Chief Executive's Overview
Introduction
The Ministry of Economic Development works across the public sector to advise on, co-ordinate and align activities that stimulate economic development. We influence the environment in which businesses grow and invest. We strive for a policy environment that regulates economic activity effectively and at low cost. We also deliver services to businesses and consumers that assist them to conduct their affairs effectively.
As at 30 June 2002 the Ministry administered seven Votes and reported to nine Ministers. Aware of the risks of fractionated effort and duplication, during the year we developed an outcome framework to better integrate our activities and focus them on achieving key outcomes across the economy.
The Government's growth and innovation framework, published in February 2002, sets a specific economic objective: to return New Zealand's per capita income to the top half of the OECD rankings and maintain that standing. The Ministry's main contribution to this objective is to help create the micro-economic conditions in which growth can occur. We have adopted as our major outcome working to ensure that:
New Zealand's business environment actively promotes and enables a higher rate of sustainable economic development
We have developed two supporting outcomes. The first focuses on ensuring the regulation of economic activity is effective and low cost. This recognises that an open and competitive micro-economy is a crucial foundation for New Zealand's economic growth and business success.
The second supporting outcome focuses on ensuring that regional development, business growth and innovation are actively facilitated and encouraged.
Our clear focus on outcomes has helped the Ministry to consolidate its role. Since our establishment in February 2000 the Ministry has focused more and more closely on the key drivers of economic growth for a small economy of predominantly small firms a long way from most of our international markets. We will continue to revise and develop our outcome framework in the year ahead.
The remainder of this overview outlines some of our work in key areas. It suggests the scope of the Ministry's work, but is not a comprehensive description of all we have achieved during the year.
Business Growth and Innovation
Implementing the growth and innovation framework has been a primary focus for the Ministry of Economic Development.
The Ministry's particular responsibility is to seek co-ordination and alignment of the framework's objectives across government. The Ministry is taking a whole of government approach, which involves helping to co-ordinate the work of different departments that impact on business activity in New Zealand. Our aims are to build understanding of the framework; enhance inter-agency collaboration in policy/programme design and delivery; encourage adoption of growth and innovation outcome indicators; co-ordinate research programmes; and identify and report on milestones.
We have worked closely with Industry NZ to ensure that the policy development process and the work of the taskforces (on biotechnology, information and communications technology and the creative industries) is integrated and consistent with the objectives of the growth and innovation framework.
Enterprise Capability
Innovation helps firms to compete domestically and internationally. It drives the development of new products and services and helps to lower costs. The resulting higher productivity is a cornerstone of sustained economic growth.
Enterprise capability - specialist and management skills - is needed to support innovation in firms. The Ministry's research indicates firms are experiencing significant difficulties finding workers with specialist skills. Other research shows that smaller firms' lack of management capability is also having an impact on firm performance, including the ability to access finance. Programmes have been progressively put in place to address these issues (for example, the BIZ programme, Investment Ready Scheme, Business Growth Service). We have also provided advice on the design and implementation of the Fast Forward New Zealand programme, support for business clusters and the development of incubators, all aimed at improving enterprise capacity.
Beyond policy advice and programme design in this area, the Ministry has focused on putting in place evaluation systems. At this early stage of programme implementation, we recognise the difficulties of providing definitive evaluation. Our focus during 2001/2002 has, therefore, been on providing advice on the delivery of assistance to firms in relation to Cabinet's decisions, the design of evaluation approaches, including a pilot Annual Strategic Analysis, and information collection systems in association with Industry NZ.
Looking to the future, we are working to ensure that a well-designed evaluation programme is put in place that provides reliable information to support policy development while ensuring that costs on delivery agencies are minimised.
Regional Economic Development
Regional development policy is aimed at facilitating regions to develop and implement local strategies that respond to local opportunities. We are working with other agencies to bring a whole of government approach to regional economic issues, and are providing advice and support to help build regional capability and institutions. Improving the economic performance of regions assists local communities as well as contributing to national economic growth.
