Hon Heather Roy keynote address to the NZ Defence Industry Association 12th Defence Industry Forum; the Duxton Hotel, Wakefield St, Wellington; Tuesday, October 13 2009.

Chairman Mike Wardlaw; Secretary of Defence, John McKinnon; Vice Chief of the Defence Force, Rear Admiral Jack Steer; Chief of Air Force, Air Vice Marshall Graeme Lintott; distinguished guests, ladies and gentlemen.

Thank you for inviting me to deliver the keynote address at your 12th Defence Industry Forum.

I was half-expecting protesters to be at the entrance to the hotel today.  We were graced with their presence at the Upper Hutt public consultation meeting for the Defence Review where they were practicing their spring theatrics.

I'm mindful, when encountering protesters, of those who fought for the freedoms we enjoy today.  Without the gallant and selfless sacrifice of our veterans, the right to free speech and protest would not exist.  Without the means to supply servicemen and women with the right equipment and training, they could not have been victorious.

There is a perception amongst people like those protesting that defence suppliers just make tanks, guns, warships and bombers.  Of course, the truth is very different.  Your company activities include aviation, electronics, communications, fabrication, facilities management, OSH, information technology, consumables, marine, mechanical, project management, simulation and training.

The farce of protesting against Defence industry is that were they to stop using all the products and services of companies represented in this room they would be without telephones, internet, tramping and outdoor supplies and many travel options, to mention just a few.

No doubt, since the employed are working on a Tuesday morning, and most students are preparing for exams, the protestors must be independently wealthy and the loss of these choices may be of lesser impact to them than to you and me.

No group desires peace more than those who must risk their own lives in its pursuit.  However, if peace is the absence of war then the world has not been at peace for a very long time and the 'peace dividend' that many seek to claim does not exist.

Since 1945, for example, there have been over 100 significant military engagements that have seen more than one million combatants and over seven million civilians die.  While none of these have directly threatened New Zealand, we have felt the ramifications of most of them and have sent military or other aid to the vast majority.

Why did we do this?  We did it because - as Margaret Thatcher noted - liberty relies on the three pillars of democracy, economic freedom and the rule of law. The foundation for all three is acceptance by all of society of a sense of common obligation. There is no point in New Zealand being free in an unstable, oppressed world.

I am very pleased to have Defence Industry as part of my responsibilities.  When discussions commenced on portfolio delegations, I requested a brief on the scope of the defence industry sector and was amazed at the breadth.  Since then, I have addressed your association meeting in Wellington and visited several member sites.  I intend to continue with these visits as time permits.

You will be aware that the Government is well advanced in its Defence Review.  It is unfortunate that, after waiting 12 years since the last full review, we find ourselves undertaking this vital exercise beneath the clouds of economic uncertainty.

While we are 'technically' out of a recession, it is essential to New Zealand's recovery that we grow the overall size of our economy.  That's why one of the three companion studies I am leading, in parallel with Defence Review 09, is examining the New Zealand defence industry sector and options for economic improvement via this sector.

Headed by former Minister of Customs; Trade and Industry, the Honourable Hugh Templeton with support from Neal Garnett of DICNZ, expertise from across the spectrum of industry as well as the MOD and NZDF, I have high hopes that its findings will bring a much-needed whole-of-Government focus to this part of our economy. If you have not already, there is still time for your organisation to make a time to meet with the team and outline your views.

I had hoped to be able to bring you an interim report at this forum however, as often is the case with government reviews, the work began late and we now expect draft reports in by mid-to-late November.  It is likely that final reports of the companion studies will be released with the main Defence Assessment early next year.

If you have not already seen the Terms of Reference for the companion studies, they can be downloaded in pdf format from the Ministry of Defence website.  This morning, I wish to briefly reiterate the main points of the study.  The questions put to the study team are as follows:

* What Government policies relating to Defence-related industries currently exist?

* What Defence-related industries currently operate within New Zealand or overseas with substantial New Zealand ownership?

* What is the estimated total value of New Zealand defence-related industry in terms of domestic supply, import and export?

* Which countries currently buy or sell defence products and services from or to New Zealand?

* What was the original intention behind Closer Economic Relations and Closer Defence Relations with Australia in regard to Defence industry?

* To what extent are the intentions or structures within CER and CDR, relating to Defence industry, being achieved?

* What impediments to the growth of defence-related industry in New Zealand currently exist?

* What measures should be implemented to assist the growth of New Zealand's Defence-related industry?

