State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill — First Reading 
State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill — First Reading 
[Volume:638;Page:8558] 
State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill 
First Reading 
Hon TREVOR MALLARD (Minister for State Owned Enterprises) 
: 
 I move  
That the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill be now read a first time. 
 At the appropriate time I intend to move that the bill be considered by the Commerce Committee and that the committee report finally to the House on or before 30 April 2007. 
The purpose of the bill is twofold. Firstly it permits a merger of AgriQuality and Asure to occur provided that shareholding Ministers are satisfied that a merger is viable. Secondly the bill allows shareholding Ministers to direct the board of AgriQuality not to provide certain services under the Animal Products Act 1999. 
To understand why a merger of the two companies is being contemplated it is necessary to briefly review their history. AgriQuality and Asure were established as State-owned enterprises on 1 November 1998 from the former MAF Quality Management. The reason for establishing these companies as State-owned enterprises was to improve the efficiency of the services provided by both organisations and to separate the service delivery function from the policy and regulatory advice provided by the Ministry of Agriculture and Forestry. They were created as separate State-owned enterprises because they had distinct product offerings and the operations of the new entities faced distinctly different challenges at that time. They were also structured in a way to ensure that there was minimal market overlap as competition between the two was not envisaged. 
Much has happened in the 9 years since AgriQuality and Asure were established. Consumers have become much more demanding about food safety and traceability thus placing greater pressure on companies like AgriQuality to provide comprehensive end-to-end food safety solutions. The New Zealand economy has also become more vulnerable to biosecurity threats as the international community has become more interconnected—and probably we have become aware of some of the threats we were not aware of previously as well. This has placed greater value on the provision of an integrated and comprehensive biosecurity response capability. AgriQuality and Asure currently compete to provide these services. Better New Zealand - wide outcomes could result from a more collaborative approach particularly in the provision of a highly skilled and coordinated standing army should a major biosecurity threat such as foot-and-mouth or a similar disease strike. 
In respect of the key provisions of the bill it is right to consider the merger of the companies for the reasons I have already mentioned should the business case currently being developed make financial and strategic sense from the perspective of the shareholders and the Ministers but on behalf of the taxpayers. 
 To enable a possible future merger legislation is required to remove one company or both from schedules 1 and 2 of the State-Owned Enterprises Act 1986 and to consequently amend a number of other enactments. The bill enables this to occur. The bill also provides that certain matters are not affected simply by reason of the merger of the two companies. For example a merger cannot be used by a third party to claim that there has been a breach of contract and an employee cannot claim that there has been a technical redundancy effectively through the merger. 
Part 2 enables that a merger of the two companies is time limited. It expires 2 years after the date on which the bill receives the Royal assent. The bill enables shareholding Ministers to direct AgriQuality’s board of directors not to provide export red meat inspection services under the Animal Products Act 1999 without specific authorising legislation preventing AgriQuality from providing export red meat services which could breach Part 2 of the Commerce Act 1986. The bill also specifies how the direction must be given to the board of directors and how direction must be notified. Furthermore it provides that the board of directors of AgriQuality must comply with that direction. I commend the bill to the House. 
SHANE ARDERN (National—Taranaki-King Country) 
: 
 I rise on behalf of the National Party in opposition to the proposals laid out in the bill by the Minister for a number of reasons. The first and most important is that the reason the two companies were set up in the first place was to provide a source of competition within the two structures one doing meat inspection and other doing food safety—completely different roles. It is interesting to hear the opposition from the two Ministers. Let me read what the Hon Paul Swain one of their former ministerial colleagues said at the time: “It is the second time that member has criticised the Opposition for doing its job. The point of the legislation going to the committee”—then presumably further on—“is so that the Opposition can ask the hard questions.” Well here the Opposition is doing its job and the Ministers’ colleague who criticised the Opposition last time for doing exactly what I am doing is over there chirping back; so nothing changes just the people on either side of the House. 
The reason why National is opposed to this bill is that we are seeing another intervening socialist ministerial directive telling these guys how they should do their job. At the end of the day there is no evidence to say that the competition that has been provided by having the two separate entities has any less merit now than it had then. As the Minister leaves the Chamber I just want to point out to him that the Animal Health Board chairman and chief executive have raised very serious concerns about the proposal because they have some major doubt as to whether the tuberculosis and possum eradication process can continue under the proposed merger in the way the Minister is proposing. 
I wonder whether the Minister has had a submission from this organisation; if not I suggest that it gets its submission in quickly to the Commerce Committee because I understand that that is the committee hearing submissions on this bill. The Chief Executive of the Animal Health Board Mr William McCook told farmers that TB levy payers had enjoyed real benefits from competition between TB testing contractors. I know as a farmer that that is correct. I know prior to the set-up of the two entities we used to be dictated to as to who would come to the farm when they would come to the farm and what they would do when they were on the farm and it was just tough if we did not like that. If we could not comply with that then we were penalised. Since there has been competition in regard to that we have had a far more conciliatory and far more organised approach to that with a much more cost-effective provision of service. So I tell the Minister that he needs to listen carefully to the Animal Health Board and its members because they have done a fine job in getting TB in this country under control. 
Further I understand that one of the concerns the Minister has is the issue of meat inspection. I invite members to go back to have a look prior to the division of AgriQuality and Asure from the Ministry of Agriculture and Forestry structure they came out of and what used to happen in our meatworks in regard to meat inspection. A cartel held farmers and the meatworks to ransom. It used to demand exorbitant fees to provide that service. Its service was often found to be wanting. As an effect of that we had the highest killing charges in our meatworks of any of the OECD countries. Here we are a competing nation exporting our products to the world and what we have is a Government structure piling thousands of dollars of costs into that structure for no net gain to anybody—not in terms of quality not in terms of what the meat inspectors are there for in the first place and not in terms of market access. There is no gain. 
So I invite members to go back and look at that and ask the question whether having the ability of another suitable organisation that would be recognised internationally and having the ability of that organisation to say “I will” or “we might” compete in this area has brought huge benefits. I have no understanding of what it is that has brought the Minister to his conclusion that these two organisations should be merged and then come under the jurisdiction of the Minister himself. 
