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This section summarises the Ministry's intended work programme. It first outlines aspects of the Ministry's work that contribute across each of our six outcomes. It then discusses the six outcomes in turn. Finally, it shows how our outcomes align with appropriations.

Work Contributing to All Our Outcomes

A significant amount of the Ministry's work contributes across all six outcomes, directly supporting the Government's Economic Transformation theme.

Helping the Government to develop and implement its Economic Transformation agenda

We will seek to ensure that the Government's Economic Transformation agenda is effectively targeted, coordinated, and implemented, by helping the Government to:

• ensure effective implementation of agreed Economic Transformation initiatives
• ensure that future phases of the agenda take account of, and coordinate, the views of all relevant government agencies and Ministers
• develop its engagement with external stakeholders, so that future phases of the work are well-informed by their views.

Our work with external stakeholders will include continuing to support the work of the Growth and Innovation Advisory Board, and the Small Business Advisory Group.

Researching and advising on the factors most likely to impact positively on productivity

We will help the Government to focus on the areas where it may be able to make the biggest positive contribution. We will do this by continuing to research, analyse, and advise Ministers on the factors that are most likely to impact positively on productivity, and on the investments most likely to drive innovation.

Measuring Our Progress

In order to measure progress towards an internationally-competitive and sustainable economy, we will prepare a comprehensive Economic Development Indicators report every three years. The last of these reports was published in December 2007.

Enterprising And Innovative Businesses – Improving The Drivers For Success And Productivity Improvement In Firms

What We Are Seeking To Achieve

Our overall aim in this area is to ensure that:

• there is business growth in New Zealand's areas of competitive strength relative to the rest of the world
• New Zealand firms can operate sustainably, and use environmental integrity for economic advantage.

More specifically, we will deliver well-targeted, effective policy advice to help ensure that:

• New Zealand businesses can build their capability to become globally-competitive firms
• the Government's overall support for enterprise and innovation is well-focused on where the greatest gains can be made
• innovation and investment in sustainability are strongly encouraged among firms and within the community.

Why This Outcome Is Important

Increased productivity depends on enterprising and innovative firms

Enterprise and innovation are essential for productivity improvement in firms of all sizes. Sustainability is a key part of this: building on New Zealand's comparative global strengths as a natural resource and biologically-based economy, and mitigating negative industry impacts on the environment will be central to this country's long-term competitive advantage.

Our contribution to this work will support the Government's achievement of its Economic Transformation theme of "Globally-competitive firms".

New Zealand firms face real challenges in this area...

New Zealand firms have to overcome many constraints to innovation and operating sustainably. These include:

• firms' inability to reap all of the benefits from their innovation and their investment in sustainability – in many cases, the investments made by one firm deliver benefits to many others and the community more generally
• uncertainty about returns from innovation and investment in sustainable products and practices – exchange rate volatility, market access, or regulation all play their part in this
• weaknesses in capital markets – for example, a lack of the necessary long-term investment, based on specialist skills and knowledge, that is needed for long-term innovation and sustainable business.

...and their performance is mixed

According to the most recent Economic Development Indicators report, New Zealand firms have higher innovation rates than European firms. This is backed up by high firm entry and exit rates, reflecting business dynamism and entrepreneurship.

However, the level of business R&D in New Zealand is low – albeit growing much more rapidly than the OECD average. New Zealand's perceived availability of management skills is below that of Australia, the UK, and many OECD countries, and the level of high- and medium-technology products exported by New Zealand firms is far behind the OECD average.²

What's more, business linkages with public research institutions are mixed, and New Zealand businesses are some of the worst in the world for collaborating with each other.

Coordinated government support for innovation is essential

Government has an important role in addressing the constraints faced by New Zealand firms, so that innovation can become a more effective strategy for business growth and productivity enhancement.

It is also crucial that government support for innovation is well-targeted and well-coordinated. This needs to be a particular focus, given that the 2007 OECD review of New Zealand's innovation system identified fragmented government support for innovation, and a lack of cohesiveness across the full range of innovation-related policies.

What We Will Do To Achieve This Outcome

We will focus on providing well-targeted support for innovation, and promoting sustainable business

The Ministry has identified two strategic priorities that will be our focus over the next one to three years – providing aligned and well-focused government support for enterprise and innovation, and helping firms use environmental integrity for economic advantage (see boxes overleaf).

Other areas of focus include skills and capability...

The Ministry will continue to work actively with the Business Capability Partnership to develop initiatives to improve management capability, and a firm capability assessment system that will be used in conjunction with regional economic development agencies and New Zealand Trade and Enterprise.

We will also contribute significantly to the development of the Unified Skills Strategy, with our focus being principally on the entrepreneurial and management skills needed for the growth of New Zealand's globally-competitive firms.

...investment...

The Ministry will work with New Zealand Trade and Enterprise to implement policy changes flowing out of the recent evaluation of Investment New Zealand.

We will also continue to make progress on improvements in financial sector regulation, and lead advice on the performance and policy related to the Venture Investment and Seed Co-Investment Funds.

...and the drivers of global success

We will continue to work in partnership with the Global Business Focus Group to identify and refine policies that help firms to be internationally successful.

