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Policy Advice: Economic Development Multi Class Output Appropriation

Output Expense: Policy Advice and Sector Leadership – Firm Capability, Sectoral and Regional Development

Description

This output expense provides policy advice encompassing the development, evaluation and overview of economic, industry and regional development policies and initiatives to promote sustainable economic development.

This includes the development and implementation of the Government's economic transformation agenda; the researching and analysis of factors influencing the capability and performance of firms, industry sectors and regions; undertaking work on the overall management and adequacy of New Zealand's infrastructure; and the monitoring and evaluation of New Zealand Trade and Enterprise (NZTE) programmes and services.

The outputs included in this Output Expense contribute to the following business environment outcomes³ in 2006/07: Growing business capability; Promoting dynamic and trusted capital markets; Harnessing ICTs; Building international links; Prompting sustainable tourism; and Boosting the productivity of Auckland.

Quantity, Quality, Timeliness and Cost

Work Programme

Policy advice projects were delivered in accordance with the terms of the work programme as agreed with the Minister. Changes to deadlines were negotiated with the Minister.

The following outputs were included in this output expense for 2006/07:

Regional Development Policy

This output relates to economic development in the regions of New Zealand, with a focus on policies and programmes to improve the business environment at the regional level, a key influence on individual firm performance. In 2006/07, this output included the following:

Progressing with implementation of a refreshed framework for regional economic development policy for the future

• The Ministry led a review of the Government's approach to regional economic development policy and Cabinet agreed to a new approach centred on improving the regional business environment to support the attraction, retention and development of globally competitive firms. In support of the refreshed approach, a contestable fund is being established for sizeable regional projects of regional and national scale, along with a revised fund for developing high-quality regional strategies and implementation of strategies. In addition, to create greater scale and capability to take up economic opportunities, the new approach reduces the number of regions from 26 to 14 larger regions. These changes to policy and the regional programme were effective from 1 July 2007. To support the transition to the new arrangements, the Ministry and NZTE are undertaking a series of visits to regions to outline and discuss the new approach.

Understanding what contributes to cities performing well and applying this learning to our work on improving Auckland's contribution to New Zealand's economic performance

• The Ministry established a cross-government action agenda for making Auckland an internationally competitive city as part of the overall economic transformation agenda. An action plan was launched in October, which outlines initiatives for the Auckland Regional Economic Development Strategy. In support of strong relationships and mutual understanding, the Government Economic and Urban Development Office worked actively with government agencies and between these agencies and Auckland local government and business.

Economic Transformation

This output relates to the ongoing development and implementation of the Government's cross-agency economic transformation agenda and promotion of associated activities undertaken in regions, sectors and firms. In 2006/07, this output included the following:

Supporting the alignment of economic policy activity

• The Ministry provided advice and support to enable Ministers to develop and agree an economic transformation strategy, including priority economic transformation goals and action agendas, in August 2006. The relevant Cabinet papers were released in November 2006. Work has started on reviewing the agenda. The Ministry also worked with Treasury to provide Ministers with advice and support on the development of the economic transformation components of Budget 2007. In addition, the Ministry provided advice and support to enable Ministers to develop and agree new initiatives on business-related sustainability in May 2007. The relevant Cabinet papers were released in August 2007.

Reviewing the National Innovation System with the intention of creating an evidence base to support the future development of innovation policy

• The aim of this work was to build the Ministry's understanding of innovation issues. The Ministry has used this greater understanding to inform both its thinking on economic transformation as a whole and its contributions to the development of advice on more specific innovation-related issues such as the introduction of a new research and development tax credit. An OECD review of New Zealand's innovation system was commissioned jointly by the Ministry and the Ministry of Research, Science and Technology as part of this national innovation system work. This OECD review was published in August 2007.

Publishing the new edition of the Economic Indicators report

• The Ministry, Treasury and Statistics New Zealand have agreed the scope of the next report, and the collection and processing of data from a wide range of international sources is well advanced.

Firm Capability

This output relates to the issues that affect and influence management, business capability and overall performance at the firm level. It includes advice on the design, implementation and ongoing operation of industry programmes delivered through NZTE. In 2006/07, this output included the following:

Contributing to Export Year 2007 by aiming to draw the links between the importance of exporting and the Government's broader economic transformation agenda

• The Ministry worked with the Ministry of Foreign Affairs to develop initiatives for Export Year 2007, which was officially launched on 30 November 2006. The Ministry identified and helped develop a number of complementary measures, which were approved by Cabinet. These included additional funding for the Market Development Assistance Scheme; the extension of NZTE's footprint onto Asia; and a contract bonding facility for the supply of goods and services by New Zealand firms under government-funded projects in the United States. The Ministry also proposed, and had considerable input into Thinking Globally, a new resource kit for schools.

