The Contribution of Antarctic-Related Activities to the New Zealand Economy Caroline Saunders Paul Dalziel Meike Guenther Client Report 16 December 2013 Lincoln University Research to improve decisions and outcomes in agribusiness, resource, environmental, and social issues. The Agribusiness and Economics Research Unit (AERU) operates from Lincoln University providing research expertise for a wide range of organisations. AERU research focuses on agribusiness, resource, environment and social issues. Founded as the Agricultural Economics Research Unit in 1962 the AERU has evolved to become an independent, major source of business and economic research expertise. The Agribusiness and Economics Research Unit (AERU) has four main areas of focus. These areas are: trade and environment; economic development; non-market valuation; and social research. Research clients include Government Departments, both within New Zealand and from other countries, international agencies, New Zealand companies and organisations, individuals and farmers. DISCLAIMER While every effort has been made to ensure that the information herein is accurate, the AERU does not accept any liability for error of fact or opinion which may be present, nor for the consequences of any decision based on this information. A summary of AERU Research Reports, beginning with #235, are available at the AERU website www.lincoln.ac.nz/aeru Printed copies of AERU Research Reports are available from the Secretary. Information contained in AERU Research Reports may be reproduced, providing credit is given and a copy of the reproduced text is sent to the AERU. ii Contents Contents iii List of Figures v List of Tables v Acknowledgements vi 1. Introduction 1 1.1 Background to this report 1 1.2 Research methods 1 1.3 Structure of the report 3 2. New Zealand’s Involvement in Antarctic-Related Activities 4 2.1 Scientific research and innovation 4 2.2 Historical heritage and conservation 6 2.3 Natural environment and protection 7 2.4 Cultural exploration and education 8 2.5 International diplomacy and profiling 9 2.6 Gateway logistics and business support 10 2.7 Antarctic-related tourism and events 12 2.8 Southern Ocean commercial fishing 13 3. Economic Benefits to Canterbury and New Zealand 15 3.1 National Antarctic Programmes 15 3.2 Tourism and Events 15 3.3 Fishing 16 3.4 Education and Research 16 3.5 Antarctic Heritage 17 3.6 Aggregated Economic Impacts 17 4. Towards an Assets-Based Strategy for Development 21 4.1 A whole-of-government response capability 22 4.2 Investment in multi-purpose infrastructure for the Gateway City 22 4.3 Contribution to the profile of New Zealand Inc. 23 iii References 24 Appendix 1: Organisations Interviewed 25 Appendix 2: Semi-structured Interview Guide 26 iv List of Figures Figure 1: The Five Gateway Cities 11 Figure 2: Ross Island 11 Figure 3: Antarctic Statistical Reporting Areas 88.1 and 88.2 14 Figure 4: Sub-Antarctic Fisheries Management Area (FMA 6) 14 List of Tables Table 1: Direct Impacts of Antarctic-Related Activities in Canterbury and New Zealand, 2013c, Millions of New Zealand Dollars 18 Table 2: Direct Impacts of Antarctic-Related Activities in Canterbury and New Zealand, 2007c, Millions of New Zealand Dollars 18 Table 3: Antarctic-Related Activities Expenditure Analysed by Industry Sector, 2013c, New Zealand Dollars 19 Table 4: Direct, Indirect, Induced, Total and Employment Impacts of Antarctic-Related Activities in Canterbury, 2013c, Millions of New Zealand Dollars and FTE Jobs 20 Table 5: Direct, Indirect, Induced, Total and Employment Impacts of Antarctic-Related Activities in New Zealand, 2013c, Millions of New Zealand Dollars and FTE Jobs 20 v Acknowledgements The AERU research team is grateful to the many people who provided us with information or their time during the course of this project. We thank people who agreed to be interviewed as part of the research and people who met our requests for data with unfailing and prompt courtesy. All of these contributions were appreciated, but we would like to thank Neil Gilbert and Jeff Fenwick in particular; without their assistance and support the project could not have proceeded. vi 1. Introduction 1.1 Background to this report In 2007, the AERU at Lincoln University was commissioned by the Canterbury Development Corporation (funded by Antarctica New Zealand) to prepare a report on The Contribution of Antarctic-Related Activities to the Canterbury and New Zealand Economies (Saunders et al, 2007). That report concentrated on the local and national impacts of Antarctic-related activities based in Canterbury. Thus, it included Antarctic-related research at the Gateway Antarctica programme of the University of Canterbury, for example, but not research at the Antarctic Research Centre of Victoria University of Wellington. The 2007 study found that the