Government exporter funding focus shifts

BY NICK CHURHCHOUSE

New Zealand exporters will have to sing a different tune for their supper soon, but changes to government funding means the chorus will be markedly smaller.

Last year Wellington fruit paste exporters Rutherford and Meyer were making headway in the fiercely competitive United States market, backed by a hard-won market development grant from New Zealand Trade and Enterprise.

Also last year they were told the five-year funding deal they had been granted was being pulled, halfway through. That funding stops on June 30 this year, as the Government moves to a more elite focus and chops the export assistance grant budget by $20 million.

Rutherford and Meyer owner Jan Meyer says her company suddenly does not pass muster, clearing the $250,000 export sales hurdle but falling short of the required $3m turnover for the new funding.

That means a lot of hard work may prove fruitless, she says.

The shift in export funding is geared toward getting more return on investment for the taxpayer's dollar. From this year, only big companies and the up-and-coming stars will get grant money.

NZTE group general manager international Jack Stephenson says he understands why some businesses are taking it hard. "I used to run the grants programme so I know the companies."

In addition to the former $50m pool shrinking to $30m from 2011, he describes the change as moving away from anyone who filled in a form getting a grant.

"That's been a major investment over the past four years. This is more focused on those companies that we think make the greatest impact on the economy. That is the guts of it."

He points to existing research and development funding, export credit services and other helpful arms of assistance. The programmes are aimed at gaining productivity, helping businesses improve through design and gain in-depth knowledge of overseas markets. "Not everybody can access these services but they are a significant investment by us."

Ms Meyer is not convinced. "I don't need to do courses on how to export. I have been doing it for years."

With the former grant regime repaying a 50 per cent portion of what the company spent overseas, she had to spend her own money first and then justify why she deserved it, something she says is entirely appropriate. "I understand they can't be helping everyone. It's not automatically given and I like that system."

But cutting off the small-time operators to look after the big companies is not. "There are very few New Zealand companies that have the capacity to go it alone. Why give it to the big guys? Why give it to the companies that can afford to do it without the help of the government?"

Mr Stephenson's answer is that any public money needs to be well targeted to get the best return possible. That wasn't happening before.

"There's no doubt that for small and medium businesses those old grants were significantly helpful, but we weren't always clear that we had the outcomes needed for it to be worthwhile carrying on."

He says that the problem was that it was too hard to ascertain the benefit, not that there was not any in the first place.

Cutting down the number of companies to work with could solve that problem, but it is not certain.

"Drawing a straight line between the success and the funding is never easy. You get a very mixed response when you survey companies about how important that funding has been for them."

Thousands of businesses have accessed the disappearing export grants in the past four years, Mr Stephenson says. The new international growth fund has up to 12 businesses vying for $10m over the next three months. With the fund expanding to $30m next year, he says there was "no way to know how many would make the cut".

Another exporter The Dominion Post spoke to had just done that, but still felt Ms Meyer's frustration. Having just cleared the criteria for access to the new fund, he did not want to be named, but says that if the changes had happened a little earlier, he would be cut off from June 30 too. "That would seriously slow the rate of export market development. We'd have to look at some markets and just say we can't do them."

For a business that had been working along a course for some years, the abrupt cessation of funding would be crushing. "There are companies that have the potential to grow and be doing much more in terms of export earnings. This benchmark will cut out quite a lot of them."

Business New Zealand chief executive Phil O'Reilly is torn. The Government has got it "more right than wrong" with the changes, but he acknowledges the angst it means for some of his own members. "There's never a single right answer to this. It's all about where you perceive bang for public buck to be best."

The previous funding system was a Labour government invention and equated to a view that "if you watered the ground with funding, you'd get some flowers".

Unfortunately with that comes the inevitable failures that suck up funding that could be used more effectively elsewhere, he says.

Mr O'Reilly says the new approach is the only one that can bring New Zealand, as a whole, up to par with Australia and other comparable nations. "While I'm deeply sympathetic, if you want taxpayer money you have to demonstrate you are worth it, that you are not just something ordinary."

But something had to be available for the companies left behind, and the main thing is some sort of help they could use. "Let's not abandon the little guys, because that's where the next Fisher & Paykel or the next Weta will come from."

The key to getting businesses up the first few steps is public-private partnerships, he says. "It will concern me if we end up with some sort of a glass ceiling. I'd prefer we staircase them up."

But when it comes to capital, it simply should not be the government bankrolling business. That is where banks and other finance sources need to be more proactive and open to help fledgling companies, Mr O'Reilly says. "Why should the taxpayer be the bank of last resort?"

Ms Meyer says the message from the Government is that innovation is the key to pushing the company up the OECD rankings. But even with an innovative product, in the food and beverage sector money is needed to market and educate consumers.

- © Fairfax NZ News