NEW ZEALAND PORK INDUSTRY BOARD ANNUAL CONFERENCE

  • John Luxton
Food, Fibre, Biosecurity and Border Control

Charles Kettering who was born in 1876 said "we should all be concerned about the future because we will have to spend the rest of our lives there".

Today we live in an ever changing world. Capital, people and technology can move out of the country at any time. Once those things have gone, so too will have the wealth that they create and the taxes that pay for our social and environmental goals.

Globalisation and technology have made the world smaller, more informed and competitive. To have a prosperous future we need to be internationally competitive in whatever we do and not be afraid of change or of grasping the opportunities that it brings.

So today I want to touch briefly on some specific issues that I know your sector is interested in and talk briefly on some of the things Government has been doing to ensure a prosperous future for all New Zealanders

The Pig Industry
The pork industry is important to New Zealanders. Every morning many of us bacon eaters enjoy some of the 47,000 tonnes of pork production. This decade the pig industry's contribution to GDP has grown from $125 million in 1990 to an estimated 139 million in 1997. With the retail value of pigmeat at about 3.5 times the farm gate value, you are close to selling half a billion dollars annually.

This is impressive as the number of pig producers registered with the Pork Industry Board has dropped from around 900 to under 600 in the past 3 years and the trend, according to the Board, is set to continue.

In 1997 the annual kill was 773,270. There are few exports from New Zealand, because of some historical Biosecurity issues. In 1988 strict protocols were put in place to enable exports from the South Island to Australia, but as yet no exports have been undertaken. It is interesting to note that in the 1930s New Zealand produced over one million pigs and exported almost 70% of production, while today almost all is consumed domestically.

Having total reliance on the domestic market creates challenges for your industry. It means that to get the growth in the market for your product you have to rely on population growth and consumer preference to increase for pork. Imported product therefore creates a challenge as you battle for supremacy at the supermarket checkout.

One of the most significant challenges to the New Zealand pork industry, as considered by the Pork Industry Board, is the volume of pork imports particularly from Canada. Competition from other meat products, such as beef, is also a challenge to the New Zealand pork industry.

The Board is, therefore, encouraging the industry and its producers to find solutions to reduce input costs and is promoting vertical co-operation within the industry to achieve cost savings through strong and supportive alliances. While your market is onshore, you have to become more internationally competitive to compete with the off shore producers.

It is no doubt with this in mind that the Board has targeted five key strategic areas of focus, which are:

Industry leadership
Market development
Quality environment
Animal welfare
International competitiveness
The Board?s 1997 Annual Report gives more details on programs under each strategic area, but the focus must continue to be on capturing the minds and wallets of the consumer. The August 1997 launch of the promotional campaign "Mmmm its got to be New Zealand Pork" is a Board initiative to do just that. As with any product, it is the consumer, at the end of the day, who makes the buying decisions that will make your industry a success.

I understand that the Board believes that the increasing imports of cheaper frozen pork, mainly from Canada, destined for processing is driving some producers out of business. The declining number of producers have led to falling pig kill and thus additional pressure on the industry?s financial resources to fund programs and promotions.

It is therefore vital that the levies producers pay to the board are value for money. In challenging times it is vital that the producers are getting a return on their investment.

The government accepts that it sometimes can be useful for sectors to work collectively for the common good of the whole industry. But the focus must be on putting more money in producers pockets and on accountability to the producers who are doing the paying.

To this end, as you know the Pork Industry Board Act was passed in December 1997, which increased the Board?s accountability to its levypayers, and has directed the Board to dispose of its pig breeding unit, a commercial venture, by 30 September 2000, unless an extension (maximum of 12 months) is granted.

Producer Board Deregulation
We now are moving again as we evolve the 70 year old producer boards structures. As you know the Government announced in the 1998 Budget that producer boards were to report back to the Government by 15 November 1998 with their deregulation plans.

The whole focus of this reform is on increasing farmer and rural sector incomes.

Prior to the announcement, the Minister of Agriculture also spoke to the Pork Industry Board chairman and the Board?s chief executive on the Government's intention to remove all the producer boards' statutory backing. The Government will assess the Pork Industry Board?s proposal rigorously and implement change in a way that is appropriate for the industry.

Ultimately, the Government wants to see the industry participants making the best possible returns and see the industries making their optimal ongoing contribution to the New Zealand economy within a normal commercial law framework. Policy concerns to be addressed include:

commercial activities not being carried out by bodies with regulatory powers;
the optimal funding (voluntary or compulsory) of industry activities, e.g. research.
Proposals need to provide for the shortest practicable transition to operating under a normal commercial law framework, while taking account of commercial realities. The transition to a deregulated business environment needs to be undertaken in a manner that minimizes disruptions to industries.

Important issues the Board may like to address in their freeing up proposals include:

funding of industry activities, e.g. research, (including implications for the Commodity Levies Act 1990 which I understand you are looking at as a funding option, e.g. appropriate uses of compulsory levy money, and the workability of the legislation);
any sanitary/phytosanitary issues that may be relevant
asset transfer and related tax issues (to ensure that there is equity in the transfer of the board?s assets, and some ability for industry participants to withdraw their capital); and
statistical information collection/dissemination (as the Board has specific statutory powers and functions relating to collection and dissemination of statistical information).
and of course anything else that your industry thinks is relevant.
In preparing proposals, it is imperative that board consult with industry participants and representative organizations about how the industry should operate in a deregulated environment, and the transition path to deregulation. This is to gain their perspectives and help ensure that important considerations are not overlooked. Consultations should be documented in the Pork Industry Board?s proposals. The Board is also encouraged to have dialogue with the Minister of Agriculture and MAF officials during the Pork Industry Board planning process.