The two State-owned enterprises were created as the Minister said in November 1998 out of the corporatisation of the MAF Quality Management business units. AgriQuality’s core business is the provision of food safety and biosecurity services. I agree with the Minister that we need to do whatever it takes to ensure that we have solid biosecurity structures in place; on that I have no disagreement with the Minister. But what I do disagree with the Minister over is that merging and thereby reducing the number of organisations that can have input or provide technical advice or respond in the case of a biosecurity incursion is not the way to make sure we achieve that outcome. 
I remind the Minister of what happened on Waiheke Island at the time of the foot-and-mouth hoax. We had the Ministry of Agriculture and Forestry scurrying around trying to round up enough people to get out there and find out whether this was a real foot-and-mouth incursion or a hoax. Media people were travelling to farms and travelling back and furnishing their reports in Auckland and other such places before the ministry could get there. That says a lot about the resourcing but how will merging these two organisations together thereby presumably reducing the amount of expertise that exists help in that matter? For the life of me I have not heard anybody submit to me that this would somehow or other have assisted on that particular occasion. The Minister has a lot more questions to answer than he has given answers to and I am sure we might hear some of those answers during the course of this debate but I doubt whether they will come from that Minister. 
So I suggest that the Government makes sure that all the relevant bodies are able to submit to the select committee and that it does stand back and not just take advice from those within various departments that have vested interests. It should stand back and listen to the stakeholders themselves—the farmers the meat companies the biosecurity agencies and all those who feed into the various aspects of this bill—to justify where the improved efficiency the Minister speaks of can come from when one turns what is now a competitive environment into a monopoly service provider and justify also to the select committee how it is that it will increase the resourcing into certain areas such as biosecurity when one actually reduces the efficiency of the service provided. I would like answers to those questions and I am sure they may be forthcoming in that select committee. 
The aim of the bill as the Minister put it is to merge AgriQuality and Asure New Zealand and to give the Minister himself powers to direct those agencies where and when they should or should not poke their beaks as it were. It defies logic how Ministers of the Crown will ever be in a position to have that kind of micromanagement advice or expertise to ensure we get the right outcome. I just say to the Minister that wherever this has happened before the outcome the Minister was seeking has always been the opposite of that set out by those groups who have advised the Minister on it. I suggest that the Minister should also take a look at some of the articles being written by some within the agricultural sector who are overwhelmingly opposed to what is being proposed. He should take the time to go through the detail of some of their argument so that he can have a clearer view of what he is trying to achieve and whether this will achieve it. 
I think that this is a backwards step. I think it is a mistake. I hope that during the select committee process the Government will come to realise that and drop the idea altogether although its track record suggests that that would be unlikely. If the Government does go ahead with this I can see further amendments not too far down the track to what is being proposed. 
MARYAN STREET (Labour) 
: 
 I rise to speak to the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill 2007. I thank the member opposite Shane Ardern for his comments and I look forward to the National Party’s constructive contribution at the Commerce Committee when it is considering this bill. 
The two entitiesAgriQuality and Asure New Zealand were as has been traversed already established in November 1998 but I think it is important to remember what the functions of the two organisations were in order to work out the sense of now contemplating a merger. The AgriQuality core business was the provision of food safety and biosecurity services—that is its business was to inspect live meat as it were—whereas Asure New Zealand inspected dead meat or processed meat. Those two functions were important and perhaps in their day justified establishing separate organisations—although personally I would query that as well; I am not sure whether it was altogether sensible to separate out those two functions. It was as though in 1998 the corporatisation model was being extrapolated out to another level again beyond that to which it was originally intended to apply. It is one thing to create a State-owned enterprise for the purpose of establishing greater efficiencies in delivering public services but then to split those out into two different organisations with different functions was a kind of atomisation of the process that really did not stack up or has not stacked up in recent times. 
I want to traverse a little of that history. The corporatisation move was established under the fourth Labour Government in the 1980s and it resulted in a lot of improved efficiencies in businesses that were core business of the State. Certainly when the key export earner of the economy is agriculture it is right and proper that the State has a direct and hands-on function in the administration and quality supervision of that part of the economy. But to separate out the functions into two different organisations—and for my own understanding more than for anything else I refer to them as live meat and dead meat; people will understand what I mean by that: the meat inspectors and the inspection of processed meat—was to carry corporatisation to an extreme. 
It becomes important to say that a number of things have changed in the intervening years. There are two things that make the consideration of a merger and therefore this bill that is in front of Parliament a sensible suggestion and a sensible proposition from the Government. First of all consumers now require higher and more transparent standards of quality than they used to. Although that is no reflection on the standards that were met in the past it does mean that if two State entities were to compete with each other—which is the proposition that gave rise to this bill—then the interests of consumers are not likely to be observed or met in that instance. The second thing that has become important in the course of the intervening years has been the need to track meat—the need to track live and processed meat in order to be able to determine in the event of a biosecurity risk the precise herd from which a piece of processed meat has come and therefore to go back to that particular farmer and that particular herd and contain any identified risk. 
The images that will come into the minds of the public in the consideration of this bill will be those ghastly images from the late 1990s of the burning of herds in the United Kingdom which showed the need to track back exactly where the biosecurity risks came from. My colleague on the other side of the House referred also to the recent putative outbreak of foot-and-mouth on Waiheke Island. That is a very good contemporary example. Although of course it came to nothing it was an essential test. 
It is the view of the Government that creating the possibility for these two Crown entities to merge will in fact provide a greater efficiency in that if there ever were a need to separate out the two functions the time has long since passed for that to be the most effective way to administer the quality standards we need not only to assure consumers here and abroad but also to maintain the integrity of our biosecurity protections in New Zealand. Those twin challenges have emerged over the last few years—the higher expectations of consumers and the need to identify contain and sheet back to its origins any biosecurity risk. 