Promoting a well-functioning market for management and business capability development services through involvement with the Business Capability Partnership, an initiative comprising public and private representation

• The Business Capability Partnership Programme is a collaborative partnership between business and government, focused on raising business, management and leadership capability in New Zealand. The Ministry worked with the Partnership to develop two specific initiatives: a business capability benchmarking toolkit, and Management Focus, which is aimed at raising awareness of the management and business capability development opportunities available to New Zealand firms.

Developing measures of innovative firm activity and examining the two-way causal relationship between practices and performance, in particular, the ways firms respond (through changes in practices) to market signals of their performance

• The Ministry is conducting research on firm performance using a new Longitudinal Firm Performance Database developed by Statistics New Zealand. The Ministry anticipates that the research will yield new insights into the relationship between firms' practices and their performance.
  The research will draw on Statistics New Zealand's annual Business Operations Survey, which is a rich source of information on business practices and behaviours. The main results of the 2005 and 2006 surveys were used to enhance the value of the 2007 edition of the Ministry's Structure and Dynamics publication. Structure and Dynamics included new information on exporting, innovation, research and development, firms' use of information and communications technology and their ratings of aspects of their operating environment.

Growth and Innovation Advisory Board

This output relates to the function of the Growth and Innovation Advisory Board (GIAB), which is to provide the Prime Minister and senior economic Ministers with informed advice on how the Government can best develop its economic transformation strategy. In 2006/07, this output included the following:

• The Ministry provided secretariat support to enable the Board to perform its function. The Board has been increasingly integrated into the development of the economic transformation agenda and has particularly contributed to thinking around the development of Auckland as a world-class city, sustainable business, innovative and productive workplaces, broadband and Export Year 2007. Five Board meetings were held during the year.

Research, Evaluation and Monitoring

This output relates to the evaluation and monitoring of industry and regional development programmes and the performance of NZTE and the New Zealand Venture Investment Fund Ltd. In 2006/07, this output included the following:

Evaluation of a number of specific programmes and completion of the Government's expenditure review of business assistance programmes. All programmes will be evaluated within a four-year cycle

Three reviews undertaken as part of the four-year evaluation cycle were:

• the Expenditure Review of Business Assistance – a whole-of-Vote review of opportunities to improve performance, which drew heavily on evaluation evidence and had input from other departments;
• four evaluations covering the Investment New Zealand programmes and related funds; and
• a baseline review of angel investment in New Zealand related to the Seed Co-investment Fund.

In addition, the Ministry developed a national survey of New Zealand business internationalisation behaviour and completed an annual stocktake of evaluation themes.

Sector Development Policy

This output relates to the factors that influence the level and quality of sustainable economic growth from an industry development perspective. The focus is on those factors that influence the growth of industry sectors and New Zealand's international connections, and includes the design, implementation and ongoing operation of programmes delivered through NZTE. In 2006/07, this output included the following:

In consultation with the industry, developing the Government's response to the Food and Beverage Taskforce recommendations, including development of a work programme and addressing the key challenges identified by the Taskforce

• The Ministry prepared the Government response to the Taskforce, which included a work programme. Cabinet approved the proposed response in May 2007, and this was announced on 10 July 2007.

Identifying the indicators, critical issues and actions (short-term and long-term) that will foster more globally competitive firms in New Zealand

• The Ministry convened the economic transformation agenda theme Growing globally competitive firms which focused on initiatives and actions to help grow and retain the economic benefits of more New Zealand firms able to compete effectively in global markets.
• The Ministry is leading work across government on better targeting economic development activities, both by better targeting around some explicit areas of focus, and through better coordination of activities across the key economic development Votes.

In consultation with key stakeholders, developing policy and operational parameters for the Government's Buy Kiwi Made initiative

• A $3 million fund was established to support sectoral and regional projects associated with Buy Kiwi Made. Round one funding decisions were made by Ministers in May. The second round opened in July. The media campaign is well under way and progressing well, with good interest and feedback from firms and industry groups.

Major Events

This output provides secretariat support to the Major Events Development Fund as part of the Major Events Strategy and ensures that expenditure on approved events is properly monitored and accounted for. During 2006/07, the Ministry:

• approved financial support of over $2.5 million for 11 events with a projected economic benefit estimated at over $250 million. Event data for potential events was identified and analysed, including the World Netball Championships 2007. The Interagency Events Group (IAEG) also supported Conventions and Incentives NZ over this period;
• drafted economic impact assessment reports for five events delivered by a contracted external agency. These will be reviewed, prior to completion, early in the 2007/08 reporting year; and
• established a bid evaluation process to provide a framework for proactive identification of bid opportunities.

