori, $200,000 to begin a $20 million wood processing centre in the town, and $5 million for KiwiRail to reopen the Wairoa to Napier line.

Further afield, it may spend $6 million upgrading Whanganui's port and railway subject to a business case showing it to be worthwhile. It thinks Whanganui can be a centre of "value-added specialist manufacturing" and "an attractive investment prospect for marine and logistics-related industries".

Northland, Economic Development Minister Shane Jones' home province, will get new cultural centres in Opononi and Whangarei, a pilot project to explore a possible market for totara products, a $2.3 million tourism "hub" in Kawakawa and a $9 million project to reduce congestion at the Waipapa intersection.

National says it recognises many of the projects and Jones concedes only 70 per cent of them will be new capital. National did not make much of a promotion of its regional assistance, preferring to emphasise the industries such as viticulture and tourism that are booming in the regions on private investment. This coalition Government is different.

Both Labour and Winston Peters want to demonstrate what active government can do for economic development, particularly Peters who campaigned strenuously for regional votes last year.

With $3 billion to spend over the next three years, Jones appears to have made a cautious start. None of the approved projects appears to be unduly risky. The railway revivals are the most expensive, and most dubious. The national rail operator closed the Napier-Wairoa line for good commercial reasons. Labour, NZ First and the Greens want to reopen abandoned lines for reasons that are not purely economic. They want fewer trucks on the roads and electric railways produce fewer greenhouse emissions.

Presumably, the reopened lines will be electrified, probably at taxpayers' expense. But it cannot be resumed they will take trucks off the road. That is a decision for trucking companies and their freight customers. If rail cannot match the costs of door-to-door road deliveries and customers are unwilling to pay for the additional handling of good onto and off trains, the Government's revived rail services will be underused, an expensive indulgence.

Strong economies are built on products of genuine market value and the most efficient means of distribution. It is heartening that the Government's first tranche of regional projects do not include anything too rash. None of them are new ventures in untested or high-risk industries. Gisborne's wood processing "centre of excellence", Whanganui's marine and logistics industries, Northland's totara products, all sound tentative and subject to investigation.

Regions need industries that will not depend on Government subsidies. Unfortunately, by the time a government-sponsored industry proves to be a lemon, the Government usually has long gone.