The Future of the Kiwifruit IndustryDeputy Prime Minister
John Palmer, Doug Voss, Malcolm Cartwright, fellow Ministers, distinguished guests, ladies and gentlemen.
Thank you for the opportunity to speak to you today, in closing what has been a useful debate on the future of the kiwifruit industry.
The high attendance at this Summit is testimony to the fact it has NOT been a waste of time as some critics have said.
It's no secret the kiwifruit industry has had its share of ups and downs. One is tempted to liken it to the recent performance of the world's sharemarkets.
But seriously, the industry has seen some good times and some very tough times.
For some here today, the 1992/93 crisis will still be a bitter memory, despite the better performance of the board in more recent years.
The board's $80 million deficit that year forced many out of business.
That appalling result also brought the board under enormous pressure and intense scrutiny.
No group was more scathing in its criticism of the board than Integrated Kiwifruit Services or IKS - an influential group of growers, packers and coolstorers that sought to topple the board's monopoly status.
As you know the board survived this with a last minute rescue package and better financial results the following year.
However, the troubles of 1992/93 led to some very tough questioning over the board's effectiveness as sole marketer and seller of New Zealand kiwifruit.
Since then, there have been numerous reviews of the industry and as John Palmer has warned, the industry is in danger of "reviewing itself to death".
But there are reasons for constant reviews.
There's a significant number of dissatisfied growers who have called for these reviews.
The time has finally come to get this industry RIGHT, once and for all.
The issue is simple: "Have we got the right structure to deliver maximum returns to growers?"
There are really only four alternatives worth considering.
Maintain the current monopoly board.
Corporatise the board.
Partially deregulate the industry.
Fully deregulate the industry.
It cannot be denied that opinion is divided on the options with passionate support for each alternative.
The single desk approach has come under much scrutiny for failing to deliver the money that one would expect from a monopoly.
The problem is that a monopoly removes the incentive to be as efficient as possible.
Studies show that firms protected from competition are between 6% and 20% less cost efficient than competitive firms.
There is also increasing international pressure for free trade to occur on an equal footing and monopoly producer boards are not necessarily conducive to this.
A recent survey of growers quoted in the annual report, shows the average level of support for corporatisation of the board's assets is 6.7 out of 10.
This indicates that growers support some change to clarify ownership issues by giving growers a share in the industry, based on volume.
The problem is that corporatisation may already be an out dated model for producer boards.
There is evidence that other industries are on the verge of abandoning corporatisation in favour of more competition.
Partial deregulation is a viable option for the kiwifruit industry and the present number of dissatisfied growers suggests there is support for this type of structure.
On the other hand, there will be costs in developing new marketing, shipping and distribution channels and pricing patterns will also change.
Intangible, but valuable market contacts and personal networks may also be lost.
Multiple exporters would also be subject to the same international market forces that the current structure is.
Whilst it will always be difficult to get consensus on which is the best option, the overriding concern MUST be which option will deliver the BEST returns for growers.
It's NOT a case of competing ideologies. It's a case of MAXIMISING growers' incomes.
This is the fundamental principle that will guide the Government in making decisions.
The chosen marketing structure must be efficient, cost effective, accountable and must employ the most effective marketing and pricing strategies.
The Coalition Government respects the views of the industry and will continue to uphold growers' incomes as the paramount consideration.
This conference was called so that the issues may be laid out in front of you and your views aired.
We are pleased to take the time to consult and are grateful that you attended in such numbers.