direct impact on the Canterbury economy was at least $87.6 million per annum, which was estimated to be associated with 676 full-time equivalent jobs in the region. The direct impact on the New Zealand economy was estimated to be $133.2 million, supporting 965 full-time equivalent jobs. Taking into account multiplier impacts, the direct, indirect and induced impacts amounted to $155.1 million in Canterbury and $282.0 million in New Zealand. In 2013, Antarctica New Zealand commissioned the AERU to update and extend its 2007 study. In particular, the AERU was asked to consider significant Antarctic-related activities outside as well as inside the Canterbury region. The role of Christchurch as a ‘gateway city’ to the Antarctic means that his report retains a focus on the Canterbury region, but the authors have attempted a wider national scope in its analysis. 1.2 Research methods The research methods followed those used for the 2007 report. The project began by drawing up a representative list of key people and organisations to be interviewed for background information and data about their Antarctic-related activities. All of the people approached to be interviewed were very helpful, although in a couple of instances conflicting demands meant that a meeting could not be arranged. The AERU research team is grateful to all those who participated in this part of the research (a list of organisations who took part is provided in Appendix 1 of this report). The semi-structured guide for these interviews is reproduced in Appendix 2. In most cases, the interviews took place at the participant’s place of business attended by both Professor Caroline Saunders and Professor Paul Dalziel. A small number of interviews were conducted by telephone. Handwritten notes were made during the interviews (which were not recorded), which became the basis for some of the material contained in this report after checking by the research team with web-based documents. 1 The second part of the project involved a standard economic impact analysis of economic- related activities in New Zealand. This required gathering data on revenues generated from these activities. For example, the project identified over 600 firms that supply goods and services for New Zealand and United States science programmes and it was possible to obtain data on these items aggregated by industry sector (to maintain privacy). Antarctica New Zealand was able to provide data on significant research programmes by New Zealand Universities and Crown Research Institutes. Other information was obtained from the interviews and web-based sources. These expenditure flows were sorted by location, either to Canterbury, New Zealand or overseas. Antarctic-related activity from companies or organisations located overseas was not included in this study. The allocation of an organisation’s expenditure to Canterbury required that the supplying firm operate more than just a local sales office. In other words, the organisation was required to have a locally operating business unit. The data collected from the interviews, databases and other sources were used to estimate the economic contribution provided by Antarctic-related activity to the Canterbury and New Zealand economies. Three types of contribution – the direct, indirect and induced impacts- were calculated for the total value of output. 1. Direct impact – this is a result of direct revenue injected into the local and national economy by Antarctic-related activities. 2. Indirect impact – this is a result of downstream revenue created by other firms selling goods and services organisations operating in the Antarctic-related sector. 3. Induced impacts – these are the effects of the above two contributions on further household spending which generates revenue as a result of increased purchases of household goods and services. Multipliers for the indirect and induced expenditure flows in Canterbury were obtained from output multiplier tables presented in Butcher (2007) while multipliers for expenditure in New Zealand were derived from Butcher (2005). The multiplier tables for Canterbury were composed of 114 sectors, while multiplier tables for New Zealand consisted of 53 sectors. Thus, sectors from the Canterbury multiplier tables had to be mapped to the sectors in the multiplier tables for New Zealand and sector composites for the Canterbury multipliers had to be created using averages. Employment estimates associated with the total expenditure – including the direct, indirect and induced impacts – were calculated for the different categories using relevant multipliers obtained from Butcher (2007) for Canterbury and Butcher (2005) for New Zealand. The multiplier tables estimate the average number of employees required to produce a million dollars of output by industry. These multipliers were applied to the direct, indirect and induced impacts of expenditure on Antarctic-related activities to obtain estimates of employment for firms supplying or servicing these activities. 