Overview
Vote: Commerce is a large and complex portfolio comprising the following major areas:
- A broad range of policies and laws that impact on the way business operates in New Zealand - The main areas are corporate governance, intellectual property, financial markets, insurance, non-bank financial institutions, competition, standards and conformance, and government purchasing policy. The Ministry provides policy advice on these matters, runs the corporate and intellectual property registers and enforces the corporate governance statutes.
- The international dimension of the policies and laws summarised above plus tariff policy and trade remedies - Ministry of Economic Development officials have a significant involvement in trade negotiations to facilitate cross-border business and to ensure our domestic regulatory objectives are not undermined by more integrated markets.
- Quality of regulation - We have the lead role in promoting measures to improve the quality of regulatory analysis and processes across government combined with taking an overview of business compliance cost reduction.
- Regulatory impact analysis of current and proposed environmental legislation and multilateral agreements, and administration of import and export controls for ozone depleting substances and hazardous waste.
Appendix 4 summarises policy, registry, enforcement and adjudication responsibilities within the Commerce portfolio.
Vote: Commerce covers both policy responsibility for, and administration of, some 50 statutes, six Crown entities and one trans-Tasman organisation. It extends across three branches of the Ministry of Economic Development: Regulatory and Competition Policy, Resources and Networks, and Business Services. The Business Services branch includes the Companies Office, Insolvency and Trustee Service and the Intellectual Property Office. The annual appropriation for Vote: Commerce is in the order of $72.590 million: $9.101 million for policy advice outputs, $36.271 million for operational services that generate fee incomes, $21.664 million for purchasing outputs from a number of Crown entities and $5.554 million for non-departmental expenses that relate to the Crown's membership in various organisations and possible Crown entities' litigation activities.
This introduction highlights the key features of the portfolio, and the challenges ahead.
The portfolio includes most of the laws needed to support innovation and economic growth, i.e. the laws governing competition, intellectual property, insolvency, corporate governance, insurance, financial reporting, the raising of capital, and conduct in financial markets. New Zealand is regarded internationally as having a modern and sophisticated regulatory system and effective regulatory institutions. In some areas, such as using information technology to keep down compliance costs for business, we are a world leader. There has been, and continues to be, a significant law reform programme in business law. This has been driven, in some cases, by the need to bring old laws up to date (insolvency law and intellectual property law), in others, to align our laws more closely with the international mainstream (securities law), and in others, to implement our international obligations (some parts of intellectual property law).
The challenges we face in this area are:
- Maintaining a regulatory system for business that is appropriate for a small economy and largely small firms, while at the same time allowing us to interconnect with other economies, both to encourage overseas investment into New Zealand and to reduce costs for our firms operating in Australia and other overseas markets. Generally these objectives are complementary, but tensions arise from time to time.
- Striking the right balance between the rights and obligations of consumers, and those of business. If too much weight is put on the former then productive business activity and innovation could be stifled. However, a reasonable level of consumer protection is required both to protect the vulnerable and encourage people to invest in shares.
- Maintaining regulatory capacity. Regulators such as the Securities Commission and the Commerce Commission are being given more functions, and, in some cases, additional powers, and they need to build capacity rapidly to administer the law effectively.
Judgments on all of these areas are reflected in Bills such as the Securities Legislation Bill and the Insolvency Law Reform Bill. These are currently at an advanced stage in the legislative process. Judgments are also needed on policy such as the review of financial products and providers, and the review of financial intermediaries, which is at a formative stage. The absolute size of the policy and legislation programme itself creates a challenge, not least in terms of parliamentary time. [Three sentences withheld under Section 9 (2) (F) (iv) of the Official Information Act 1982].
The portfolio also includes the institutions that develop New Zealand's standards for goods and services, and the means by which firms can demonstrate that they are meeting these standards. Known as the standards and conformance infrastructure, these institutions support private commerce, significant elements of the regulatory system, such as electrical safety and building controls, and New Zealand's trade policy and current negotiations with countries such as China.
The challenges we face in this area are:
- Ensuring that our standards and conformance infrastructure continues to be, and is recognised internationally as being, at the leading edge of practice for both standards development and conformity assessment.
- Strengthening the relationship between regulators and the infrastructure bodies so that the greatest possible use is made of our standards-writing and conformance capacity.
A draft Bill currently on the legislative programme brings the statutory framework for the standards and conformance infrastructure up to date. The infrastructure is also being reviewed, examining, amongst other things, the relationship between the standards and conformance and regulatory systems, and funding issues.
The portfolio has a significant international focus. This reflects the fact that a number of the areas for which this Ministry has policy responsibility are elements of international negotiations or, as discussed above, involve trans-Tasman or international convergence of laws. The areas include tariff policy (including rules of origin), trade remedies, government purchasing, standards and conformance, intellectual property, competition policy, insolvency and the regulation of securities markets. We are very active participants in negotiating closer economic partnerships, including the negotiations with China, and lead much of the business law coordination work with Australia.
