Wool Industry Restructuring Bill — Second Reading Instruction to CommitteeCWH In Committee Third Reading 
Wool Industry Restructuring Bill — Second Reading Instruction to CommitteeCWH In Committee Third Reading 
[Volume:609;Page:7106] 
Wool Industry Restructuring Bill 
Second Reading 
Hon DAMIEN O'CONNOR (Associate Minister of Agriculture) 
 on behalf of the 
 Minister of Agriculture 
: I move  
That the Wool Industry Restructuring Bill be now read a second time 
. The Wool Industry Restructuring Bill was introduced to the House on 11 December 2002. It had its first reading on 19 March 2003 after which it was referred to the Primary Production Committee for consideration. The committee received and considered 33 written submissions on the bill. 
This bill facilitates the regulatory and structural reform of the wool industry. It provides for the dissolution of the statutory New Zealand Wool Board and the allocation of its assets among woolgrowers. That will enable a greater separation of commercial and industry-good activities and will give growers greater control of their industry organisations. Growers will be allocated shares in the commercial entities and the industry is separately working to seek grower approval for a levy to fund industry-good activities under a new organisation. 
 The bill provides for the conversion of the Wool Board into the Wool Board Disestablishment Co. The disestablishment company which will be known as “Disco” to the trendy wool industry will be responsible for dealing with the residual liabilities and commitments of the board and for implementing a restructuring plan including the allocation of board assets to growers. The disestablishment company will also be responsible for the collection of an interim levy on wool and its expenditure for industry-good purposes after consultation with SheepCo or a successor body established to undertake wool industry-good activities. The restructuring plan will specify that portions of the board’s assets will be allocated to merino growers through Merino Grower Investments Ltd and to another company Wool Equities Ltd for growers of non-merino sheep. 
The bill contains provisions concerning the constitutions of the two grower companies Wool Equities Ltd and Merino Grower Investments Ltd. Those provisions relate to restrictions on share trading during the first 2 years which were agreed to by growers in the May 2002 referendum and to voting rights which will provide added security for grower assets. The bill provides for a grower’s share entitlement to be based on either the average number of sheep the grower has farmed as at 30 June 2000 2001 or 2002 taken over the years that the grower had sheep or the number farmed at 30 June 2002 whichever is the greater. That ensures that growers who have progressively increased their sheep numbers over the 3 years are not disadvantaged compared with those who have recently entered the industry. 
The Government will be introducing a Supplementary Order Paper to make minor technical amendments to two clauses. The Supplementary Order Paper will amend clauses 20B(2)b and 20C(2)b. Those clauses deal with the allocation of shares to growers and the changes will ensure that such allocations are fairly made to growers who have both merino and non-merino sheep. Growers of sheep other than merino sheep will have the opportunity to cash in their redeemable preference shares or to convert them to ordinary shares in Wool Equities Ltd. Because Merino Grower Investments Ltd considers it has sufficient capital the disestablishment company will redeem the redeemable preference shares and merino growers will be paid the appropriate amounts. 
The Minister of Agriculture must approve the restructuring plan including the plans for share allocation before its implementation can commence. The Wool Board’s preferred restructuring day is the first day of September 2003. That date if met would enable share allocations to be made to growers by the end of this year. To that end the board is working towards having its restructuring plan ready for submission to me later this month. Wool Equities Ltd and Merino Grower Investments Ltd are respectively aiming to have a prospectus and information memorandum ready to be distributed to growers with a notice of their entitlements shortly after the restructuring day. 
Minister Sutton and I would like to thank the members of the Primary Production Committee for their consideration of the bill and for the report tabled on 16 June 2003. I commend this bill to the House. 
Hon BILL ENGLISH (Leader of the Opposition) 
: 
 I rise to welcome this legislation to the House even if it has taken a long time to get here. In the rural community this legislation is a further signal of the massive change that has gone on—a change in attitudes in farming practice and in the way that people see the path to a successful future. 
It has been a long hard road to get this legislation here to the House. In 1991 as a brand new MP I can recall going to a large farmer meeting in Gore to discuss the hugely controversial decision made by the Wool Board then to withdraw its price support scheme. It is not so very long ago that the New Zealanders who produced wool were tied up in price support schemes. At that stage the board also made controversial decisions like cutting back the contribution to the International Wool Secretariat. To my mind as a long-suffering levy payer to the Wool Board the contribution to the International Wool Secretariat really summed up the problems that needed to be solved in the Wool Board. In 1990 the Wool Board donated $90 million of farmers’ money to the International Wool Secretariat—a contribution that it stoutly defended—but under pressure it was suddenly able to cut that in half and still argue that it was about the right amount. 
So the Wool Board is a relic of a bygone age. It came from a time when the statutory boards were the on-ramp to the protein highway to Britain. They were convenient Government structures that were able to organise the flow of product to the British market. But unfortunately that market became unhitched from New Zealand some 30 years ago and it is only today that we are finally putting the board out of its misery now that its functions have long since ceased to be useful. 
The rural community has changed dramatically and this bill is a sign of that. In particular the attitudes of today’s producers have changed. It used to be the peak of a farmer’s achievement to become a member of the electoral college which was the body that decided on who would become members of the Wool Board. There was a very clear career path and many of the more competent more skilled and certainly more articulate farmers went down that path. They started out by becoming the chairperson of the local meat and wool section of Federated Farmers then gradually worked themselves up the tree and if they were elected to the Wool Board itself they were then entitled to trips around the world to talk to the board’s customers. The Wool Board had salubrious headquarters here in Wellington. Its members talked to the Minister of Agriculture and to all sorts of important and official people and the main function of the board was to maintain its political viability. 
In that respect the board let farmers down. I can still remember receiving the receipts for the wool that I was selling and looking at the line that deducted 6 percent of the gross income. For many years that exceeded the profits that most sheep farmers in Southland would make. I am pleased to see that over the decade of the 1990s wool producers came to realise that the board was essentially a political body not a commercial one and that any organisation that has a guaranteed statutorily declared income like the Wool Board levy is bound to become lazy and unfocused and is bound to spend much of that resource on the maintenance of its own political viability. I can remember the Wool Board running a campaign about $5 a kilogram and 5 kilograms of wool on every sheep and it sounded great. It was a public relations idea and the board members went around the country whipping up the enthusiasm of farmers. Within 2 years the price was about half that because it had dropped precipitously. The Wool Board needs to be more than restructured and in some respects this bill is misnamed because it abolishes the Wool Board. I am very pleased to be able to stand in this House and to see that happen. 
I want to pay a tribute to the leadership of the farming community which has finally brought this bill to this House and which will bring about the ultimate dismantling of the Wool Board. I will mention two people in particular—Geoff Grant and Mike Petersen. Those people represent a new generation of farmer politicians who understand that their main function is to bring about change not to maintain the status quo because markets and farming practice change so quickly. Therefore the organisations that are the conduit between the farmer and the market need to change very quickly. Of course the Wool Board because of the statutory protection it was given by this Parliament for so many years did not change quickly. The changes it went through were very painful slow and expensive. However in the future we will have no cause to have to spend parliamentary time as we have done a lot over the last decade on trying to adapt that out-of-date organisation to contemporary pressures and times. 
The Wool Board did some good things and I see that this bill makes the attempt to preserve the desirable aspects of what was there. I want to refer to a couple of organisations that are important to the industry but that need to be subject to commercial pressures rather than to political sponsorship. The first is Wool Services International. The wool industry is one that has a continuous need for higher and higher levels of understanding of the product and of the market requirements for that product. Various organisations have contributed to technology transfer in order to increase the skills and knowledge of the industry about the product that it produces. 
I also want to refer to the Wool Research Organisation of New Zealand. It has been typical of many publicly funded science organisations and the Wool Board levy has been virtually equivalent to public funding. The Wool Research Organisation has done some excellent science. It has also chewed up millions and millions of dollars on projects of dubious merit and in the end there has been no real test by the industry or by the market of the activities of that organisation. However the intellectual capital that is there in the form of some outstanding people and some excellent ideas can be carried over into the new environment. We want to make sure that that is the case. 
I am pleased to see that there has been a very vigorous discussion about the issue of what amounts to public good in the wool industry. A feature of that discussion has been the role of research. In the past the agricultural industry has relied far too much on the Government and on levies to fund its research. It is my hope that the wool industry will follow the path that the meat industry is starting to follow without the automatic funding of the levies and without relying totally on Government funding for all aspects of research. I hope that the industry will take on some of that role itself and will take responsibility for long-term investment and research in order to get a better understanding of the enormous potential of the protein-based products that we produce so effectively and so cheaply and that it will take some of the risks that go with investments that use biotechnology to increase returns. 