2 1.3 Structure of the report The main body of the report is presented in three chapters. Chapter 2 provides an overview of significant Antarctic-related activities that materially involve New Zealand. These activities are classified under eight headings: 1. Scientific research and innovation 2. Historical heritage and conservation 3. Natural environment and protection 4. Cultural exploration and education 5. International diplomacy and profiling 6. Gateway logistics and business support 7. Antarctic-related tourism and events 8. Southern Ocean commercial fishing Chapter 3 presents the economic impact analysis. It estimates that the aggregated direct economic impact of the surveyed Antarctic-related activities is $102.9 million for the Canterbury economy and $161.7 million for the New Zealand economy. These are significant increases on the values estimated in Saunders et al. (2007), although for the New Zealand economy this is partly due to a wider scope taken in this current report. The chapter shows that Accommodation, Restaurants and Bars is the largest sector in the Canterbury region, reflecting the importance of accommodation (and associated spending) for Antarctic personnel and for tourists attracted by Antarctic themes. For the national economy, fishing is the sector that has the largest direct impact, estimated as contributing $71.0 million of the $161.7 million (43.9 per cent). The report finishes in Chapter 4 with a discussion of potential issues concerning Antarctic- related activities in New Zealand, drawing on the interviews undertaken for this project. The chapter comments that the positive aspects reported from the interviews in the 2007 study have been justified by events over the last six years. Between 2007 and 2012, the National Antarctic Programmes continued to develop, tourism benefits increased, as did the Sub- Antarctic Ocean and Ross Sea fisheries, and the resources devoted to Antarctic research (including from philanthropists) grew. Against that positive background, this chapter comments on three major themes that emerged from the interviews for further consideration by Antarctica New Zealand: (1) a whole-of-government response capability; (2) investment in multi-purpose infrastructure for the Gateway City; and (3) contribution to the profile of New Zealand Inc. 3 2. New Zealand’s Involvement in Antarctic-Related Activities New Zealand’s geographical position means that it has enjoyed a long association with Antarctica, arguably going back to 1642 when Abel Tasman’s sighted the west coastline of New Zealand during his expedition in search for the unknown southern continent, the Terra Australis. Similarly, James Cook circumnavigated and landed on New Zealand in 1769 following orders to search for the Terra Australis after sailing to Tahiti. In December 1901, the British National Antarctic Expedition led by Commander Robert Scott (the Discovery Expedition) spent three weeks in New Zealand preparing for the trip south. Since then, Lyttelton Harbour and the Christchurch International Airport have been important gateways for travellers to Antarctica. The purpose of this chapter is to provide an overview of significant Antarctic-related activities that materially involve New Zealand. It is based on interviews undertaken for this project, complemented with desk-based research by the AERU research team. It is convenient to classify the activities under eight headings, although as chapter 4 will discuss, there are considerable synergies among these different categories. The eight headings are: 1. Scientific research and innovation 2. Historical heritage and conservation 3. Natural environment and protection 4. Cultural exploration and education 5. International diplomacy and profiling 6. Gateway logistics and business support 7. Antarctic-related tourism and events 8. Southern Ocean commercial fishing 2.1 Scientific research and innovation All of New Zealand’s universities and many of its Crown Research Institutes are engaged in Antarctic research, including some recognised centres of research excellence. The oldest dedicated centre is the Antarctic Research Centre, established by Professor Peter Barrett in the Department of Geology at Victoria University of Wellington in 1972, building on a research programme going back to 1957 shortly after Scott Base was opened in December the previous year (see Hatherton, 1967, and Clark, 1967). The current director is Professor Timothy Naish. The centre’s mission is “to better understand Antarctic climate history and processes, and their influence on the global climate system, especially in New Zealand and the southwest Pacific region” (see www.victoria.ac.nz/antarctic). 4