Scientists clash over 'cash cow' funding

By Stephen Ward

Crown research institute AgResearch has voluntarily paid the Government an extra $3 million in dividends.

But, ironically, the chief executive of AgResearch, Andy West, has also urged greater Government capital expenditure contributions to CRIs, saying they are being treated more as cash cows than vehicles for investment.

A $5 million dividend for the latest financial year is revealed in the AgResearch annual report released yesterday. It compared to a budgeted $2 million dividend and was made possible by greater than expected gains from the sale of the company's AgVax vaccines business last year.

On the wisdom of handing over additional cash given calls for more primary sector research, West said the extra $3 million was volunteered by AgResearch.

The company had opportunities coming up, but "do you sit on it because there are things coming along later, or do you give it back?"

AgResearch decided the Government might have a better immediate purpose.

But it was important to recognise the Crown was not putting equity in AgResearch directly, and it was not able to apply for cash from the Government's Equity Investment Fund because it did not have enough debt.

"I think there is a policy issue that the Crown does need to start putting significant amounts into capital [expenditure for] Crown research institutes. It's put $100 million or thereabouts of capital into universities in the last four years.

"It needs to start investing capital into CRIs, more than just the Equity Investment Fund, which is really just shuffling money between CRIs. It needs to put new money in and it needs to do that when CRIs put up reasonable and valid business cases. CRIs are more being treated as cash cows than they are as vehicles for investment."

If the Government continued not putting new capital in "it does create a situation where CRIs are going to hang on to money for as long as they can".

West said that "if you're a long-term owner you've got to be able to be prepared to put your hand in your pocket in terms of equity".

Research, Science and Technology Minister Steve Maharey said that when he was Tertiary Education Minister he introduced a scheme under which universities could get capex funding from the Government provided they could find another funding source.

West had argued that CRIs could have problems affording capex by themselves, Maharey said.

While the Government did not have a solution to CRIs' capital issues, the matter was being studied.

On "cash cows", Maharey said the CRIs were expected to earn a reasonable return on equity and pay dividends.

But the practice was to retain the money within funding available for Government science spending, and in recent years it had been kept for CRIs.

"I'm reluctant to let the money drift elsewhere when I've got people with good priorities in the CRI area as well."

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