During the year we worked intensively with four regions with acute development needs to develop their capacity and assist with planning for regional economic development. Tairawhiti, Northland, Eastern Bay of Plenty and South Waikato each drafted economic development strategies for their respective regions.
The Ministry convened a national conference on regional development in Rotorua in late November.
Tourism is a key economic driver in many regions. It distributes benefits widely, providing employment and improved earnings for regional businesses. The Ministry of Tourism is working to implement the recommendations of the New Zealand Tourism Strategy, which sets out a vision for the sustainable development of the industry to 2010. The strategy notes tourism's potential to accelerate economic growth, particularly in the regions. In implementing the strategy the Ministry of Tourism is working closely with regional tourism organisations, local government agencies and Māori groups so that tourism maximises its contribution to sustainable economic development.
Infrastructure for Development
Businesses rely on high quality infrastructure to produce goods and services, maintain contacts and get products to market on time and at the lowest possible cost. Key infrastructure includes reliable and cost effective supplies of energy as well as modern communications services and fast internet. The Ministry takes a lead role in advising the Government on the regulation of network industries, principally telecommunications, electricity and gas.
Our regulatory role is to promote good governance and regulatory design so that supply risks are effectively managed, prices are fair to both consumers and suppliers, and technological development is encouraged. In addition, our regional development policy advice assists in the co-ordination of infrastructure investment by central and local government to best support business development.
A new regulatory regime for telecommunications was introduced during the year under review, with establishment of a Telecommunications Commissioner within the Commerce Commission. The Commissioner will resolve disputes between service providers to facilitate competition in the provision of telecommunications services.
The Ministry negotiated a revised Kiwi Share Obligation with Telecom to provide an upgrading of its rural network for internet services and to modernise the agreement. The new agreement became a Telecommunications Service Obligation under the Telecommunications Act, which provides for enforcement of obligations and cost sharing with competitors.
Radio spectrum is a vital resource for the provision of wireless telecommunications and broadband services, and for broadcasting. By 30 June preparations were complete for an auction of spectrum for local broadband services, following consultation with the industry and peer review of the auction catalogue.
The Ministry advised Government on the effectiveness of self-regulation by the electricity industry, including the development of any new regulations required if industry failed to implement requirements set out in the Government Policy Statement of December 2000.
The Ministry monitored and facilitated industry progress on delivering key Government Policy Statement issues arising from milestones set by the Post-2001 Winter Review. A particular focus was working with the major generators/retailers to identify and progress industry solutions to improve competition in the contract and retail market.
The Ministry completed a review of the overall efficiency of the gas sector and released a report for public consultation in November 2001.
In the first half of the year, the Ministry led an officials' team developing policy proposals for domestic emissions trading to meet New Zealand's climate change obligations. We worked to ensure achievement of New Zealand's Kyoto Protocol emissions obligations in a manner that demonstrated environmental integrity and leadership, while keeping as low as practicable the direct and indirect costs of achieving those obligations. In December 2001 lead responsibility for this work transferred to the Climate Change Project team in the Department of Prime Minister and Cabinet.
Culture of Entrepreneurship
Understanding and strengthening the links between innovation and entrepreneurship is a key priority for the Ministry. In March we co-ordinated, with the support of Te Puni Kōkiri and Industry NZ, a highly successful forum in Christchurch - the Innovate Event. This brought together some of New Zealand's most well-known innovators, entrepreneurs, business people, academics and policy advisors to share experiences and discuss how to improve the quantity and quality of innovation. We are consolidating the lessons learned by taking a follow-up "roadshow" to the regions, focusing on how to support local innovation and entrepreneurship.
In a small, open and remote economy like ours innovation is crucial to economic success. The Ministry has led or participated in several projects to understand more about the innovation process. Gearing Up 2002 is a study based on a sample of 2,700 firms, which follows on from a similar survey four years previously. It correlates best practice in areas like innovation and leadership with quantitatively superior business performance.
