Rich rewards for quiet global player

It would never have happened in the old days. In the past few years, New Zealand's state-owned Industrial Research Ltd has quietly started earning millions of dollars making chemicals for American drug manufacturers.

"Anti-cancer molecules" and other biopharmaceuticals account for the bulk of a dramatic leap in the company's export earnings, from $8.6 million in the year to June 2000 to $14.6 million in the latest year.

In the 10 years that departing chief executive Dr Geoff Page has been at the helm, IRL has been transformed from part of a rambling government department into a global technology company, earning more revenue offshore than the $8.4 million it earned in the past year from New Zealand commercial clients.

Yet, most of the 41 local experts surveyed by the Gem entrepreneurship study still feel that new technology is not being transferred efficiently from public research centres and universities to new and growing businesses.

"The research and development sector generally is not aligned to the needs of most New Zealand entrepreneurs, who are not interested in 'edge of knowledge' projects, but rather how to make regular business more innovative and entrepreneurial," the study says.

As the only crown research institute not focused narrowly on primary production or the environment, IRL is inevitably the main target of this criticism.

But Dr Page, who leaves at the end of this year to head the commercial arm of the Australian National University, believes that the critics' perceptions are dated.

"It's a long-term game," he says. "We [New Zealand] have only just twigged that advanced technology is important. You are not going to see a major shift that is detectable for a decade."

Unusually, Dr Page defines IRL's role not in terms of what it does for a living, but by its role in society. He believes New Zealand must become more than an exporter of primary produce if it is to prosper.

"Our role is creating an advanced technology sector."

In part, that sector already exists. For instance, Peter Blacklock, of Buckley Systems, says that when Ruapehu erupted a few years ago, the global silicon chip industry began to worry about contingencies because Auckland-made Buckley electromagnets are used in making 90 per cent of the world's silicon chips.

Another Auckland company, Rakon, makes more than half of the quartz crystals used for radio communications in the fast-growing global positioning system (GPS) market. Fisher and Paykel Healthcare dominates the world market for medical humidifiers.

These successes don't happen by chance. Both Buckley electromagnets and F&P humidifiers originated with Auckland University professors who went to these local manufacturers to turn their ideas into products.

Dr Page believes IRL's biopharmaceuticals unit, which employs more than 40 people on IRL's Lower Hutt site, has a similar capacity to become a $30 million to $50 million business within five years.

"What we are trying to do is create a pharmaceutical manufacturing business, albeit a niche one," he says.

"We'll spin it off as a business because the money required to generate a manufacturing facility is way beyond our resources."

He sees parallel potential in other fields such as robotics, where a 25-strong team at IRL's Parnell head office leads the world in designing robots to handle animals and other "variable raw materials". IRL already has clients for this technology in the United States beef industry.

Critics slam this, saying IRL should support NZ industry rather than Americans. Peter Crawford, an analyst with Business New Zealand, is supportive, but cautious.

"They can play a role in helping to lead industry in the technology it should be looking at, and helping to develop in the first instance some of the early technologies," he says.

"But it needs to be done with guidance from industry. If they are leading industry in a new direction, they need to talk with industry to see if there is a capacity to absorb the new products they are developing."

Business NZ has suggested that IRL could bring local manufacturers together in technology cluster groups to look at their needs. Dr Page says IRL is discussing an optics-based cluster including companies such as Porirua's Vega Industries, which makes searchlights for the US Coast Guard.

"The real issue is how can we get some of these small and medium-sized enterprises to cluster," he says.

"You can start to see now the beginnings of clusters around technologies. In Christchurch, a number of companies are beginning to work together in electronics. In Auckland, I see some of Massey's incubator stuff being a potential there around the software area. "

Dr Page plans to stay a director of the new NZ Venture Investment Fund after he moves to Canberra in the New Year.

"I think there could be some benefits with the linkages between Australia and New Zealand," he says. "I think now is the time to contribute.

GEM Special Report