Mallard Trevor: State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill — First Reading 
Mallard Trevor: State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill — First Reading 
[Volume:638;Page:8558] 
Hon TREVOR MALLARD (Minister for State Owned Enterprises) 
: 
 I move  
That the State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill be now read a first time. 
 At the appropriate time I intend to move that the bill be considered by the Commerce Committee and that the committee report finally to the House on or before 30 April 2007. 
The purpose of the bill is twofold. Firstly it permits a merger of AgriQuality and Asure to occur provided that shareholding Ministers are satisfied that a merger is viable. Secondly the bill allows shareholding Ministers to direct the board of AgriQuality not to provide certain services under the Animal Products Act 1999. 
To understand why a merger of the two companies is being contemplated it is necessary to briefly review their history. AgriQuality and Asure were established as State-owned enterprises on 1 November 1998 from the former MAF Quality Management. The reason for establishing these companies as State-owned enterprises was to improve the efficiency of the services provided by both organisations and to separate the service delivery function from the policy and regulatory advice provided by the Ministry of Agriculture and Forestry. They were created as separate State-owned enterprises because they had distinct product offerings and the operations of the new entities faced distinctly different challenges at that time. They were also structured in a way to ensure that there was minimal market overlap as competition between the two was not envisaged. 
Much has happened in the 9 years since AgriQuality and Asure were established. Consumers have become much more demanding about food safety and traceability thus placing greater pressure on companies like AgriQuality to provide comprehensive end-to-end food safety solutions. The New Zealand economy has also become more vulnerable to biosecurity threats as the international community has become more interconnected—and probably we have become aware of some of the threats we were not aware of previously as well. This has placed greater value on the provision of an integrated and comprehensive biosecurity response capability. AgriQuality and Asure currently compete to provide these services. Better New Zealand - wide outcomes could result from a more collaborative approach particularly in the provision of a highly skilled and coordinated standing army should a major biosecurity threat such as foot-and-mouth or a similar disease strike. 
In respect of the key provisions of the bill it is right to consider the merger of the companies for the reasons I have already mentioned should the business case currently being developed make financial and strategic sense from the perspective of the shareholders and the Ministers but on behalf of the taxpayers. 
 To enable a possible future merger legislation is required to remove one company or both from schedules 1 and 2 of the State-Owned Enterprises Act 1986 and to consequently amend a number of other enactments. The bill enables this to occur. The bill also provides that certain matters are not affected simply by reason of the merger of the two companies. For example a merger cannot be used by a third party to claim that there has been a breach of contract and an employee cannot claim that there has been a technical redundancy effectively through the merger. 
Part 2 enables that a merger of the two companies is time limited. It expires 2 years after the date on which the bill receives the Royal assent. The bill enables shareholding Ministers to direct AgriQuality’s board of directors not to provide export red meat inspection services under the Animal Products Act 1999 without specific authorising legislation preventing AgriQuality from providing export red meat services which could breach Part 2 of the Commerce Act 1986. The bill also specifies how the direction must be given to the board of directors and how direction must be notified. Furthermore it provides that the board of directors of AgriQuality must comply with that direction. I commend the bill to the House.