Another study, An Interface Between Innovation and Entrepreneurship: A New Zealand SME Perspective discusses the links between innovation and entrepreneurship in an economy characterised by a predominance of small and medium enterprises.
Regulatory Environment for Business
The Ministry has continued working to reduce the cost of regulation to business, and to balance those costs that cannot be avoided against the benefits to the wider community and economy. While effective policy design can help contain the costs, tension between concerns about the cost of regulation and broader policy goals is inevitable.
Through our Business Compliance Costs Unit the Ministry has led government-wide efforts to reduce transactions and compliance costs associated with government regulation. The unit aims to improve the quality of Regulatory Impact Statements and Business Compliance Cost Statements through second opinion advice and the delivery of an education programme aimed at lifting departmental capabilities.
The Ministry advised on the Ministerial Business Compliance Cost Panel's report, released in September 2001. The Government's final response to each of the panel's 162 recommendations was publicly released in December 2001. In the May 2002 Budget funding was allocated to reduce compliance costs in the resource management area and to fund a business portal to provide information to small business through the E-Government portal and BizInfo.
The Ministry is leading a substantive review of New Zealand's business law. We are looking to adapt best practice models from other OECD countries to New Zealand needs. The strategic goal is to improve the efficiency, effectiveness and integrity of our capital markets in order to improve the availability and reduce the cost of capital to businesses. We have already made substantial progress on reform of capital markets.
Major components of this work include reviews of securities markets trading law and insolvency law. Three discussion documents on insider trading law, market manipulation law, and penalties and remedies, have been released, with a deadline for submissions of 30 August 2002. With regard to the insolvency review, a discussion document on business rehabilitation was released in May 2002.
Access to Business Information
Information on businesses and markets is necessary to create confidence in those markets, to ensure that participants can make good investment decisions, and to minimise undesirable conduct such as fraud. The Ministry advises on the law that creates obligations on market participants to disclose information. We also manage a range of databases and provide information on a variety of topics to assist people to make well-informed decisions.
During the year Companies Office clients conducted 16,000 manual file searches and 357,000 electronic company searches. The Motor Vehicles Securities register received 584,000 electronic inquiries.
A major development during the year was implementation of the Personal Property Securities Register, which lets people and businesses record security interests in personal property. The register was launched on 1 May 2002. Clients were offered the opportunity to pre-load existing registrations in April, and 200,000 financial statements were registered.
The Ministry of Consumer Affairs provided comparative information enabling domestic electricity consumers to compare the offering of various electricity companies. This was done through the Powerswitch database on the Consumers' Institute website, funded by the Ministry.
Regulatory Integration
The Ministry is providing an effective voice in the international institutions that establish regulatory frameworks in order to protect and promote New Zealand's interests.
International connections are important for a small country like New Zealand because they open up opportunities for investment and business growth. We need to participate in international institutions like the WTO that establish the rules governing international business and trade, because an increasing number of the regulations applying in New Zealand are based on norms or rules that are developed in these institutions or in the jurisdictions of our major trading partners.
To maximise our development prospects, businesses need a transparent set of rules that apply consistently across borders. The Ministry is making a major investment in influencing the development of international regulatory frameworks in order to create these conditions.
The Ministry is giving particular priority to the further co-ordination of New Zealand's business laws and broader regulations with Australia. The aim is to further reduce transaction and regulatory costs and to allow firms to operate in a single trans-Tasman market.
Improving the Ministry's Capability
To achieve the outcomes required of us, the Ministry must have the right combination of people, resources, systems and structures. Over the past year we have made good progress in building the Ministry of Economic Development as a distinctive organisation with a strong economic development focus.
The Strategic Leadership Team, comprising the chief executive, deputy secretaries and the general manager of the Ministry of Consumer Affairs, has refined its role to focus on two key areas: economic development strategy and organisational development and capability. This provides active and visible leadership on strategic issues across the Ministry.
