Sector Selection Criteria and Food and Beverage
9. Cabinet agreed to a set of criteria to guide the selection of sectors with which to engage [CBC (04) 70 refers]. These are:
- the sector's current contribution to GDP, and potential to grow (material impact);
- the value that the sector can add across a range of other sectors (spillover effects);
- the ability of government to add value (for example, by improving co-ordination across government agencies, developing better linkages between the sector and public sector training providers or by changing regulatory settings), recognising the costs and risks of government intervention; and
- the commitment of the sector to work in partnership with government, and its preparation and ability to lead development of a vision and strategy, and to implement action points.
10. New Zealand's Food and Beverage sector meets these criteria par excellence, for example:
- The sector has undergone significant transformation over the last ten years increasing its contribution to GDP. Exports have doubled and today account for close to 50% of total merchandise exports, a significant proportion of which can be characterised as added value. The sector's growth rates and productivity increases have consistently been above the average for the whole economy, and there is significant potential for this level of growth to be maintained and enhanced;
- The level of growth and innovation already achieved by the sector has had spillover effects into related technologies and sectors, including packaging, refrigeration, containerisation and agritech industries. There continues to be considerable potential for New Zealand agribusiness to be a building block for new businesses and industry growth in related and in new areas. These associated industries contain many of New Zealand's truly world class firms.
- Up to fourteen government agencies have some direct interaction with the food and beverage sector in a variety of roles, from regulatory compliance, resource management, food safety standards, R&D funding, business assistance, policy development and so on. Yet policy makers do not have an integrated and co-ordinated food system strategy (e.g. paddock to plate) with which to engage with industry. Hence the engagement is likely to add significant value, through improving co-ordination and alignment across the whole range of government activities, and ensuring that policy and assistance programmes support to best effect the growth of the sector.
Results of Consultation
11. The key determinant is the level of commitment of the sector to an engagement. Officials have consulted key stakeholders (see Annex 5 for list). All stakeholders expressed interest in the engagement proposal and considered it useful and timely. This was tempered with concerns that:
- the engagement would amount to little more than a "talkfest";
- Government may not have an appetite to tackle some tough issues facing the sector (see list of issues below), although there is an appreciation that Government must balance differing objectives;
- the engagement could result in extra layers of bureaucracy or Government interventions which could skew market conditions; and
- the largest companies already engage directly with Government on a regular basis on the issues that affect them. Any sector engagement would have to add additional value, and not be used by Government to avoid engaging with individual companies.
12. Stakeholders indicated that, so long as these concerns were taken into account, then an engagement had potential to add significant value. A number of issues were identified by stakeholders during consultation, and these can be taken as an indication of the types of areas where the sector thinks that an engagement process might add value. The issues include the:
- Impact of skill and labour shortages, e.g. the supply of food technologists; the supply of labour for picking horticultural crops; the aging demographic in many production areas;
- Prevailing trading environment, in particular market access and potential impacts of free trade agreements;
- Increasing compliance costs and unintended consequences of new legislation, particularly in relation to border charges as a result of changes to New Zealand's international security and bio-security regimes, other legislation such as the Holidays Act, Resource Management Act, Customs and Excise Act and the Hazardous Substances and New Organisms Act and strategies such as the biodiversity strategy;
- Inconsistency in i) the application of cost-recovery mechanisms across sectors; ii) the application of New Zealand's food standards to imported foods; and iii) the scientific basis of bio-security standards and other standards restricting use of products and practices at the farm level (reacting to perceptions rather than scientific analysis);
- Factor conditions, particularly energy, transport and sustainable land and water use;
- Need for improved co-ordination in the sector, including a whole value chain focus such as partnering on distribution channels and marketing initiatives;
- Level and direction of current R&D spending, by both Government and the private sector, in particular the potential for taking a broader integrated approach to realise synergies and partnering opportunities across the value chain;
- Lack of recognition of the value the sector creates;
- Need to develop the local market to provide improved opportunities for SMEs; and
- Promotion of the importance of international developments, such as changes in consumer demand and changes in the structure of food retailing.
13. A full list of potential issues with associated opportunities for the engagement to add value is contained in Annex 4.
14. In summary, a high-performing Food and Beverage sector is fundamental to achieving the Government's economic goals. Given this pivotal role in the economy - in terms of growth and exports, spillover benefits and future potential - and taking account of the high level of interaction between government agencies and the sector, the proposed engagement has potential to add significant value.
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