How We Will Demonstrate Success

We will use an overall set of economic indicators, together with feedback from the business community, to measure our progress. The main aggregate innovation indicators include:

• improvements in the level of business research and development investment, with these tied closely to customer demand and firm strategy, including in international markets
• improvement in measured innovation, including product innovation, marketing methods innovation, operational processes innovation, and managerial and organisational processes innovation.

We will also measure the impacts of government policies on business innovation by:

• measuring and reporting changes in business performance in the six innovation investment areas of focus – with a particular focus on changes in firm productivity
• showing how interventions produce results for business performance that are different to what would otherwise occur
• examining impacts both on performance of participating firms, and wider positive impacts to other firms and the community at large
• where policies are implemented by Crown entities such as New Zealand Trade and Enterprise and the New Zealand Venture Investment Fund, working with them to demonstrate the efficiency and effectiveness of those services – this includes using both their internal performance management systems and our independent evaluations
• evaluating impacts of broader initiatives designed to affect the New Zealand innovation system, such as the research and development tax credit.

Longer term, we expect to see more than 50 New Zealand-headquartered firms with revenue of US$250–500 million. These firms will also base their core functions – such as back office and R&D facilities – in New Zealand. As well as merchandise exports, this includes services, earnings from selling ideas produced in New Zealand, and revenue generated offshore.

We will also measure our impact on sustainable business by using the following measures:

• New Zealand business interests value their partnerships with the government to use sustainability for economic advantage.
• New Zealand firms and/or sectors use options from a comprehensive and credible eco-verification system to measure, verify, and promote their environmental performance.
• There is evidence that, as a result of making use of the eco-verification system, firms are reducing their greenhouse gas emissions.

International linkages – improving the linkages that allow New Zealand firms to benefit from trade, and the flows of investment, skills, and technology

What We Are Seeking To Achieve

We are aiming to help create an environment in which New Zealand firms can thrive in a global setting. This environment will promote not just increased exports of goods and services, but also assist firms to take greater advantage of outward and inward investment, the movement of people, and transfers of knowledge. It will allow New Zealand businesses to define their place in the world and to compete successfully.

More specifically, we are seeking:

• higher productivity – created by firms seeking out and accessing new markets, new technologies and knowledge, skilled labour, and best practice work and management techniques
• increased incentives for firms to innovate by exposing them to competitive pressure in offshore markets
• an increased ability for New Zealand firms to overcome scale disadvantages in the domestic market, so they can leverage much higher returns from innovation.

Why This Outcome Is Important

New Zealand will not achieve economic success without succeeding in the global market

Fast-growing developed countries have high levels of exports and imports, high inward and outward investment flows, and large inward and outward movements of skilled people.

What is more, the globalisation of both trade and investment is rapidly increasing, with the development of global value chains seeing countries increasingly specialising in types of goods rather than industries.

This all means that strong international linkages are critical if New Zealand is to succeed in the new global environment, and reap the benefits offered by these new ways of doing business.

Improved international linkages that allow New Zealand firms to benefit from these global flows of investment, skills, and technology will contribute to the Government's Economic Transformation theme of "Globally-competitive firms".

...but New Zealand firms can struggle to go global

As a small, distant economy, New Zealand faces obvious challenges when endeavouring to form and maintain these international linkages.

Despite large decreases in transport and information sharing costs and reductions in trade barriers, as global trade flows have increased, New Zealand firms still perform poorly when it comes to internationalisation.

For instance, New Zealand has a relatively weak outward investment performance, with outward investment undertaken by only a handful of firms. The rate of return on New Zealand's outward investment is also towards the bottom of the OECD rankings.

There is also room for improving overall export performance. New Zealand's export growth has been slower than that of comparable OECD countries and slower than the world average. As a result, New Zealand's share of world exports shrank from 0.27 percent in 1990 to 0.21 percent in 2005, which is indicative of a loss in its competitiveness.

In addition, New Zealand has a relatively low level of intra-industry trade in manufacturing.

...while grappling with an increased global focus on sustainability

New Zealand needs to address concerns about the environmental impact of the products global consumers buy, in order to remain competitive. It needs to look for new methods of engaging with distant markets, taking advantage of the opportunities resulting from sustainable production processes, while reducing the environmental impacts of long-haul transportation.

What We Will Do To Achieve This Outcome

We will seek greater participation by New Zealand firms in global value chains...

Supporting the development of globally-focused and linked businesses is a strategic priority for the Ministry for the year ahead (see box opposite). This will also require a step change in New Zealand's innovation activities, so there is a strong linkage with work aimed at achieving our "Enterprising and innovative businesses" outcome.

...and ensure that our work with other countries is appropriately targeted

Working closely with the Ministry of Foreign Affairs and Trade and other relevant agencies, we are also seeking to achieve targeted outcomes through Free Trade Agreements (FTAs) and other international agreements (where the Ministry has a key role in supporting the negotiation of many of the FTA chapters). These agreements not only directly impact on the trade and investment opportunities available to firms, but also significantly influence the regulatory environment in which they operate – through inclusion of commitments in such areas as standards and conformance, intellectual property, government procurement, and competition policy.