The purpose of this bill is to put into legislation a way of preventing these two bodies from competing with each other in the provision of export red meat inspection services and to allow for the merging of the two organisations at some point. It is interesting and pertinent to note that the Public Service Association (PSA)# welcomes the announcement of this legislation. The PSA national secretary Richard Wagstaff has stated: “The benefits to PSA members at these enterprises and the New Zealand taxpayer will be significant. It’s a common-sense solution to issues that hamper efficiency and effectiveness.” He went on to state that the two enterprises must provide an integrated service in order to protect New Zealand’s biosecurity interests that that is almost impossible to achieve if the two organisations are running against each other head-to-head in competition so a merger will promote a more strategic and responsive capacity to address biosecurity threats. I welcome those comments because the PSA represents almost totally the workers who work in both organisations and they have been the ones who have experienced some career instability and uncertainty which has affected recruitment and retention. Certainly their endorsement of the potential merger of the two organisations is significant in that it comes from those who are the experts within the two organisations. 
In conclusion I think it will become obvious what the benefits of the potential merger are. I look forward to debating this matter when it comes before the Commerce Committee. Thank you Mr Assistant Speaker. 
NATHAN GUY (National) 
: 
 I rise to take a call on the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. This bill is all about the merger of two State-owned enterprises that are in direct competition with each other. We in the National Party think that competition is quite a good thing. These two State-owned enterprises compete for a variety of services. They compete for TB testing. Asure has about 40 percent of that market share; AgriQuality has most of the remainder. They compete for biosecurity work they compete for livestock inspections and now AgriQuality wants to move into red meat inspection. Of course the Labour Government and the Minister for State Owned Enterprises say no. They say that this is terrible because they say we cannot have State-owned enterprises competing. So the Minister says no to competition yet there is a whole list of State-owned enterprises already competing against one another. 
We have had AgriQuality and Asure in front of the Primary Production Committee since I have been in Parliament in the last 18 months. We went down and visited Asure in Belfast on the outskirts of Christchurch. It is doing a fantastic job and it is a very very good operation. We have had AgriQuality out on our farm doing our TB testing and doing a very very good job. It has a very professional approach and it gives great service. So when I look back through the collection of financial reviews in 2004 and 2005 one really strikes a chord. I quote from the comment made by the select committee on the merger in the bill that is in front of us now: “This merger will reduce competition in the provision of the quality assurance services significantly disadvantaging the New Zealand primary sector.” So up will go the meat inspection charges up will go TB testing up will go the price that people pay at the supermarket counter and so it will flow on. 
Then I looked through the Bills Digest particularly with regard to this bill. I will quote from it: “The Government would prefer to see SOEs collaborate and coordinate their activities rather than compete against each other at a cost to the Crown and taxpayers.” Well what about this? We have Meridian Energy we have TrustPower we have Genesis Energy—the list goes on and on. 
R Doug Woolerton 
: That’s a bit ho-hum sometimes too. 
NATHAN GUY 
: That is exactly right. But they are all competing to try to bring the cost down not to remove competition so that the cost will go up. 
It is interesting when I followed on from looking at the Bills Digest to find that the business case for this merger still has not even been established. So we do not know what will happen in the business case. We do not know the economic benefits of this merger. We have not seen those. We did not hear about them when Mr Mallard stood up and spoke in front of us today. He did not talk about that. He was silent on any economic benefits he believes it may have. So I think we have some serious flaws in this whole merger of these two State-owned enterprises. 
It is ironic that Minister Mallard wrote in June 2006 within the last year to all the chairs of State-owned enterprises suggesting that they should go ahead and invest in areas outside but related to their core business. In other words he said: “Here is the chequebook. Get out there and diversify.” When I put on my rural hat and think about it I would ask whether farmers would want public sector entities such as Landcorp diversifying into milk production. Would farmers want Landcorp setting up a milk plant in competition with Fonterra? 
Here we have a Minister saying we do not want competition and we do not believe that it is very good with regard to AgriQuality and Asure but on the other hand we actually want to see all State-owned enterprises diversifying. Mr Mallard believes that this role will bring about economic transformation. Well is that not a buzzword? It is very like the buzzwords about carbon neutrality that we hear—it is more hollow words more bumper stickers from this Government. 
Yet Treasury has concerns with this move. The Ministry of Economic Development has concerns with Mr Mallard’s approach and it states that State-owned enterprises should be able to diversify. So we in the National Party have real concerns about this matter. 
When I did a little bit of research on what the Labour Government thinks about these State-owned enterprises I came up with this comment from Graeme Hunt: “In former times the Labour Government acquired business influence by nationalisation or licensing. Now the Government extends its reach into the private sector by regulation and through the power of State-owned enterprises.” 
Labour was founded about 90 years ago on a wild socialism sort of agenda. It is immensely distrustful of business but it is willing to let it prosper in a State-owned enterprise straitjacket of regulation and high taxes. When I looked at this matter I also noticed that Dr Richard Norman a senior lecturer in human resource management and industrial relations at Victoria University did a study in August last year—just in 2006—and it was not one where he was going to damn the public sector. What he did was to go out and survey all those directors to see what they thought of the State-owned enterprises. 
He did a survey of 62 directors who are currently on the boards of State-owned enterprises. He found that two-thirds of those who responded—28 directors—had serious questions about the process of selecting directors. There were rumblings about directors being chosen to satisfy the political correctness of the Labour Government and not for their skills and experience. Here we have the Minister Trevor Mallard wanting State-owned enterprises to diversify yet he goes around and handpicks his Labour lackeys to put on these State-owned enterprise boards. Mr Norman found that the competence of these boards is left floundering. It is a long and sometimes unprofessional and embarrassing appointment process—that is what Mr Norman found when he looked at State-owned enterprise boards. 
Darren Hughes 
: Like Jim Bolger. 
NATHAN GUY 
: Some of them are very good but some of them are actually left floundering. That is what his study confirmed when he researched and got 28 replies from those directors on State-owned enterprise boards. 
