OPENING OF HORTRESEARCH'S NEW POSTHARVEST BUILDINGCrown Research Institutes
MT ALBERT (AUCKLAND) RESEARCH CAMPUS
It's a pleasure to be here today for the opening of your new Postharvest building, the Padfield Building. If you want an outward symbol of the successful operation of our Crown Research Institutes - and HortResearch in particular - look around you.
Over the last few years I've been privileged to attend a number of CRI building openings such as this. In fact, just over a year ago I was at Palmerston North to open another fine new HortResearch facility - a transgenic glasshouse at the Batchelar Research Centre.
It should be no surprise that such new facilities are sprouting up around the country. We in Government set out quite deliberately to achieve this when we set up the CRIs in 1992.
New facilities such as this Padfield Building are part of the drive to get rid of the CRI's dismal inheritance of decrepit and scattered premises - the result of a decade long rundown of the fabric of our science system in the 1980s.
As the Government's investment in science fell over that decade, the science infrastructure was neglected as capital investment fell away. The focus was on retaining staff; new buildings and equipment came well to the rear. This meant that many buildings were well past their use-by-date by the time the CRIs came along. As might be expected, staff morale was sapped by inadequate working conditions.
In setting up the CRIs we hoped to create the conditions that would reverse this decline. In part, we did it by requiring the institutes to operate in a business-like way and make a profit but, unlike State Owned Enterprises, they were not required to pay a dividend to their Crown shareholders. The profit they retained would be used for re-investment in the business, notably the capital infrastructure.
At this point I think it would be helpful if I took a few moments to discuss this word "profit" and its close associate "rate of return." Often those who feel badly treated by the science reforms focus on these words as though they are the cause of problems rather than part of the solution to them.
Without the retained earnings that come from profits and an adequate rate of return any organisation is exposed to the constant risk of financial shock and the need to return cap in hand to the owner to raise capital. This saps morale and intellectual independence and dramatically decreases the willingness of an organisation to innovate and take risks.
In this context I was interested to note a speech by Andy Pearce, Landcare's Chief Executive, to a science human resources conference last week. He said that the level of depreciation on assets transferred from its predecessors was just $1.35 million - a striking indication of the rundown in capital expenditure and assets in the period preceding CRIs.
Now he said Landcare has spent about $3 million on computing equipment, $12 million on buildings and facilities and $5 million on scientific equipment. That's about $20 million in five years or three times as much as could be funded from the depreciation expense on the assets inherited from the old departments.
That's a fine outcome in anybody's language. And its not an isolated example. The fact that HortResearch is able to finance quality new facilities such as this Padfield Building shows it also is performing admirably (and profitably).
The CRIs lit their fifth birthday candle in June this year. In those first five years they have had an effective net retained tax-paid cash flow of $193 million, made up of $89 million net profit and $104 million depreciation.
I'm unable to give you a breakdown on how that money was re-invested but it's gone into such things as plant and equipment, buildings, increased capital and payment of debt. Mostly it's gone into the fabric of science - new buildings and equipment.
That's what we want. Pleasant, modern working conditions must contribute in their own way towards helping produce good science results. It's in facilities like these that some of the most vital work in maintaining our economic well-being is being carried out.
The Padfield Building we are officially opening today has been purpose built for Postharvest and Food Science Division especially for use by two groups - Postharvest Science and Market Access Science. It brings together for the first time most of the Mt Albert Research Centre Postharvest staff.
I know they will be carrying a full load of important research work covering the full spectrum of postharvest work, ranging from strategic/fundamental research to applied research.
As Minister for Biosecurity I was interested to note that among your wide range of work you are looking at disinfestation of quarantine pests. This is a crucial element for access to export markets. Your Market Access Science Group has already developed a number of environmentally acceptable solutions to ensure our exports arrive insect-free at their overseas destinations.
There could hardly be more important work. Recent foreign pest invasions have brought home to all of us the tremendous economic damage that can result from these unwelcome imports. I wish you well in this and all your work in this splendid new facility.