Chief Executive's Report
Introduction
The transformation of the Ministry of Commerce into the new Ministry of Economic Development made 1999/2000 a watershed year. The new Ministry now services two new portfolios, Economic Development and Industry and Regional Development.
Since March 2000 the Ministry has been building its economic development capability, while also working to establish Industry New Zealand as a Crown entity. This has involved:
- developing economic, regional and industry development policies;
- advising on the legislation needed to establish Industry New Zealand; and
- forming the Industry New Zealand establishment unit and developing its operational capability.
To achieve its goals of sustainable development, the Government is introducing a range of mutually reinforcing policies covering economic, social and environmental issues. These policies encourage individuals, businesses, industries and communities to make choices that are compatible with, and enhance, sustainable development.
Economic development is not seen in isolation from the other component parts of sustainable development. The Ministry's role is to assist Ministers in determining an appropriate economic development strategy and policies to achieve these goals. This requires us to work across a wide range of areas in an integrated way. This places new demands on the Ministry. It is a new way of thinking. It is about doing things differently. In addition, the Ministry also provides second opinion advice on related policy issues that are the primary responsibility of other departments to ensure an economic development perspective is incorporated.
A further, new dimension to the Ministry was added with the transfer of the Office of Tourism and Sport from the Department of Internal Affairs to the Ministry of Economic Development on 1 July 2000. This will strengthen the linkages between tourism, major events and sport on the one hand and the Ministry's focus on economic and regional development on the other.
By June 2000 the Ministry was servicing six Ministers and providing strategic support to the Deputy Prime Minister regarding the two new portfolios. Since July the Ministry has been administering nine Votes and servicing nine Ministers.
Inside the Ministry
We have continued developing our human resources capability, with initiatives to develop the Ministry's management capability and to strengthen the performance management system. Treaty of Waitangi training and significant initiatives to advance the Ministry's responsiveness to Maori were undertaken, and will continue next year.
A review of the Ministry's policy advice processes resulted in the adoption of a revised policy advice framework and a project management approach. The aim of the review was to enhance the effectiveness and quality of the Ministry's policy advice.
Recognising the importance of managing information effectively, the Ministry has continued to refine its information management and technology strategy and systems.
The Ministry requires a high level of ethics and integrity from all staff, and this was reinforced by a seminar series for managers and staff on public service ethics and the proper role of public servants.
Alignment with the Government's Key Goals and Strategic Priorities
The Ministry's 2000 Departmental Forecast Report and Key Result Areas, prepared during the first half of 1999, were aligned to the previous Government's Strategic Priorities.
The present Government agreed a statement of Key Goals to guide the public sector in February 2000, and these have superseded the Strategic Priorities.
Outlined below is a summary of how the Ministry contributed to both the Key Goals (post February 2000) and the Strategic Priorities (pre February 2000).
Key Goals
The Ministry has adopted the Government's Key Goals as the basis for its purchase agreements with Ministers and as the main driver of its business planning for 2000/2001. Many of the activities commenced during the previous year also align to the Key Goals. These include:
1. Grow an Inclusive Economy for the Benefit of All
Following the November 1999 election the Government established two new portfolios, Economic Development, and Industry and Regional Development, to be supported by a Ministry of Economic Development established by a refocusing of the Ministry of Commerce. A new Crown entity, Industry New Zealand is being formed to take the lead on delivering industry programmes.
In addition to being the Government's primary advisor on business and consumer issues, microeconomic policy and the operation of specific markets (including energy and telecommunications) the Ministry of Economic Development is responsible for providing policy advice on industry and regional development and any other matters relevant to economic development.
The Ministry commenced building its economic development capability and establishing Industry New Zealand in March of this year. This has involved:
- Developing economic, regional and industry development policy frameworks and advising on the legislation needed to establish Industry New Zealand.
- Forming the Industry New Zealand establishment unit and developing its operational capability.
- Providing strategic support to the Deputy Prime Minister regarding the two new portfolios.
The Ministry also has a significant role in supporting the Cabinet Economic Development Committee.
The Ministry has provided immediate operational support to the Government in the areas of regional and industry development, while simultaneously undertaking policy development in these key areas. The normal approach is to develop policy and then build the operational capability required to deliver on it. Instead, to meet the high priority the Government places on these initiatives, the Ministry has managed a concurrent and iterative process.