Right now a big part of this bill is that the national biosecurity response capability will somehow improve under the merger of these two entities. It needs to because Biosecurity New Zealand is an embarrassment—it is an embarrassment to the landowners of New Zealand. Recently we had a GE corn outbreak that got into this country somehow because of human error. The Ogden report found that there were big problems with the computer system at Biosecurity New Zealand and with the human resource capability of its staff. As a result 18 farms in New Zealand planted 260 hectares of corn contaminated with GE. So there are big concerns about Biosecurity New Zealand’s response—and I cannot see how merging these two State-owned enterprises will improve that. Didymo has broken out right throughout the rivers of the South Island. We have real concerns. 
Let me tell members what I think is really important when we look at this whole State-owned enterprise debate. Recently 400 millimetres of rain fell in Northland. I as a farmer who was flooded in the Manawatu floods of 2004 am very sympathetic towards those people and I hope they are bearing up OK. But when we look at the Meteorological Service which is a State-owned enterprise and the National Institute of Water and Atmospheric Research which is a Crown research institute we see that those two organisations need to work closer together. The institute has a multimillion-dollar Cray supercomputer that can forecast weather bombs and flood events 12 to 36 hours ahead of the Meteorological Service yet the service has the contract for weather forecasting in New Zealand. If ever there was a case for a State-owned enterprise and a Crown research institute to get together and work more collaboratively then there it is. There is the evidence. If the institute can get that information to the Meteorological Service and stop Mr Maharey and Mr Mallard from fighting then that will deliver a better response to rural New Zealand landowners. 
In looking forward National has some real concerns about this bill and we will have to iron those out in the Commerce Committee. What I have identified today is that the Minister for State Owned Enterprises has double standards. He does not want competition. He is willing to open up the cheque book and say that State-owned enterprises should diversify. At the end of the day the public do not trust Mr Mallard because he has closed so many schools and has made a complete shambles of the Rugby World Cup stadium in Auckland. Right now he wants to see less competition which will drive up the costs for rural New Zealand. 
R DOUG WOOLERTON (NZ First) 
: 
 When I was on the Primary Production Committee which is the select committee that these two organisations used to—and presumably still do—report to I remember one thing that stood out above all others. These two organisations went at it in the courts. They sued each other. I listened carefully to the words of Shane Ardern—a man I admire and whom I think I would like to call a friend—and some of them did not ring true. They were not the words of the Shane Ardern I know. I know what Mr Ardern thinks and he does not like waste. He does like competition that is true but he does not like waste. This State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill will eliminate waste because in this situation the so-called competition is actually illusory. There is very little competition in real terms between these two companies. There is fighting there are court cases and there are takeover bids—there are all of those things—but I am not too sure that there is true competition in the way there should be. 
I liked the words of Maryan Street who said that this is State-owned enterprise privatisation to an extent that is ridiculous. I think she used the word “atomised”; I would just about go to the word “vaporised” as far as these two organisations are concerned. That is quite true. I think it is eminently sensible that some cooperation and collaboration be brought into it—in other words that common sense begins to prevail again. It is a matter of ideology. I can understand the ideology of both the Labour and National sides when it comes to services—because that is what we are talking about here at the end of the day—and how they are delivered through Government agencies which I think it would be fair to say is Labour’s preferred model; or trading enterprises which is the National Party’s preference. 
If these two companies were to be merged and for some reason or another voters had a hiccup and put National into Government I would be very very surprised if National split asunder these two organisations. I think that would be most unlikely. So I think the competition we are seeing now is illusory and that efficiencies can be made. New Zealand First supports this bill. 
It saddens me that too often when we have a debate like this we forget what it is all about. This bill is about ensuring that the food products that leave our shore the products that set the standard of living for almost all New Zealanders are paramount. It must be and it is essential that these companies that oversee our product quality are absolutely beyond any shadow of doubt when it comes to their efficiency and diligence. Companies overseas and other countries will use anything they can—any little slip-up—to bar our products from their shores. Mr Guy knows that Mr Ardern knows that and Eric Roy who I see is getting ready for a major speech knows that because I have heard them talking in the select committee. 
I think that to regard these operations as services is right and proper and it is right that the Government exercises some control over them. Certainly I think it fits the New Zealand First model because we are interested in one thing: that the products leave our shores in the highest possible bracket as far as finance and quality go so that we can return the goods to this country. I do not think it is excessive to say that when companies are fighting each other are in takeover mode and are in the business of going to the lawyers rather than getting on with their job that must indeed result in them taking their eyes off the prize. It must be a situation that is not conducive to good business. 
I think that New Zealand First will support this bill right through. I will be interested like Mr Ardern and the other speakers to see what comes out of the Commerce Committee. I hope the wise heads on that committee do not overlook the service aspect of this bill and I hope they do not get bogged down in ideology. I know that Mr Guy Mr Ardern and Mr Roy will not do that and I ask them to restrain some of their colleagues who have a bent for that sort of thing. So New Zealand First supports this bill. Thank you. 
KEITH LOCKE (Green) 
: 
 The Green Party supports the essence of this State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill which merges the two organisations and creates a non-competitive model for such things as our meat inspection services. But we do have some concerns about the bill which is why we will be abstaining. We think there is a problem with the merger in that the system may become too bureaucratic. 
We would prefer that the merged entity was not a State-owned enterprise which is not really a very transparent model and not terribly accountable. It could be a bit too bureaucratic and repeat some of the problems that have accompanied Asure New Zealand over the years. Asure New Zealand was in a terrible mess particularly in terms of relations with its staff. It laid people off and there was all kinds of skulduggery a few years ago. Apparently that has been largely sorted out now but if this bill creates just one organisation using an State-owned enterprise model without more transparency we could find that the organisation is not efficient and that there are other problems associated with that model. So we would favour some more transparent form of Crown entity rather than a State-owned enterprise. 
I see two problems in using a competitive model in this area. I have some experience in this area. I was at one point in my career a meat grader at the Gear meatworks. I worked closely with the meat inspectors who at that time worked under the Ministry of Agriculture and Fisheries. So I am pretty aware of what they do at least in terms of operations on the mutton chain and beef chains. 
