Donnelly Brian: Debate on Crown Entities Public Organisations  and State Enterprises — In Committee 
Donnelly Brian: Debate on Crown Entities Public Organisations  and State Enterprises — In Committee 
[Volume:631;Page:3051] 
Hon BRIAN DONNELLY (NZ First) 
: 
 First I note that the issue that I wanted to address today was in fact the Crown research institutes but the Foundation for Research Science and Technology is so closely linked with Crown research institutes that it does not really matter. In particular I want to talk to the two reviews that were carried out during the 2003-04 financial review period. Being on the same select committee for quite a considerable period of time certainly has one advantage particularly when it comes to the Crown research institutes in the sense that one gets to see the whole lot of them find out what they are doing find out the amazing range of science that is taking place in our Crown research institutes and see how valuable they are to our society. It is also possible to see the changes over time within their practices and what is happening with them. 
I have to say that largely the model has been very successful but there are some issues with it. I want to use the two reports that were done for the New Zealand Pastoral Agriculture Research Institute and for Landcare Research to highlight some of those issues at this particular time. If we refer to the Pastoral Agriculture Research Institute we can see the contribution it makes to our society and our economy. During this particular period of time it employed 950 staff including 640 scientific staff; its total revenue was $133.651 million which compared with $129 million from the year before; and it had 13 subsidiaries operating under it. 
 During the period of review a decision was made in terms of this particular Crown research institute to transform the focus from life sciences to a closer focus on the pastoral sector. The chief executive told us that although statistics show that New Zealand farming has been the most productive sector of any industry in any OECD country in the last 20 years it is increasingly facing challenges from other countries with cheaper and better land and cheaper currency and labour. For example South American countries already produce milk more cheaply than New Zealand does and several other countries are not far behind. That is really a wake-up call to us that we cannot continue to take things for granted in this “backbone of the country” industry. 
Significant restructuring took place during the year in review particularly with the move towards establishing three national research centres in partnerships with other entities. These included an animal health institute in Palmerston North in partnership with Massey University a National Centre for Biosecurity and Infectious Disease in Wallaceville with the Institute of Environmental Science and Research and Biosecurity New Zealand and a National Centre for Reproductive Sciences and Mammalian Genomics in Dunedin in partnership with the University of Otago. So we get some sense of the complexity of the arrangements that are taking place within our society. 
One of the issues in New Zealand is the level of private funding or private investment in science research. Pastoral and agriculture research certainly highlights this because one would consider this as an area where there was a lot of private funding of research. Admittedly our figures are skewed in the sense that we do not have a lot of funding into weapons development as some other nations do. Nevertheless it is a continuing and ongoing problem. AgResearch analysis shows that in 2003-04 the pastoral sector invested approximately $10 million in research and development. This is less than one-fifth of 1 percent of the New Zealand dairy industry’s $5.72 billion in export earnings. Of the $10 million AgResearch received $1.4 million. Only $1.4 million went into the particular entity that focuses on this particular sector. AgResearch considers the lack of investment by the sector in research and development—rather than in dairy processes and proprietary in-house assets—and declining Government funding to be matters of serious concern particularly in view of the challenges facing the sector. New Zealand First has to agree that this is a worrying trend in such an important area of investment. 
It is extremely important to compare the report on AgResearch with that on Landcare Research New Zealand. One of the things I have to note with regard to the Landcare Research report is that it is a model of annual reporting. [ 
Interruption 
] Just by way of explanation for the Minister in the chair Steve Maharey New Zealand First has rolled up its two calls into one. Only one person from New Zealand First will speak in this debate and we want to put our comments all together in a cohesive form. 
Landcare Research specialises in the sustainable management of land resources by optimising primary production enhancing biodiversity and increasing the resource efficiency of businesses in conserving and restoring the natural assets of our communities. I was speaking about reporting processes. Landcare Research was awarded the Institute of Chartered Accountants of New Zealand award for sustainability reporting for its 2003-04 annual report for the fourth consecutive year. It really is a worthwhile model for us to keep a close eye on. In addition Landcare Research also undergoes a performance verification audit based on international standards for the voluntary reporting of the economic environmental and social impact of a company’s performance in accordance with the Global Reporting Initiative guidelines. We were informed that Landcare Research benchmarks itself against companies such as BP and Vodafone. So we have a model of excellence in this particular case and as I said it is certainly worthwhile noting that model of excellence. 
During our review we uncovered an interesting statistic on research output in New Zealand. In July 2004 the  
New Scientist  
reported that New Zealand scientists produced the highest number of refereed publications per million US dollars of research funding at 6.2 papers per million. In the same period Landcare Research claims that it produced 7.3 papers. 
One of the things that comes through is that vulnerability that hangs over all the institutes when priorities change in Government funding—it was certainly expressed by Landcare Research and in fact only one Crown research institute really did not come through with this sense of vulnerability. That vulnerability leaves the institutes rather exposed. We have to note—and we note positively in fact—that the Government introduced in I think last year’s Budget a capability fund of $39 million to smooth over the troughs that occur as a result of the research grants. HortResearch was a classic example of an institute that lost a huge amount of human capacity purely and simply because it did not get research grants from the foundation for a particular year. The question that a Crown research institute has to ask itself is how it holds on to staff in the interim period while it prepares fresh proposals for research in the following year. We make mention that that $39 million is particularly interesting. 
We really want to make another point which Landcare Research highlighted. It is an issue that is invariably brought to our attention. Only one Crown research institute—the Institute of Environmental Science and Research—does not report serious concerns about human capability about scientists and about being able to maintain scientists. We were informed that a critical mass of scientists in New Zealand will be retiring in the next 5 to 10 years. That particular organisation does a huge amount to try to make sure that it can retain the high-quality graduates it has including giving various benefits in addition to base salaries profitsharing from commercial dividends making employer contributions to a superannuation fund and giving bonuses for exceptional performances. It also has a rather innovative scheme whereby it will pay back the student loans of its graduate scientists—scientists coming straight out from universities—up to a maximum of 6 percent per annum. That is another sort of thing it is doing in order to retain staff. 
The Minister has to continue to look at the issue of how we can ensure that we retain the staff of our Crown research institutes so that we can make sure that the model continues to work. It generally is working fairly well but it will not work if we do not have the human beings to make it work. 
Finally I mention the interest that our select committee has in the commercialisation processes of the Crown research institutes. They all do it in a different way. I guess there have been some issues around Industrial Research Ltd and whether it is prudent to be involved as an almost 100 percent investor in high-risk companies. By this particular point in time there should be enough information around regarding best practice so that the notion of best practice when it comes to the commercialisation of intellectual property can be passed on to Crown research institutes so that they can be pretty well informed.