• Home
• Doing Business in NZ
• Standards & Conformance
• Infrastructure
• Infrastructure Review
• Structure
• Part Three
• Discussion Document
• Common Issues and Themes

• Standards & Conformance

• Infrastructure

• Infrastructure Review

• Structure

Infrastructure Needs and the Size of the New Zealand Economy

96. In this section of the paper a number of common issues facing all parts of the standards and conformance infrastructure are identified, the combined effect of which draws into question New Zealand's capacity to continue to provide sufficient standards and conformance services to meet its developing needs over time. The common issues identified are listed below. Comment is particularly sought on these issues and their relative importance individually, but also upon their collective impact.

97. While many of the issues identified in this paper could be individually addressed, there remain those that reflect the size of New Zealand's economy. Feedback is therefore sought on whether, if all of those issues which can be addressed are resolved, there might be a role for government to facilitate alternative arrangements which secure some of New Zealand's standards and conformance services. This may involve using resources outside of New Zealand, particularly jointly as part of the push towards the development of a single economic market with Australia.

98. Where New Zealand standards and conformance services have been established they are well regarded internationally. Looking to a more complex future, a range of questions need to be posed:

• Will the New Zealand standards and conformance infrastructure have the capacity to meet increasing demands to provide services of greater diversity and complexity?
• Will the New Zealand economy be sufficiently large to provide the technical resources and fund, of itself, the full range of standards and conformance services necessary for economic prosperity?

99. This paper generally takes the view that New Zealand can rise to these challenges. Some of the answers will lie in working closely with other governments in the international community. New Zealand will also need to be innovative and focused on meeting future challenges in standards and conformance.

Common Issues within the New Zealand Infrastructure

100. The following questions arise throughout this paper. In order to make the most of the existing standards and conformance infrastructure arrangements, these questions must be addressed:

• How can the infrastructure bodies better support alignment and the achievement of the Government's overall objectives?
• What role could the Ministry of Economic Development play, beyond its current activities, to further objectives in this area?
• Is there an inadequate understanding and application of the role and benefits of the standards and conformance infrastructure in New Zealand?
• How, if at all, can current arrangements for information flows between infrastructure bodies, regulators and firms be improved?
• Is New Zealand's representation in key international standards and conformance processes sufficiently organised to manage risks and take up opportunities?

Regulation and the Role of Standards and Conformance

101. Quality regulation is defined as regulation which is efficient, effective, transparent, clear and equitable, according to the Ministerial Review of Regulatory Frameworks.²² In terms of the quality of regulation, the following questions need to be posed:

• What should the role of standards and conformance be in supporting quality regulation?
• Where are linkages between regulation, standards and conformance inadequate?
• Is adequate use being made by regulators of the standards and conformance infrastructure?
• Where is a lack of enforcement of regulation and standards creating problems for business?

102. The international recognition of outputs from New Zealand's standards and conformance infrastructure is crucial. While the reputation and standing of the infrastructure internationally is high, and the infrastructure bodies participate in voluntary sector MLAs, these arrangements have variable recognition within the regulated sector, both inside New Zealand and internationally. Mutual Recognition Agreements and other government-to-government agreements can promote recognition of accreditation by MLA partners.

103. In some notable cases, the use of the voluntary sector MLAs has been seriously affected by changes to external regulator's informal recognition arrangements such as those applying to the United States' recognition of New Zealand's electromagnetic compatibility testing agencies, Singapore's recognition of New Zealand's electrical safety testing facilities and Australia's recognition of United States' medical device certification.

104. Feedback is sought on whether the government's current level of involvement in facilitating international government-to-government arrangements is adequate and whether the recognition by regulators of the voluntary sector arrangements should be promoted as part of the facilitation processes.

105. Increased requirements from overseas regulators can be driven by advances in technology. For example, the precision of measurement changes with new technology. Sometimes the appropriate response to this will require more investment in capability and technology by New Zealand (the pressure on resources described above). At other times, where a high degree of precision is not required to protect health, safety or the environment, increased precision may be used as a technical barrier to trade. In this case New Zealand (and other countries) will have to use the world trading system to ensure that regulation is meeting a legitimate objective as defined in the TBT Agreement.

Common Issues: Governance, Accountability and Alignment

106. The New Zealand standards and conformance system is fundamentally sound and successful in what it does. This review provides an opportunity to examine how it might be possible to further strengthen the infrastructure or improve its outcomes. There are significant inter-dependencies between Standards, accreditation and measurement - the activities undertaken by the infrastructure. Do the governance and accountability arrangements of the infrastructure bodies support the overall outcomes and alignment needed?