I can see two problems with the competitive model. The first is that if firms are competing for a contract and want to get their costs down the easiest way to do that is to employ less qualified staff—they do not have to be paid as much—and to push the meat through a bit quicker which is quite easy to do. Of course mistakes follow and the product can create problems for New Zealand when it is exported and the mistakes are discovered overseas. We are talking here to a large extent about an export industry. I know from the way things work that if firms are put into that competitive model to get costs down what suffers is quality and that is something we want to protect at all costs. 
My friend Shane Ardern has talked about the fact that on the farm different inspectors come in to check for TB. Even there the competitive model may have some problems. But I think that with TB either it is there or it is not and with a bit of quality testing it can be worked out whether each contractor is performing its duties. But with the sorts of things that meat inspectors do on the chain in a meatworks there is a fine line often between what is acceptable as a disease and what is not. 
For example pleurisy is one of the common diseases that comes down the chain and whether the animal is deemed to have pleurisy depends on the amount of pleurisy. There is a shifting dividing line; it is not an exact science. A lot of meat inspection and meat grading is not an exact science. I can imagine that under a competitive model to try to please the farmers or the meatworks the inspector might put that line of where pleurisy exists more in the direction of the meatworks and the farmer—at the cost of our overseas markets. That could easily be done if we got too much into this competitive model. 
My experience with the Ministry of Agriculture and Fisheries model in the past was that meat inspectors did not have any pressure on them to push the line in the wrong direction or to push the meat through too fast. They were just doing their job to the best ability they had. So the Green Party certainly thinks that a non-competitive model is best but we just do not want it to be too much of a bureaucratic model or an inefficient model. Thank you. 
TARIANA TURIA (Co-Leader—Maori Party) 
: 
Tena koe Mr Assistant Speaker. Tenatatou katoa. I am pleased to have a chance to speak about the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. I do not know a great deal about it but I have listened carefully to what people have said in the House today. I guess we have an interest in the way in which this nation assesses the quality of animal products and materials and in particular the way in which it invests in the export red meat market given the number of Maori people who are involved in farming. 
This bill is about services and we do support it at this first reading. The Maori Party has taken an interest in the way in which quality outcomes and services can be achieved through two key State enterprises established to do so—AgriQuality Ltd and Asure New Zealand Ltd. Part of our interest concerns how a merger can be planned between two very similar enterprises and it would appear that the process is thoroughly agreeable to all parties despite all the flexing of muscles between these agencies. 
We have on one hand Asure New Zealand bound by its mission: “Whaia ko taikaka Building Consumer Confidence”. Its stated mission is to provide “simple and efficient solutions to complex food safety issues” with key values such as objectivity know-how and integrity. It is already well on the way towards creating a trusted partnership. Importantly it has already established relationships with the Ministry of Agriculture and Forestry based on the State-owned enterprise model. On the other hand we have AgriQuality Ltd an entity that last week issued a release saying that it was committed to creating value for its ultimate stakeholders the New Zealand public. It then went on to further suggest that in the past 7 years we have witnessed immense changes across the international global supply-chain and regulatory environment and that there is now a strong case to be considered for merging the two companies. Both companies are firmly focused on creating value which will benefit the agricultural and food industries in New Zealand with a particular focus on enhancing their reputations for the good of the New Zealand public. 
There has been a bit of an X factor as far as the Maori Party is concerned. I want to draw to the attention of this House the fact that one of these entities AgriQuality Ltd is chaired by a NgaiTahu person HenareRakihia Tau and that a NgatiPorou and NgatiKahungunu person Tom Mulligan is a director of Asure New Zealand Ltd. Too often in this House we hear about issues of disparities and problems that the Government has identified in another sector that seem to be disproportionately falling upon Maori yet every day throughout this land Maori directors managers leaders and entrepreneurs are helping to shape the society that we are a part of. I am thinking of some of New Zealand’s finest leaders and movers and shakers who are on boards—people like June McCabe a director of Television New Zealand Ltd and New Zealand Venture Investment Fund Ltd; Taari Nicholas a director of Transmission Holdings Ltd; Mavis Mullins a director of Landcorp Farming Ltd; Sir Paul Reeves a director of Mighty River Power Ltd; Dr Mere Roberts a director of the Institute of Environmental Science and Research Ltd; Tem Hall deputy chair of the New Zealand Forest Research Institute Ltd; Professor Ngatata Love a director of New Zealand Post Ltd and Witi Ihimaera-Smiler a director of Learning Media Ltd—and that is to name but a few. The great thing is that this is a sample of much much more to come. We have a wealth of talent out there in governance and in leadership which this bill demonstrates. 
We believe that the bill reflects the desire for cooperation in that it will prevent AgriQuality Ltd from providing export red meat inspection services. It would appear to be good business sense for the business case of AgriQuality Ltd not to be in competition with Asure New Zealand Ltd. At the end of the day the Maori Party would prefer to see State-owned enterprises collaborate and coordinate their activities rather than compete against each other with a cost to the Crown and more important to taxpayers. It would appear really good business sense to maximise the commercial and non-commercial ownership benefits of both entities. If they were private enterprises then I would probably agree with Shane Ardern in regard to competition but they are not. So merging AgriQuality and Asure must mean that there will be more efficiencies. 
In its most recently completed financial year AgriQuality Ltd had a total operating revenue of $79 million had total assets of $54.6 million and had 750 fulltime-equivalent staff. The needs of stakeholders in the dairy meat horticulture and food industries are central to the New Zealand brand. The proposal to merge AgriQuality and Asure will now mean a far more effective surveillance and monitoring of food from the paddock right through to the shop shelf. In the interests of safe and wholesome food for opportunities for our future export markets and for the sense of confidence we have in Maori as successful managers governors and directors we are happy to support this bill at its first reading. 
GORDON COPELAND (United Future) 
: 
 United Future will be supporting the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill at least for the first reading and referral to the Commerce Committee on which I serve as deputy chair. The whole question of assurance particularly with regard to New Zealand’s meat export products probably takes on an added significance today compared with the recent past. The development of new technology is one of the reasons for that. 