We stand four-square behind this bill. I know there will be debate about the detail but it is long past time that the Wool Board was dismantled and the industry was able to get on with its own future subject to the pressures of the world market and the strong incentives that that puts on participants in the industry to do a good job for New Zealand as well as for the sake of their own profits. 
R DOUG WOOLERTON (NZ First) 
: 
 New Zealand First supports the abolition of the Wool Board which is really what this bill is about as the leader of the National Party has just said. However we will introduce amendments in the Committee stage to provide that the abolition of the Wool Board should be just that and that the process set out in the bill should not continue thereafter without the oversight of a statutory manager to investigate it. The Wool Board is being disestablished—or got rid of as one says—but in the view of New Zealand First and I am sure of some of the members of the Primary Production Committee farmers are unsure of what is to come after that. Farmers voted to get rid of the Wool Board; of that there is no doubt. Whether they voted to put the same old faces in different places for the future is a matter of some doubt. 
I make no apology whatsoever for saying that New Zealand First’s amendments are based on the submission of Mr Phil Verry of the International Wool Corporation who has said that farmers do not know what is coming after the disestablishment of the Wool Board and that we need to take a far closer look at that. A lot of companies are being set up. One needs to understand what they are all about and more important to have the farmers understand what they are all about. The question that should be asked at that stage is whether that is what farmers want. Do they want to have the Wool Board continue in many different guises with basically the same people running things or do they want to stop the board there and do their own thing and indeed to sell off or not to continue with some of the companies that are proposed? The companies are all being set up; many have been set up as we speak and prior to this legislation going through the House. 
It is true to say that people whom we respect have advised the select committee well and diligently. I understand that they had no option but to advise us in the way that they did—that is to preach caution and to say to us that this bill is the result of a farmer referendum. I understand that the Minister of Agriculture said that if farmers agreed to bring a restructuring plan to him the Government would implement it. The officials subsequently had no option but to carry on down that line of advice. 
However questions arise in relation to the setting up of the companies—Ovita Covita Merino Grower Investments Wool Equities Canesis Venture Capital and Canesis Network which we only learnt about as the select committee was winding down its deliberations on this bill and one suspects that there are more companies to come. New Zealand First says that if there is any doubt it should be dispelled that it is best dispelled by an independent person and that it is best dispelled by this House preaching caution in these matters. If there is no suspicion and if nothing is untoward and everything is as it should be then of course the plan should go ahead. 
I cannot help but mention the fact that the $100 million that is commonly talked about that the Wool Board has in reserves was built up during World War II—if one believes that—and has been carried forward since then. Many submitters have said they have paid the levies the Wool Board is being wound up and they want what is left over of those levies to be paid back to them. But that is not to be the case. That money was put aside in the heyday of the wool industry and it is a sad story that its heyday was back in World War II and that it has since been seriously depleted. 
Hon Member 
: It’s wool not hay! 
R DOUG WOOLERTON 
: My colleague tells me that it is wool and not hay and he is absolutely right. 
 We are told that the average farmer—bearing in mind that people with fewer than 250 sheep are as from 30 June I think disbarred from participating in an allocation of cash or redeemable shares and that we are talking about quite substantial farmers having ruled those smaller ones out—will receive individually in the vicinity of only $1500 to $2000. That is an average and averages are dangerous. So the pot of gold that farmers thought at the beginning of this process would be there for them has been seriously depleted and I think the mood amongst farmers is very much one of not caring what happens. They just want the Wool Board to go. They are not expecting a whole lot of payout from it but say there is a curse on its house. 
That being the case I think it is absolutely appropriate that we have the amendments in my name that are before the House to— 
Clayton Cosgrove 
: Who wrote them? 
R DOUG WOOLERTON 
: The member is being facetious; he knows I am not a lawyer. I should have been one but I am not. Writing amendments is not my cup of tea and I freely admit that. Nevertheless the amendments are in my name and they are a precaution. Even though I am not sure whether all the parties of my fellow members on the select committee will vote for my amendments I am sure they address a concern that all the members on the select committee had to a degree—it is just a matter of the degree to which the matter concerned them. 
I sum up by saying that New Zealand First supports the abolition of the Wool Board. It has doubts about the companies that are to be set up with the same old faces appearing in different places. However we will address that by introducing our amendments at the Committee stage. 
MARK PECK (NZ Labour—Invercargill) 
: 
 I will take only a very short call on this bill and say to the member who preceded me that one of the things I miss about not being on the Primary Production Committee is being there for his deliberations. He is a humorous member. He says he is not a lawyer but can I tell him he is probably a better lawyer than he was a farmer—and he might take that as a compliment. 
I simply want to say that this bill continues with the restructuring of our primary industries and it is a good piece of legislation. I pass on a little bit of thanks to a person who has not been mentioned so far in this debate a bloke called Robin Campbell. He is a farmer who lives just outside the Otago electorate. He is on the AgResearch board and has done quite a bunch of research work in that area. I certainly want to pass on my congratulations to him on the work he has done on this bill and to the select committee on the work it has done in bringing the bill back to the House. 
GERRARD ECKHOFF (ACT NZ) 
: 
 If the House is prepared to listen very carefully it will hear a huge sigh of relief throughout the whole of rural New Zealand this very morning because I believe that this is the day that the Wool Board is finally euthanised—the day on which it will meet its maker. It is appropriate in this second reading to reflect—and the Leader of the Opposition Mr Bill English did that—on where we have been and where we have come to on this very day in the year 2003. 
I personally think back to the days of the Korean wool boom which were the halcyon days of the wool industry—the days when the public from the towns and cities went out to the country to pick the wool off barbwire fences to sell such was the demand for that product back in the 1950s. Then both Australia and New Zealand went into times of having huge stockpiles of wool for which we could get virtually nothing. So we have gone round in many circles in this industry. In my days of farming in the early 1970s there was a great wool-acquisition debate in which it was determined that if some structure acquired all the wool and had an orderly marketing system things would be brilliant. The growers rejected it then and I suspect that if they had the same opportunity today they would reject it again. 
It is also appropriate that I give recognition to Owen Jennings the former member of Parliament who was responsible for drawing to the public’s attention—certainly he reflected in this House the views of the farming community—the inadequacies of the huge monolithic structure that the Wool Board came to be. Owen worked very hard at considerable personal cost to himself to ensure that the Wool Board was finally put to rest. This is a day he can take real pride in. 
As I said earlier the wool industry has lurched from crisis to crisis. Growers had the view that they were throwing good money after bad and that the auction system was a method whereby they just dumped their product on the auction room floor and hoped that somebody turned up to buy it. Essentially that was the marketing system we had and still have to this day. But major refinements to the wool industry have been made. I believe that the archaic attitudes that were displayed in the past are being whittled away very consistently and that we are now moving quite strongly towards a very commercially focused industry. “Marketing” and “research and development” are the operative words we use today when talking about the industry. 
We cannot help but reflect on the days of the Wool Board when farmers were very perplexed—which I think is a nice way of putting it—about the world trips its members took and they saw an attitude of “jobs for the boys” and so on. The board always talked about accountability. It said it could account for every dollar it spent but it was interesting to note that nobody ever accused the board of performance. What is required today in this very competitive commercial world is performance not just accountability. 
Report after report was done until finally the McKinsey report came through and recommended that a vote take place on whether the board should be retained or got rid of and replaced by some other structure. I agree with my colleagues from this side of the House that the vote taken on the McKinsey report was in essence purely on one issue and it was that the farmers wanted to get rid of the board. In my view they did not actually vote in favour of the structures that have been put in place by the board. With advice received during the select committee process I have with some reluctance come to accept that to protect the massive tax losses for example and to protect the intellectual property of the Wool Board and the Wool Research Organisation of New Zealand it is necessary to ensure that other structures are put in place when the Wool Board is finally laid to rest. 
I think that is entirely appropriate just as a few years back it was entirely appropriate for merino growers to tell the Wool Board that it was not performing that they could do a better job and that they wanted the right of self-determination. It was with huge reluctance that the board finally relented and allowed Merino New Zealand to do its own thing and relatively speaking it has been very successful by comparison. 
Other individual growers have done the job that the board should have done. I can think of two highly successful growers in my region Jeanette and Russell Emerson who have contributed enormously to the development of the fine wool industry. They would go to Italy and knock on the doors of processors and sell their wool directly. They were vertically integrated—if one likes. There were people throughout the industry who wanted the opportunity to develop the industry the way it should be. They certainly challenged the fiefdom—and that is what it was—of the Wool Board and finally its hours and minutes are running out and that is great to see. 
