Subsidy for EDS labelled 'corporate welfare'

By ADAM GIFFORD and NZPA

Global IT services firm EDS has won a $1.5 million Investment New Zealand subsidy to build up its call-centre and application development operations here.

Investment New Zealand's initiative was immediately knocked by Opposition parties, led by Act MP Rodney Hide, who labelled it "corporate welfare".

EDS has promised to pump $18 million of its own into the new venture and to create at least 360 jobs within three years.

"If we don't create the jobs we have to give the money back," said EDS New Zealand managing director Rick Ellis.

He said the Government grant was an essential part of convincing the Texas-based corporation to include New Zealand in its "Best Shore" initiative, which aims to beat competition from Indian IT services firms with cost structures lower than US firms.

EDS, founded by billionaire and former US presidential candidate Ross Perot, is the world's No 2 computer services and consulting company behind IBM.

EDS New Zealand employs about 2300 staff. In 2001 it made a $2 million loss on revenue of $349 million. Its parent last year made a US$1.12 billion ($1.99 billion) profit on revenue of US$21.5 billion.

Investment NZ's subsidy provoked indignation from politicians.

"You can't blame the company for putting their hand out and grabbing as much taxpayer cash as Mr Anderton is prepared to throw at them," Hide said, "but it is disgraceful that our Government is taxing New Zealanders hard to help multinational companies."

He said Economic Development Minister Jim Anderton "is swanning around handing out corporate welfare".

National MP John Key attacked the grant on similar grounds.

"I'd rather see the Government applying a fairer approach ... creating an environment which is a lot more conducive for all businesses, and get out there and cut compliance costs and make business go faster for everyone, not just one or two of the chosen few," he said.

Greens co-leader Rod Donald said he was "extremely unhappy" the Government had given so much to a multinational. "EDS can afford to do their own expansion in New Zealand, whereas there are a lot of small New Zealand companies that desperately need working capital and should be getting support from Industry New Zealand."

Ellis said that securing Best Shore status meant the New Zealand subsidiary could generate up to $280 million in foreign exchange earnings and $200 million in domestic benefits over the next eight years.

"Best Shore is about selecting a small number of centres of excellence in contact centres and application development to which the company could direct work from Global 1000 clients," he said.

"The $1.5 million is a token payment. It is as much about the symbolism. To a large corporation like EDS, it is evidence of Government support for the EDS business in New Zealand."

Ellis said the new jobs would probably be equally divided between Auckland and Wellington.

Anderton said Hide's attack just showed Act was anti-business.

"The Government is in the business of facilitating high-growth, high-technology, high-skill business development in New Zealand," he said. "EDS already fits that profile here."

Anderton said the Government was protected if the jobs did not eventuate.

EDS is also promising to work with Work and Income NZ to hire migrants, "many of whom are highly qualified people who are having trouble getting jobs for what are quite frankly discriminatory reasons".



The Deal

* Investment New Zealand will give EDS New Zealand $1.5 million from its Industry Development Fund to help develop a call centre and an application development centre.

* If EDS fails to generate 200 jobs in three years, it gives all the money back. If there are fewer than 320 jobs, it gives back a proportion.

* In 2001 the same fund promised $1.6 million to a joint venture between Ericsson and Wellington software developer Synergy. Only $355,000 of that was handed over and the joint venture was wound up last November.