In my briefing to Hugh and the team, I emphasised my expectation that recommendations should seek to achieve economic leverage through more effective use of current funding streams rather than seeking substantial new money from Government.  I also encouraged them to seek innovative solutions, rather than seeking a return to former programmes, except where the latter can be shown to be the most effective approach for the future.

The current downturn brings extra challenges to the process but that is not a reason for us to under-pitch the review or studies.  We may have to delay action on some choices, but better times will enable well-thought out research to be implemented in the future.

Innovation is vital in all industries.  Regardless of whether this is in production of raw materials, design, manufacture or the supply chain, those that aren't moving forward will inevitably be overtaken by competitors.  I understand that changes are afoot in the way that Government and the New Zealand Defence Force, in particular, go about their procurement. While this is an operational matter, I can understand how some of you may be uncertain about being faced with more change in an already turbulent economy.

I'm also aware that there are many different models - ranging from the New Zealand buyer/provider split, to the Australian Defence Materiel Organisation model - for acquiring military platforms and systems.  Each has its merits.  The Government has signalled its interest in more PPPs (Public-Private Partnerships) and other joint ventures and this clearly has relevance for your industry.  From what I have seen to date, through-life partnerships, involving significant service components are the most successful of this style of funding and acquisition for the defence forces.

In May, I travelled to Canberra for two days of briefings on the recently released Australian Defence White Paper. It was pleasing to hear from several agencies how impressed they were with procurement innovation already underway in the NZDF.  We should not, however, underestimate the challenge of planning for defence and security requirements out to 2035.  I'd like you to contemplate a few of the questions we are grappling with in the political scene.

* What will the demographics and GDP of NZ be?

* What will a 19-year-old Kiwi be like?

* What technologies will be pre-eminent (society and military)?

* What will the world's governance, management and legal systems look like by 2035 i.e. UN, international courts, nation vs non-nation state actors etc?

* What is the likely world population and GDP spread, based on current trends then?

* What wealth will we be seeking to defend?

Then consider what your companies will look like. What will your products be and to whom will you be selling them? Warfare reflects society and there are strong political, economic, social and technological trends that are shaping our security environment. Examples of these include:

1) Pressure on the relevance of the nation state

2) The rapid appearance of smaller economic entities.

3) Increasing loyalty to a cause rather than the nation.

4) The Internet and advances in bio-technology and nano-technology.

Just as in science, the rate of change of our security requirements is exponential rather than linear; however, advanced technology sometimes means that long lead times are required to reach appropriate levels of capability.  The electro-magnetic spectrum, referred to as the cyber battle-space domain is gaining increasing relevance and this is one area where New Zealand can rapidly boost its international relevance without great cost.  For your industries, all these factors represent opportunities rather than threats.

Increasingly, both government and industry will be faced with the challenges posed by the presence of civilian contractors on the battlefield.  The recently signed Montreux Document acknowledges this and I encourage you all to consider how you can increase the number of reservists on your staff as one way to manage the issue.

For most of you, defence is a market segment rather than a reason for your existence and a product, such as a piece of instructional software, might have equal or greater relevance to the education sector as it does for Defence.  I intend to continue my work in order to improve public and political understanding of this important sector and this industry forum is one of the ways we can work together on better awareness and understanding of your contribution to the economy.

Tomorrow, you will acknowledge the top achievers in your industry via the Minister's awards ceremony.  Leadership is one of the most studied and also least understood talents. In the corporate world, the terms leadership and management are often used interchangeably.  A cadet once asked a veteran instructor what the difference between the two was.  The Sergeant Major, after a moment's reflection replied: "That's easy son - you can lead a man to his death but you can't manage him there."

That is why the awards ceremony is so important.  As senior office holders in your respective organisations, your management ability is unquestioned.  At the awards ceremony, many of you will be recognised because you are leaders.  You have led by example and you have chosen a tougher path - one that involved making sacrifices for a greater good.  All your organisations, in my view, deserve recognition because, in a difficult industry, you have assisted New Zealand to play its role in the World, and to keep Kiwis safe.
 
The planning and conduct of this forum and the awards involves much work and I congratulate your Chairman and Committee members for giving up their time to help not only the industry but the whole of New Zealand.

Thank you for your attention and for taking the time from running your own companies in order to share your knowledge and experience with your colleagues and with me.  I look forward to chatting with you over lunch.  In the meantime, I wish you the very best of luck with your business and families.