107. A related question is what the role of MED, as the government's main adviser on standards and conformance policy, should be in relation to co-ordination. There are trade-offs between each infrastructure body operating independently and more centralised coordination. Areas where more coordination may lead to better outcomes may include sharing of information, and better integration with government-to-government negotiations of Free Trade agreements, Closer Economic Partnerships or Mutual Recognition Agreements.

Alignment between Central Government and Infrastructure Bodies

Current Situation

108. In New Zealand, the standards and conformance infrastructure is made up of two Crown entities (SNZ and IANZ), a unit of a Crown entity (MSL), an international organisation (JAS-ANZ) and a section of a government department (MAPSS). As such, some of the infrastructure bodies are subject to the Crown Entities Act 2004,²³ while others are not. This means that there is a complex mix of statutory structures, governance and accountability arrangements, including:

• The Standards and TLR Councils are appointed by the Minister of Commerce (for the Standards Council) and by the Minister and the Council (for TLR Council). The Chairs of both Councils have a Memorandum of Understanding with the Minister of Commerce.
• MSL is accountable to the IRL Board which in turn is accountable to the Minister of Research, Science and Technology. It has a contract with the Minister of Research, Science and Technology known as an Output Agreement for Services relating to Physical Measurement Standards.
• JAS-ANZ was established by treaty between Australia and New Zealand and the JAS-ANZ Board has Australian and New Zealand government representatives, is accountable to Australian and New Zealand Ministers and produces a Statement of Corporate Intent.
• MAPSS, as part of the Ministry of Consumer Affairs is expected to contribute to the outcomes of the Ministry and is also included in output agreements with the Minister of Consumer Affairs.

109. There are examples in the economies of our trading partners where the standards and conformance bodies are within the same or related organisations. In other cases, there are formal mechanisms,²⁴ such as memoranda of understanding, which link the different standards and conformance bodies.

Things to Consider

110. In New Zealand, the variety of organisational structures and accountability arrangements raise questions about the ability of, and/or incentives for, the infrastructure bodies to appreciate and deliver on the government's strategic priorities for the infrastructure as a whole. More specifically, the different structural and governance arrangements may limit MED's ability, on behalf of the government, to align the infrastructure bodies with the government's strategic priorities. There are also implications for the ability of the Minister of Commerce (through the Ministry) to influence the strategic priorities of the bodies, where appropriate.

111. Government departments can be directed by Ministers, while Crown entities, such as the TLR and Standards Councils exercise independent functions. They are only subject to Ministerial directions to the extent authorised by legislation. In terms of policy directions, the Crown Entities Act 2004 provides that autonomous Crown entities, such as these, are subject to Ministerial policy directions affecting their areas of business. Their statutory obligation is to have regard to such directions - as distinct from government departments which must give effect to Ministerial directions. The status of JAS-ANZ as a Treaty body sets up yet another type of arrangement between Ministers and the Governing Board, while direct government funding (such as for MSL) brings further obligations and agreements.

112. MED also has a responsibility to advise the Minister of Commerce on issues pertaining to the infrastructure generally and on the Crown's ownership interests in the Standards Council and Testing Laboratory Registration Council specifically. The variety of structures and governance arrangements may affect the Ministry's ability to provide whole-of-infrastructure advice to the Minister.

113. Another aspect of governance to be considered is the task and structure of the governing boards which most of these entities have. Generic requirements of a board, whether public or private, include financial and capability management and risk management decisions. While it is to be financially responsible, the main purpose of a public sector board is fulfilling its public objectives, not profit maximisation.

114. The boards of these entities also need to consider both technical and industry factors across a variety of sectors of the economy, and their governance responsibilities. The effectiveness of the boards of these organisations is influenced by:

• the representative nature of board membership;
• the size of a Board;
• the time available to board members to govern; and
• the knowledge of board members or the knowledge they can access to contribute to the effectiveness of the organisations.

115. There is also a tension between operating as a revenue-raising business and a not-for-profit public entity.

Issues

116. How can the governance and accountability of the infrastructure bodies be improved to allow for better fulfilment of the government's objectives and strategic priorities and appreciation of the role of the infrastructure bodies in supporting these priorities?²⁵

117. How can existing formal instruments for example, Memoranda of Understanding, be better utilised to support the Ministry's effectiveness in promoting the government's strategic priorities across the infrastructure?

Options

118. One option is to retain the status quo in governance regimes and accountability documents. The expectations of the organisation being agreed and set out once a year in their Statement of Intent or other documents, and little further active involvement from MED.

OR

119. More active bilateral engagement between MED and the infrastructure bodies could be pursued to achieve greater understanding and alignment.

AND/OR

120. Advisory and governance functions of the boards could be separated. Much smaller governance units could be put in place, which would allow representative perspectives to be channelled through advisory committees. Provisions for adequate training and support for the boards could also be increased.

