When is government going to start to value local manufacturing?

When are we going to see government realise the value of local manufacturing and start supporting our businesses and their employees?

As we watch yet another long-running New Zealand manufacturing business disappear with the likely closure of the Whakatane wood processing mill – yet another in a long line of plant closures in the last two years – manufacturers are questioning the Government’s attitude and lack of action.

[The following comment piece ran in the National Business Review, 13 March 2021]

Our manufacturers are under pressure, some more than others, from not only failing international supply chains but rising energy and carbon costs, unwillingness of government to address subsidised exports and imports that undermine competitiveness and an ineffective investment environment

Yet many of New Zealand’s main trading partners place high value on their manufacturing sector and are proactively enabling them to thrive in a post-COVID recovery. Major interventions being implemented are documented in the new MartinJenkins report commissioned by the Wood Processors and Manufacturers Association.

The Australian government for instance has committed $1.3 billion to “supercharge manufacturing and grow jobs” through its Modern Manufacturing Initiative. Likewise, China, Canada, Germany, Japan, Singapore and Korea have all moved quickly to support their manufacturing sectors, to protect jobs and build resilience in their economies to failures of international supply chains to deliver on time, in full and to specification.

If the New Zealand government doesn’t step up and do the same, we will see more local manufacturing closing down as international companies move manufacturing to countries with more favourable investment environments. New Zealand will continue to lose capacity, highly skilled jobs in the regions, and be more reliant on imported products. Is that the future New Zealanders want to see?

So why should we care?  Manufacturing accounts for about 10% of jobs and GDP. It also underpins much of New Zealand’s exports.   Where would the dairy and wine sectors be without innovative stainless steel manufacturers that not only enable milk and wine exports but are themselves engaged in exporting innovative Kiwi designed and manufactured milk factory and food drying equipment to the US, Ireland and even China?

Similarly, our plastics industry provides packaging critical for the food safety, shelf life and protection of our added-value food export sector. The same industry, while also exporting its own products, provides critical componentry for others exporting equipment, machinery, and devices across sectors such as telecommunications, optical treatment, and healthcare, as well as supporting our local economy.

To be fair, the Government is working on several Industry Transformation Plans (ITPs) – including one for advanced manufacturing and for forestry and wood processing. That said the merits of developing individual sub-sector plans without having an overarching manufacturing strategy are questionable.

Indeed, in April 2020 the NZ Manufacturing Alliance released the Manufacturing Matters report providing a blueprint of what government and industry needed to do to realise the value of our manufacturing sector. The Government’s response was to commission a plan.

As our trading partners have shown, manufacturing doesn’t need more plans it needs action and New Zealand needs to follow their lead or our manufacturing sector and the regions and communities it supports will suffer further.

The thing is that New Zealand governments have adopted a free market, laissez-faire attitude to local manufacturing; let the free market provide rather than watching and learning from our key trading partners.

As a result, our manufacturing sector continues to be undermined by subsidised imports, very often substandard.  New Zealand has at least five manufacturing exporters of sophisticated, computer-controlled roll forming equipment for roofing / cladding and light steel framing, supplying globally into construction markets.  These businesses thrive by developing end-to-end business solutions while providing high-value jobs, predominantly in the regions.

However, New Zealand’s open approach to free trade enables importers to import and distribute cheap take-offs of these machines which frequently do not meet New Zealand’s health and safety requirements, nor our electrical standards, compounded by references to out-of-date standards in our current legislation enabling these underhanded business practices to continue. Is that what free and open trade is about?

The MartinJenkins report provides a comprehensive list of actions government could take to address skills / talent shortfall, to grow capability in our manufacturing businesses, particularly with respect to trade, investment, innovation and government’s tole in procurement.

With the pipeline of infrastructure work ahead the next decade, government has an opportunity now to use procurement as an instrument to grow capability and capacity of local manufacturing and build resilience in face of disruptions to international supply chains. It’s about identifying what will be required and working with the manufacturing sector to provide certainty for businesses to invest further in manufacturing in New Zealand.

The fact is that manufacturing has largely been neglected by successive New Zealand governments – heck, we have a Minister for Racing yet no equivalent for manufacturing. Is gambling (and bloodstock) more important than high value add jobs in the regions and the enabling of New Zealand’s export sector?

Nick Collins, CEO Metals NZ and spokesperson for the NZ Manufacturing Alliance