We will continue our efforts to deepen New Zealand's relationship with key economic partners, particularly Australia and dynamic Asian economies such as China and ASEAN. We will contribute to the conclusion of existing negotiations with ASEAN/Australia and the Gulf Cooperation Council, as well as supporting processes aimed at beginning negotiations with new prospective partners such as the United States, the European Union, India, Korea, and Japan. We will continue to support specific new opportunities for New Zealand firms that arise from this work.

Tourism will continue to be important

We will work towards achieving the New Zealand Tourism Strategy 2015 goal of tourism being valued as the leading contributor to a sustainable New Zealand economy. To do so, we will focus on New Zealand delivering a world-class visitor experience, and ensuring the tourism sector is prosperous, attracts ongoing investment, and takes a leading role in protecting and enhancing the environment.

How We Will Demonstrate Success

We will track a number of key indicators included in the Ministry's Economic Development Indicators report, particularly those measuring:

• New Zealand exports and imports
• New Zealand investment overseas and foreign investment in New Zealand
• the growth in skilled migrant numbers.

In addition, we will seek to more fully understand the approaches that firms in key sectors are taking to internationalisation, and evaluate the success that such approaches are having. We should be assisted significantly in this work by material obtained from the international section of Statistics New Zealand's 2007 Business Operations Survey, which has been designed in collaboration with the Ministry.

Dynamic and trusted markets – improving the competitiveness, integrity, and effectiveness of New Zealand's markets

What We Are Seeking To Achieve

Government support is often needed to realise the full potential or build the sophistication of markets. Our aim is to ensure that this support improves the competitiveness, integrity, and effectiveness of New Zealand's markets.

More specifically, we will work to ensure that New Zealand's policy and legal framework:

• penalises anti-competitive behaviours – behaviours by firms that reduce the incentives on them to be creative and innovative, and raise costs to consumers
• promotes informed and confident consumers, by providing sufficient consumer information, safe goods and services, accessible and timely redress mechanisms, and the effective prevention of unfair practices
• fosters creativity and innovation by rewarding investment in product and process innovation, the exploring and exploiting of new opportunities, and the forging of new, more relevant, and effective institutional forms
• protects intellectual property rights appropriately, while also allowing new ideas to spread and be absorbed by others
• delivers the inputs firms require at their various stages of development, such as funding, at competitive prices.

Why This Outcome Is Important

Effective markets generate wealth and higher living standards

Dynamic, trusted, and well-functioning markets are a powerful transformative tool for generating wealth and improving living standards. They help to develop new and innovative ways of creating value, while responding to ever-changing human needs and interests.

To function well, markets need a well-functioning policy and legal framework

Effective markets require an effective legal and policy framework. That framework is made up of a number of areas, each of which play a role in making markets work well – and therefore contribute to a successful economy:

• Competition underpins an efficient and innovative business sector and economy. Competition, or the threat of it, stimulates firms to do better to maintain or improve market share.
• Effective consumer law, particularly around misleading and deceptive conduct, is critical to fostering competitive markets.
• Intellectual property rights are an essential ingredient in an innovation-friendly business environment, allowing innovators to profit from their ideas, and therefore creating incentives for them to innovate. However, these rights also need to be flexible enough to allow the free flow of ideas, where innovations spark new innovations – rather than locking up knowledge to the benefit of the few.
• Insolvency law deals with corporate failure – the reality of a dynamic market, where innovation is inherently risky. If this law is overly punitive, then the entrepreneurial activity that is necessary for growth is likely to be reduced.
• Investment is essential for dynamic markets – which need people and institutions prepared to invest in new ideas and new businesses, and effective and efficient mechanisms to match flows of funds with investment proposals.
• Corporate governance requirements and securities market regulation promote investment by giving confidence to investors, allowing them to make judgement about risks, and protecting them as far as possible from fraudulent behaviour.
• Domestic legal frameworks need to facilitate international transactions that foster investment in the growth of New Zealand firms, while protecting New Zealand consumers.

This outcome will make a substantial contribution to all of the Government's Economic Transformation themes – including, in particular, "Globally-competitive firms" and "Innovative and productive workplaces".

This framework needs continual review and improvement

New Zealand has well-developed and well-governed markets, but because they are open to both internal and external influence, they continue to evolve rapidly. New Zealand's small size and geographical isolation also creates challenges – particularly in how competition law is applied. For these reasons, we need to continually review and improve the policy and legal framework within which New Zealand's markets operate.

What We Will Do To Achieve This Outcome

We will improve the investment environment...

We will continue our focus on financial markets as drivers and facilitators of growth and innovation in other markets. Improving the investment environment for New Zealand firms, including improving confidence in New Zealand's capital markets, is one of our strategic priorities for this year (see box overleaf).

In the corporate governance area, we will be reviewing the regulation of auditors – who play a vital role in promoting the integrity of financial markets and, therefore, the confidence of investors.

We will also be reviewing the financial reporting framework, which has developed in an inconsistent manner over the years. This has led, in some cases, to differences in the preparation, filing, and auditing requirements across different classes of entities without any clear rationale. We will look at the framework afresh and design a new system that will promote appropriate levels of transparency and accountability.

