Gilmore Aaron: Regulatory Improvement Bill — First Reading 
Gilmore Aaron: Regulatory Improvement Bill — First Reading 
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AARON GILMORE (National) 
: 
 I rise to support the Regulatory Improvement Bill which has been taken over by the Minister for Regulatory Reform the Hon Rodney Hide. As other members have said prior to this call this bill is another big step forward by this Government which is business-friendly and wants the economy to grow faster. 
Our Government cares about the level of compliance costs of business and it cares about getting rid of some of the red tape that stifles the ability of businesses everywhere to do what they want to do—serve their customers earn a reasonable return for their shareholders employ good people and make our communities the way we want them to be. Communities need things like this bill to make small businesses grow faster. This is a tidy-up bill and it is hoped that it will become an annual bill to tidy up the regulations that cause problems annually. 
This bill has a broad range of amendments 22 in total that will wither away some of the red tape that strangles many businesses in New Zealand. Prior to becoming a member of this House I was in business working for a large US multinational—a US$7 billion business. I was part of the Asian management team. I travelled across 14 different countries and I worked regularly in 11 of them. As some members opposite have said I found that it is very easy to set up a company in New Zealand. It can be done very quickly—in 24 or 48 hours. The interesting thing is that the ease of doing business day to day is quite remarkable relative to some other countries that I operated in—in particular Hong Kong and Singapore which is one of the countries mentioned by the previous speaker Raymond Huo. We have seen economies grow at a rate four to five times the rate of New Zealand’s—8 to 10 percent and even up to 13 and 14 percent. In New Zealand economic growth has averaged quite a lot lower. One of the reasons for that as outlined to me by my prior employers their shareholders and also by small businesses in the street is the number of things they have to deal with that they do not really want to deal with—red tape as they call it. I will talk a little bit about that. 
The difference between working in Hong Kong and working in New Zealand is that it takes a little while to set up a company in Hong Kong. Once the company actually gets there the compliance costs and operating costs are much lower in terms of what has to be done for reporting relative to what is seen in New Zealand. I will take just one example contained in this bill that would benefit the business I used to run and I will talk a little bit about that particular change—the change in the Companies Act 1993. That Act has a significant number of compliance costs with it particularly when compared with other nations that I have worked in and that Mr Chauvel referred to earlier. Yes it is easy to set up a business in New Zealand relative to some other nations but it is not necessarily easier to operate those businesses—for smaller companies in particular especially special-purpose entities or overseas-owned rapid-growth entities that are subsidiaries of overseas-owned businesses. I was pleased to see that this bill has changes to a particular Companies Act requirement for overseas businesses. 
My last role before being elected to Parliament was as the managing director of one of those businesses. We were established to commercialise a revolutionary technology in the area of high-temperature superconductors. This business has the potential estimated by external entities in Europe to be a market worth US$20 billion. It is an industry that is being developed right here in Wellington. I was pleased to be the leader of that business and today it is progressing very well. I was proud to be the leader of that business in its early stages and today that business continues to expand. At the time of establishment one of the hardest things to do for an early-stage business is to preserve cash flow and management time. Time of management is absolutely critical and is very hard to value. It is absolutely critical particularly for companies at their early stages and even if they are part of a larger overseas operation. It is in the time of the management that procedures can be at their weakest because the focus is on cash flow on trying to get revenue and on trying to get the product to market as fast as possible. So it is wonderful that this bill will allow some changes for businesses like those that I used to manage to give some degree of leniency in removing that Companies Act requirement if the business has fewer than 50 employees under $10 million in assets and under $20 million in revenue. Where such businesses are more than 25 percent owned by overseas operators or where they themselves are subsidiaries of an overseas incorporated company they will no longer have to incur the costs and time commitments of undertaking an audit should they pass a resolution not to do so. 
