Comment by Heavy Engineering Research Association Director Dr Wolfgang Scholz

The Heavy Engineering Research Association has just put a funding proposal to Government’s research funding agency the Foundation for Research Science and Technology (FRST) aimed at supporting the New Zealand Metals Industry in becoming more productive and developing export opportunities. This new proposal comes at a time when Government and industry advisor’s stress the need for companies to join Government in increasing investment in research and technology (R&D) if we want the New Zealand economy to transform and create wealth funded on knowledge-based, high value-added and profitable industries.

Government Science Advisor, Sir Peter Gluckman, outlined recently at a medical technology conference that our industry spending on R&D is at best 0.4 % of GDP, while in more advanced nations, industry spends as much as 2% of GDP on research and technology. However, he noted that New Zealand’s Government fares much better and is the only nation where Government RS&T spending is actually higher than industry’s with 0.5-0.7%, which is close to the average of the advanced nations’ 1% for government-funded RS&T.

He also noted that the medical technology sector – to which our metals industry makes a significant contribution  through tool making, casting or general metals-based manufacturing – has shown resilience despite the global financial meltdown and is predicted to be a billion $ industry within the next 5 years. In 2008, metals-based products – excluding steel- and aluminium-based products of our two steel companies and NZAS – provided export earnings alone of over $560M.

I am convinced that with the right leadership and incentives in place, our strategically important industry will be able to crack the billion dollar export mark as easily as medical equipment exports are projected to. We have an amazing depth of capabilities due to our engineering skills being honed through serving the needs of a remote island nation and have earned a reputation for good quality and cost-effectiveness.

We recognise that we need to transform in order to become more competitive and need to invest accordingly and significantly. Having been responsible for putting our research proposal together, I note how hard it is for our industry to invest in R&D when budgets are tight and margins are slim. The proposed HERA-led R&D programme is an opportunity for our industry sector to significantly increase its contribution in a targeted way, while supported by the Government’s co-funding incentive.

However, does Government do enough to stimulate industry innovation? The Government’s Science Advisor is obviously pushing the government line, but apart from an assurance of strong commitment to R&D we are still awaiting an improved approach by Government, to stimulate industry’s R&D effort, which will replace the previous Government’s clearly transformational R&D tax credit scheme.

In my view, research for industry must be driven by industry and not science providers. Would it not be better to reduce government spending on R&D and shift the money to industry to stimulate their spending in R&D?

Or even better to make us more mainstream and in-line with the more advanced nations cited, to maintain the government share and put incentives in place to stimulate industry to at least double its current spend. As a country we are not going to stimulate the development of high-value export-focused products without a strong R&D commitment. The challenge for Government is to create an environment that supports and encourages industry to invest.