Part 2: Origin and administration of the Visiting Investor Programme

New Zealand Trade and Enterprise: Administration of the Visiting Investor Programme.

Establishment of the Visiting Investor Programme

2.1
The VIP was originally Trade New Zealand’s Special Investment Project, a “red carpet” visitors’ programme. This Project was part of a package of trade and investment initiatives launched by the Government in 1998.

2.2
The Special Investment Project promoted New Zealand as a competitive destination for new investments. It introduced selected guests to “pre-qualified” business opportunities, business networks, and New Zealand’s investment climate. The visitors were treated as guests of the Government.

2.3
In 2000, the Special Investment Project was renamed the VIP, but the intent remained largely unchanged. The VIP is one of a range of options that Investment New Zealand uses, in its engagement with clients, to promote New Zealand to overseas investors.

2.4
From its establishment until the end of the 2002-03 financial year, the VIP was funded through Vote Foreign Affairs and Trade. The Estimates of Appropriations for 2002-033 described the VIP as a scheme aimed at facilitating visits to New Zealand by investment decision-makers. The VIP was said to be one of several such “facilitation services” aimed at increasing direct foreign investment – for which the performance objective, for all the services, was to create 450 jobs for given investments and $90 million in foreign exchange earnings in the 2002-03 financial year.

2.5
When NZTE was established on 1 July 2003, funding for the VIP was moved to Vote Economic, Industry and Regional Development, and to a non-departmental output class (O2) entitled Enabling Services – Promotion of New Zealand Business. The Estimates of Appropriations for 2003-04 stated in relation to this output class –

The Minister for Industry and Regional Development will purchase from NZTE services to promote New Zealand’s products and services both on and offshore to attract investors and to support the development of international trade by New Zealand businesses. Services purchased will also be aimed at building a supportive business environment in New Zealand, by fostering and supporting a culture of entrepreneurship and business success and by promoting the benefits of internationalisation and global connectedness.4

2.6
No specific mention was made of the VIP, which was not surprising given its size relative to the total amount of funds appropriated under this output class ($21,866,000). However, the Estimates also noted that the performance measures for the output class would be specified in the NZTE Output Agreement5 for 2003-04 – a statement repeated in 2004-05.

2.7
We found that the 2003-04 Output Agreement between NZTE and the Minister for Industry and Regional Development made no specific mention of the VIP. The VIP is a stand-alone programme with a specific objective. Because of the way participants are selected, and the type of expenditure that is involved, we expected the VIP to be clearly identified in the Output Agreement, with a specific set of performance expectations and measures.

2.8
We note that NZTE’s 2004-05 Output Plan corrects this omission, and makes specific reference to the VIP (an appropriation of $671,652).

Administration of the Visiting Investor Programme

2.9
The VIP was administered by Trade New Zealand from its inception in 1998 until 30 June 2002. From 1 July 2002, it was administered by Investment New Zealand, a newly established business unit within Industry New Zealand. From 1 July 2003, the VIP was administered by Investment New Zealand as part of NZTE.

2.10
NZTE was established on 1 July 2003, by the merger of Industry New Zealand (the Government’s economic development agency) and Trade New Zealand (the Government’s trade promotion agency).

2.11
The organisational structure of NZTE changed during our audit. Between 1 July 2003 and 30 June 2004, Investment New Zealand’s Chief Executive reported directly to the NZTE Board. From 1 July 2004, the Chief Executive of Investment New Zealand reported to the Chief Executive of NZTE.

Guidance and processes

2.12
Investment New Zealand has prepared an internal briefing document, setting out how it administers the VIP. This is attached as Appendix 1. The document describes:

  • how a decision is made to invite a potential investor;
  • how an invitation should be extended to a potential investor;
  • how an application is to be made to the Director New Zealand6 of Investment New Zealand for approval to incur expenditure under the VIP; and
  • how the programme for the potential investor is to be determined.

2.13
Investment New Zealand has also produced a one-page document for visiting investors, describing the purpose of the VIP and how it might be of use. This is attached as Appendix 2.

2.14
We did not find any guidance on acceptable levels of expenditure, or any guidance on appropriate types of expenditure. For example, Investment New Zealand did not have guidelines on the appropriate standards and costs for hotel accommodation and meals – for either the visitors or Investment New Zealand staff accompanying the visitors, and it did not set out its expectations regarding the entertainment of visiting investors.

2.15
We expected such guidance to be in place, particularly given the sensitive nature of the expenditure incurred under the VIP. We discuss this further, and make recommendations for improvement, in Part 3.

3: The Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2003, Parliamentary Paper B.5 Vol I, Wellington, ISBN 0-478-11828-7, pages 588-589.

4: The Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2004, Parliamentary Paper B.5 Vol I, Wellington, ISBN 0-478-11845-7, page 389.

5: Output Agreements, or Output Plans, are formal documents that record the details of outputs and performance expectations agreed between entities and the Minister or Ministers responsible for the Vote (in this case, the Minister for Industry and Regional Development and the Minister for Trade Negotiations).

6: The Director New Zealand is responsible for Investment New Zealand’s operations in New Zealand, and reports to the Chief Executive Investment New Zealand, who is responsible for Investment New Zealand’s global operations.

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