11 May 2015

Who gains from research funds?

4:58 pm on 11 May 2015

The benefit from millions of dollars of taxpayer-funded research subsidies may be heading straight offshore.

A boat building firm owned by Team Oracle's founder, American billionaire Larry Ellison, drug giant Bayer, Nasdaq-listed Fiserv and global software firm SAP are all recent recipients of research and development grants from Callaghan Innovation, the government agency charged with administering the money.

Chemical research in a science laboratory.

Photo: 123rf

But the Government says it has no idea whether any of its investment is actually benefiting New Zealand.

Any company domiciled in New Zealand and spending at least $300,000 a year and at least 1.5 percent of its revenue on research and development in this country can claim up to $17.25 million in reimbursements over a three year period.

Callaghan Innovation has given out more than $140 million worth of grants over the last two years.

Labour Party spokesman on innovation, research and science, David Cunliffe, said he was not against foreign-owned companies receiving the subsidy but the Government should know whether it was money well spent.

"Nobody is asking the question or tracking the results 'Is it good for New Zealand?'. I believe that's something they'll give thought to in the future, but it's not in place yet and Callaghan's been going for nearly three years.

"It should have been something that was thought about before they started spending the taxpayer's money, not afterwards."

Mr Cunliffe said Callaghan Innovation admitted to MPs on the Science and Innovation Select Committee who visted the organisation last week that it had more work to do in that area.

David Cunliffe.

David Cunliffe. Photo: RNZ / Diego Opatowski

Mining companies eligible

Green Party science spokesman Gareth Hughes believed Callaghan's funding criteria was too broad. That meant two mining companies, Chatham Rock Phosphate and Trans-Tasman Resources, were eligible for grants.

"It's hardly innovation just sucking up the seabed, as these two proposals were. The fact is neither of these two companies managed to get a consent, yet they were eligible for considerable sums of taxpayers' money."

"The Government really should be investing in true innovation for the coming century's economy, not just for drilling, mining and fracking," he said.

Mr Hughes also questioned why German pharmacutical company Bayer was eligible for funding.

The firm posted profits of 5.5 billion euros last year, but its New Zealand arm has filed four years of losses.

Bayer declined to be interviewed but in a statement said recent discussion about research funding had not been "fair and balanced".

Bayer said it was a good corporate citizen and it had invested more than $1 million in New Zealand charities, schools and community groups in recent years.

Better assessment years away

Callaghan Innovation chief executive Dr Mary Quin said the aim of research and development funding was to encourage more jobs and research to be carried out in New Zealand, irrespective of who owned the company, or the type of industry it worked in.

She said the organisation was trying to improve the way it measured the impact of its funding, but it could take up to 10 years to see results.

That was because it could take a long time for companies' research and development programmes to bear commercial fruit.

However, New Zealand Association of Scientists president Dr Nicola Gaston has warned that intellectual property created by foreign-owned firms using taxpayer money is being lost overseas.

Funding contracts state that all intellectual property created during the grant period is retained by the company.

"Intellectual property is one of the key things that you're trying to generate. It's really where all the value is in R&D," she said.

"If we want to be moving into the high tech, high value manufacturing industries and creating value for New Zealand from that then a model that explicitly denies any interest in keeping that IP in New Zealand is concerning.," she said.

Japanese-owned appliance manufacturer Rinnai is one the newest recipients of a Callaghan Growth Grant.

The company's head of design, Ben Hawkins, said the money would be used to employ two more engineers next year, and he had to report quarterly to Callaghan on how the money was benefiting the country.

Science and Innovation Minister Steven Joyce said he had no concerns if some intellectual property was lost offshore.

He said funding should be open to all companies willing to spend money on research and development in New Zealand, regardless of ownership or industry.

"The New Zealand government wants to incentivise R and D to take place. Much of it will be in New Zealand. Some of it won't be.

"But what we do know is as the research and development system grows, we get a lot more people, a lot more companies and some very high tech industries growing as a result of it," he said.

Get the new RNZ app

for ad-free news and current affairs