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Have you heard about the funding changes to the Primary Growth Partnership?

The government's recent announcement of changes to the Primary Growth Partnership (PGP) is set to turn a few heads in the local industry. The program funds agriculture research in New Zealand, and until recently, was bankrolled equally by the government and the private sector. 

However, in an October 16 media release, Minister for Primary Industries Nathan Guy announced that the government was pulling back its stake in the PGP by 10 per cent, reducing its share of funding to 40 per cent – a move which the Minister states won't reduce annual funding overall.

The change will effectively take place on December 1, 2015, but will not have an impact on PGP projects that have already been approved. 

About the Primary Growth Partnership 

Inaugurated back in 2010, the PGP funds innovative research projects to support the advancement of the local sector, as well as new technology that can be sold both here and overseas.

"We also believe the commercial benefits of the PGP are higher than the public benefits, which makes it only fair we tweak the formula." Nathan Guy.

New Zealand's primary industries make up in excess of 70 per cent of the nation's merchandise exports, according to the government. The PGP is designed to ensure that we stay at the forefront of innovation in the sector on the global stage by increasing profitability, value and productivity of relevant industries. 

"It encourages research and growth that wouldn't otherwise happen, and will deliver wider public benefits," said Mr Guy.

For example, the NZ Sheep Industry Transformation (NZSTX), which aims to transform the industry into one that is more market-driven in light of the dip in profitability over recent years. 

Under the PGP, the NZSTX has received over $16 million in funding from government and private sector sources that will drive research into improving animal health, including a genetic test to detect foot rot. 

Research projects usually have a five to seven year duration, with government funding only being released upon receiving the invoices for PGP-compliant work. Projects are also subject to monitoring requirements such as progress reports, financial audits, steering groups and reviews. 

According to a report by the New Zealand Institute of Economic Research in 2014, the PGP stands to inject $6.4 billion into the economy by 2025, with this estimate inflating to $11.1 billion should all research and development come to fruition.

Agricultural research can have huge benefits for the local and international market.
Agricultural research can have huge benefits for the local and international market.

Looking to the future of the program 

"The PGP has been operating for around five years, so it is a good time to consider the proper level of Government investment going forward and align it to other Government Funds such as the Callaghan Fund," said Mr Guy.

"We also believe the commercial benefits of the PGP are higher than the public benefits, which makes it only fair we tweak the formula."

At present, the government has co-invested some $724 million into the PGP with the private sector, with 18 out of a total 20 projects underway. According to the Beehive, the funding reform will not change the $500,000 that the industry is obliged to co-invest over the course of the program, equating to $71,500 per annum over seven years. 

Mr Guy defends the move, stating that a 40 per cent share still represents 'a major investment' that will provide a boost to innovation and research for the primary sector. 

"The PGP is delivering tangible benefits and the Government has confidence that our primary industries will be able to continue their good work towards primary sector innovation activities," he said. 

In a Beehive media release, Mr Guy outlines the simplified application PGP application process that will accompany the funding changes, including additional assistance throughout the business case development stages and simpler reporting requirements. In addition, there will also be possible new opportunities to support access to PGP funding for smaller-scale sub-sectors.

The PGP has funded projects such as the NZSTX.