...encourage household savings...

We will work with the Treasury to help develop and implement policies to increase household savings in financial assets, building on the successful introduction of KiwiSaver. Ultimately, New Zealanders' ownership of firms depends on the amount they invest in financial assets.

...protect the competitive process...

We will conclude existing work on the regulation of natural monopolies, with a view to establishing a regime that will encourage regulated firms to innovate and invest in their networks without overcharging consumers. We will also continue work to improve the efficiency and effectiveness of the merger and trade practice clearance and authorisation processes under the Commerce Act.

We will continue to work closely with the Commerce Commission, Securities Commission, and Takeovers Panel, along with the key Crown entities responsible for promoting firm growth, such as New Zealand Trade and Enterprise, to ensure market competition is supported and enhanced. In doing this, we will take into account the particular size and nature of New Zealand's markets.

...empower consumers...

We will continue our work to ensure that transactions are as transparent as possible for consumers, and that adequate redress is available for them when traders infringe their rights.

In particular, our work will focus on the challenge, enforcement, and redress provisions of the Fair Trading Act. We will ensure that the Consumer Guarantees Act effectively covers new forms of exchange (particularly e-commerce transactions) and that the Credit Contracts and Consumer Finance Acts provide an environment in which consumers have the information and confidence to make effective decisions about credit-related purchases. We will also continue to monitor the resilience of New Zealand's product safety infrastructure.

...manage intellectual property...

The Ministry's Intellectual Property Office of New Zealand (IPONZ) will continue to ensure that intellectual property processes are robust, easily accessible, and timely and are provided at minimal cost.

We are also in the process of updating intellectual property legislation to ensure that it works effectively in the light of new technologies, new business processes, and changes in the international environment.

As part of this, we are progressing the Copyright (New Technologies and Performers' Rights) Amendment Bill, working on legislation to update the Patents Act, and developing measures to enhance public enforcement against breaches of intellectual property rights. We also have a significant programme of work around the linkages between intellectual property rights and traditional knowledge, particularly Mäori traditional knowledge. This is aimed at assisting Mäori to realise the potential of traditional knowledge, by providing appropriate protection for that knowledge.

...and deal fairly and effectively with distressed debtors and corporate failure

We will also continue to provide high-quality insolvency and trustee services. These will continue to protect the rights of investors and creditors, while not taking an overly-punitive approach – which might create a disincentive for firms to take the sort of risks associated with innovation. This includes enabling debtors to choose the solution that will provide the best outcome for them and their creditors.

How We Will Demonstrate Success

We will continue to measure New Zealand's progress on this outcome every three years from international comparisons, which we will publish in subsequent Economic Development Indicators reports. In particular, we will measure:

• New Zealand's position on the OECD's product market regulation index, looking to at least maintain and, if possible, improve New Zealand's standing
• New Zealanders' household savings rates – specifically, increased household savings in financial assets and increased capitalisation on the New Zealand Stock Exchange
• improvements in New Zealand's inward and outward investment indices
• the competitive environment for business in New Zealand, including the behaviour of any cartels, with the assistance of the Commerce Commission's quarterly reports.

Ease Of Doing Business – Improving The Way Public Agencies And The Regulatory Environment Interact With Business

What We Are Seeking To Achieve

Our aim is to ensure business has high-quality interactions with public agencies and the regulatory environment, which directly contribute to firms' – and therefore New Zealand's – economic success.

In particular, we are aiming to create:

• a relatively low-cost regulatory environment for business
• streamlined business-government interactions that allow business to transact with government quickly, cheaply, and effectively.

Why This Outcome Is Important

A business-friendly environment helps New Zealand attract and keep firms

World-leading government interactions with business, which minimise compliance and opportunity cost, offer business a competitive advantage. An international reputation for frICTionless, low-cost business-to-government interactions and prudence in regulation-making also offers a point of persuasion for business location decisions.

...and improves firm performance

Minimising any unnecessary costs, delays, and uncertainties imposed by regulation also allows firms to concentrate on achieving their key objectives, and encourages enterprising activity.

This is particularly critical in New Zealand, with its relatively high proportion of small businesses, because the relative costs of complying with legislation are usually higher for smaller businesses.

However, it must be noted that many costs of regulation are unavoidable. They represent, for example, the price of promoting fairness or public safety. The key is to reduce the impact that regulations and taxes have on businesses without reducing the effectiveness of regulation, or the efficiency of the tax regime.

This outcome contributes to the Government's Economic Transformation theme of "Globally-competitive firms".

While good, New Zealand's regulatory environment could be improved...

The quality of New Zealand's business-related regulation is relatively high – reflected in the fact that New Zealand ranks second as the most business-friendly regulatory environment in the world.

However, there is always room for improvement – particularly given that New Zealand's small-to-medium enterprises still perceive the compliance burden as the single most important barrier to their growth.

...and there is scope to reduce the cost of doing business with government further

Similarly, New Zealand has relatively high-quality processes and systems that reduce the costs to firms of doing business with government agencies. However, increasing coordination between the government agencies dealing with business will help to reduce costs to business further.