As we move towards a freed up environment there will be transitional issues to be addressed and planned for. The Board?s proposals should address these issues and how they believe they would best be handled.

Proposals should include analyses of the various issues and options, and provide full reasons for proposals. The Government will scrutinize and assess the Board?s proposals, and the rationale behind them, before decisions are reached on the changes appropriate for the industry.

The Government anticipates that the Board will need to include commercially sensitive information in their proposals, and we are well aware of the need to safeguard this. Any commercially sensitive information should be clearly identified. The Official Information Act 1982 has provisions relating to the withholding of commercially sensitive information.

One of the functions of the Board, under the Pork Industry Board Act 1997, is for the Board to help ensure that there is an adequately wide genetic base for the New Zealand pig industry, and that New Zealand pig farmers may buy suitable pigs to rear. For this reason, the Board has been undertaking commercial breeding, rearing, and sale of pigs. However, the Act specifies that this function of the Board is to cease by 30 September 2000, unless the term is extended by a maximum of 12 months by an Order in Council. The direct impact of this on the Board would be for the Board to sell its pig breeding unit prior to the expiry date. The future of the Board?s pig breeding unit would therefore need to be addressed in the Board?s deregulation plan.

The Government looks forward to working constructively and positively with you as we move through this important evolutionary process. To facilitate this a working group of senior ministers has been formed. An officials group has also been established so that Boards can be assisted where appropriate to achieve the best outcome with a smooth transition.

I would now like to touch on a few other issues which I know are of concern.

Cost of compliance
Currently, both my Commerce department and the Ministry of the Environment are doing work on the RMA. While the basic principles in the Act are good, the implementation and interpretation of the Act can be improved. We have made some progress. Last year we removed the "factory farming" clause in relation to pork production to remove discrimination against pork production. I want to thank the Board for their input and efforts in achieving this change.

But further work is needed on the Act, particularly the cost of compliance and the process involved. I know that the Board considers that many of its producers are confronting compliance costs imposed by this Act which are unfair and unjustified. As a farmer myself I know the frustration involved. We hope to be able to introduce any necessary legislative changes to the RMA later this year.

The Meat Act is currently under review, and your Board is having its say in this process. I hope that we can get changes that will mean that unnecessary compliance costs are removed.

Other Government initiatives
I know that for your industry to be internationally competitive Government has to do what it can to reduce compliance and regulatory cost and maintaining an attractive economic environment in which to do business and attract the capital, skills and technology that we need to improve our standards of living.

Currently we have a number of initiatives underway to improve our international competitiveness as a nation. The whole area of micro economic reform aims to do this. For example within my portfolios we have done a number of things:

car tariffs reduced to zero midnight, $30 million tariff rebate, $400,000 community transition package (saving $4000 - $5000 per av new car, $300m p.a)
general tariffs post 2000, announcement expected soon on speed and profile of reduction
parallel importing prohibition removed - world best prices (eg saving $80,0000 on $250,000 truck)
Producer boards - allowing more innovation and investment in key agricultural sectors
generic occupational regulation legislation to ensure consumer safety at a fair cost.
Increased competition enhances the international competitiveness that we need to prosper e.g.
Progress in oil industry, telecommunications sectors (saving $240m per year)
electricity reforms announced by Max Bradford (if 10% saving then $250m per year)
ACC
working on roading reforms
local government
Valuation NZ (70% savings on rates valuation for one council already)
And we are trying to reduce regulatory impacts through a number of measures:

a code of good regulatory practice;
a generic policy development process;
a requirement for regulatory impact statements. Implemented 1 July 1998;
a proposal to establish a taskforce to examine existing regulation;
a number of reviews currently underway of the impact of specific Acts on business; (RMA, Building Act, OSH Meat Act) and
possibly a Regulatory Responsibility Act.
Other specific Commerce initiatives underway to help business include

Commerce Act changes to increase penalties, remedies and simplify judicial procedures.
Securities Commission review
business law review and amendments - insolvency, credit unions, insurance law, capital markets
Insurance legislation
Personal Properties Law reform
Improving services to business, for example in my own portfolios e.g. Lands automation, companies office automation, fisheries devolution
At the same time we are enhancing Trade opportunities. Recent Commerce initiatives include:

Australia New Zealand Government Purchasing Agreement - access to $40 billion
Trans Tasman Mutual Recognition Agreement - implemented 1 May
signing European Union mutual recognition agreement this Thursday
JAS ANZ agreement signed Canberra
Fish, Forestry APEC advance tariff thing
APEC - promoting the interests of business 1999
These are just some of the thinks that Government is currently doing to improve our international competitiveness to enhance our standards of living and job opportunities.

While we are experiencing some impact from the Asian turmoil we are pretty well placed to weather the storm. As well as making progress on the micro level, our marco settings are pretty good -

still running a fiscal surplus,
more tax cuts 1 July, ($3 billion), possibly lower corporate taxes
low inflation,
NZ $ good for exporters, seeing results
Asset sales - Auckland Airport float
In conclusion ladies and gentlemen, I am positive about the future. Thank you for inviting me here today. As Heraclitus said in 540 BC " nothing endures but change". I believe the pork industry, and New Zealand, both have a prosperous future if we address the challenges and opportunities that our fast changing world offers.

I now declare the 1998 New Zealand Pork Industry Board Conference open.

Thank you.