Slow start to using Provincial Growth Fund prompts questions from Berl

Hillmare Schulze
Hillmare Schulze
Announcements of initial projects for the Government’s Provincial Growth Fund (PGF) were disappointingly light, Business and Economic Research Ltd (Berl) deputy chief economist Hillmare Schulze said.

The Government’s PGF had could be a lifeline for struggling provinces and regions. The recently announced $3 billion fund, over three years, was the largest injection of central government funding into provincial New Zealand in decades, she said.

Regional Economic Development Minister Shane Jones said when announcing the first projects on February 23 they supported the regions most neglected by the previous government: in Northland, Tairawhiti-East Coast, Hawke’s Bay and Manawatu-Whanganui and the West Coast of the South Island.

The Government was providing an immediate boost to these areas by investing $61.7 million into forestry initiatives, tourism ventures, rail and roading projects, and supporting these regions to develop their proposals further to help them get off the ground.

"The first of many projects the PGF will support will create more than 700 direct jobs, and 80 indirect jobs, an impressive start to what will be an exciting three years for our provinces," he said.

Ms Schulze and Berl senior economist Fiona Stokes, told a business seminar there was an opportunity to use the fund to address the top three problematic factors identified by New Zealand businesses in the latest Global Competitiveness Report. They included: inadequate supply of infrastructure, inefficient government bureaucracy, and insufficient capacity to innovate. Clearly, infrastructure was the primary focus for the PGF and Berl encouraged the Government to proceed aggressively in this area.

"But the small scale and apparently sporadic projects initially announced are nowhere near enough. With $1 billion a year, we would have been expecting more significant announcements.

"This rather tentative start perhaps signals a more fundamental concern around the rapidity that current government processes can respond with necessary urgency."

From experience with other fund approval processes, Berl was not brimming with confidence an accelerated provincial infrastructure programme could get under way swiftly, Ms Schulze said. There was a need to change the attitudes of bureaucracy of officials towards proactively assisting development, as opposed to process-driven policy and decision-making.

Another element is the selection of surge regions in the initial package. These regions has a "striking similarity" to those selected by the previous government for Regional Action Plans, she said.

"We would query why any such selection is required.

"It indicates a deficit of thinking around the way all regions fit together in  the jigsaw puzzle that makes up New Zealand."

"Should the fund be used to target the infrastructure across all regions, consistent with a cohesive map of the role and function of all regions in the New Zealand effort, together with building and supporting innovative capacity, then the potential value of the fund could well be significantly positive. 

"However, we await further details before passing our verdict.

"Will this be another chapter in New Zealand’s miserable recent history of failed regional government programmes or will it be different this time around?" Ms Schulze asked. 

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