What We Will Do To Achieve This Outcome

We will continue to work on reducing the impact of regulation on business...

The Ministry continues to be prominent in developing policies and proposals to reduce the regulatory burden and cost of compliance for business. Much of the focus has been on regulatory design, assessing and costing the regulatory impact, and improving the quality of regulation generally.

To assist the Ministry and other agencies to assess the likely compliance costs of proposed regulations, we will enhance our contribution to the guidance on best practice regulation on the web-based Policy Development Toolkit, and will promote the use of the Business Cost Calculator tool that was introduced in April 2008.

We will lead work assessing the impact of regulations on economic growth at firm and sector level (some in concert with the Australian Productivity Commission), continue to assess and audit the quality of regulatory impact analysis, and develop a framework for assessing the quality of existing regulations.

Over time, some legislative requirements become less relevant and of doubtful purpose. We will work with the Legislation Advisory Committee and the Ministry of Justice to explore the value of inserting sunset clauses in regulations. We are also committed to undertaking, at five-yearly intervals, "fit for purpose" reviews of any regulations administered by us that have significant economic impacts, and have not kept pace with new and innovative technologies or business practices.

...and improve our service delivery to business

Over half the Ministry's staff and resources are involved in delivering services to business. Many of these services involve licensing, registration, and granting of rights and interests.

A strategic priority for the Ministry over the next one to three years is simplifying transactions between government and business by developing the business portal, and investigating the possibility of a standard business reporting proposal (see box overleaf).

We will also focus on completing the programme of making all the Ministry's services to business available electronically. This will include the extension of existing electronic systems and refreshing core systems, specifically the Companies and Intellectual Property Office systems, by 2010.

We will lead an inter-agency programme, which will address the opportunities for improvement, and by 2010, we aim to have New Zealand ranked first in the World Bank Ease of Doing Business Survey. In the areas within the survey where the Ministry has a key part to play – for example, starting a business – we will aim to be ranked first by 2009.

We will benchmark our services across a broad set of performance, cost, timeliness, and quality measures with international counterparts. We will aim to maintain our position as the most helpful government agency in the annual KPMG Compliance Cost Survey, a position held by the Companies Office since the survey began.

We will implement a one-time notification of a change of address to government for business by 2010. Business would also value a single business number and a single annual return for all compliance obligations to IRD, the Companies Office, ACC, and Statistics. We will complete an assessment of that potential by 2009.

How We Will Demonstrate Success

Our success will be evident in:

• the acknowledged quality of our regulatory impact analysis, when assessed by independent auditors
• acknowledgment of the Ministry's service delivery units as the most helpful government agencies in the annual KPMG Compliance Cost Surveys
• New Zealand maintaining its high ranking in the annual World Bank Ease of Doing Business Survey
• high level of satisfaction from users of the business portal as the gateway for business doing business with government
• the Ministry's business services modelling the way in performance, cost, timeliness, and quality benchmark studies with international counterparts
• all the Ministry's service delivery units being ISO-accredited by 2011
• all the Ministry's primary business services being available electronically.

Efficient, Reliable, And Responsive Infrastructure Services – Improving The Quality And Reliability Of Key Infrastructure Services That Support Growth

What We Are Seeking To Achieve

We want to achieve high-quality, reliable key infrastructure services that impact on growth, with a particular focus on information and communications technology (ICT) and energy.

In particular, we are aiming to ensure that:

• ICTs make a significant contribution to productivity improvement and quality of life in New Zealand
• New Zealand has a reliable and resilient energy system that delivers sustainable, low-emissions energy at a reasonable and efficient cost
• business can generate economic benefits sustainably from Crown resources such as the mineral estate and the radio spectrum.

Why This Outcome Is Important

Infrastructure supports sustainable economic growth in a number of ways

Infrastructure is a key enabler of sustainable economic growth. Efficient and reliable infrastructure services reduce the costs of production, increase the attractiveness of New Zealand as a location for investment and as a place to live, and facilitate the flow of ideas, goods, services, and people. They also assist in meeting wider social and environmental objectives.

ICT in particular is a key driver of productivity, allowing firms to improve products, services and processes, reduce costs, and enhance sustainability – through reduced transport costs and more efficient production.

Conversely, actual and perceived infrastructure bottlenecks can constrain investment confidence and day-to-day commercial activity. To be successful, New Zealand needs to provide certainty to business and consumers that they will have access to effective, efficient, and reliable infrastructure services.

The Ministry's work in this area will contribute to the Government's Economic Transformation theme "World-class infrastructure".

Government plays a major role in infrastructure provision and development

As well as price, infrastructure investment decisions are often influenced by environmental, social, and other factors. Infrastructure provision can also exhibit natural monopoly characteristics, particularly in a small economy. These characteristics explain why governments have typically played major roles in decisions to regulate, establish, and operate infrastructure.

New Zealand faces challenges in realising the potential of ICT...

While New Zealand is relatively well-connected for phone and basic internet, provision and uptake of advanced broadband services remain relatively slow, according to OECD data.

