Metals NZ/HERA Submission to Parliamentary Inquiry into Manufacturing

The New Zealand metals-based industry is actively involved with and supports many other industries, such as food processing, energy generation, agriculture or construction. As such, industry-specific figures are difficult to pinpoint, but 2010 estimates are:
- Contributes over 7% to Annual NZ GDP
- Direct metals-based product manufacturing employs more than 26,000 people
- Over $7.3 billion worth of metals-based product manufactured annually
- More than $2.6 billion of product exported, representing 5.6% of total NZ exports

Metals New Zealand, as a sector over-arching entity, developed in co-operation HERA a Metals Engineering Industry Position on Public Policy Issues. This submission heavily draws on this document but is limited to respond only to the inquirys economic development policy question under the Industry Transformation Policies heading. For the full document, download HERE.

Our recommendations are as follows:
Industry R&D
- An R&D tax credit scheme is an ideal broad-based mechanism for industry transformation. However, in the absence of such a scheme a suitable replacement might be to widen the access to R&D grant schemes and deliberately target the sectors of industry which enhance creating high value products and services for exports or as import substitution.
- Continuous availability of company-specific grants over several years to help embed R&D functions within the business, as opposed to the current emphasis on R&D service providers being in charge of the grant funds and providing only time-limited initiatives under their drive.
- Widening the range of approved research providers for the R&D grants schemes to include non-public sector or independent research providers such as HERA.
- Supporting the combined funding of research projects by companies that have common interests e.g. in renewable energy or resilient building systems.
- Government increases support for non-agriculture manufacturing sector groups to create stable industry levy funded R&D streams, provided industry groups are unified behind funding R&D via compulsory levies enshrined in legislation. The legislation should include the industrys right to subsequent abandonment of the scheme should industry consensus be lost.
- Capability of Independent Research Organisation Funding is implemented without delay to ensure important research capability is not lost in the transition from old funding mechanism to the new.
- Making the early stage R&D commercialisation costs 100% tax deductible in the form of depreciation over the first year
- Introducing faster depreciation rates on productive manufacturing equipment

Public-funded research and its impact on industry
- More government R&D money is channelled through industry rather than directly through the research provider to industry. This will result in industry deciding what research provider they wish to spend R&D funds with. Demand will then dictate which research providers and what research services best meet the needs of industry and determine which will expand and thrive
- In largely academic programmes government R&D policy puts more emphasis on industry involvement to determine research needs and its funding, the performance of the research, and in the governance process

Economic Development Strategies
- Inclusion of local industry development objectives in national economic development strategies
- Creation of Projects of National Significance for industry development to focus national efforts
- Endorsement of the principles developed in Pure Advantages Green Growth Report, including support of the development of an associated Green Growth Strategy. However, this must also include greening of essentially dirty activities, and New Zealand contributing to harvesting natural resources in a responsible manner

Government Procurement Policy
- Provide balanced government procurement in respect to social, economic and environmental impacts. In particular include the consideration of loss in tax revenue from imported products in government procurement decision making
- Develop the New Zealand-specific business case for procurement excellence via supportive research and case studies
- Develop the technical side of whole-life costing guidelines and implement in the public sector procurement guidelines
- Develop the concept of lead-user innovation as part of the public sector procurement model
- Adoption of the developed guidelines, including the development of Industry Participation Plans, is a mandatory requirement for all major public sector procurement
- No import tariff exemption unless a detailed and satisfactory IPP has been provided
- To further the active adoption of procurement excellence assist in the associated training, especially of whole-life costing, cost management and development of IPPs

SOE Procurement
- Consideration is given for SOEs to follow the above procurement excellence principles e.g. a requirement is placed on SOEs that in relation to major projects they operate asgood New Zealand corporate citizens, including support for national priorities in industry development as lead user innovators
- The SOE Act, and any legislation that considers the proposed mixed-ownership model, be reviewed in relation to best practice procurement
- Major project procurement must include establishment and publication of local IPPs

Free Trade Agreements
- Free trade agreements are weighted in relation to the level of equity between New Zealand manufacturers and those overseas.