Rail revivals most dubious regional goals
The Government went to Gisborne last Friday to announce the first projects it will finance from a regional development fund of $1 billion a year. It will provide $2.3 million to redevelop Gisborne’s inner harbour, $1m to commemorate Cook’s first encounters with Maori, $200,000 to begin a $20m wood-processing centre in the town, and $5m for KiwiRail to reopen the Wairoa-Napier line.
Further afield, it may spend $6m upgrading Whanganui’s port and railway subject to a business case showing it to be worthwhile. It thinks Whanganui can be a centre of “value-added specialist manufacturing” and “an attractive investment prospect for marine and logisticsrelated industries”.
Northland, Economic Development Minister Shane Jones’ home province will get new cultural centres in Opononi and Whangarei, a pilot project to explore a possible market for totara products, a $2.3m tourism “hub” in Kawakawa and a $9m project to reduce congestion at the Waipapa intersection.
National says it recognises many of the projects and Jones concedes only 70 per cent of them will be new capital. National did not greatly promote its regional assistance, preferring to emphasise the industries such as viticulture and tourism that are booming in the regions on private investment. This coalition Government is different. Both Labour and Winston Peters want to demonstrate what active government can do for economic development, particularly Peters who campaigned strenuously for regional votes last year.
With $3b to spend over the next three years, Jones appears to have made a cautious start. None of the approved projects appears unduly risky. The railway revivals are the most expensive, and most dubious. The national rail operator closed the Napier-Wairoa line for commercial reasons. Labour, NZ First and the Greens want to reopen abandoned lines for reasons that are not purely economic. They want fewer trucks on the roads and electric railways produce fewer greenhouse emissions.
Presumably, the reopened lines will be electrified, probably at taxpayer expense. But they may not take trucks off the road. That is up to trucking companies and their customers. If rail cannot match the costs of door-to-door road deliveries and customers won’t pay for the additional handling of goods onto and off trains, revived rail services will be under-used.
Strong economies are built on products of genuine market value and the most efficient means of distribution. It is heartening that the Government’s first tranche of regional projects includes nothing too rash. None are new ventures in untested or high-risk industries. Gisborne’s wood processing “centre of excellence”, Whanganui’s marine and logistics industries, Northland’s totara products, all sound tentative and subject to investigation.
Regions need industries that will not depend on Government subsidies. Unfortunately, by the time a government-sponsored industry proves to be a lemon, the Government usually is long gone.