Critical issues to progressing the development of the ICT sector include limited competition – in part, because of small market size of telecommunications infrastructure – and a lack of affordable high-speed ICT infrastructure, which is constraining the development of advanced technology and business applications.

The full potential that ICT offers is difficult to estimate reliably, but is likely to be substantial.

...as well as dealing with climate change and energy supply

NZES actions for which it is responsible, with a particular focus on advancing renewable electricity and energy efficiency." In energy, New Zealand faces two major long-term challenges. The first is tackling greenhouse gas emissions from energy production and use. The second is delivering secure, clean energy at affordable prices to support the global competitiveness of New Zealand firms, and New Zealanders' way of life in general. These challenges take place against a background of heightened international awareness of climate change and oil price volatility.

What We Will Do To Achieve This Outcome

We will support further development of the ICT sector

The Ministry's main focus will be on improving the level and availability of broadband to support growth, which is one of our strategic priorities for the coming year (see box opposite).

We will also continue to provide advice on how to maintain a high-quality regulatory environment that supports investor confidence, and ensures access to world-class ICT at reasonable prices.

We will monitor ICT sector developments, and advise on how they might influence the sector's contribution to the New Zealand economy. And we will work to identify ICT infrastructure gaps, advising on how such gaps could be filled.

The Radio Spectrum Management office will continue to organise its people, systems, and policies to ensure that access to the radio spectrum and compliance with radio spectrum regulations continue to get easier and cheaper.

In energy, our focus is on implementing the New Zealand Energy Strategy...

The Government's New Zealand Energy Strategy (NZES) and New Zealand Energy Efficiency and Conservation Strategy (NZEECS) are part of the Government's climate change policy response. They set the direction for the energy sector by providing the strategic context and a detailed action plan for initiatives across the whole of government.

The Ministry will continue to implement the NZES actions for which it is responsible, with a particular focus on advancing renewable electricity and energy efficiency, which is a strategic priority for the Ministry over the coming year (see box overleaf). In addition, we will monitor and report on progress against the NZES action plan.

...along with other Government energy initiatives...

In support of the Government's climate change policy, we will implement and administer the New Zealand Emissions Trading Scheme, and develop the electronic register that will be a key platform for its operation. The core functions of the register are expected to be available in mid-2008.

We will also progress the Government's biofuel sales obligation and ensure New Zealand maintains access to adequate petroleum reserves.

...and our ongoing energy work...

We will administer gas and electricity regulations, and monitor regulatory institutions and outcomes in electricity and gas markets. We will also continue to work to ensure the safe supply of electricity and gas through the work of the Energy Safety Service.

We will develop and maintain long-term scenarios for energy supply and demand and related greenhouse gas emissions.

In addition, we will effectively regulate and facilitate development of the Crown's mineral estate, consistent with the goals of energy security, sustainability, and economic development.

...and we will be working with other key players on the energy sector

The Ministry is the monitoring agency for the Electricity Commission, which regulates the electricity market and has responsibility for ensuring electricity security of supply. From July 2008, the Ministry will also be the monitoring agency for the Energy Efficiency and Conservation Authority, which implements key NZES/NZEECS actions on energy efficiency and renewable energy.

We will work with a number of agencies on other infrastructure work

The Ministry contributes to work that spans all the infrastructure sectors and provides an economic development perspective on selective transport and water projects.

To this end, the Ministry will work with the Ministry of Transport to gain a better understanding of the likely demands that freight will place on the New Zealand transport system, and work on any issues arising in relation to economic development. We will contribute to the Water Programme of Action, with a focus on means for allocating scarce water. We will support the Ministry for the Environment in the development of National Policy Statements and National Environmental Standards relevant to the infrastructure sectors. And we will work with the Ministry of Civil Defence and Emergency Management and other government agencies in national emergency preparedness and management in the infrastructure sector.

How We Will Demonstrate Success

We will demonstrate success through:

• benchmarking New Zealand's ICT infrastructure against relevant international performance metrics such as coverage, speed, and performance – this includes the benchmark measures in the Economic Development Indicators report and the Statistics New Zealand ICT two-yearly reports
• working with the Commerce Commission to monitor the competitive environment within the ICT sector, through the Commerce Commission's quarterly monitoring reports
• annual reporting on progress against the objectives of the NZES and NZEECS, including progress towards the target of having 90 percent of electricity from renewable generation by 2025
• periodic reporting on progress against a range of energy indicators, including those in the Economic Development Indicators report
• monitoring performance against regulatory settings that maintain the appropriate standard for security of supply in electricity and oil stocks.

Auckland, A World-class City – Improving Auckland As A World-class City That Attracts Firms, Investment, And Skills

What We Are Seeking To Achieve

We are seeking to ensure Auckland becomes a truly world-class city to help drive New Zealand's economic development. A world-class city is one with a high quality of life for its population, high levels of income, and unique advantages to attract skilled labour and investment in high-value economic activity.

According to the international literature, Auckland needs to develop seven key characteristics to become a world-class city:

• economic diversity with specialisation in key sectors, to ensure it is not vulnerable to market changes, while building critical mass and attracting skills and investment
• a good supply of skilled workers
• the physical and electronic infrastructure to move goods, services, and people quickly and efficiently
• effective strategic decision-taking capacity
• an effective local innovation system
• high-quality lifestyle and urban environment to attract highly-skilled workers
• ready access to capital for companies and entrepreneurs.

