Media Release 28 May 2008.

R&D gains a long term win?

The New Zealand Manufacturers and Exporters Association (NZMEA), has welcomed Navico’s decision to base its Research and Development (R&D) in Auckland, saying that the move is a positive step for manufacturing in this country and underpins the importance of the 15 percent R&D tax credit, provided the rules under which the credit is applied by the IRD are not changed.

“This move by Navico shows the value of providing incentives that drive better outcomes and how much more might be achieved if we really tried to keep companies such as F&P in New Zealand. Promoting behaviour is always better than trying to pick winners, as positive outcomes increase exports and build the economy”, says Chief Executive John Walley.

“We must extend the support for R&D with a view growing our industrial base”.

Mr. Walley says that while the 240 jobs created by Navico is good news, job losses in the manufacturing sector will continue as long as Government thinking relaxes to ‘internationalisation’ – the separation of production from the rest of the manufacturing process.

“R&D alone will not sustain our economy. It is but one component of company activity. It provides jobs, workplace knowledge and revenue, but unfortunately, it is not enough to offset what is being lost to other countries under current Government policy”.

Mr Walley says that the debate over separating R&D from production is about much more than labour costs.

“For New Zealand companies competing in the global marketplace, the interaction between each of their ‘separate’ business components, their wider networks and supply chains, has a subtle and pervasive impact on the effectiveness of that firms performance, separation comes at a cost. Those that promote ‘internationalisation’ as the answer to defending living standards in New Zealand choose to ignore, or fail to comprehend the value of such interactions”, says Mr. Walley.

“If we persist with the notion of ‘internationalisation’, then despite the advances New Zealand is making in the field of R&D, our companies will continue to bleed activity offshore, more local jobs will be lost and our export success will depend on the oil we can find and primary commodity cycles – not a warm and cosy prospect”.

“Generally our exports are not keeping pace with imports, as the latest trade figures illustrate, and nor will they until policy makers better understand the interconnections between the components of a companies structure, and that the separation of R&D and production is not sustainable over the long term”.

NZMEA – the authentic and independent voice for manufacturers and exporters.

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