Wool has been one of the great products of New Zealand—as a carpet a furnishing a suit or whatever—but we have to understand that in essence wool is a protein. Its base is pure protein and that is where the future lies for wool. I have no doubt that the real future will lie with organisations that can take wool and turn it into a product that the world really demands not just some sort of article to keep. That is why Canesis has been set up. The Wool Research Organisation of New Zealand is an incorporated society and cannot raise money. It needs those commercial organisations under the very capable stewardship of Richard Bentley—a very commercially focused and performance-focused individual. 
Although I accept that it is a huge article of faith to ask the growers of this country to yet again stump up with their money and invest in the industry I think the bill gives this industry and those woolgrowers an opportunity—and that is all it is—to invest in their own future with a pure commercial focus. Although I personally have very real doubts about where we are heading sometimes one just has to take that article of faith that giant leap and hope that one has appointed the right people. Surely the reality in this commercial world of ours is not the system but the individuals. It is the people who run the systems who will take any industry forward. It is absolutely crucial that we attract and retain the very best people and I think we have taken a giant step forward in that direction. 
CLAYTON COSGROVE (NZ Labour—Waimakariri) 
: 
 I rise to support the bill. First it is interesting being a member of the Primary Production Committee where there is a great deal of unanimity and consensus—unlike another committee I chair that is highly political. Maybe it is because the issues are rural ones but we tend to cooperate in a way that I think brings a lot of esteem and honour to this place. Although we all support the bill—[ 
Interruption 
] A Green member does not and I apologise. Although most of us support the bill we echo the words of Doug Woolerton: “We gave it a lot of scrutiny.” 
It is worth pointing out that although growers have given us a mandate to do this and the Government and other parties in the House have said that they will do what the industry wants to do—in this case restructure—the point should be made as Mr Woolerton said that after 2 years growers can sell their shares. I think they will receive in the order of $2000 or $3000 each but they have an ownership cap of around 5 percent. However I can recall that when the Primary Production Committee was doing the Fonterra legislation at the same time as the fruit legislation the concern it had was somehow to preserve the cooperative structure of the dairy industry to prevent the sort of corporate burgle and raid that ENZA and fruitgrowers were put through by the Guinness Peat Group. 
As a Government we have done what growers wanted. This bill is mandated by growers and this Government will adhere to that. My hope is that at the end of that 2-year period before growers decide to sell or retain their shares they will acknowledge that there are huge issues at stake. For instance Mr Woolerton has pointed out the huge public good the research and the intellectual property that exist within a number of entities in this structure—Covita is an example—and even though there is a 5 percent cap any person who has run a business could argue that growers could make their industry vulnerable to a corporate raid. But once this bill is passed that will be a decision for growers. I support the bill because it is mandated by industry but I hope that at the end of that 2-year period growers will look very carefully at how their industry could change in terms of corporate raid or outside input and at how the cooperative structure they have had for many years could change should they decide to sell their shares. It does not take a rocket scientist to work out that 5 percent plus 5 percent plus a few other blocks of shares could end up producing a controlling or dominant interest through intangible relationships between entities or growers. 
As Gerry Eckhoff pointed out there has been huge progress in the wool industry. The select committee went to the Wool Research Organisation of New Zealand and saw the amazing things that are happening with wool. As Mr Eckhoff said with wool being a protein that organisation is turning it into all sorts of products and that is a magnificent thing for the industry. Again I just hope that growers will acknowledge that and the huge value they have if they choose to maintain that sort of cooperative control in their industry. 
I support the bill. It is good legislation and I believe that it will deliver what the industry wants. It is also fair to say that as Mr Woolerton pointed out a large amount of the motivation for providing a mandate for this legislation is that growers for whatever reason have had a gutsful of the Wool Board. Finally I say again that I hope growers will think carefully when actioning their shares 2 years hence. 
IAN EWEN-STREET (Green) 
: 
 The Greens oppose this bill. We support the disestablishment of the Wool Board but from that point on we part company with what Clayton Cosgrove has just mentioned. We do not believe that there is a mandate from farmers for this restructuring. As a consequence of that this is bad legislation. It is predicated on the basis that there is a mandate. 
I want to take members through some of the figures to illustrate why I do not believe that there has been a mandate. First there are around 28000 woolgrowers in New Zealand. Of those 12000 in round figures have fewer than 250 sheep and those people were not entitled to vote. Already 40 percent of potential voters were disenfranchised even though those people paid levies to the Wood Board—sometimes for many years. Sixteen thousand people who owned more than 250 sheep on 30 June 2002 were eligible to vote but only around 40 percent of those did vote. Sixty percent of the growers were entitled to vote and 40 percent of them did so a total of 24 percent of the total number of woolgrowers in New Zealand actually voted. 
The next question is why the vote was put as only one question. Why were the farmers given only the choice of getting rid of the Wool Board and accepting the new structure? Was it so hard to have two votes to ask them whether they wanted to get rid of the Wool Board yes or no? There would have been an overwhelming vote in favour of getting rid of the Wool Board but did farmers actually understand what they were getting? Did they vote “Yes we do want this new structure.”? I doubt it. I do not think that they thought that through at all. They thought that anything had to be better than the Wool Board. 
I am also very concerned that the people who ran the Wool Board—the organisation that has been dysfunctional for many years—have also been influential in the creation of the new structure. Did they engage in true consultation with the woolgrowers? That is a very leading question. I know that McKinsey did a survey and it believed that it had a mandate from farmers for this structure but there seems to be some evidence that McKinsey was instructed to come up with the new structure. If that were the case it may be that premeditation was involved in this consultation. I remind members and farmers of the Wellington Airport case where the company was accused of not doing proper consultation. The company had an outcome in mind. It went to the shareholders and said: “This is what we’re going to do.” It believed that that was consultation! The court found against the company. If there is premeditation in the consultation process then that becomes legally challengeable. I urge farmers to think about whether there was any premeditation in the way they were consulted; if so they have a right for that consultation process and the mandate to be legally challenged. 
Another question I have about the consultation process is whether the farmers actually understood what the reforms would mean to them in a practical sense. I personally doubt it. I am a woolgrower myself but the information I received seemed so complex at the time that I just dismissed it. To be fair though at that point I had sold all my sheep—I was coming into Parliament—so I was not entitled to vote anyway. I did not really engage but on a serious note I do not consider myself to be an idiot— 
Hon Member 
: Everyone else does! 
Hon Member 
: Can we have a party vote on that? 
IAN EWEN-STREET 
: It is a real surprise! I do not consider myself to be an idiot but I really struggled to come to terms with the complexity of these new structures. They are needlessly complex. Do farmers or any members of the Primary Production Committee or any of the officials or anybody in the world understand the intimate interrelationship between organisations like Wool Equities SheepCo the Wool Research Organisation of New Zealand Keratec Ovita Covita merino growers non-merino growers and many others that I cannot remember? [ 
Interruption 
] Gerrard Eckhoff who assures me that he has led a life of blameless excellence does understand the complexity of those new structures and I can only aspire to his intellectual grip. I do not understand it and I doubt that very many people do. I am pretty well certain that farmers do not. 
I am also reasonably certain that farmers do not understand how the assets that were accumulated—primarily from World War II as Doug Woolerton said—have been diluted over time and that the control of those assets is slipping away from farmers under this restructuring. Do they really understand what they are getting with this restructuring? Do they understand that the distribution of assets amongst farmers will on average come to around $1500 or $2000 for a big farmer? A fluctuation in the currency will give them that amount of money. It is a drop in the ocean for a big farmer. We should not forget the 12000 woolgrowers who are disenfranchised. They could not even vote because they had fewer than 250 sheep even though they pay their levies. So what has happened to the $100 million in assets? Do farmers retain control of those assets? I do not think so. 
That is bad enough but the worst for me came after the select committee hearings concluded. At that point we were informed that two new structures were being introduced into this already complex structure. They were called Canesis Network and Canesis Venture Capital. If their existence became apparent only after the submissions to the committee had closed how could anyone believe that farmers had given that structure a mandate? They had never heard of those companies so they could not have given them a mandate. The average cocky would not have even heard of those names. The consultation about Canesis was non-existent. 
I believe that there is premeditation in this consultation process and as such I believe it can be legally challenged. I believe that because there is no mandate for this restructuring. Everything that happened after the abolition of the Wool Board is farcical. I will be supporting Doug Woolerton’s amendment to remove a lot of the latter part of the bill. I think we need to put the Wool Board assets in the hands of a statutory manager and let him or her decide the best thing to be done for farmers. 