Infrastructure Advice

This output relates to work on a range of infrastructure issues not covered under Votes Energy or Communications. The work is directed to advice on improving the contribution of the transport and water sectors, and of infrastructure generally, to economic development. The Ministry also leads the development of national guidance for infrastructure under the Resource Management Act 1991 (RMA).⁴

During 2006/07, the Ministry:

• contributed to the development of a National Policy Statement (NPS) and National Environment Standards (NES) under the RMA for electricity transmission with the Ministry for the Environment (MfE);
• contributed to work MfE is leading on the development of NES under the RMA for Telecommunications; and
• facilitated participation of infrastructure providers in Capital Quake and Exercise Cruickshank (designed to assist in pandemic preparedness).

Projects Not Included in the 2006–2009 Statement of Intent

Aquaculture Strategy

The Ministry coordinated the Government's response to the New Zealand Aquaculture Strategy and developed a national aquaculture position statement. The Government announced its five-point plan to work with the aquaculture industry and support aquaculture development (Our Blue Horizon) on 7 June 2007.

Right Hemisphere

The Government finalised the contract and spillover agreement with Right Hemisphere and implementation is progressing, including actively working with partners to establish Nextspace as a delivery vehicle.

Manufacturing Strategy

The Ministry prepared the Government's response to the Manufacturing Plus report, which was the product of a process convened by NZTE, in response to concerns about pressure on the manufacturing sector from rapidly changing economic conditions. The Ministry generally endorsed the report's Vision Statement and 12-point Value Creation Model. The Ministry catalogued programmes and initiatives under way or about to be implemented that partly, or fully, address the 16 recommendations. The Ministry, working with other agencies, will create a Manufacturing Advisory Group to work with the sector to ensure the views of the sector are kept before government.

Crown Entity Monitoring

The Ministry, in conjunction with the Ministry of Foreign Affairs and Trade (MFAT), reviewed and provided comment to Ministers on the performance of NZTE, within agreed timeframes. This included providing advice on Ministers' Letters of Expectations, NZTE's Statement of Intent, Output Plan 2006/07, quarterly reports and related financial reporting.

Major Budget Variances

The Supplementary Estimates change ($4.127 million) reflected funding for the preliminary work and pre-staging activities for the 2011 Rugby World Cup ($1.900 million), the Buy Kiwi Made programme ($1.870 million), the economic transformation agenda ($0.170 million), aquaculture projects ($0.097 million) and the 2007 Export Initiative ($0.090 million).

The variance between Supplementary Estimates and actual expenses was primarily due to the Buy Kiwi Made marketing programme, in which work on the programme did not commence until the latter half of the year ($1.020 million). An "in principle" expense transfer has been approved to allow for the carry-over of funding into 2007/08.

The variance between 2006/07 and 2005/06 actual expenses was mainly related to costs for the Rugby World Cup ($1.900 million) and Buy Kiwi Made programme ($0.850 million), partly offset by a reduction in funding in 2006/07 for the Regional Economic Statistics ($0.378 million), and the National Guidance on Network Infrastructure under the RMA ($0.133 million).

Policy Advice: Economic Development Multi Class Output Appropriation

Output Expense: Policy Advice – Small Business

Description

This output expense provides policy advice on issues relating to lifting the capability and performance of Small to Medium Enterprises (SMEs), including development, coordination and implementation of policy advice concerning SMEs.

This output expense contributed to the business environment outcome: Growing business capability.

Quantity, Quality, Timeliness and Cost

Policy advice projects were delivered in accordance with the terms of the work programme as agreed with the Minister. Changes to deadlines were negotiated with the Minister.

The following outputs were included in this output expense for 2006/07:

Small Business Advisory Group (SBAG)

This output relates to facilitating the work of the SBAG in considering SME issues and providing advice to the Government.

• The SBAG met 12 times over the year ending 30 June 2007.
• The Ministry assisted with the process that led to 12 new SBAG members being appointed on 13 December 2006 (to replace the previous nine members), and the first meeting of the new SBAG membership was held on 13 February 2007.
• The Ministry assisted the Government in the publication of its response to the second SBAG report that was released in October 2006.

Examining how regulatory flexibility can be applied to ease compliance costs for SMEs

• This output included a contribution to the production of two sets of guidelines for officials involved in designing and implementing regulations: Guidelines on Regulatory Flexibility, reducing costs through compliance choices and varied requirements; and Regulatory Compliance Guidelines. Both were published in August 2007.

Communication with SMEs

• In 2006/07, the Ministry's business consultation website (www.businessconsultation.govt.nz) was utilised as a tool to encourage submissions from business to the Government's Quality Regulation Review and for gathering input for the contents of the Government's Tax Compliance Costs Discussion Document (which is to be released in late 2007).

Projects Not Included in the 2006–2009 Statement of Intent

Publication of report on SME statistics

The 2007 edition of SMEs in New Zealand: Structure and Dynamics was released on 18 July 2007.

Major Budget Variances

The variance between 2006/07 and 2005/06 for actual expenses related to the additional costs in 2005/06 for the Central Online Management and Export Trade Project (COMET), targeted at providing expertise to 30 SMEs, to use electronic commerce as a basis for entering export markets ($296,000).