New Zealand's R&D - It's How We Spend It

New Zealand's R&D - It's not what we spend, but how we spend it.

The New Zealand Manufacturers and Exporters Association (MEA) says that this week's debate over New Zealand's spending on research and development (R&D) has missed the point.

"Overall, New Zealand spends approximately 1.1% of GDP on R&D, which is below the OECD average of 2.3%. Government expenditure on R&D as proportion of GDP is above the OECD average, but in R&D, quality matters as much as quantity", says Chief Executive John Walley.

"The Government's R&D expenditure is heavily weighted towards the primary sector. The Crown Research Institutes (CRIs) spend just over 20% on industrial R&D, compared to 63% into the primary and associated sectors and this needs to be redressed if New Zealand is to become a leader in innovation", says Mr. Walley.

"The R&D spend in the private sector is varied. For example, Fonterra, which has NZ$13 billion in sales, spends less than 1% on R&D. The primary sector represents 6.3% of GDP, and contributes 11.6% towards the total business R&D expenditure overall. This is compared with manufacturing companies at 14.7% of GDP that contribute nearly 50% of the total".

"Manufacturing is weighted towards R&D spend and it is not uncommon for manufacturing companies to spend between 5% and 12% of sales on R&D. Tradable goods are vectors of innovation; they form the basis of the pay off to innovation when sold but if industry diminishes in New Zealand, expect to see very low levels of R&D".

"R&D has both technical and commercial risks, such risks are unlikely to be taken on the basis of a tiny New Zealand market, adding export markets is necessary but further compound commercial risks. Add the impact of the yo-yo exchange rates, especially for New Zealand's small to medium sized companies in the high tech space - we should not be surprised if R&D investment falls".

"The CMA has always called for better tax treatment of R&D. We are pleased by the tax credit available from April 2008 that will help manufacturers and exporters, but not as much as broader policies that deliver inflation control without the devastating impact on exporters of the exchange rate. Only then, would it be reasonable for both public and private investment to pour into R&D".

ENDS

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