KEY POINTS:
As Export Year draws to a close, many manufacturers reckon they've been all but forgotten by the Government. "Why does the Government support schemes that involve spending taxpayers' money pushing jobs and business activity offshore?" complained the Manufacturers and Exporters Association, a new lobby group, in its submission to the parliamentary inquiry into future monetary policy framework. "The export sector needs mates."
The Export Year scheme, which involved the Government giving an extra $64.2 million over four years to assist overseas market development, was opposed by 73 per cent of Manufacturers and Exporters Association (MEA) members in a snap poll, said chief executive John Walley.
The MEA - an alliance of the Canterbury Manufacturers' Association, the Engineering, Printing and Manufacturing Union and the Engineering Federation - complains of "two economies" - one for manufacturing exporters and one for manufacturers who sell within New Zealand; something it wants the parliamentary inquiry to fix.
"Exporters need equitable treatment from policy and change is long overdue to target the specific drivers of domestic inflation and to include measures that provide support and stability for the external sector. New Zealand seems to see manufacturing and exporting as optional extras."
John Heng, chief executive of plastic goods manufacturer Click Clack, which has cut 200 jobs during the past three years and closed its Christchurch factory in April, says any support for companies to set up offshore is "ridiculous".
"Why should we be supporting them to go and spend our taxpayers' money in someone else's country?" Heng said. "Can't they see that [that business] never touches New Zealand again? I'll be taking a lot of those products I don't make in New Zealand and exporting them direct into the 72 markets we export to. There'll be no impact in New Zealand on PAYE, GST, transport or fuel taxes.
"There's enough subsidies around the world for these people to make more money in business and sell back to New Zealand."
The lessons learned from this year, and what's needed for the future of exporting will be the subject of a report by New Zealand Trade and Enterprise and Ken Stevens, founder of baggage-handling company Glidepath and the business champion for Export Year. That report is expected on November 14.
David Percy, owner of Wellington fire alarm systems manufacturer Pertronic Industries, says one of the big problems is that it's becoming impossible to quote real prices to customers because of the dollar's instability.
"If the currency was stable at least you'd know when discussing something with your offshore customers if the project was viable or not," he says.
"The effect on manufacturers is that they're unable to quote stable prices for customers. Any investment (in plant, equipment) decision a manufacturer makes now is made in blind hope because they can't predict what price they'll get next year."
The amount of currency trading of the kiwi dollar hasn't helped steady things, Percy says, pointing out that just 10 per cent of currency transactions in New Zealand relate to goods.
"A few years ago, to earn $100 for a product you'd have to charge US$50. Now you have to charge US$80 and it's just not possible to command those prices."
The argument for New Zealand-made everything doesn't help cut costs either.
"Everyone goes on about the importance of New Zealand content but, if you use all New Zealand-made components, you're financially worse off. If all your costs are in New Zealand dollars when the exchange rate goes up you get nailed."
So what's the answer? Some say the only way to save the export sector is to incentivise, or subsidise, by way of tax. And tax incentives are high on many exporters' wish lists, a recent business survey by PricewaterhouseCoopers and the Employers' and Manufacturers' Association shows. The majority - 85 per cent - indicated a preference for tax-based incentives, while 77 per cent want pressure brought to lower the exchange rate.
In a perfect world, says Bruce Goldsworthy, of the Employers and Manufacturers' Association (Northern), the Government would introduce a lower corporate tax rate and get rid of the "hairy-arsed" schemes and grants which become "lopsided" and expensive to administer.
"We'd say the money's better off in the hands of the company to make the decisions as to how they'll spend it, as opposed to being returned to Government who then make decision on how [the company] will spend it.
"In the absence of that, these surveyed companies are saying that one way to significantly increase our export business would be recognition of those by way of a tax incentive. It frees up some cash they can then reinvest in their export endeavours.
"If you look at selling on the domestic market, there's a lot less risk and cost involved in selling offshore, which may or may not be justification for a tax incentive."
Since the exchange rate is frequently beyond the control or influence of economic instruments available, "the Government should bring in tax-based incentives to offset its pernicious and unpredictable effects".
Lifting sales in existing export markets is seen as the major route for growth for 56 per cent of those already exporting, although expectations of higher revenue from overseas were subdued because of the high kiwi dollar.
To achieve growth, 83 per cent of exporters in the sample said they were expecting to expand their existing overseas markets.
Well over half said they were planning to enter new overseas markets, and 39 per cent were looking to introduce new products and services in markets abroad.
However, with the kiwi dollar doubling and halving every 10 years or so, this debate will go on forever.
Perhaps the parliamentary inquiry will find a solution.
Export Year
Export Year is a Government-private sector campaign to encourage businesses to export. It is overseen by NZ Trade and Enterprise and a spin-off group called Export Year. Specific initiatives include:
* More money for NZTE's in-market assistance for local firms in China, India and Japan.
* A boost for NZTE's Export Market Development Assistance Scheme, covering up to half the cost of things like promotions and exhibitions.
* A 15 per cent tax credit for eligible R&D spending.
* More money for NZTE's Beachheads programme.
* Backing for exporters bidding for US state or federal contracts that require a bond.
* A variety of education and information campaigns.
