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Interislander: Ministers Warned 'Careful' Talks With Korea Needed Over Ferry Cancellations
Russell Palmer, Digital Political Journalist
Despite officials warning cancelling Interislander ferry replacements would require "careful and deliberate" communication with Korea, that only happened the same afternoon it was announced.
Finance Minister Nicola Willis on Friday 8 December appeared on RNZ, warning of cost blowouts from the ferry replacement project known as iReX.
The Ministry of Foreign Affairs and Trade (MFAT) provided advice later in the day, at her request, on potential effects if the government chose not to continue providing funding for the project.
The ministry's memo highlighted that not continuing the funding would likely lead to the project being cancelled.
"Under Option 2 STOP, the Government funding committed for the IREX project (new electric ferries and terminals in Picton and Wellington) would be significantly reduced which will likely lead to the two ferries which have been ordered from Hyundai Mipo Dockyard (Hyundai) in the Republic of Korea (hereafter Korea) being cancelled."
Several points in MFAT's 8 December advice were redacted from the released document, but at least one line was quite clear.
"Careful and deliberate communications with the Korean Government would be required in advance of any public announcement," it said.
The following Monday, the decision was made at Cabinet to rescind the provisional funding the previous government had promised. Willis announced it via press release, about 3.30pm on the Wednesday, 13 December.
MFAT has now confirmed to RNZ the discussions with the Korean government did take place - on that same afternoon of the 13th.
"Discussions took place in Wellington and Seoul between New Zealand Ministry of Foreign Affairs officials and their respective counterparts on the afternoon of the announcement to provide advance notice of the New Zealand Government's decision," the ministry said.
"Confirming the announcement was 13 December 2023."
The ministry declined to comment on what the discussions involved, or whether other such discussions took place.
Willis was unavailable to speak to RNZ. State-Owned Enterprises Minister Paul Goldsmith - the other shareholding minister for KiwiRail - provided a statement via a government spokesperson.
It did not directly respond to questions of whether the official discussions with the Korean government met MFAT's advised threshold of "careful and deliberate communications," but said it had been "in the public interest" to make the announcement on the Wednesday.
"After Cabinet considered the request for additional funding, KiwiRail was advised on 12 December of Cabinet's decision to decline the request. Ministers then announced the decision publicly the following day, 13 December as it was in the public interest to do so."
The Cabinet paper from 11 December also shows ministers were advised of risks related to a decision to shut down the iReX project. These included risks to the reputation of KiwiRail, of New Zealand, and risk to New Zealand's relationship with Korea.
"There is a risk of concerns being raised by the Republic of Korea with respect to the cancellation of the contracts with HMD," the paper said.
"Clear reasons for the decision such as affordability and value for money should be communicated. From a commercial perspective this risk should be manageable if KiwiRail conducts its negotiations in accordance with the contracts and undertaken on a reasonable basis."
The decisions also came after a late-November briefing from Treasury, which warned Willis against making premature statements that might compromise KiwiRail's ability to negotiate.
"In the event the KiwiRail Board decides to exit the ship contracts with HMD, this will need to be negotiated by KiwiRail. We advise that communications by any party should not jeopardise KiwiRail's negotiating position," Treasury advised on 29 November.
"We would not recommend making any public statements concerning the detail of Project iReX at this time. This includes the specific cost escalation that has occurred or the level of Crown funding that has been provided to the project, or may be provided in future."
The government spokesperson gave a defence of Willis' statements in light of that warning.
"As noted in the Treasury briefing to Ministers on 29 November, it was '...public knowledge that Project iReX is facing cost escalation, and that KiwiRail is working with its partners, including port companies, and the Crown as shareholder, on how this cost escalation can be managed and funded'.
"Minister Willis' comments on 8 December were deliberately general in nature, for example she specifically stated to media 'I am not going to go into those figures today...' in reference to specific details of the cost escalation. This approach aligns with officials' advice on this matter."
On Tuesday, RNZ will look at how Labour's decision to provide $750m for project iReX left KiwiRail with uncertainty and pushed up the costs.
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