Meeting these challenges has been demanding but exhilarating. Given the urgency and scope of the task, the Ministry formed a dedicated project team, and adopted project management disciplines to provide overall co-ordination and risk management during the transitional period. The Project Team consists of Ministry staff, officials seconded from Te Puni Kokiri, the Department of Labour and the Ministry of Foreign Affairs and Trade, and external specialists employed on short-term contracts. The Team is working to build the Ministry's permanent capability so it can successfully implement the Government's economic development programme, while also focusing on transitional issues.
Achievements include:
- forming an experienced team to provide support to the Deputy Prime Minister across a wide range of issues affecting the Economic Development and Industry and Regional Development portfolios;
- preparing major policy papers establishing the framework for economic, regional, and industry development;
- developing a timetable for a comprehensive policy development programme over the next 12-18 months;
- assembling a second experienced team to develop the business plan to enable Industry New Zealand to be incorporated and operational by October 2000. The team already has significant operational capability;
- providing significant leadership and capability to support the Tairawhiti Development Taskforce;
- managing effectively a series of major regional and industry development initiatives;
- making considerable progress in recruiting highly skilled staff for the Ministry's permanent Economic Development Policy Unit and
- establishing linkages with other government departments and existing multilateral forums to enhance programme co-ordination.
The Government has also undertaken inquiries into the electricity and telecommunications industries to assess the current regulatory regimes. The Ministry advised on and assisted with setting up these inquiries.
2. Strengthen National Identity and Uphold the Principles of the Treaty of Waitangi
The Ministry has advised the Minister of Broadcasting on the Crown's legal and Treaty obligations to promote Maori language and culture through broadcasting, financial and governance issues relating to Maori television, and processes for furthering the Government's priorities for Maori broadcasting.
The offer of 15 MHz of 3G spectrum to the Maori Spectrum Charitable Trust and policy related to that offer are designed to increase the participation of Maori in the knowledge economy, particularly the information and telecommunications sectors.
By ensuring its Treaty, staff capability, business, resource management and consumer information policies and programmes will strengthen Crown-Maori relationships, the Ministry will contribute to upholding the principles of the Treaty of Waitangi and to closing the gaps for Maori and Pacific Island people, particularly in the area of economic development.
Strategic Priorities and Key Result Areas
Three of the previous Government's Strategic Priorities for the public sector related to improving the business environment and business capability, and were key drivers for the Ministry of Economic Development for 1999/2000. The following table shows the Government Strategic Priorities applicable to the Ministry for 1999/2000 and the corresponding Key Result Areas.
Key Result Area 1 required the Ministry to work in co-operation with other departments to reduce the costs of doing business and to enhance opportunities for businesses to innovate and grow - to remove barriers to business growth and innovation and to enable access to markets, expertise, capital and technology.
Achievements included the bringing together of the "Bright Future" package, a broad-ranging assessment of how New Zealand might prepare itself for the knowledge economy, which involved co-operation with several key departments. The project included an assessment of the major barriers to business growth and innovation that enabled the Ministry to respond quickly when the new Government sought advice on barriers to business, for example, in the work commenced in the current year on the legal status of electronic transactions.
The research and analysis underpinning the "Bright Future" work also led to some innovative work on domestic regulation, for example, the establishment of the first "test panel" as a way to assess the effects of statutes and regulations before they are enacted.
Internationally, the Ministry was responsible for obtaining broad agreement, particularly amongst APEC economies, on the significance of behind the border barriers in restricting the expansion of economic activity.
The Ministry commissioned an evaluation of the BIZ programme to verify that the programme met its objective of improving the performance of small and medium enterprises.
The programme of initiatives implemented by the Year 2000 Readiness Commission, attached to the Ministry of Economic Development, contributed to a successful changeover to the new millennium with no significant problems encountered.
Under Key Result Area 2 the Ministry agreed to work to "lower costs for business and encourage efficiency, competition and innovation", facilitating high quality standard setting and regulation, and well-designed business and consumer law.
Achievements include preparing and promulgating guidelines for departments on producing good regulatory impact statements.
The passage of the Personal Property Securities Act, described as perhaps the most technically complex legislation on our statute books, has allowed for reduced cost to business and has also enabled repeal of outmoded statutes.
In 1999 the Ministry co-ordinated the listing of redundant regulations across the public sector and through the Business Law Reform Bill (currently before Parliament) is seeking to remove or amend legislation it administers that impacts on the efficiency of doing business in New Zealand. Amendments have been sought to the Companies Act 1993, Fair Trading Act 1986, Financial Reporting Act 1993, Insolvency Act 1967, Securities Act 1978, Superannuation Schemes Act 1989 and the Unit Trusts Act 1960, with the aim of clarifying the legislation and reducing compliance costs. For example, a proposed amendment to the Companies Act would permit a company to transfer shares under an approved system without sending a share certificate; while a proposed change to the Financial Reporting Act would end the requirement for directors to re-certify copies of financial statements.