Alignment between Each of the Infrastructure Bodies

121. A related issue is whether the right levers and/or incentives exist for MED to promote better alignment between the bodies, particularly where shared strategic priorities exist or there are technical issues of common interest that require better alignment. This limited alignment may be restricting the infrastructure's ability to maximise potential synergies between their strategic priorities and work programmes and may have a negative impact on the efficiency and effectiveness of how the bodies carry out their work in relation to meeting client needs.

122. Currently, there is a mixture of formal and informal arrangements between some of the bodies. Some have memoranda of understanding with each other. Some have specific roles such as membership of another body's advisory committees. Some other relationships, such as between MSL and MAPSS, are not supported by any formal processes. In 1999 the Standards, Accreditation and Metrology (SAM) group was set up with the intention to meet twice-yearly on co-ordination issues, but it is not clear that this has effectively supported co-ordination across the infrastructure.

Issue

123. How can the different bodies comprising the infrastructure as a whole work together, at both the strategic and technical levels, to develop a clearer appreciation of, and better align with, the government's strategic priorities?

Options

124. Clarification of expectations could be included in the performance agreements between the Minister, Crown Entities and government Departments. This would provide Boards with an indication of the importance attached to cooperation.

AND/OR

125. Sharing of Statements of Intent could also be a request or requirement of the bodies at the time they are being developed, to encourage a strategic discussion about priorities in the infrastructure as a whole.

AND/OR

126. MED coordination could be more formalised through, for example, regular meetings at Chief Executive level (to replace SAM). This group could support coordination at other levels where necessary, such as technically between IANZ, MSL and MAPSS). Performance agreements could include regular reporting to ensure progress is being made. This option could also address other issues of the delivery of the governments objectives.

Common Issues: Information

127. The availability of information on the standards and conformance infrastructure and the services these bodies provide is an important issue and one that affects the infrastructure as a whole. There are two dimensions to this general issue: the flow of information between the infrastructure bodies and regulators, and firms' ability to get the information they need about standards and conformance (including regulation).

Information within the Infrastructure

Current Situation

128. In the context of developing good quality regulations which achieve both risk management objectives and do not create unnecessary barriers to trade, regulators need to know what services the infrastructure bodies can provide to support the development of regulation. In this respect, there is evidence to suggest that the use of the infrastructure by regulators is varied. Some regulators make extensive use of the infrastructure, while others do not. This is either because they are unaware of the services available to them, or they have judged these services as inappropriate for their needs.

129. The infrastructure bodies do provide information and maintain relationships within the regulated sector, but these may not be comprehensive or in a form useful to regulators.

Issues

130. How can the infrastructure bodies improve the way they promote and tailor their services to regulators?

Options

131. Clearer expectations around responsibility for information exchange with regulators could be included in performance agreements (for Crown Entities and government Departments).

AND/OR

132. The formalised meetings option already discussed could be a platform for addressing this issue. The infrastructure could work together to develop joint information tools, which might include electronic information options, to facilitate information exchange with regulators.

AND/OR

133. A forum to bring together regulators and the infrastructure bodies, along with MED, may be appropriate. Options for formalising the interaction of regulators with the infrastructure are discussed in the later section on regulation.

Information for Business

Current Situation

134. The second dimension of the broader information issue is the availability of information for business. This applies equally to New Zealand firms selling in New Zealand, New Zealand firms selling offshore and to offshore firms selling in New Zealand. Businesses need to know what the relevant technical regulations are, including mandatory standards, and also what conformance requirements they must meet.

135. There are a number of possible sources of information for an importer or exporter. Currently each regulatory agency takes responsibility for promotion of its regulatory requirements. The infrastructure bodies already provide a range of information and relationship services targeted at their clients and potential clients. There are also business associations and private consultants who may offer this service. What is the appropriate role of government versus the private sector in this regard? Minimum requirements might be met by posting information on a website, whereas much more active promotion of information may be necessary in some cases. There may be more effective and efficient ways of making this information accessible to business.

Issues

136. How can existing mechanisms be improved to give businesses quick and timely access to up-to-date information about mandatory requirements and conformity assessment requirements both in New Zealand and export markets?

137. Does the lack of user friendly guidance materials on how to comply with regulations create compliance uncertainties, particularly in the case of performance-based regulations?

Options

138. The status quo situation should continue. Each infrastructure body and regulator remains responsible for information provisions in their own area. The most valuable information for business comes from other people in the same sector through business groups, or advice commissioned from specialists.

AND/OR

139. The work proposed by the infrastructure on developing joint information tools could also have a public mechanism which ensures that the facts on regulatory requirements are known, or at the least that people are told who to contact to find out. The main choice for this option is whether to try to gather all types of information in one place or centralise information around sectors or markets.