More govt funds for firms moving offshore

The Government is scrapping some grants aimed at attracting foreign investors and will instead boost support for local firms keen to partly move offshore.

Economic Development Minister Trevor Mallard announced the change in focus today, saying hundreds of millions of dollars spent on grants to attract inward investment since 2000 had achieved little.

At the same time New Zealand needed to dramatically boost its companies' strategic linkages and investments in other countries if the export sector was to grow at a faster rate.

Mr Mallard said a review of Investment New Zealand's programmes had found some were of little worth.

Over four years from 2002 the agency – set up as part of former economic development minister Jim Anderton's "jobs machine" – was involved with 19 investments worth $502 million.

The review found $155 would not have occurred without its involvement, but it was unlikely that extra investment would have accrued enough benefits to pay for the $60 million cost of getting it.

Half the investments were in wood processing acquisitions and most of the investments were foreign companies merely extending their interests here.

As a result, Mr Mallard said the Government would scrap the major grants and loan guarantees element of its Strategic Investment Fund.

However, Investment New Zealand's Visiting Investor Programme, which hosts high-rolling investors in a bid to solicit cash for local firms, would remain as it had been "better value for money".

Mr Mallard said government research showed the level of foreign investment in New Zealand was similar to other small developed economies, but outward foreign investment by local firms was below half the OECD average.

As a result the Government was changing its focus to help local companies expand offshore.

He acknowledged overseas expansion was high risk and high cost.

It is also politically risky with the recent departures of part of Fisher and Paykel's manufacturing operation to Thailand raising an outcry over a loss of jobs in New Zealand.

But Mr Mallard said the potential benefits were high with businesses able to produce and sell their goods more competitively and on a larger scale.

"The message here is that internationalisation is not a threat and in fact it can be a vehicle through which we reinforce and take advantage of our unique national identity and special attributes," he said in notes prepared for a speech to the Wellington Diplomatic Club.

A ministerial direction had been given to government investment agencies to prioritise this work through their existing programmes and officials from the Economic Development Ministry were investigating what additional assistance could be offered.

However, grants were unlikely and assistance would probably be in the form of information and support to ensure companies were properly prepared and help them overcome regulatory and legal barriers to entry.

Mr Mallard said businesses looking to expand offshore would have to fulfil three criteria to qualify for taxpayer assistance. They were: