KINLEITH PULP AND PAPER MILL INVESTMENT ANNOUNCEMENT

Thankyou John. Special guests, ladies and gentlemen. I am delighted to be here today at your announcement of $313 million of new investment in the Kinleith Pulp and Paper Mill and the South Waikato.

This huge investment being made by Carter Holt Harvey is a strong vote of confidence for the future of New Zealands forestry industry. This investment will significantly add value to New Zealands sustainable forest harvest. It will enhance the quality of Kinleiths product and reposition Kinleith as a facility that is internationally competitive in both market pulp and liner board.

It has been widely recognised that for New Zealand to benefit most from its renewable tree resources, it needs to invest in processing capacity onshore. This was a major reason for the sale of Forestry Corporation prior to the election. Such processing not only adds value to our exports, but also provides more jobs and opportunities for New Zealanders.

The numbers surrounding this announcement are very impressive.

• projected cost of $313 million - an enormous amount of money
• a 30 percent total production increase to nearly 600,000 tons per annum
• an estimated spend in the local region of $45 million
• a construction project work force peak of 700 with local employment of 300
• major environmental benefits which will see improvements in water and effluent, recycled fibres, co-generation and oxygen bleaching.

Since the first trees were planted in the forests that supply this mill in the 1920s, there has been enormous progress. I might add this area was represented briefly by a member of parliament in the 1930s, who devoted much of his maiden speech, to the topic of speculators wasting peoples money by planting small trees of the wrong species in the area.

How wrong he was about the efforts of Smith and Wylee, two visionary young entrepreneurs, who began large scale commercial exotic forestry in New Zealand with the establishment of an initial planting of 180ha in the Woatu- Lichfield area.

Today this project builds on a history of investment in this area. The outcome will be a doubling of Carter Holt Harveys pulp and paper exports.

And this investment is also a vote of confidence in New Zealand. Carter Holt Harvey, with the backing of their majority overseas shareholder, International Paper, has decided to invest hundreds of millions of their shareholders funds here in New Zealand at Kinleith. They could have invested that elsewhere. They realise that Kinleith, its workers and the New Zealand environment has the potential to get a return on their investment. By making this investment here they are demonstrating that they believe Kinleith and New Zealand have a bright future.

For those who mistakenly oppose overseas investment in New Zealand I suggest you consider the alternatives to not upgrading Kinleith and keeping it internationally competitive,

• the export of lower value unprocessed logs
• the eventual closure of this site
• and bad news for jobs in Tokoroa and New Zealand

As Minister of Commerce, I welcome companies who invest their money in providing jobs and technology in New Zealand.

In this case the major shareholder, International Paper is a worldwide producer of paper, packaging and forest products, complimented by related speciality products and an extensive distribution system. The company operates more than 400 facilities in the Americas, Europe and Asia on behalf of customers in 130 nations.

It is access to this marketing infrastructure of the majority overseas shareholder that will enable Carter Holt Harvey to get better penetration into the fast growing and important Asian regional markets. Without a substantial overseas shareholding in Carter Holt Harvey this opportunity may not be realised.

But Carter Holt Harvey also has a large number of New Zealanders as part owners, including local employees, who with their savings have invested in this companys future prosperity and in their own future prosperity. They expect to get a return on this investment better than if they left their savings in a bank.

New Zealand is faced by a world that continues to become more regionally and globally intertwined in both an economic and political sense. It is a dynamic world that we live in. We cannot afford to stand still or be myopic about such investment and change.

Such change is essential to keeping Kinleith up with and ahead of Carter Holt Harveys competitors.

As a small trading nation in the Southern Pacific it is vital that our businesss remain competitive in international markets. With our commitments to CER, APEC and the WTO, the level of local tariff protection is reducing. We need to continually improve the way we do business, continually improve our technology and continually improve the way we do things to ensure we can be internationally competitive in all sectors of our economy, both public and private.

Carter Holt Harvey and their parent company International Paper are to be congratulated for having the foresight to make this investment.

I would also like to congratulate Carter Holt Harvey on making this investment in uncertain political times. Just as our commercial landscape has changed over the last decade, our political landscape is now changing dramatically.

Since October 12 we have had a caretaker government. The jury is still out on whether the choice of MMP, and the changes to parliaments standing orders are going to provide the dividends that some hope for.

In politics, interestingly, those most critical of Government seem generally to want it to grow the most.

Personally, I believe generally changes that reduce the impact of politics on business is good.

We now have less government involvement in the economy than we used to. Accordingly there are less opportunities for politicians to mess things up.

I believe this positive trend in New Zealand of reducing governments overall involvement in the economy needs to continue, albeit slower under MMP.

In a recent Economist article entitled Withering Away the State the authors noted that New Zealand has reduced public spending from 46% of GDP in 1988 to 36% in 1994 and falling, while many other countries are pushing over the 50% of GDP figure.

The article states as a general rule those economies with the lowest rising public spending since 1960 seem to be more efficient and more innovative and notes that in newly industrialised Asian countries which are often envied for their growth, public spending averages only 18% of GDP or half as big as ours which provides a significant competitive advantage.

However there is still a role for government. That role is increasingly now being focussed on issues of social cohesion which sees a focus on education, security, health and welfare. The real challenge for governments, I believe, as we move into the 21st century, is having a balanced and consistent approach to both economic and social goals.

But social goals still have to be paid for. That means keeping up with the changes that are occurring out there in the market place and not impeding the market from working. That means business making investments such as this to earn the income the country needs to meets its social goals. It means having an economic framework that is conducive to attracting investment from whatever source, be it from overseas or local savings.

The coalition building process has created some uncertainty. However, it is my hope that irrespective of which way the government goes, that the urge to continue reform in vital areas of the economy, to ensure the future of our nation, is not lost, and that some semblance of fiscal discipline is maintained.

While the political process in Wellington may take some credit for New Zealands economic success in recent years, it is companies like Carter Holt Harvey and their workforce that have rolled up their sleeves and got on with the job, taken the risks and made the most of the opportunities and created the economic growth at the end of the day. This is particularly so in on- processing New Zealand raw materials into internationally demanded exports.

Finally, ladies and gentlemen, I would like to congratulate Carter Holt Harvey on this announcement. I would like to take this opportunity on behalf of the Government, to not only congratulate you but also to wish you well in your endeavours and challenges you will face as you proceed towards the new century.