I point out that the ownership of Canesis Venture Capital consists of industrial members and other investors—no farmers there. The governance of Canesis Network consists of seven directors: two appointed by Wool Equities—that is by farmers—three by the Wool Research Organisation which is now pretty much a stand-alone research organisation and two by Canesis Venture Capital. Therefore two of the seven votes are from farmers. Is that what farmers voted for? 
R Doug Woolerton 
: No. 
IAN EWEN-STREET 
: I agree with Mr Woolerton; it is not what farmers voted for. They were not consulted because Canesis Network and Canesis Venture Capital did not come into existence until after the consultation. I am not often a conspiracy theorist but this structure has my crap-detector going off full bore. It seems to me that this is a classic set-up to rip off farmers’ assets into the hands of corporate raiders. 
Gerrard Eckhoff 
: It smacks of scampi! 
IAN EWEN-STREET 
: It smacks of ENZA I can tell the member that. I would very much like my thoughts of a conspiracy theory to be proved wrong. I put this matter to the Minister and to the officials—and to their credit the officials have done their best—but I still have serious doubts about this bill. 
LARRY BALDOCK (United Future) 
: 
 I delayed taking a call on this bill because I wanted to allow the members who have been on the Primary Production Committee and have vastly greater experience of the wool industry than I do to speak first. Some of those who are unfamiliar with this bill may be surprised to learn that the issues it addresses have been the subject of considerable debate and controversy within the wool industry over a number of years. United Future had no representation on the select committee that examined the bill and as someone looking at the bill from outside this process I can say that the issues surrounding the restructuring of the wool industry are challenging in their complexity. I hazard to suggest that the MPs who did sit on the committee also found it challenging to untangle the network of organisations involved in this process and I think they have done a very good job in trying to address the concerns of the 33 groups and individuals who made submissions. 
The most important changes that the committee has made have been in response to a lingering concern that the new grower-owned organisations would be vulnerable to corporate raiders who might strip assets by acquiring a majority stake as occurred following the restructuring of the pipfruit industry. Vulnerable assets include accumulated tax losses and intellectual property and funds to be invested in the joint-venture biotech firms Ovita and Covita. The draft company constitutions prohibit the sale of shares to non-growers for the first 2 years and prevent shareholders from holding more than 5 percent. Those restrictions can be changed only by amending the constitution. Fifty-eight percent of growers approved this proposal in the referendum. The committee included a new clause specifying that those safeguards be included in the constitutions. Final approval of the constitutions and the restructuring plans is in the hands of the Minister of Agriculture. 
United Future is reasonably satisfied that these changes will help to safeguard the assets of the growers but the only real way in which that can be guaranteed is if the growers get involved in these organisations themselves. An example of this can be found in the recent announcement of the restructuring of the Wool Research Organisation of New Zealand into Canesis Network which has resurrected concerns about corporate raiders as the effort to attract investor capital is likely to reduce grower shareholding. This bill—nor this Parliament—cannot stop that restructuring from taking place. 
We have had many calls to put this bill on hold so that there can be a fresh invitation for a mandate from growers across the country. But no one here is convinced that that would produce an outcome any different from the one we are facing right now. In fact in conversations that I have had the growers themselves have admitted that if a referendum or a mandate was sought to be achieved in the next few months there would still be a huge lack of participation. Even if meetings were held in woolsheds across the country for a year to try to explain the new structures it is unlikely that we would end up with a different result. The structures themselves are complex and it would take an enormous effort to try to explain them satisfactorily. 
In my first reading speech on this bill I urged the woolgrowers of New Zealand to participate and to become involved in the submission process at the Primary Production Committee and I do commend the 33 submitters who did come to the select committee. I think they have seen satisfaction in some of the changes that have been recommended. But without going into great detail I say that the best way that the growers can ensure their interests are represented is to make sure they become active in the new entities Wool Equities and SheepCo which will have interests in Canesis Network. 
Other changes recommended include a cut in the number of directors appointed to the transitional company from a maximum of seven to five. The directors may still be selected from the current directors of the Wool Board despite the widespread disillusionment with those personnel amongst growers and the suspicion that the reforms are designed to perpetuate their careers. As Doug Woolerton has said the same faces appearing in new places is of concern but the answer to that concern is participation by the growers themselves. There is also a fear that those same personnel will install themselves in the top positions of the new entities as I said. Once again if the growers want to change the situation all that they need to do is to get involved in these organisations and to make sure they vote for those whom they want to lead them. The Minister has yet to approve the final constitutions but from the drafts it is clear that there will be opportunities for the growers to have a say on who sits on the boards. I would like to say that there could be some improvement to the bill to make it clear that the new directors particularly those of Wool Equities would need to face re-election at the first annual general meeting. That is not clear to me in the draft and I think it would be an improvement to make sure that it was clearly spelt out so that the growers would know that within a year’s time they could give a mandate to that board through an election process. 
The select committee extended the eligibility criterion for shares from a raw number of 250 sheep on 30 June 2002 to incorporate the average over the last 3 years. But calls to set a lower minimum were rejected. Any number that is set will be arbitrary and although growers with fewer than 250 sheep may have contributed levies over a long time some threshold has to be set that will overcome the transaction costs of distributing the shares. After all we are talking about only around $100 for someone who has 100 sheep. Merino growers will not be able to swap their redeemable preference shares in the transitional company for shares in Merino Grower Investments because it already has enough capital but the growers will still get exchangeable shares that can be converted into ordinary shares. 
Although the committee addressed some of the growers’ concerns particularly those surrounding the issue of corporate takeovers others remain. It is still claimed that there is no mandate for the new structure as the referendum results reflected an overwhelming urge to dismantle the board rather than necessarily constituting an endorsement of an alternative model. This point has been spoken to by other members before me. Some also point to the low turn-out and say that there is even less of a mandate for the proposed restructuring. By that logic most Presidents of the United States have not held a mandate to govern the United States. President Clinton in 1992 and 1996 was elected on less than 26 percent of the vote. 
Mr SPEAKER 
: Please come back to the bill. 
LARRY BALDOCK 
: If someone does not vote then it is very difficult for him or her to complain about the outcome with any credibility. Unfortunately this malaise is reflected in the industry and the growers need to think about their own involvement in it. Granted their interest may not be heightened by the complex nature of the structural reforms but if the referendums did not offer a mandate for new structures what alternatives did those growers have in mind when they voted? It would have been impractical to remove the Wool Board yet not think about what would be done in the aftermath. But growers are practical people and I think that if they do want to have some influence over the new entities there will come a point where most of them want to go past all the restructuring details and to find out what the entities might offer growers once they are set up. The best way for them to ensure that the new bodies work for them is to get involved in them. 
From the point of view of those running Wool Equities there will be a big incentive to listen to the growers and to respond to them in order to ensure that they hold their shares. Growers will have representation on the Wool Research Organisation through their involvement in SheepCo and through their involvement in Wool Equities on the other side of Canesis Network. I believe that we are offering them the best we possibly can. 
PHIL HEATLEY (NZ National—Whangarei) 
: 
 I am delighted to stand in support of this bill. The National Party as members have heard over the last few months has always supported the dissolution of the Wool Board and National recognises that we do so with the overwhelming support of farmers in the industry. 
It all started a long time ago of course in the 1990s. I acknowledge John Luxton who started the process during the forth-fifth Parliament. John made quite a contribution during the 1990s. He had vision. He worked with all sorts of other people in the industry to see this measure go through and now in the forty-seventh Parliament we are seeing this bill pass. One would think that it would be passed today. 
I must say that the members of the Primary Production Committee were put under tremendous pressure not just because we had to deal with Ian Ewen-Street’s endless questions intelligent though they were but also because of the time frames we had to work with. Ian Ewen-Street is the Green member of the committee. He is the member who galvanises that select committee there is no doubt about that but he galvanises it against him. The bill is already behind time. The Hon Jim Sutton promised that this bill would be introduced at the end of November. It was not introduced until 11 December 2002 and David Carter the select committee chairperson was under tremendous pressure to ensure that it went through. The Minister promised that it would be passed by early May. It was not. The restructuring date in the bill is 1 July. That is outdated now. Mr Sutton has been behind the game the whole way through and I think members should acknowledge that. 
But we have brought the bill to this stage. It will pass today with the National Party’s support but there is no doubt that that is because of the select committee process. The select committee was efficient. We listened to concerns and re-listened to concerns. We all received unsolicited mail and solicited mail as well and we saw David Carter bring this bill through the whole process. So I acknowledge him and my colleague Shane Ardern as well. 
