Dear Mr Simpson

Thank you for your email of the 16th of March.

I am dismayed at the time it took for it to get to me. It appears it was the fault of Parliamentary Services email system and it has now been sorted out.

I get thousands of emails and letters a week. Not all of these get responded to within the week. In fact ones such as yours that raise serious issues take a longer time to reply to as I want to give them the attention they deserve.

Placing a clock on your website timing how long it takes for me to reply to just one of the thousands of pieces of correspondence I receive shows an immaturity that unfortunately degrades the other serious points of your email to me.

Nevertheless you raise a number of points in your letter and the editorial referred to in it.

The Alliance Labour government has announced that we will be spending up to $100 million per year on industry development over the next three years. The final amounts have not been decided yet, but the total amount will therefore be significantly more than $100 million over three years.

The Alliance advocated more funding than this over a wide range of strategic areas in our Alternative Budget and during the election campaign.

The economic development strategy we are following is not a top down one.

A document you might be interest in is Partnership 2000 at http://www.alliance.org.nz/policy/partnership2000.html

We are not relying on 'career bureaucrats' to make decisions for us. Industry New Zealand will have significant private sector expertise in it.

We are committed to entering partnerships with local government and the private sector to invest in new job-rich, high-skill, high-value industries on the technology frontier.

There have been many requests to spell out exactly which industries will be supported, and what level of support there will be. That is to mistake the partnership approach we are taking. I will not determine the answers to those questions in my office in Wellington nor will any 'career bureaucrats'. The answers will come from partnership between communities, businesses, the scientific innovative sector and Industry New Zealand.

The new approach will be flexible and dynamic. If it works well, we will do more of it. If it doesn't work, we'll stop doing it.

But there are some clear views about the solutions needed.

We need to combine well-judged public investment in education, infrastructure and science and technology with creative private sector investment focused not just on adopting technologies already available but on continuously creating new products, processes and designs.

The tax treatment of R&D will be studied as part of the Government?s review of the entire tax system.

More immediately, Industry New Zealand will be able to enter R&D joint ventures, with an emphasis on new technology industries providing sustainable, skilled, well-paid jobs and high added-value exports.

I am supportive of much greater public sector funding for science and R&D through Crown Research Institutes and Universities. The Foundation for Research, Science and Technology has cautioned the Government that a large number of worthwhile projects are being refused funding each year.

Universities receive only 18% of public sector funding for R&D, compared with an OECD average of 27%, even though they are internationally recognised as hotbeds of innovation and new business formation.

By under-valuing university-based research, New Zealand is likely to be missing out on a valuable source of commercial applications and new business formation on the knowledge frontier.

Innovation and investment cannot occur without a well-educated population, equipped with a high level of industry-specific training.

Although the number of engineering graduates in New Zealand has been increasing, much of the increase is made up of overseas students who leave New Zealand after qualifying. More alarmingly, the number of New Zealand students who leave New Zealand after graduating is increasing steadily.

It is hardly surprising that our best and brightest are leaving New Zealand when we are burdening them with enormous debts for their education.

I agree with you that if we want to retain our most skilled young New Zealanders, we have to bring down the cost of education. Did you vote for higher taxation revenues to achieve this goal?

The sources of venture capital in New Zealand appear to be expanding. I?ve met a number of organisations recently that are demonstrating confidence in our economy by setting up new venture capital funds.

The traditional banks have not performed well in this area. They are risk averse. And the stock market is attracting pronounced criticism for its failures as both a reliable source of investment capital for new listings and as a source of steady returns to investors.

Industry New Zealand will provide capital for Small and Medium-sized Enterprises -- not only to establish new businesses but also to sustainably expand existing ones. Potential contributions could include direct development grants, loans and start-up equity capital.

These are just some of the areas this government is working in to create a knowledge based economy.

Another significant development has been the Telecommunications inquiry, which hopefully will come up with ways to free up the Telecommunications market.

I can understand the frustration of people who work in New Zealand's fledgling knowledge based economy when they perceive the government is doing nothing to help them.

I would just ask for a little patience while we change the attitude of government to one more supportive of industry.

15 years of ignoring industry development cannot be undone overnight.

Yours sincerely
Jim Anderton
Deputy Prime Minister