Why This Outcome Is A Priority

Auckland is significant because of its size and growth rate...

The Government has had a long-standing focus on Auckland because of its share of the national population and its growth rate (both of which are unusually significant in world terms) and the pressures this places on its infrastructure, environment, and communities.

...and its contribution to New Zealand's economic success

Recent work has found that large, outward-facing cities are increasingly driving economic development in their nations, because:

• they allow greater levels of specialisation, thicker and deeper markets, and form hubs of economic activity inputting to value chains that span the world
• they are key attractors in the global competition for skills, investment, and location of business headquarters
• their ever-increasing concentrations of people and economic activity create agglomeration benefits, including faster rates of growth, higher productivity, and higher incomes.

Auckland is a relatively small city by international standards. However, it is the only city in New Zealand with the size necessary to provide the full benefits that large cities can offer. New Zealand, as a small, distant economy, stands to gain by maximising the potential of its largest city.

However, this is not about focusing on Auckland for its own sake – or to the cost of other regions. In fact, Auckland's success is likely to have flow-on benefits for other parts of the country.

Our work in this area will contribute to the Government's Economic Transformation theme of "Auckland – an internationally-competitive city".

Auckland is currently underperforming

Our task is more crucial because Auckland is currently underperforming in its role as New Zealand's largest city. It has been assessed as offering a high quality of life by international standards. But its GDP per capita is lower than virtually all internationally-comparable cities, although only slightly so in most cases. Its productivity levels, patent applications per capita, and share of working-age population with a tertiary education are also lower than in most comparator cities.

What We Will Do To Achieve This Outcome

We will build on the work we've done with other agencies in recent years

In recent years, we have been working closely with other government departments, helping the Government to develop policy and invest in Auckland in partnership with Auckland's eight local authorities. This has included work on the Auckland Sustainability Framework, Regional Growth Strategy, Land Transport Strategy, and Metro Action Plan.

Our increased focus on Auckland has driven the extension of the Government's Urban and Economic Development Office (GUEDO) from a policy office of four departments in Auckland, to a network of ten government agencies with hubs in both Auckland and Wellington. The Ministry will continue to play a leadership role in working with the network of central government and local stakeholders to provide an informed Auckland perspective on the development of central government policy.

Developing "One Plan" for Auckland is a key priority

The Ministry will work with other government agencies to support Auckland local authorities in developing "One Plan" for Auckland. This is a strategic priority for the Ministry over the next one to three years (see box opposite).

We will also focus on connectedness...

The Ministry will continue to work with the region to facilitate the alignment of their broadband priorities within the national broadband work that is underway.

...Auckland's waterfront...

Redevelopment of Auckland's waterfront provides an opportunity for the city to step up to world-class status. It is one of its strongest points of difference, and could be a standout feature of the city-region on the international stage. The Ministry will continue to work with the Auckland Regional Council and its subsidiaries, Auckland City Council, and the business community to test the most appropriate structures to deliver a world-class waterfront. As an immediate step, we are working with Auckland Regional Council on the options for redeveloping Queen's Wharf.

...developing specialisation in key sectors...

The Ministry will work with the Auckland City Council and AucklandPlus to develop and test innovation concepts for the digital content and health ICT/technologies sectors for Auckland and nationally over the next year.

...Auckland's innovation system...

The Ministry will continue to work with organisations represented on the Metro Innovation Leadership and Working Groups to assess the strengths and weaknesses of Auckland's innovation system, and to identify actions that will significantly improve innovation and economic performance. We will also continue to work with New Zealand Trade and Enterprise, the University of Auckland, and Auckland City Council to establish an innovation centre at the university's Tamaki campus.

...and increasing our understanding of how cities develop

In order to judge how policy can best assist Auckland city's productivity and growth performance, and its social and environmental outcomes, the factors determining the development of cities need to be better understood. To understand these issues from an evidential base, the Ministry is leading a two-year research programme that focuses on cross-cutting city issues linking productivity (including potential agglomeration effects), firm and worker location decisions, links to R&D and educational institutions, transport, land use, and social development.

How We Will Demonstrate Success

In the long term, the key measure of success will be that Auckland outranks comparable international cities (such as Brisbane, Melbourne, Adelaide, Seattle, Vancouver, and Copenhagen) on:

• quality of living (as provided by the Mercer Worldwide Quality of Living Survey)
• average income (GDP per capita)
• labour productivity (output per worker).

Intermediate indicators of success, which relate to the key drivers of successful cities described earlier, will include improvements in Auckland's:

• share of population with tertiary education
• level of patent applications per capita
• percentage of householders with access to high-speed broadband
• road congestion rates
• employment in medium- and high-tech manufactured goods
• ranking in governance (Jones Lang LaSalle City Governance Survey).

We will also measure success in terms of the extent to which our work influences the One Plan and feedback from Auckland stakeholders on the quality of our work and relationships.