My own experience of auditors has been an interesting one and I would like to touch a bit on that. I used to work in one of the world’s leading commercial accounting and advisory businesses and having subsequently become a client of such firms it has given me some strong understanding of the costs that such firms may put in place for a business and the effort required for such an audit and for the preparation of financial statements for a company even if it is just a subsidiary of a much larger business. I can tell this House that this can amount to tens of thousands of dollars in fees paid to some sort of chartered accountant or audit firm and thousands of hours of management time. Collectively across New Zealand I estimate that would amount to millions of dollars of fees that could be shaved off the chartered accountant firms floating around New Zealand. More important thousands of hours of management time could be saved which could be used for what firms actually want to do—productive business decision-making to make New Zealand grow faster. What a wonderful thing that would be. That would help to create wealth for the benefit of New Zealand and get our economy growing at the speed we want it to grow. 
For many early-stage businesses the window of competitive advantage is narrow particularly in New Zealand where we have many global competitors to operate with. That was my experience in the business I used to manage. Additional time and costs saved early on in the first few months or years can be absolutely critical to the success of that business in subsequent years particularly when the growth flowing through is exponential. The business I used to operate in had a situation where we went from a few hundred thousand dollars in revenue to millions of dollars in revenue in a very short space of time. But if I had had to spend more time and effort dealing with auditors than I really wanted to the impact of that today would be significant. 
Another change in this bill is also an administrative technical one in nature and it is one that I commend for being an omnibus measure. We are not just dealing with all these 22 changes of provisions in individual fashion; we are dealing with them in one group. I think that that is a good thing; in itself it is an example of productivity in this House. Rather than dealing with 22 separate bills we have one bill dealing with a whole bunch of regulatory changes which will mean some efficiency gains will come from that process. 
I will talk now about one of the other amendments which would have also impacted on me in my former business career. It was talked about before by a couple of prior speakers and it concerns the Hazardous Substances and New Organisms Act. As outlined the regulatory improvements to that Act are those where many of those small businesses—particularly when they are in start-up type operation—have major problems going through some of the compliance issues for dealing with some of those hazard issues. It can take many many months—or that was our personal experience when we had a small amount of radioactive material to deal with in one of the things we were trying to create. It took us between 4 and 6 months to get approval. We could not operate any faster; we could not change the situation. Exactly the same process in Australia took 4 days but in New Zealand the approval took 4 to 6 months. That meant that in that time we could not proceed with the development of our product and as a result that led to loss of revenue and it actually led to the loss of competitive progress for our technology relative to that of our competitors particularly in Europe. The result of that was that we lost a contract of around US$4.5 million. That is US$4.5 million that was lost to this country because of that particular regulation which concerned some of the things we dealt with. 
Hon Maryan Street 
: Are you surprised? It was radioactive material. 
AARON GILMORE 
: Yes radioactive substances are an important sort of example. So we had a situation whereby if we had developed that technology overseas—in this case in America or Australia—we would have had approval in 4 days but instead it was 4 to 6 months and that was over US$4 million lost to the New Zealand economy. That is an example of why New Zealand in the last few years has been growing at a much lower rate than what we are seeing in China in other countries in Asia and in other places around the world. New Zealand has had to settle for second-best with growth rates of 2 to 3 percent. That is all we have—2 to 3 percent—to pay for the things we want in health education pensions and everything else. I must say that instead of taking a blatant line that—as in the case I dealt with—just because something is different means that it is wrong and it is bad we should be thinking of a practical solution and asking what is done overseas in dealing with these products. If we could speed these things up by the changes we have here—like changing the provisions in the Hazardous Substances and New Organisms Act—it will allow businesses like the ones I used to manage to get their products to market faster so that they do not have to wait for such a long period of time and those businesses will be in a position to grow faster which will help New Zealand to grow faster. 
Those are the reasons why these changes to the Hazardous Substances and New Organisms Act and the Companies Act are such good changes. They are wonderful changes to help our economy grow faster. Thank you very much.