A number of issues that were of concern were brought up during the select committee process. The first concern was about the mandate whereby 97 percent of farmers voted to see the Wool Board disestablished. Concerns were raised as to whether when they did that they voted for what would be established in its place in the future. But 97 percent of farmers did vote in favour. Although there was only a 36 percent turn-out that is a good turn-out in the farming industry. I do not think anyone would argue against that. 
Clayton Cosgrove 
: Better than the National Party. 
PHIL HEATLEY 
: Clayton Cosgrove I know would be delighted to have a 36 percent turn-out of even his board members in his local electorate so let us not argue about that. 
The second issue of concern to people was the Meat Industry Association’s claim on I think $41 million of reserves. The select committee considered that. We appreciated the argument but ultimately two things nullify it to a greater degree. Firstly the reserves were actually not recent levies but World War II payments—that applies to some of the issue. Secondly although the Meat Industry Association acknowledges that it paid part of the more recent levy that sum was then deducted from the price of lamb. If a $100 killing sheep was sold $60 would go one way but part of the remaining $40 was the Meat Board levy ultimately. So we believe that to a greater or lesser degree that particular issue has been addressed. 
Thirdly there was concern about the number of sheep a farmer should own before he got part of the assets. Ninety-three percent of farmers as I said before supported the concept of the shareholding being based on sheep numbers. The Greens wanted the number to be 100 sheep the rest of us were satisfied with 250 and 250 it will be. I do not know how many sheep that Green member runs on his farm but we felt that 100 was a little low so we have settled on 250. 
The fourth issue was to do with the Wool Board presenting a restructuring plan to the Minister of Agriculture. The information we have about Canesis Network came to the Primary Production Committee late and we acknowledge that it has come late to farmers. But we believe that we have beefed up the requirements for a report to be made to the Minister and that concern will be addressed in that way. 
So with those issues addressed I leave this second reading to other speakers. I hope that they will support along with the National Party the passage of this bill. 
Bill read a second time. 
Instruction to CommitteeCWH 
Hon CHRIS CARTER (Minister of Conservation) 
 on behalf of the 
 Minister of Agriculture 
: I move  
That it be an instruction to the Committee of the whole House on the Wool Industry Restructuring Bill that it take the bill part by part and consider any schedules as one question. 
Motion agreed to. 
In Committee 
Clause 1 Title 
DAIL JONES (NZ First) 
: 
 I think it should be recorded at this stage of the Wool Industry Restructuring Bill that as indicated by the New Zealand First agriculture spokesman Doug Woolerton we have put together some amendments. Bearing in mind that they are of a legal nature and will be put at the end of the debate on the various parts we are looking at putting the amendments to Part 2 individually but the amendments to Part 3—amendments 5 to 16—together. New Zealand First is looking at the Wool Industry Restructuring Bill— 
The CHAIRPERSON (Ann Hartley) 
: We can do those amendments when we come to Part 2 if the member wants. 
DAIL JONES 
: I just want to speak very briefly on the title which talks about wool industry restructuring. New Zealand First is concerned about the extent of everything that has taken place as was indicated by Doug Woolerton. We are quite happy to take the full role of an Opposition in this matter. The Greens appear to be supporting the amendments we are putting forward so that there can be better protection and wider consideration of this matter on the part of all the farmers of New Zealand who possibly do not fully understand what is being undertaken in the Wool Industry Restructuring Bill as it is called. It is not just a case of restructuring; someone said it is euthanasia. The bill puts the existing Wool Board to death and puts something else in its place; one might say it is a renewal as well. New Zealand First will put various amendments on Part 2 and Part 3. 
Clause 1 agreed to and Part 1 agreed to. 
Part 2 Conversion of Board 
R DOUG WOOLERTON (NZ First) 
: 
 Clauses 5 to 17 in Part 2 set up the new companies that I was referring to before. There is movement of the same people from the old Wool Board structure into the new one Wool Equities. From Wool Equities flow all these companies that one could suspect people apart from growers—and I am being very careful with my words here—might benefit from. 
Ian Ewen-Street 
: You’re privileged. 
R DOUG WOOLERTON 
: The Green member tells me I have privilege but I assure the Committee that I do not intend to get into anything controversial. We suggest that the members of the Committee should show caution and should look at the amendments I am promoting because we believe that once the money flows to Wool Equities it will be a case of “out of sight out of mind” and the institutions that are picked up beyond the scope of this bill are put in place by there being agreement that the money go to Wool Equities. 
We believe that a person should be put in a position of some power to look not only forward but back at what has happened leading to this point. In other words were the farmers fully informed of what will happen in the future? Are the farmers happy to go forward into these companies which everybody has said go into uncharted territory? I think the ACT member referred to them as a leap of faith. We in New Zealand First believe that leaps of faith are not something that should be promoted by this House. We do not believe that leaps of faith are something that it is in farmers’ natures to take. There are enough leaps of faith with God’s gift of the weather in this country without their taking commercial leaps of faith. 
So we believe that a note of caution needs to come in here. We believe that a statutory manager needs to be put in place to look backwards and to the future in order to give some clarity and to unravel what every member has said is an extremely complicated set-up. I recommend that course to the Committee and I can only ask that the other members namely the Labour ACT and National members will consider at this point changing their vote and supporting what I believe are very very worthy amendments. 
PHIL HEATLEY (NZ National—Whangarei) 
: 
 The National Party has given consideration to the amendments in the name of Doug Woolerton of New Zealand First. We will not be supporting his amendments. We have given them a lot of thought. The issues he raises are not new to us. The bill when passed requires the Wool Board to present a restructuring plan to the Minister of Agriculture. We entrust this matter to the Minister and expect him to do his job. We will be watching him very closely. Even though the issues have been firmly put to us on a number of occasions we do not believe that there is a conspiracy as many are led to believe. We did beef up the bill to ensure that no share exchange takes place for 2 years and that fewer directors are on the board and there are other issues that address that. So we entrust this matter to the Minister and to the industry as a whole. 
GERRARD ECKHOFF (ACT NZ) 
: 
 I am very pleased to have this opportunity to speak on this part. I refer to a comment made by my colleague Mr Doug Woolerton. He like all the members on the Primary Production Committee took very seriously the submissions received from a whole range of people. At this late stage it appears there is a divergence of opinion about where we should be heading. In all honesty at one stage in the early formation of the bill I was opposed. 
Sitting suspended from 1 p.m. to 2 p.m. 
GERRARD ECKHOFF 
: As I recall I was reflecting on the fact that at the early stages and the preliminary hearings of the submissions I too along with Mr Woolerton and Mr Ian Ewen-Street believed that we just send the receivers in and they dispose of the assets of the board as the receiver sees fit. That seemed to me to be a pretty sound concept at that time. But I have changed my mind after listening to people like Richard Bentley who is now the chair of Wool Equities. I listened to him and indeed had a private meeting with him so he could better explain his thinking. I came away from that meeting thinking yes I could accept the proposal that the Government has come up with because I believe in the strength of that particular individual. 
The board has to divest itself of its assets. Some will go to the growers; and the information technology the technology that the board owns has to go somewhere. It is better if it is going to an organisation that is essentially controlled by the farming community. 
I make the point that the Wool Research Organisation of New Zealand is an incorporated society and it has been the research vehicle for the wool industry. But it is an incorporated society and it cannot raise capital. There is a huge demand for the technologies and the new research and development that the organisation had come up with—for example Karatec is just one. New and equally exciting opportunities have been developed and there is a huge demand for capital to ensure that these developments take place. Mr Bentley assures me that with the structures now in place we will not have to go overseas to find capital that it can be financed in a local sense. That is something that should please us all. 
Under the new structures that Part 1 will authorise it is important to recognise that the Wool Research Organisation now has a new business plan and Wool Equities has rewritten the business plan for Ovita the biotech company. That company will be looking at ways of ensuring that the protein that is wool can be used in perhaps the pharmaceutical industry in a whole host of biotech ways. That needs money expertise and just as important it needs a business plan to ensure that those processes take place. 
I know there have been some real concerns about the “sudden” development of Canesis Network Ltd. We are confusing the two roles here. It is not the role of Parliament to get into the management of this industry. That is for the commercial arms to develop. There are very distinct roles here. One role is governance and one role is management. If we are to get into the micro-detail of determining in the Wool Restructuring Bill that this or that should happen to parliamentarians’ satisfaction then I think we are limiting the ability of these commercial organisations that will happen to best reflect the nature of the workplace and indeed the demands of the commercial world. 