How Our Outcomes Align With Our Funding Appropriations

The Ministry works towards its six outcomes through the outputs it produces. These outputs are shown in Table 1, which sets out the links between individual departmental output expense appropriations (listed by Vote) and their contribution to particular outcomes. Outputs that have a major contribution to the Ministry's strategic priorities are marked with an "SP" in the table.

Table 1: Alignment Of Funding Appropriations With Outcomes

Vote and output expense	Enterprising and innovative businesses	Inter-national linkages	Dynamic and trusted markets	Ease of doing business	Efficient, reliable, and responsive infra-structure services	Auckland, a world-class city
Vote Economic Development
Policy Advice and Sectoral Leadership	X SP	X SP	X		X	X SP
Policy Advice – Small Business	X			X
Vote Commerce
Policy and Purchase Advice – Business Law and Competition Policy	X SP	X	X SP	X
Administration of Import Legislation			X
Administration of Trade Remedies			X	X
Registration and Granting of Intellectual Property Rights			X	X SP
Administration of Insolvencies			X	X
Registration and Provision of Statutory Information			X	X SP
Vote Communications
Policy Advice – Com-munications				X	X SP	X
Management and Enforcement of the Radio-com-munications Act 1989				X SP	X
Vote Consumer Affairs
Policy Advice and Support on Consumer Issues			X
Promotion and Enforcement of Measurement and Product Safety Infrastructure			X
Vote Energy
Policy Advice on Energy and Resource Issues	X				X SP
Management of the Crown Mineral Estate					X
Administration of Gas, Electricity and Energy Efficiency Regulations and Related Acts				X
Emissions Trading Im-plementation				X	X
Energy and Resource Information Services					X
Provision of Climate Change Unit Register and Information				X	X
Vote Tourism
Policy Advice – Tourism	X SP	X				X

How We Ensure The Cost-effectiveness Of Our Work

Operating within tight budgets and delivering value for money...

While the Ministry's short-term focus is on prioritising operating expenditure and managing within budgets, our long-term focus is on examining ways to meet increasing cost pressures within relatively fixed or reducing revenue, while minimising the impact on our strategic objectives.

The Ministry will continue to ensure we can provide efficient and effective services to Ministers and third party fee-payers, within the resources available to us.

...requires strong systems, accurate information, and robust decision-making

We will do this through the efficiency of our processes and systems, efficient decision-making around priority work, and accurate identification of financial implications and capital expenditure. We will also continue to use approaches such as external benchmarking to examine the most cost-effective way to deliver our outputs and services.

Delivering Cost-effective Services To Business

We will minimise costs to the Ministry and firms when delivering services

Some of the Ministry's programmes lend themselves to specific measures of cost- effectiveness. Those that fall under the "Ease of doing business" outcome offer the most potential for this. A key objective of this aspect of the Ministry's operations is to provide effective services to business at least cost. This, in turn, contributes to the minimisation of transaction costs for consumers and businesses.

The most recent World Bank Doing Business – Benchmarking Business Regulations Survey (based on 2007 data) ranked New Zealand as second for ease of doing business. In areas where the Ministry has a particularly important part to play, New Zealand was ranked third for starting a business, and 16th for closing a business.

While the Ministry is not the only organisation involved in these processes, and cost is not the only relevant measure, the survey does provide some indications on the cost-effectiveness of our services. For example, the cost indicator for setting up a business (as a percentage of income per capita) was 0.1 percent for New Zealand compared to an OECD average of 5.1 percent. For closing a business, the cost indicator for New Zealand (as a percentage of estate) was 4.0 percent against an average of 7.5 percent, with a recovery rate of 77.1 cents in the dollar compared to an average of 74.1.

Delivering Cost-effective Policy Advice And Implementation

Monitoring and evaluation will help us provide cost-effective policy advice

Developing robust cost-effectiveness measures for the Ministry's policy roles is challenging. To do so requires a good understanding of:

• the net economic benefits of a set of interventions when the effects are often indirect and complex
• the range of feasible options that may achieve similar outcomes and their possible impacts
• how interventions will actually be delivered, when this delivery is often carried out by other agencies.

Given these challenges, the Ministry uses a monitoring and evaluation approach to support evidence-based policy development. This helps us to identify what works and what does not.

It is also particularly important, as a number of interventions are piloting approaches not previously used in New Zealand. Good evaluation enables these pilots to be refined, discontinued, or more fully implemented. The process for doing this is through evaluation reports-back to Ministers after sufficient time has elapsed to test policy impacts and decide on policy refinement.

Quantifying The Costs And Benefits Of Regulation

We will aim for more robust assessment of the costs of regulation

A key element in improving the quality of regulation is ensuring that appropriate rigour is placed on regulatory impact analysis.

In 2006/2007, the Government agreed to changes to the regulatory impact analysis regime. The changes emphasise the need for quantification of costs and benefits where possible, identification of the full range of feasible options, high-quality discussion documents, and assessment of all the impacts of options.

We expect that, in conjunction with the implementation of the Business Cost Calculator, this enhanced regime will result in more robust analysis within the Ministry and across the public service. The calculator enables policy analysts to more easily, effectively, and consistently calculate the costs to business of complying with proposed new regulations.

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