I remember when the House was debating very vigorously the microchipping of dogs about a year ago. At that time I attended a meeting in Hamilton where vets were saying to farmers that it was necessary for New Zealand to microchip cattle and other animals that produce red meat because our international markets demand the ability to trace a particular cut of meat from the plate of the consumer whether in France Britain or elsewhere right back to the exact animal it came from. That has happened because of the way in which mad cow disease and other transmitted diseases have been highlighted and the consciousness of consumers today who want to be assured that the products they consume are safe to eat. 
The spotlight is also on the question of carbon miles I think it is which is the amount of carbon used to send meat from New Zealand for example to export markets in Europe. 
R Doug Woolerton 
: “Food miles”. 
GORDON COPELAND 
: I thank the member very much; I knew I had the term slightly wrong. I think that is a smokescreen. New Zealand will successfully defend itself I have no doubt because we will be able to demonstrate exactly the amount of carbon used in producing meat in New Zealand versus the amount used by our major competitors overseas. In that regard we have the very temperate New Zealand climate on our side. 
I say though that this bill highlights some problems for United Future in respect of the present arrangements for State-owned enterprises. Let us not forget that the shareholders of these two State-owned enterprises are the people of New Zealand and under a normal corporate model the shareholders of a company are its proprietors. So the reality for both AgriQuality Ltd and Asure New Zealand Ltd is that the people of New Zealand should be exercising proprietorship for these two organisations and they do that through their shareholding Minister—in this case the Hon Trevor Mallard. 
But when we come to the State-owned enterprise model we find as Keith Locke of the Green Party has pointed out that in some ways these organisations are neither fish nor fowl. They are somewhere in between a truly corporate model and a Crown entity. That is highlighted by this bill because we find that the proprietor of the company—the shareholding Minister on behalf of the people of New Zealand—is not able to give a directive to AgriQuality Ltd that it should not enter into competitive arrangements and into the patch that is presently occupied by Asure New Zealand Ltd. That is why the Minister has to come to Parliament to get our permission to give a directive to AgriQuality Ltd that it is not to compete with Asure New Zealand Ltd when it comes to red meat inspection. 
That says to us that we have something a little bit wrong with this whole State-owned enterprise model. If these were publicly listed companies a majority of the shareholders could exercise their proprietary rights and give a directive to the board of a company that it is not to engage in certain activities and it is to engage in others. But this is not able to be done under the present State-owned enterprise model. That is why United Future believes that the model itself needs to be changed in the interests of better outcomes for the people of New Zealand. 
United Future is proposing a suggestion that is different from any other party’s suggestion to my knowledge. We think it is time to sell down a 40 percent interest in State-owned enterprises to mum and dad investors but to have the Crown retain the other 60 percent and thereby always ensure that the Crown will be in control of State-owned enterprises. I add that in respect of the 40 percent interest sold down to mum and dad investors and for example the New Zealand Superannuation Fund those shareholders would have the ability to onsell to non-resident shareholders only up to a maximum of 20 percent of the total shares in a State-owned enterprise. 
In other words the model we propose has the safeguard that 80 percent of the ownership of State-owned enterprises would continue not only to be controlled from New Zealand but also to be owned by New Zealanders. I should add that in the case of Television New Zealand we would raise that to 90 percent. But that would actually change the face of the whole State-owned enterprise model quite dramatically. 
We could adopt a genuine if you like public company model where directors would be elected by all the shareholders of the company and would not be appointed by the Minister and the Government of the day. Indeed the Crown would have a 60 percent say but potentially a 40 percent interest would be the view of other shareholders who are independent of the Crown. I know for a fact that State-owned enterprises would welcome that change because the confidential survey undertaken by Victoria University about 18 months ago indicated that even the directors of State-owned enterprises themselves say that a major problem they see with the model is political interference. Ministers cannot direct State-owned enterprises what to do but of course they can change the composition of the board which I guess is another way of sanctioning various activities. 
We believe that this change would give a far better outcome not only for these two State-owned enterprises but also for others. We would then see boards comprised of people who were elected at an annual general meeting and it would be more representative. It would depoliticise the appointment process to some extent and we think that is all very positive for State-owned enterprises not to mention the fact that they would also start to answer to the financial disciplines that would accompany the listing of those 40 percent shareholdings on the New Zealand Exchange. 
Also of course I cannot overemphasise the importance that we attach to building a genuine ownership model in New Zealand. In this economy an unusually large share of all commercial activity is Crown-owned. The debate that has gone on for years between the two major parties about 100 percent Crown ownership versus 100 percent privatisation has I think become counter-productive and we need to look for a new and different way forward. 
Having said that the other provisions of the legislation seem to be quite sound—that we should look to the possibility of merging these two State-owned enterprises into one single seamless organisation. That makes sense to us. I liken it a little bit to the Customs Service. I do agree wholeheartedly in normal circumstances with the idea of competition to get costs down but we do not have a competitive arrangement for customs because it is an official function. On the other side of the ledger when we are giving assurance to our export markets and overseas consumers competition does not make a lot of sense there either because those involved are carrying out something that is official in nature. 
I think Keith Locke made the point correctly that we need to put quality assurance at the top of the list in this area otherwise our getting this wrong has the potential to jeopardise our entire meat exports. That of course is something that none of us can take a risk with. So with those remarks I again signal United Future’s support for the bill’s referral to the select committee and for the compressed time frame in that regard. 
Hon LUAMANUVAO WINNIE LABAN (Minister for the Community and Voluntary Sector) 
: 
 Kia ora talofa lava and warm Pacific greetings. It is my pleasure indeed to stand and speak in support of the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. This bill makes for good common sense and is very well supported by the sector. 
I wish to make a couple of points about it. The bill provides for a possible merger between the two State-owned enterprises—AgriQuality and Asure New Zealand. The bill does not force a merger or require a merger; it simply enables a merger between the two State-owned enterprises to take place. It is good to see that both AgriQuality and Asure New Zealand have both agreed to work together to explore the possibility of a merger. Rakihia Tau Chair of AgriQuality has expressed his company’s strong support for this initiative and Asure New Zealand has also agreed to cooperate. In a recent media statement the Chair of the board confirmed Asure’s willingness to cooperate fully in the preparation of a business case to assess the economic viability of the merger. 