Hon DAMIEN O'CONNOR (Associate Minister for Rural Affairs) 
: 
 I understand the good intent of the member’s amendment the principles of which were discussed at the select committee. The proposal which is very similar to one put forward to the committee by Mr Phil Verry is one that was considered. The background to it was put very thoroughly to the committee. As the previous speaker has said on balance the committee—and the Government is happy to support that position—decided that the proposals as laid out and put to the select committee and the process for dissolution of the board are sound and have the backing of the farmers and to intervene at this late stage with such a proposal is simply not warranted. That is why the Government will not be supporting Mr Woolerton’s amendment. 
The question was put that the following amendment in the name of R Doug Woolerton to clauses 14 and 15 be agreed to: 
to omit these clauses and substitute the following clauses: 
14Administration and governance of company 
The Minister must appoint a statutory manager to the company on the restructuring day to take full control of the company. 
15Powers and responsibilities of statutory manager 
The statutory manager shall have all the powers of the directors of the company and in addition shall have these powers and responsibilities: 
(a)to review the conduct and policies of the former Wool Board since 1996 to determine whether or not the actions taken by the Board and/or entities controlled by the Board including Wool Research Organisation of New Zealand (WRONZ) conform to the provisions intent and spirit of the Wool Board Act 1997; 
(b)to take such action as is necessary to remedy any actions or omissions that do not conform to the provisions intent and spirit of the Wool Board Act 1997; 
(c)to forthwith resolve all outstanding issues affecting the Board including claims against it on a fair and equitable basis respectively preferably by mediated negotiation but failing that by court processes pursued expeditiously; 
(d)to review whether or not the past and intended treatment of and/or disposal of assets of the Board and/or WRONZ including intellectual property assets has given proper consideration to: prior rightful proprietary interests in those assets; the best utilisation of those assets on behalf of their rightful owners; and such rightful owners’ entitlement to fair recognition of and recompense for the value of such assets; 
(e)to resolve any issues arising from these reviews as he/she shall deem appropriate; 
(f)to institute an appropriate procedure as he/she shall determine whereby wool growers: are fully informed of the options for the future structure of their industry that are practicably possible; are informed of the relative merits of each option; and are allowed to freely make an informed decision by referendum of the structure they prefer for their industry; 
(g)to facilitate and oversee the introduction of the industry structure preferred by wool growers; and to the extent that he/she deems appropriate to make available the assets of the former Board to support the establishment of that new structure. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 20 
New Zealand First 13; Green Party 7. 
Noes 86 
Labour 52; New Zealand National 20; ACT New Zealand 6; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of R Doug Woolerton to clause 16 be agreed to: 
to omit this clause. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 20 
New Zealand First 13; Green Party 7. 
Noes 86 
Labour 52; New Zealand National 20; ACT New Zealand 6; United Future 8. 
Amendment not agreed to. 
The question was put that the following amendment in the name of R Doug Woolerton to clause 17 be agreed to: 
to omit this clause and substitute the following clause: 
17No compensation for loss of office 
No director of the Board is entitled to compensation for loss of office either from the Boardany subsidiary of the Board or any other company or entity. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 20 
New Zealand First 13; Green Party 7. 
Noes 86 
Labour 52; New Zealand National 20; ACT New Zealand 6 United Future 8. 
Amendment not agreed to and Part 2 agreed to. 
Part 3 Restructuring of wool industry 
DAIL JONES (Junior Whip—NZ First) 
: 
 I raise a point of order Madam Chairperson. In view of the previous vote New Zealand First will withdraw its proposed amendments to clauses 18 through to 29. 
GERRARD ECKHOFF (ACT NZ) 
: 
 I rise to speak briefly on Part 3. Clause 18 requires that the board must prepare a restructuring plan which is right and proper. But again I think the concern of the farming industry has been the question of who should prepare this restructuring plan rather than whether a plan should be invoked. I have heard comments that many members of the existing board will reinvent themselves in terms of these new structures. 
 To my certain knowledge the only person who has resurfaced is Mr Mark O’Grady who will be the chief executive under contract to Wool Equities. This is a fixed-term contract for a period of 2 years. It was essential according to Wool Equities that it have somebody with an in-depth knowledge of the industry to assist the new directors in their deliberations as to how they believe the governance of Wool Equities should take place. They needed somebody who had hands-on management experience. It is perhaps a very debatable question as to whether Mr O’Grady was responsible in whole or in part for the fortunes or misfortunes of the board in the past but in the judgment of the new board of Wool Equities he was deemed to be the best person suitable to assist the new board to come to grips with the complexities of the wool industry. 
I do not see the names of previous board members other board members or even current board members resurfacing. So I think the one fear perhaps justified that my colleagues have has perhaps been a little overstated when we look at Part 3. As I said earlier I think it is very important that the employment of individuals within this new structure generally speaking these days is under fixed-period contracts. If the growers decide they do not want a specific individual as their chief executive they can relay that to the board—indeed they can sack members of the board for having appointed this particular fellow and that is as it should be. But the governance of the board should be left to the people who now govern it. It is appropriate that they should have the right to make their appointment rather than the wider industry having a vote on it. It is just not practical. 
One of the concerns I have in the farming world is that many farmers do not understand that it is not their job to have a hands-on day-to-day influence over the running of a company whether it be Fonterra or whatever. We place that in the hands of the individual the chief executive and it is his or her job to perform in the role and to be accountable as well but essentially if the chief executive does not perform then hopefully his or her contract will not be renewed. 
However I do understand the concern of my colleague Mr Woolerton. It was a concern that I also held in a very genuine way. But after quiet reflection I have determined that it is appropriate that the new board of Wool Equities will determine whom it shall appoint and not have myself or other politicians stick their oar in and say that it is quite wrong to appoint a certain individual. That is the board’s choice and the directors of Wool Equities will stand or fall on the correctness of that choice. That is one contribution I would like to make to this part and I look forward to my colleagues’ contributions to Part 3. 
PHIL HEATLEY (NZ National—Whangarei) 
: 
 I rise today as the National Party spokesperson on this bill to support the Government’s Supplementary Order Paper which corrects the misrepresentation on the calculation formula. As a responsible National Party we certainly support the Supplementary Order Paper amendments and we will be voting that way. 
R DOUG WOOLERTON (NZ First) 
: 
 I want to correct a couple of things that may have inadvertently crept in. The first is the suggestion and I know that Mr Eckhoff did not mean this personally that we would even want to involve ourselves in the administration of the wool industry. [ 
Interruption 
] I know that it was not put in quite that way. We have just lost the last chance quite frankly to have somebody who is independent look over the process. It was not to involve ourselves or this Parliament in the administration and certainly not to be casting aspersions on the good names of any people who may be employed in the wool industry henceforth. We have just passed a critical time. 
I say to the woolgrowers of the future—and I am not lecturing them but this is an observation that I think all members of the select committee would make and agree with me on—that the lack of participation in the industry by growers is lamentable. I know many of the reasons for that. It is a matter of having been ground down over the years. It is a feeling that their voices have not been heard. It is all those things. But it is very hard for a select committee and for a Government—those of us who are involved in the process—to get a fair understanding from such a small participation of grower members. 
I would like to make a comparison but not necessarily suggest that they follow the same route as the Fonterra board which put up three people for re-election. The price was not as they had hoped it would be and the returns were not as they hoped they would be so two of the directors were fired. The farmer participation dealt to them very very quickly. I am not so naive as to believe that it is just the farmers. There was a lot more politics. Further to that we have had the summary dismissal of Fonterra’s chief executive officer in favour of another person. That level of participation is very very healthy. I urge the woolgrowers of this nation to involve themselves in the new structures that are being put in place and to watch over them very very carefully because a lot of the things that we suggest could go wrong and that some people may profit from individually are beyond the scope of this bill. They are in the companies that are set up under the Wool Equities banner. 
Mr Eckhoff is absolutely right. We have no place meddling in those companies. We have no place directing people how to administer those companies but we do surely have the ability—and I suggest the responsibility—to urge farmers to participate fully in the democratic process in those companies and to ensure that the things we hope and pray will not happen do not happen. 
GERRARD ECKHOFF (ACT NZ) 
: 
 I would like to comment on clause 19A “Constitutions” and specifically on the constitution of Wool Equities. I bring this to the Committee’s attention because some concern has been expressed at the possibility that growers will lose control of the industry within a couple of years. The bill states that a shareholder must not sell shares in Wool Equities to a person other than another grower; a person who is not a grower must not buy shares or become a shareholder in Wool Equities; a shareholder and an associated person must not acquire hold or control voting rights for directly or indirectly in concert or otherwise more than 5 percent of the total number of shares in Wool Equities. 