The challenges we face in this area are:
- Knowing when and how much to coordinate our policies and laws with Australia. On the one hand, coordination has the benefit of reducing compliance costs for firms operating in Australasian markets, gives both countries more leverage in influencing international practice and helps compensate for a lack of regulatory capacity, which is becoming more of an issue for small countries. On the other hand, close coordination (where New Zealand and Australia take on reciprocal obligations) can involve making tradeoffs between what we might regard as optimum policy or law in a domestic context, in favour of a trans-Tasman regime.
- Determining how ambitious we should be in the closer economic partnership negotiations. For example, there are more traditional at-the-border issues on the table for negotiation, such as reducing tariff levels. However, it is increasingly recognised that some of the more significant barriers to entry to the markets of the negotiating partner, and some of the more significant costs to firms operating in those markets, arise out of behind-the-border laws and their administration. These include different standards and conformance requirements and, in some cases, weak enforcement of intellectual property laws. Addressing these behind-the-border barriers potentially opens up new areas for negotiation to identify new mechanisms to lower them.
As noted, we are currently involved in a number of closer economic partnership negotiations, including those with China, Malaysia and the Association of Southeast Asian Nations. On the trans-Tasman front, jointly with Australia, we are undertaking the first five-year review of the Memorandum of Understanding on Business Law Coordination. An outcome of this will be a revised action agenda for coordination work over the next five years. We are discussing with Australia a number of coordination issues, in areas such as competition law and the administration of intellectual property regimes, and are progressing coordination work that has already been agreed in areas such as accounting standards, mutual recognition of securities offerings and goods and services (under the auspices of the Trans-Tasman Mutual Recognition Arrangement).
The portfolio includes responsibility for the regulatory impact analysis regime. The objective of this regime is to encourage departments to undertake good quality policy analysis and, in the context of this, factor in the impacts on business of proposed new policies and laws. The activities undertaken in this area are training on regulatory impact analysis, advice on preparing regulatory impact statements that must accompany all Cabinet papers proposing either primary legislation or regulations, and formally reviewing regulatory impact statements that have a business compliance cost statement attached, i.e. the proposal will have compliance cost implications for business. We comment, in terms of the adequacy of information on the problem that needs to be addressed, on the costs and benefits of the options for addressing the problem and who was consulted, and on whether the accompanying regulatory impact and business compliance cost statements are adequate or not. In addition, we also informally advise departments on impact statements that do not require a business compliance cost statement.
The challenges we face in this area are:
- Encouraging some policy advisors to think of the regulatory impact statement not as a compliance cost but as an important discipline that should be built into the policy development process from the beginning and that will result in better quality policy advice.
- Strengthening the incentives on departments to produce high quality regulatory impact statements. This is not simply a matter of departments taking the regime seriously, but in some cases building their capability to provide good quality advice consistently.
We have been discussing with departments a proposal to extend our formal review of regulatory impact statements to include all regulatory proposals that have business impacts, not just the sub-set of those that create compliance costs, and also on other ways in which the regulatory impact statement regime can be improved.
Finally, Vote: Commerce is fully integrated into the Ministry of Economic Development as a whole. We work closely with other branches, including the Ministry of Consumer Affairs, on our common objective of sustainable economic development.
The Role of Government in Promoting Business and Economic Growth
Government has three broad roles in promoting business and economic growth:
- ensuring appropriate and stable macroeconomic policy settings (price stability and fiscal balance)
- ensuring appropriate legal and regulatory frameworks, enforcement and service delivery that support competition, participation in markets, and a low-cost business environment - in short, ensuring high quality microeconomic foundations for growth
- within the disciplines of these frameworks, identifying appropriate interventions to support and accelerate the growth of innovative businesses and support industry and regional development.
The Ministry of Economic Development, through Vote: Commerce, plays a central part in the second of these roles and a partial role in the third.
Strategic Priorities
The Ministry's strategic priorities focus our expertise and resources on activities that have the most impact for sustainable economic development. In summary, these are:
- leadership - leading a whole-of-government approach to economic development
- international linkages - improving international linkages that allow firms to benefit from trade, knowledge transfer and investment
- innovation - fostering entrepreneurship and innovation in New Zealand firms
- regulatory environment - strengthening the growth focus in the regulatory environment for business
- infrastructure - strengthening the quality and reliability of key infrastructure services.
In keeping with the Ministry's five strategic priorities, the work programme under Vote: Commerce over the next three years will include:
- ensuring New Zealand's business laws (with financial sector law the current priority) are robust and effective, encourage participation in the sector and, where appropriate, are consistent with international best practice and developments in Australia, in order to position New Zealand as a quality place to invest
- ensuring New Zealand's intellectual property statutes support the growth of innovation in the economy
- driving improvements in government departments' quality of regulation and reducing compliance costs
- improving New Zealand businesses' ability to compete internationally by contributing to bilateral free trade negotiations and reducing technical barriers to trade
- protecting and advancing New Zealand's economic interest under international agreements, including the next round of trade negotiations under the World Trade Organisation
- ensuring environmental and conservation measures, in particular the Resource Management Act 1991 and the Hazardous Substances and New Organisms Act 1996, are implemented in a well-targeted, effective and low-cost way
- enabling all New Zealanders to participate in the growth opportunities offered by the new electronic environment supported by the internet.
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