We are building our capability around the key drivers of economic development, and are developing stronger mechanisms to assist Ministers prioritise activities that will contribute most to achieving their desired outcomes. A key initiative has been formation of a Medium-Term Strategy Group (MTSG). Its functions include building our understanding of sustainable economic development and where the Ministry can make the most significant contribution to our identified outcomes.
The Group will also advise the Strategic Leadership Team and branches during strategic planning processes and when high-risk issues arise. The group manager of MTSG joins the Strategic Leadership Team for its deliberations on economic development strategy.
We have improved our business planning and risk management processes. The outcome framework developed for the Ministry's first Statement of Intent marks a major step towards effective outcome-based management of our work programmes.
To achieve the outcomes we have identified will require the Ministry to harness our wide expertise more effectively to advance economic development. We have begun that process through an organisational development project called Creating the Future.
Through an interactive process with staff that project developed the Ministry's enduring purpose and uncovered the Ministry's core values. It has also painted a picture of the Ministry we want to become and how we intend to develop as an organisation over the next decade.
We are working to make the vision reality. We have formed a team to investigate better ways to manage knowledge in the Ministry, with particular focus on sharing what we learn across work unit boundaries. We have strong networks in the community, the business world and the state sector, and need to share intelligence and understandings across the Ministry.
Statement of Resources as at 30 June 2002
| Ministry Staff (Expressed as Full-Time Equivalents) | 2001/2002
Actual | 2000/2001
Actual |
|---|
| Chief Executive's Office1 | 1 | 2 |
| Corporate Branch2 | 104 | 97 |
| Industry and Regional Development Branch | 46 | 29 |
| Operations Branch | 422 | 431 |
| Regulatory and Competition Branch | 61 | 60 |
| Resources and Networks Branch | 42 | 42 |
| Ministry of Consumer Affairs | 64 | 61 |
| Ministry of Tourism3 | 13 | 12 |
| TOTAL | 753 | 734 |
Male/Female Staff Numbers
| Ministry Staff (Expressed as Full-Time Equivalents) | Male | Female | Total |
|---|
| 2000/2001 | 364 | 370 | 734 |
| 2001/2002 | 369 | 384 | 753 |
Staff Remuneration
We have developed a three-year human resources strategy that focuses on valuing and developing the Ministry's people as the key element in building a high performance organisation. One of its goals is to create a supportive environment that enables everyone to perform at their best. We aim to motivate staff around our core purpose and vision for the Ministry, so they are well-placed to align their own activities with the organisation's goals.
To this end, we are reviewing our performance management system and our core conditions of employment. We are seeking to improve how we manage performance to reinforce a high-performing culture across the Ministry. The core conditions review aims to develop a set of core conditions that best suit both staff and the Ministry, and will enable us to sustain strong staff-Ministry relationships. The PSA is working with us on both projects as part of our Partnership for Quality Agreement, and there has been extensive staff consultation.
Good communication, within the Ministry and with our stakeholders, is a prerequisite for good performance. In 2001 we adopted communication as the key competency to focus on across the Ministry. We introduced a communications development programme for all managers. A starting point was collection of confidential feedback from staff and outsiders on the communication skills of each manager.
This exercise was repeated later in the year. The results showed there had been good improvement from the first survey. Based on their results, each manager has a personal communications development programme.
Our human resources strategy also emphasises that the Ministry must develop and recruit staff who can provide policy and operational leadership, and who understand the business environment. To encourage interaction between the Ministry and the business sector we have revised our staff development awards to emphasise opportunities for hands-on work experience through short-term secondments, study tours and staff exchange programmes.
Conclusion
The 2001/2002 year marked the consolidation of the Ministry's economic development function. The outcome framework we have developed will help us to integrate our work and focus on those outcomes that contribute most to fostering economic development and prosperity for all New Zealanders.
I conclude by thanking the Ministry's management and staff for their efforts over the year.
Geoff Dangerfield
Chief Executive
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