Unions also support the bill and as my colleague Maryan Street said the Public Service Association which represents meat inspectors employed at Asure and staff at AgriQuality says that the benefits of a possible merger to union members and the taxpayer are significant. It is really heartening to see the two State-owned enterprises and the union in agreement at such an early stage as this Labour-led Government prefers to see State-owned enterprises collaborating and cooperating together where they can instead of competing with each other and spending taxpayers’ money to do so. 
The bill will also prevent direct competition between the two State-owned enterprises and companies in delivering export red meat inspection services. Our Labour-led Government is committed to value for money and value for people and to competing in the global market to maximise gains for New Zealand quality product quality service and quality business. That is the Kiwi way. That also feeds nicely into an important provision of this bill. It authorises shareholding Ministers to issue a direction to AgriQuality to prevent it from providing export red meat inspection services. It is very important that the interests of the wider public and the sector are represented and this bill allows shareholding Ministers to do that. 
If in the future it is seen as viable and AgriQuality and Asure merge there will be many benefits for taxpayers and the sector. As outlined earlier by our Minister for State Owned Enterprises Trevor Mallard there will be cost efficiencies from having a single national provider. There will be improved integration of national biosecurity capability which is a point not to be missed I might add given the increased vulnerability of New Zealand and other nations to breaches in biosecurity in today’s interdependent interconnected and global world. There would also be the ability to provide better information for consumers about where their food comes from and additional revenue opportunities from offering quality assurance services to the wider food industry. A single integrated service provider would be better placed against international competition. 
Again Rakihia Tau Chair of AgriQuality sums this up better than I can in his recent media statement when he said: “The possible merger of AgriQuality and Asure would have the added advantage of allowing effective traceability of food from the paddock right through to the supermarket shelf strengthening access to international markets across the breadth of the supply chain. Any move in this direction will see our reputation for producing safe and wholesome food products enhanced with the potential to benefit the wider agricultural and food industries in New Zealand.” 
A previous speaker Nathan Guy made many assumptions about this bill—for example that there would be increased costs with this process and that competition is good. We are not disputing that. It is also important to have the pragmatic business savvy to collaboratively work out the best bang for our buck for business consumers taxpayers and the State. Each has a role to play in order to keep the checks and balances of our respective responsibilities to ensure we get a win-win for New Zealand. It is also important that we support AgriQuality Ltd and Asure New Zealand Ltd’s decision to work together to explore the possibility of a merger and to not make assumptions and pre-empt the process at this stage. 
This is a common-sense bill. It is also an example of a proactive Government working on behalf of all New Zealanders to ensure that where opportunities that benefit the taxpayer and industry exist they are acted on properly explored and if viable fully implemented. I congratulate my colleague the Hon Trevor Mallard for his leadership in introducing this bill and I look forward to discussing it further at our Commerce Committee. Thank you Mr Speaker. 
ERIC ROY (National—Invercargill) 
: 
 I was sitting up in my office and I heard this bill being debated and I felt I should come and make a contribution. I do so for several reasons. I am a little confused as to why we are having this State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. The bill sets out a provision for a merger or a takeover although that is not actually defined. But before I get on to that I will talk about some important principles that this House needs to engage in before it goes any further with this bill. 
There are perhaps two key elements to our prosperity as an exporting nation of primary produce. One is that we can assure the consumer—the purchaser—of the quality of that produce. Ninety-odd percent of our primary produce particularly in the meat area is exported. We need to have an unequivocal unchallenged assurance that the product is safe and wholesome. After that comes a whole range of things about the processing being done in a sustainable way and the upholding of animal welfare issues. All of that stuff helps but right at the top is assurance. We have had two State-owned enterprises providing that assurance—AgriQuality Ltd and Asure Ltd. 
Is there an issue that the model we have now has not been confirming assuring and asserting the absolute quality and safety of our products? No speaker has stood up and said that is the case. We would hold that AgriQuality and Asure have done it well because they are mandated to do so and because they abide by the Codex Alimentarius laws which are the meat hygiene phytosanitary requirements that must be met before that assurance can be given. Both companies have done that so there is not an issue in that regard. The second thing is the supply to the market which requires farmers to produce lambs at such a rate that it becomes a viable land use option. 
That is where I have some difficulty. As I go round New Zealand and talk to provincial New Zealanders and farmers I hear several cries. But one cry that I hear everywhere I go—and Government members will have heard it—is: “The cost of compliance is killing us. Everything we do is going up a little bit more every year.” I will give one very good example of that. The Holidays Act came into force on 1 April. The meat companies tell us that it will cost them $1 a lamb. OK it is a fine principle. We have actually redefined the cake and the workers are getting a bit of a bigger slice but someone else is getting less. The cost of compliance—that is where it fits. 
Darren Hughes 
: National voted for it. 
ERIC ROY 
: Well that is OK; we did—and we are not going to change it. I would just say to Darren Hughes that we cannot keep on doing it. We cannot keep on changing the wedge shapes of the pie; we actually have to grow the cake. We have to do that. I am not arguing but I am just giving that as an example. 
Here we will do something else. We will merge two companies that provide a valuable service into one. I respect what Keith Locke said about the old Ministry of Agriculture and Fisheries model. He said that was a good idea but that he did not want it to get too bureaucratic. How do we stop that? We stop it by using a competitive model surely. Is there another way that stops too many people sitting in offices fiddling with computers not being productive and having high overheads? How can we get the focus on that? It is the competitive model. 
As my good friend Nathan Guy pointed out there are many examples where we have State-owned enterprises competing. We have just had Quotable Value New Zealand before our select committee and it is now competing in Australia. There is no reason why either Asure or AgriQuality could not go and compete somewhere overseas with their expertise which is world-renowned. But we are actually putting a fence around them and saying that they have to get into one kind of unit in order to deliver. 
The principle we need to remember before we go any further is that there needs to be assurance—no question about it—and there needs to be competitiveness to ensure that. The second principle is that there has to be some viability in the producer. Otherwise there is no point in having Asure or AgriQuality in New Zealand because there will be a diminishing amount of product that will need to be assured. There is a huge question about that. 
