Science is key to primary growth

WHEN the primary sector sneezes, the New Zealand economy catches a cold. That's why it's important to rejuvenate the Bay's primary sector by providing  tax breaks for research and development.
New Zealand's future economic performance depends to a large extent on generating and implementing new and innovative ideas in our primary sector. We've got some success stories. Zespri's gold kiwifruit is an ideal example. But we need more  to become a force to be reckoned with in the world's primary sector.
The conversations KPMG held with industry leaders in preparing its Agribusiness Agenda highlighted widespread support for   using leading edge science in the sector.
This was part of a wider strategy  towards supplying food to premium niche markets and maximising the value  to  New Zealand.

  The Government is committed to securing science-led productivity improvements for the New Zealand economy.
There is no question that our spending in recent years has been well  below average  for  the developed world.
Recent data indicates our spending on research and development (R&D) at  about 1.2 per cent of GDP is just over half the average for all OECD countries.
The challenge for the Government is whether the recent initiatives  are enough to increase the total R&D spend  to  equal to or above OECD averages - and how that translates into revenue generation  for the economy.
Having cancelled the R&D tax credit scheme, a number of more targeted initiatives have been announced by the Government over the last 18 months, including the Primary Growth Partnership and an investment in the Global Research Alliance on agricultural greenhouse gases.
The challenge  with these initiatives has been moving  projects through  assessment and approval  to allow the scientists to get on with  productivity improvements.

 We are concerned that the schemes already announced will require further approval processes before our scientists are able to get on with the science.
We strongly support the concept of the Technology Development Grant and believe if the processes can be designed in an efficient manner they have the potential to encourage significant new investment in R&D.
However, until we understand what it means for a company to have a "strong record of substantial R&D investment", our concern is that there will be  few companies in the agribusiness sector positioned to take advantage of these grants.
We are aware of only a few firms that spend 5 per cent or more of their revenue on R&D.

 A real plus of the voucher system announced by the Government that will  affect mostly small to medium sized enterprises is that it should have an effect of aligning science from CRIs and universities with practical business friendly solutions.
Improvement in the productivity of New Zealand's primary sectors will be achieved through focusing resource and funds on some key priority areas - investment in productive assets, leadership development, maximising the use of our natural assets, and R&D.
Industry leaders and the Prime Minister's chief science adviser, Sir Peter Gluckman, have expressed the view that our agricultural sector has been predominantly relying on old science, much of which was developed in the 1960s and 1970s for far too long.
Without significant investment to make the leap forward, the speed at which we are caught and passed by competitor countries will increase.
The recent funding is a very small but positive step towards addressing that.
There is evidence within the industry that when a sector aligns its commercial and research activities it can achieve dramatic growth in productivity and export earnings - it seems as though the Government has recognised this in its recent announcement.
For instance, one of the significant contributors to the success of the New Zealand wine industry has been the alignment of the levy-funded industry's good research activities with the commercial requirements of grape growers and winemakers.
The investment in science has been a contributing factor to the dramatic growth the industry has experienced in export sales over the last 10 years.
The primary sector will be best served by the full alignment of innovative science institutes with the commercial and market requirements of the farmers, growers and processes.
The successes, for example the wine industry or the Zespri gold kiwifruit, add value to the industry and the New Zealand economy.
In my view, co-ordinated strategies where the public and private sectors pool their resources and collectively invest in innovative science and commercially focused research will be critical to the future success of our primary sector. Many companies in this region will continue to innovate and invest in R&D, such as Comvita New Zealand, Ballance Agri-Nutrients, Zespri International and Taura Natural Ingredients, but more of this investment needs to
be encouraged and rewarded.
Glenn Keaney is head of KPMG in Tauranga. He can be contacted on email: gkeaney@kpmg.co.nz