The proposed Commerce Act amendments and work being undertaken in the area of securities law also aim to enhance the environment for business in New Zealand by reducing uncertainty and reducing anti-competitive behaviour.
Government Superannuation Fund business systems and schemes policies were reviewed and documented during the year, to ensure quality and continuity of client services.
Key Result Area 3 required the Ministry to develop and implement policies aimed at improving the regulatory regimes to increase efficiency and competitiveness within the telecommunications, electricity and gas sectors.
Achievements include establishing, assisting and providing advice to both the Ministerial Inquiry into the Electricity Industry and the Ministerial Inquiry into Telecommunications. The new Government initiated both of these reviews. The Ministerial Inquiry into the Electricity Industry released its report on 13 June 2000, and the Ministry is advising the Government on the Inquiry recommendations.
The Ministry provided advice on auctioning the 2GHz radio spectrum (for second (2G) and third generation (3G) mobile telephony), including establishment of the competition rules. The auction commenced in July 2000.
The Ministry has also assisted the Government in negotiations with Telecom and Clear on Internet access using the 0867 prefix; introduced enhanced information disclosure rules for Telecom; and advised on 2G competition issues raised by IHUG.
With regard to electricity, the Ministry promoted amendments to enhance the information disclosure regime for line businesses and monitored the development of competition for domestic consumers.
The Ministry released a discussion paper on improving gas information disclosure in October 1999, followed by a consultation paper for an industry forum on 24 February 2000. Cabinet subsequently approved proposed amendments to disclosure regulations and drafting instructions have been sent to the Parliamentary Counsel Office.
Key Result Area 4 required the Ministry to identify ways to reduce compliance costs for, and promote contestability in, operational service delivery, and in particular, registry and insolvency services and the management of mining and electromagnetic regimes.
Achievements include the outsourcing of the Autocheck free phone service to the private sector and reducing the percentage of liquidations performed by the Official Assignee, thereby promoting contestability of these services.
The Ministry's Crown Minerals Group has progressed work to enhance the attractiveness of New Zealand to investors in petroleum and minerals exploration and development. Particular attention has been given over the last 18 months to the redesign of the application regulations for minerals and coal permits, and to the design of royalty return forms (prescribed in the regulations). These regulations were passed in October 1999.
Key Result Area 5 required the Ministry to undertake work with other government agencies, in particular the Department of Labour and Ministry of Education, to facilitate life-long learning and workforce skill development, and to progressively develop and implement policies that build an appropriate foundation of skills and knowledge across the working age population, in order to achieve business growth. This was to include developing more effective second-chance, adult learning and community education programmes that support the transition from schooling to further education and/or to employment. It would also include working collaboratively with the "Enterprise and Innovation" agencies to lift New Zealanders' skill and capability and New Zealand's intellectual knowledge base, and better focusing the direction of the Government's research and development investments.
The Ministry joined the Departments of Education and Labour, the Ministry of Research, Science and Technology and Treasury in a team established as part of the "Bright Future" project, to identify problems and propose solutions in these areas.
This project was successfully completed, with Cabinet agreeing to a package of measures relating to skill development that was published in the "Bright Future" report.
Conclusion
Providing support for the new portfolios of Economic Development and Industry and Regional Development involves significant challenge for the Ministry as it takes up the role of facilitating, leading and implementing the Government's vision for economic development.
Taking responsibility for these portfolios has brought a new focus to policy development. Central to this is the need to establish linkages across the state sector so that barriers to economic and regional development can be identified and addressed, and synergies created to maximise development opportunities.
Building the Ministry's policy and operational capability to meet these and other new demands will continue to be a focus in the coming year, with an additional emphasis on strengthening both linkages with other government agencies, and internal communication and information sharing.
A key task will be to establish Industry New Zealand as a separate Crown entity to deliver business and industry assistance programmes. Some Ministry functions are expected to move to Industry New Zealand following its establishment.
The Ministry's business units will continue to work towards providing better services to New Zealand and international businesses and consumers focusing on energy, Crown minerals, communications, companies register, insolvency service, consumer issues and managing the Government Superannuation Fund. The Ministry has achieved much during the year and more challenges lie ahead in meeting the many and varied demands placed on the Ministry by the Government. This will require a continuation of the commitment and professionalism that staff have demonstrated over the past year.
Paul Carpinter
Chief Executive
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