I think this is a very sensible part of the constitution of Wool Equities that does give what one might call a stand-down period—a shake-down period—that allows farmers a couple of years to see how things are progressing and how things are moving. If they are moving in the direction the farmers think they should be moving then they can vote accordingly after the 2-year period. I am well aware that the bogeyman—if one could call it that—of corporate raiders taking control of farmers’ assets rears its head from time to time and the example has been used of the Guinness Peat Groupbuying into ENZA and taking control of that company. 
 I must say that I thought: “Well gosh is this a good thing?”. The reality is that if we ask the growers who are shareholders and sellers of their product they say that it has been a good thing. I make the point that as I have said before what these companies need dramatically is capital to develop. It is like having a farm but no money to put fertiliser on fence or build water supplies. The companies must have access to capital to be able to develop. Whether a company like the Guinness Peat Group is coming in for some benign purpose some productive purpose or otherwise really does not matter because farmers are not compelled to be members of Wool Equities if they do not wish to be. They can sell their shares get out of the industry and perhaps invest in some other aspect if they so choose. 
I do not think it is appropriate for myself as a woolgrower to tell other growers that I believe they should leave their money in or take it out. That is entirely for them to decide. But the constitution under this clause 19A allows for this very important stand-down period—for want of a better expression—in which farmers will see the trend starting to develop whether or not it is appropriate and react accordingly. I do not see the injection of outside capital and the potential—and I emphasise that word—for outside control to be something that farmers should be overly concerned about because if that industry becomes terribly successful they as shareholders in Wool Equities will benefit from that as well. Indeed the demand for their product on the auction-room floor or by private sale will also be reflected in the price they receive for their product. 
So I do not think that we should be overly concerned about the prospect of non-woolgrowers or those who are not currently industry players taking some sort of a controlling or a 20 or 30 percent stake and injecting much-needed capital into this industry. It is something that probably will be needed. But I also make the point that this is the very reason that Canesis has developed to ensure that the capital it needs comes pretty much from New Zealand sources rather than having outside capital come in to develop these quite exciting products that the Wool Research Organisation of New Zealand has developed on behalf of the woolgrowers of this country. 
The question was put that the amendments set out on Supplementary Order Paper 101 in the name of the Hon Jim Sutton to clauses 20B(2) and 20C(2) be agreed to. 
Amendments agreed to. 
Part 3 as amended agreed to. 
Bill reported with amendment. 
Third Reading 
Hon DAMIEN O'CONNOR (Associate Minister of Agriculture) 
: 
 I move  
That the Wool Industry Restructuring Bill be now read a third time 
. The bill was introduced into the House on 11 December 2002. It had its first reading on 19 March 2003 and was referred to the Primary Production Committee on that day with the instruction that it present its final report on or before 16 June. The select committee reported the bill back to the House on 16 June as first indicated. 
The bill restructures the New Zealand Wool Board into a company New Zealand Wool Board Disestablishment Company Ltd to wind up the affairs of the board and to distribute its assets among woolgrowers. The board was originally established in 1945 to undertake wool research and development technology transfer education and training wool promotion and other issues. Since that time the board has operated under various legislation and with an assortment of functions including operating a minimum prices scheme for wool from the late 1970s to the 1990s. 
Today the board is engaged in industry-good activities and through its subsidiary Wool Equities Ltd and its associate company Meat and Wool Innovation Ltd it is engaged in commercial wool activities. When the board was established the industry was predominantly focused on the UK which took the vast bulk of New Zealand’s wool. Today the main market for this country’s wool is China which takes about 23 percent of our exports. The UK now takes 15 percent of New Zealand’s wool exports. Greater attention is now being given to innovation and to adding value to our produce prior to export. We have seen developments in the wool industry for example with respect to keratin proteins in wool fibres and now the time has come for its commercialisation through the new company Keratec New Zealand Ltd with its grower ownership stake through Wool Equities. The bill will enable growers to participate in the potential financial benefits from this commercialisation over the coming years by being allocated shares in Wool Equities. 
The bill not only facilitates regulatory and structural reform in the wool industry it also enables separation of industry-good and commercial activities. This means that the industry can be more responsive to changes in the commercial environment facing its business and to business opportunities. It should also mean that those businesses become more profit-focused. 
The industry still faces challenges ahead. They are exciting challenges if growers get behind them. However there can of course be no guarantees. The bill provides for the allocation of the Wool Board’s assets to growers split between the grower companies Wool Equities and Merino Grower Investments. It is going to be over to the directors management and grower-shareholders of those companies to ensure that the decisions in future are such as to realise the potential returns that exist on growers’ investment. 
The process of wool reform has not been a quick one. It was the Wool Board’s annual general meeting in 1999 that decided to hire McKinsey and Co. to undertake an independent review of the wool industry that has led ultimately to this bill. Some say that this process has taken too long while others want to drag it out further. The Government is convinced that the majority of growers support the bill and that is evidenced by the number of submissions the select committee received: a total of 33. Among those Federated Farmers Meat and Fibre Producers supported the bill. I wish the Wool Board Disestablishment Co. well in winding up the affairs of the board and allocating the board’s assets to growers. I also wish Wool Equities Merino Grower Investments and their subsidiary and associate companies all the best for the future. I would also at this point like to thank the officials for their very difficult work. I would particularly like to congratulate Ken Armstrong from the ministry who has been a key part of this oversight process. He will be pleased to see this bill pass through the House and place responsibility in the hands of woolgrowers instead perhaps of having it on his broad shoulders—as has happened from time to time. 
Most of all I wish New Zealand woolgrowers well. Growers have waited patiently for Parliament to enact this bill. Non-merino growers will need to decide whether to convert their preference shares to ordinary shares in Wool Equities as a future investment or to cash them in. Merino growers will get their preference shares in cash in any case. In August all growers will have an important vote to participate in under the Commodity Levies Act to determine whether they have a levy on wool post 30 June 2004 that will be used to fund industry-good activities. 
The future of the industry is in growers’ hands. As individuals they have very little chance of having their wool compete with non-renewable manmade fibres in the international marketplace. However collectively as an industry united in its objectives and vision they can maintain their place in New Zealand agriculture through innovation and growth and develop new innovative international-market opportunities. I commend the bill to the House. 
PHIL HEATLEY (NZ National—Whangarei) 
: 
 On behalf of my National Party colleagues particularly Shane Ardern and the Hon David Carter and my former colleague the Hon John Luxton I commend this bill to the House. We will be supporting it. Obviously we have voted for it through all its stages and will be doing so now. It is enabling legislation. This bill when passed very shortly will require the Wool Board to present a restructuring plan to the Minister of Agriculture. The restructuring plan will have to be sound. I trust the ministry and the Minister to give it fair scrutiny and to address issues and concerns raised by other members of the House who are less confident about the future under the current proposals. 
Fledgling companies such as Canesis those on the horizon and some developed ones such as Ovita and Covita have opportunities in research and development and the promotion of new products as does the industry as a whole. If some of those companies come to pass I wish them well as well. 
I do commend this to the House. Many issues were raised and spoken about by members. The debate still has to be had and the Minister still has to address those issues. We believe that as a select committee we have been diligent. We have beefed up the requirements to report to the Minister. Those requirements need to be met and we trust the industry to do that. As I say we will be supporting this bill. 
LARRY BALDOCK (United Future) 
: 
 I rise on behalf of United Future to express our support for this third reading of the Wool Industry Restructuring Bill and to make just a few brief comments. It has been heartening to see the cross-party support throughout this phase. Although we have not had a person on the select committee I know that the committee members worked very hard and I commend them today for the way they have addressed the particularly complex issues within this bill. Nothing is ever perfect but I believe that the House has done the best job possible today to deliver the best legislation we can to protect the interests of woolgrowers and move them forward into the 21st century. I thank the officials for their hard work. 
As I said in my second reading speech I look forward to further clarification in the transition phase for Wool Equities so that the growers will have an opportunity to express their commitment to the new board members at some stage in the future preferably at the next annual general meeting. I believe they should exercise that option and responsibility. It is now however in the hands of the Minister as this bill is passed to ensure that that takes place. United Future is happy to support the bill. 
R DOUG WOOLERTON (NZ First) 
: 
 I am naturally sorry that the amendment that was put up in my name was lost. I think we have lost an important opportunity to pause for another look and to have a further investigation of the common sense of the things that lie beyond this bill. However New Zealand First will support the bill. I make no apology for believing that industries should be controlled and owned by the participants within them. I know that sometimes these days that is becoming an outmoded concept but it has served this country well. I believe that in the guise of Fonterra it will continue to serve the dairy industry well and I believe that it could have served the wool industry well also but that is not to be. The wool industry is heading out into a brave new world and I wish the industry all the best on that journey. 
