Annex C: Strategic Investment Support Services
This annex outlines the principles and parameters for a programme to support New Zealand firms' strategic investment decisions, to be delivered through Industry New Zealand.
The Current Situation
- Currently there is no one government agency interacting and coordinating a response with New Zealand businesses making significant investment decisions, such as locational and expansion decisions.
- Trade New Zealand has developed a facilitation capability in the investment area through its Investment New Zealand division, which provides a range of services to assist overseas investors to help identify and evaluate suitable business opportunities in New Zealand. These services include a help desk, provision of information on New Zealand business sectors, investment procedures and advice on investment opportunities. The services are largely focused on attracting overseas investment for export companies.
- Trade New Zealand's offshore promotion efforts need to be supplemented by the identification and consideration of New Zealand companies who are about to engage in significant investment decisions such as expansions and relocations, and the subsequent economic and employment consequences. In this context, there is no single point of contact/co-ordinator for government to be able to input into the decision-making process. It may be that on occasion that government initiatives can be put in place to influence investment decisions for companies to retain or even expand their operations in New Zealand. Government can play a key role in informing these decisions by providing information it has a comparative advantage in such as forecasts on the availability of skills/graduates, comparative cost figures and in organising operational policy responses such as streamlining regulatory processes (e.g. immigration).
Programme Objective
It is proposed that Industry New Zealand operate a strategic investment support service to identify and promote major New Zealand investment opportunities, to complement and support Trade New Zealand's efforts to attract offshore investment into New Zealand.
The objectives include:
- supporting Trade New Zealand's efforts to encourage prospective New Zealand and overseas investors to focus on business opportunities in New Zealand
- providing New Zealand firms making significant investment decisions with an informed opportunity to compare the benefits of investing in New Zealand with other options
- linking the central government's investment promotion and facilitation activities more closely with those of the regions, and its overseas investment promotion and facilitation activities more closely with domestic investment decisions
- reducing the transaction costs of firms undertaking significant investment decisions in sourcing government information and dealing with government processes.
Programme Principles
It is important that the strategic investment support services:
- do not crowd out private sector activity in this area and should accelerate and complement the development of private sector alternatives
- are based on partial funding so that there is both a partnership between central government, local government, education and research institutions and the private sector and commitment from participants
- have clear eligibility criteria
- complement and co-ordinate with the activities of Tech NZ and Trade NZ.
- are consistent with New Zealand's international obligations
- provide genuine additionality after consideration of downstream effects.
Programme Parameters
A. Strategic Investment Support Service
Industry New Zealand would provide a strategic investment support service by:
- coordinating and connecting investors and domestic firms making significant investment decisions with the right central and local government contacts
- providing information on relevant regulations and processes and how to deal with them quickly and efficiently.
- facilitating contacts with potential key suppliers or partners (e.g. educational institutions)
- assisting with pre-feasibility and feasibility studies for major investment
- working closely with the Ministry of Economic Development to promote flexibility in the operation of policy where that flexibility is consistent with the principles and objectives underlying the policy. Examples here could be the operation of immigration policy or specific tax rules. Examples of what would not be acceptable would be granting preference in competitive processes or preferential tax treatment
- working in partnership with Trade NZ to complement its efforts to identify and promote offshore investment opportunities in New Zealand.
To carry out this function would require:
- an understanding of the business strategy of the New Zealand business
- a knowledge of the opportunities available in New Zealand
- a world-class market intelligence and networking capability to identify and respond to New Zealand firms undertaking significant investment decision
- good connections with central and local government and governance i.e. runanga, and with New Zealanders overseas
- a close partnership with Trade New Zealand's Investment New Zealand team.
B. Strategic Investment Support Grants
It is also proposed that Industry New Zealand provide a strategic investment grants programme to support the implementation of this service including:
- grants for pre-feasibility and feasibility studies, and
- grants for significant implementation projects.
These would be allocated on a case by case basis.
Grants would go to investments that could demonstrate:
- significant net benefits to New Zealand through a:
- substantial increase in employment
- substantial investment, either tangible or intangible
- no negative competitive consequences domestically
As a rule of thumb, to be considered for a grant the project/investment would have (the potential) to meet at least one of the following criteria, for example
- $50 million of investment over the next 5 years
- 250 new jobs over 5 years.
If the project were located in a "priority" region (e.g. Northland, East Coast) the threshold could be reduced to $10 million or 50 new jobs (these criteria are indicative only).
The quantum of assistance would be considered on a case by case basis but in normal circumstances should not exceed:
- $1 million for any one project
- $5 million in any one year (less in the first year when less funding will be available).
Services would only be provided on the basis that:
- the investment would not be likely to occur in New Zealand without the incentive
- the investment complements New Zealand's areas of competitive advantage.
The service should be available to all New Zealand businesses.
Grants would be paid on the basis of a minimum contribution of 50% of non-government funding sources.
Delivery
It is proposed that Industry New Zealand will operate the Strategic Investment Support Service. The strategic investment support grants programme will be both managed and administered by Industry New Zealand. Industry New Zealand will need to work very closely with Trade NZ and the Ministry of Economic Development to provide a comprehensive and responsive service.
Fiscal Implications
It is estimated that $2 million of Vote: Industry and Regional Development would be required for delivery of Strategic Investment Support Service in 2000/2001.
It is estimated that $3 million would be required for Strategic Investment Support Grants in 2000/2001.
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