I have read the explanatory note. It states: “The Government wishes to prevent this competition from occurring”—that is between the two entities—“as it considers that it would result in a net cost to the Crown as the owner of both AgriQuality and Asure.” No speaker has told us how that happens. No one has come along and said what the reason will be for the cost to the Crown or what that cost will be. Members actually do not know what the reason for this bill is. 
Then goodness me my cousin Luamanuvao Winnie Laban made a speech and said that the merger may not happen. So why on earth are we doing this if it may not actually happen? Yes it may not happen—I am going to talk about the process in a minute—but I saw when I read the bill that there is a sunset clause in clause 11. This legislation will die in 2 years. I am reasonably astute about these matters and I think the Government has a plan to make this merger happen within 2 years. I think we can assume that it is the Government’s plan to actually make it happen. I say to Winnie Laban that she may be my cousin but I think she is misleading members a bit. This legislation will happen. 
There are some other issues about this merger that quite intrigue me. The next point is the methodology by which this will happen. Winnie Laban could be right because the explanatory note states: “The Government is also considering the possibility of merging …”. So why are we doing this if the Government is only considering the possibility? These words are just trying to soften the blow. 
Let us talk about the methodology. If we go to Part 2 of the legislation to clauses 5 and 6 we see that under the State-Owned Enterprises Act 1986 as amended in 1988 it is the responsibility of the Minister to issue an authority for either of these two companies to go and do an Asure or AgriQuality kind of assessment which is the stuff they are required to do under Codex Alimentarius. This bill allows under the State-Owned Enterprise Act for that warrant not to be given. 
So we now have a very messy style of approach to this because the Government is to pick a winner. It will say that it will go with Asure or with AgriQuality New Zealand. We do not know which one it is. The bill has a provision for the Government to pick a winner without telling us which one it will go with. National members would say: “Hang on a minute. If there is to be a merger we need a little more detail about how that is to happen.” 
What I also find rather interesting is clause 9 “Part 3 of Commerce Act 1986 does not apply to the merger of AgriQuality and Asure”. Well does it not apply—or is this clause giving an exclusion for that not to happen? Why should the Commerce Commission not be involved in something that takes competition out of the market when we have a huge cry in the provinces to get the cost of compliance down? I think that the Commerce Act would apply if this clause was not in the legislation. 
Surely if we are taking away the element of competition in an area where producers are crying out about the costs of compliance and saying that they want competition—and we should remember that there is no issue about the assurance side of it; there is absolutely no issue—then why do we have clause 9 which states that the Commerce Act 1986 does not apply? Quite frankly there are so many odd things about this bill that I can see why my colleagues have said that National does not want to support it. 
We have a responsibility to go back to those first two principles that I talked about: that there is assurance—no question—and that there is viability in the industry. This is a very messy bill. We are having this debate on this bill for unspecified reasons. No one in the Government has come out and said that we are being put in a position of allowing winners to be picked. We are excluding the Commerce Commission. There is so much uncertainty on this bill—which has a sunset clause of 2 years—that we certainly do not want to support it. We say that it is a mess and that the Government must do better to protect the producers of this country. 
DARREN HUGHES (Labour—Otaki) 
: 
 I rise to take a brief call on the first reading of the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill. It has been very interesting to sit through the debate and listen to the contributions that have been made by all the parties. I offer my sympathies to the Hon Luamanuvao Winnie Laban. The member for Invercargill a National MP just told the nation that they are cousins. It seemed a very nasty thing to do in the debate. What amazes me about this Parliament is how many people do have cousins on the other side of the House; quite a few have been named. I actually have one but I am just too proud to fess up about which one of them it is. I keep it quiet that our family managed to produce someone who ended up in the New Zealand National Party—my goodness! It is obviously a big country that we have here where members of a family can be on different sides of the House. 
The bill is an unusual one because it amends the State-Owned Enterprises Act only to enable something to happen. It is does not actually direct the merger but clearly a lot of work and thought has gone into that in order for it to come to legislation at this time. I am not sure whether we have had a bill similar to this one before. It amends quite an important piece of the reforms from the 1980s and then leaves that provision in the bill in order to bring together these two businesses if that is what the shareholding Ministers want to see happen. 
Up until now of course AgriQuality’s core business has been the provision of food safety and biosecurity services and Asure has focused on the provision of export red meat inspection services. They have gone along those separate paths. Then the issue arose last year when AgriQuality signalled it wanted to move into an area where Asure has been working. I guess that is what prompted the shareholding Ministers who own both companies to ask whether it is in the best interests of the taxpayers—the whole country—as the owners to have competition between two things they already own if that competition ends up reducing the worth of both companies. That is what is being looked at here. 
I do take the point that was made by Mr Roy about the costs; service users of these two agencies do not want to see their costs continuing to go up. I would like to think that maybe there will be some efficiency gains that will flow right through to the people who are having to pay to have these inspection services done. As every speaker has noted biosecurity is a very important part of our country—making sure our reputation is intact for what is a very heavily dependent agriculture industry—and a sector that of course has a world reputation that is the envy of many countries. We have to make sure that that continues to survive in that way. I support the first reading of the bill and its referral to the Commerce Committee. 
A party vote was called for on the question  
That the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill be now read a first time. 
Ayes 64 
New Zealand Labour 49; New Zealand First 7; Maori Party 3; United Future 3; Progressive 1; Independent: Field. 
Noes 48 
New Zealand National 48. 
Abstentions 6 
Green Party 6. 
Bill read a first time. 
Hon PETE HODGSON (Minister of Health)  
on behalf of the 
 Minister for State Owned Enterprises 
: I move  
That the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill be considered by the Commerce Committee 
referred to Commerce Committee 
 and that the committee report finally to the House on or before 30 April 2007. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 64 
New Zealand Labour 49; New Zealand First 7; Maori Party 3; United Future 3; Progressive 1; Independent: Field. 
Noes 48 
New Zealand National 48. 
Abstentions 6 
Green Party 6. 
Motion agreed to.