Debate on Crown Entities, Public Organisations, and State Enterprises — New Zealand Venture Investment Fund Ltd

One of the first points I would like to make is to express disappointment that the Education and Science Committee did not look at the New Zealand Venture Investment Fund Ltd in greater detail. I am holding the committee’s report, and I am sad to say it is just a pro forma report of some four lines. I think it would have been important for the select committee to have a serious look at the fund, because since it was established in 2002 a lot of water has gone under the bridge. I think it would have been an opportunity for members to ask some questions about progress. Economists seldom agree on many things, but one of the things they do agree on is the role that innovation plays in the economic growth of any country. In fact, some of the academic literature suggests that as much as 90 percent of a country’s economic growth could be attributed to technical change, technology development, and innovation. So a subject area of this nature, I think, is one that is vitally important and one that perhaps should have been looked at in more detail.

The fund was set up in 2002, and it seeks to place about $100 million into commercial projects so that we can do a better job, as a country, of commercialising the technologies that come out of our Crown research institutes and universities, and that come as a result of the work of inventors and entrepreneurs. The aim of the fund is to leverage additional funding from the private sector, and I understand the aim is to ensure that private sector dollars match State sector dollars 2:1. So I am interested in the fact that the capital committed so far is some $60 million, yet the amount invested through the programme—the Venture Investment Fund plus the private sector funding—is $86.7 million. So that is not even close to doubling the amount put in by the fund. The Venture Investment Fund funds other venture capital funds, so the aim is to ensure that the organisation manages taxpayer funding and gives it to fund managers who will do a good job.

One of the things I am keen about, when it comes to venture capital, is that it does give us a greater opportunity to commercialise the outputs of research that is generated here. It allows Kiwis to take a greater ownership in some of the technologies that are developed here, and it means that overseas companies cannot just sail into town, pick the cherries out of the best technologies, and sail off again. So I think it gives New Zealanders a better opportunity to ensure that we attempt to commercialise our projects here, and take a greater stake in the value that, hopefully, can be accrued from some of the research that we have made into various technologies. Venture capital is a vital part of the commercialisation process, but $100 million, in my view, is very much a drop in the ocean. It is a very small amount of money. If we look at the amount put into venture capital in this country, surely we can see we have to do more to encourage the availability of venture capital, so that companies here that do have a bright idea, and that have a new innovation as a result of technical and scientific research, have the opportunity to commercialise their new products here.

I understand that there are some successes. In the long term, venture capital is a very risky business. Some projects that are funded can take 10, 20, and sometimes 30 years before they become commercial successes, but one such project I understand is Ectus, put together through the University of Waikato. A company was established around a technology and some people there, and it has just recently been sold to a Norwegian firm.

If this country is to make improvements in its economic growth, we have to get used to talking about the commercialisation of technology, supporting the technologies that are developed here, and making sure that we extract as much as we can out of the technologies that we, as taxpayers, fund through Crown research institutes, universities, and other areas.

I will take just a short call in respect of this matter. I want to touch on one of Mrs Rich’s final points, and that was the risk associated with venture capital. Of course if one has been in business—and a number of us have—one knows that any venture capital management requires prudent allocation of funds. The New Zealand Venture Investment Fund is a success story built around a Government that says we should back our universities and our Crown research institutes. It is a success story built around the fact that we believe we need to inject technology into our communities and back those institutions.

The member touched on Ectus, and she is right. It was sold to a Norwegian company, and very profitably. It is interesting to note that in the 2005-06 year New Zealand Venture Investment Fund received a $1.5 million distribution from fund managers Endeavour-icap. So there are a number of stark examples here of a successful fund. Venture capital is risky, it requires prudent commercial judgment—and with risk, of course, sometimes there can be failure or sometimes there can be delay. Most of that delay, I would argue, is based around prudential management by the board and those involved.

I thank the member for her contribution. It was one of the more enlightened contributions this afternoon. My blood pressure did not rise, unlike former speakers who have been here. That member generally makes a far better contribution than some of her colleagues. I endorse some of her comments, but I remind the Committee that this fund with which the Government is backing our universities and our Crown research institutes, and is attempting to inject technology into the market place, was set up in 2002. It was formed, of course, by the current Government.

I just note for the record that prior to that I cannot recall the party in Government pre-1999 having a policy on venture capital. If it did, it was kept so secret that that party was the only one that knew about it, because certainly universities did not, certainly our Crown research institutes did not, and certainly no one in the business community or in our communities knew it existed at all. It may have been a cracker policy but no one knew it existed—because it did not. I commend this organisation to the House. It is building on sound foundations, and long may it continue.

Report noted.

I understand that the next group of entities that members wish to debate is the State-owned enterprises. There is a considerable number of them. Is it the wish of the Committee that they be taken as one question? The reason for that is to allow a debate covering the financial reviews of all State enterprises. Is there any objection to that course of action being taken? There is not. The question therefore is that the reports on the 2004-05 financial reviews of State enterprises be noted.

I raise a point of order, Mr Chairperson. Thank you for your innovation. Government and Opposition whips have not had a chance to confer on what you have just proposed. When you say State enterprises, are you talking about AgriQuality New Zealand through to Transpower New Zealand?

Yes.

AgriQuality New Zealand

Airways Corporation of New Zealand

Asure New Zealand

Electricity Corporation of New Zealand

Genesis Power

Landcorp Farming

Meridian Energy

Meteorological Service of New Zealand

Mighty River Power

New Zealand Post

New Zealand Railways Corporation

Solid Energy New Zealand

Timberlands West Coast

Transpower New Zealand

Quotable Value

Transmission Holdings