I want to particularly mention the emerging participation of Maori corporations in the farming world. At long last Maori are banding together under a corporate identity to participate. They felt that by their numbers they were outvoted and not listened to in the structures that have just passed into history shall we say. I know they will welcome the new world. I believe they could have been incorporated into a more cooperative world than the one that is going to be faced by the wool industry but that is not to be. 
I am sure that woolgrowers and sheep farmers right across the country will view the passing of this bill with immense relief whatever side of the argument they came down on. I am sure they will pick up the challenge that I laid out to them earlier and participate with renewed vigour to ensure that the democratic processes we have been at such pains to ensure remain in the bill are picked up and carried forth so that farmers have delivered to them that which they aspire to. 
The commodity levy that comes in will be an interesting test for farmer participation. There are some views around that farmers will reject it out of hand but knowing farmers as I do—and I am sure as you have come to do over the years in this House Mr Speaker—I am sure that common sense will prevail and they will engage with their industry and go on to the better things that this allows. 
So it is with some regret that I end this speech by saying that I would have liked to see a halfway house established so that another independent person could have looked at this industry. That was not to be but we will not be dogs in the manger. We will vote for the bill and wish the industry which is so valuable to New Zealand all the best for the future. 
GERRARD ECKHOFF (ACT NZ) 
: 
 I am delighted to have this final opportunity to speak on this bill in the third reading debate. I cannot stand here with my hand on my heart and say that I know exactly where the future of the wool industry is. I cannot say with absolute certainty that Mr Woolerton is absolutely wrong and that I am absolutely right. I am not sure about that; I am not totally sure. But on the balance of probability I believe it is appropriate that this bill go forward with the support of this House and that we allow the industry to develop as it should. 
I would like to make a few points to the House. The reality is surely that if there had been no Wool Board created whenever it was—50 years ago—we would not be standing here today to debate its demise and what should take its place. I think of the opportunity cost that we perhaps face today because we have had a structure that supposedly threw a security blanket over woolgrowers and told them they did not need to worry because the Wool Board was there to look after them—and of course the wool industry went down down and down. That security blanket has now been totally removed—or in very large part removed—from the growers. 
I can only reflect too on the traumatic events—as they were back in the 1980s—when subsidies were removed from the farming industry. I lamented deeply the loss of my subsidies because I was the backbone of the country along with my farming colleagues and I asked how this Parliament dared to remove my subsidies. I was receiving about $8 or $9 for a lamb and I was going broke. The meat industry recognised that if farmers went broke it would go broke. We saw the need for a commercial focus and the requirement the absolute requirement of the industry—the farmers the meat processors and the whole lot of us—to recognise that if we wanted to have a future in this country we had to get out there and do it out in the marketplace and that is what happened. In recent years in the meat industry farmers have been receiving a cheque for a single lamb of anywhere between $70 and $120. Within that 20-year time frame we have gone from receiving $8 per lamb to receiving $70 $80 or $100 and in some cases $120. How many other industries with a primary production focus can actually state that they have gone in from that very low level back in the mid-1980s to the high peak of around $120 by trading in what are essentially commodities? Certainly the meat industry has much to be proud of. 
I wonder in these quiet moments whether the same thing will not apply to the wool industry—whether in 30 years’ time the industry will go back to this very day and ponder what happened. Will farmers say: “Thank goodness that bill was passed. Those guys—and women too of course—were not sure whether they were 100 percent right but my goodness me they gave us the opportunity.”? Today we are trying to give the wool industry—not just the growers but the whole wider industry—the opportunity to move forward. Yes as Mr Woolerton has pointed out it is a huge article of faith for us to stand here today and pass this bill but surely that is part of our job. We have to make a judgment call from time to time and we stand or fall on the results of our decision making. Woolgrowers may be so angry with me that I am never heard of again and that of course is their choice. 
R Doug Woolerton 
: We’re trying. 
GERRARD ECKHOFF 
: Some of my colleagues may help me along the way too but that is fine. 
Without question this restructuring is a huge article of faith. As a farmer of some 30 years’ standing I realise that I live in hope. That is what I do as a farmer. On this very day when huge storm warnings have been issued for my neck of the woods I live in hope that nature will pass me by on this occasion and the storm will move out to sea. We live in hope of better days. That is what this bill does for the farming industry. It provides an opportunity. Could the restructuring have been done better? Undoubtedly it could have been but there are times when we just have to say that we have done the best that we could do with the knowledge currently available to us. 
We have had many many submissions from very capable people indeed including even the Inland Revenue Department. My colleague Rodney Hide would be apoplectic if he knew we were taking advice from that department. We invoked the department’s help to assist us with our deliberations because there are tax losses of $270 million and that huge sum of money has to be utilised to the benefit of the wool industry. That is what the farming community is attempting to do with the passage of this bill. 
We have also introduced a much greater commercial focus. Some hard-nosed business people are set to represent us and to assist the wool industry to move forward. My faith is not so much in the system or the structure that we have placed in the bill but in the people who will I hope overcome the problems that we face with regard to low commodity prices. Who knows? Maybe instead of receiving $3 or $4 for a kilogram of cross-bred wool we may be looking at receiving $10. In 10 or 15 years’ time we could well see pharmaceutical companies clamouring to buy our wool product because it contains a special enzyme that enables burn specialists to solve skin-grafting problems. 
I do not know where the future of the wool industry lies. I do not know what the biotech companies will come up with but I do know that the future is exciting if we allow it to be so and allow—without getting into any political ideologies—the market investment and most important research and development to take place in that industry. The focus of research and development has been lost for so many years under the auspices of the Wool Board. 
When something is taken away as the Wool Board has been a vacuum is created. But while I certainly do not profess to be a physicist I know that a vacuum is always filled. Nature does not allow a vacuum to remain; it is always filled. As I said earlier I cannot say with absolute certainty whether that vacuum should have been filled with the Wool Corporation or whether it should be filled with the existing structures that we are promoting in this bill by means of Wool Equities. But I think the committee has worked very well together to achieve the very best possible outcome for the industry. Yes there are areas of disagreement but I do not think they are so huge that the industry will not overcome them. My time on the Primary Production Committee has been a rewarding one and I thank my colleagues on the committee for what I think is a good job and a job that has been well done. 
IAN EWEN-STREET (Green) 
: 
 I would like to start my final speech on this bill by thanking the officials who have helped the Primary Production Committee. I am aware that at times I was the bane of their lives and I just want to thank them for their patience with and tolerance of me. They did fail to convince me even in the end that we were doing the right thing but they did do their best. I would also like to join my colleague Gerrard Eckhoff in acknowledging the collegiality of the Primary Production Committee. I do think we all put our heads around this bill in a very non-partisan way in order to come up with the best possible solution. 
I have always expressed my doubts about this bill. As time went by in the select committee my opposition to it grew and I have not changed my mind. I think the growers really need to be very aware of what is going on. As I said in my second reading speech I sincerely hope that I am wrong but I have very grave fears about what will happen. I would urge woolgrowers to look at the ownership of Keratec. The figures and flow charts appear to show that Keratec ultimately remains in the ownership of farmers. However if one looks through the way that governance is covered one sees that there are votes that will outweigh the ownership percentages. I just think that the potential for farmers to lose control of Keratec which is the jewel in the crown of the intellectual property of the wool industry is very real. 
I would also urge farmers to look at the mandate that the industry claims it has for this restructuring. I detailed that matter in my second-reading speech so I will not go through it again. But if farmers believe that there was any premeditation in the consultation then there is precedent in the law to say that that consultation was not actually consultation and can be legally challenged with the result that the restructuring would go back to square one. 
I do wish the industry well. My opposition to this bill should not in any way be interpreted as being opposition to the disestablishment of the Wool Board which I think is an essential thing. I am just not convinced that the structure that has been put in place is the right solution and I am particularly concerned about the very late arrival of Canesis and Canesis Venture Capital on to the scene. I wish the industry well but unfortunately I really cannot see my way clear to supporting the bill on this occasion. 
A party vote was called for on the question  
That the Wool Industry Restructuring Bill be now read a third time. 
Ayes 99 
Labour 52; New Zealand National 20; New Zealand First 13; ACT New Zealand 6; United Future 8. 
Noes 7 
Green Party 7. 
Bill read a third time.