N.Z. Should Improve Access to Capital, Taskforce Says

Dec. 16 (Bloomberg) -- New Zealand should increase companies’ access to funding to help them reach the scale needed to compete internationally, according to a government taskforce charged with reviewing the nation’s capital markets.

“Access to domestic capital is important,” the Capital Market Development Taskforce said in a report released in Wellington today. “The evidence is, local markets matter for economic growth.”

The taskforce, chaired by Rob Cameron, was formed last year to develop a blueprint on how to improve the nation’s capital markets in order to encourage firms to raise more funds locally. The group recommended creation of a single regulator, and suggested the nation needs a Minister for Capital Markets to be responsible for policy development.

“The government will consider the report as a matter of priority,” Commerce Minister Simon Power said today. “There are plenty of things to look at.”

Prime Minister John Key will lead the response and the government expects to report back in February, Power told reporters in Wellington. Aspects of the recommendations will be included in a review of the Securities Act, which will be published early next year, he said.

“The notion of regulation occurring in one place as opposed to several different regulators operating in this space is a notion I am very interested in,” Power said.

Single Agency

The taskforce recommends a single regulator to replace a “plethora” of agencies which includes the Companies Office, the stock exchange and the Ministry of Economic Developments, Cameron said in a presentation today.

A problem for the economy is that many companies get to a stage where they have to grow either by acquisition or overseas expansion and find they are unable to access risk capital, Cameron said.

The so-called private capital markets aren’t working, and there should be scope for an agency such as NZX Ltd., which runs the stock exchange, to get involved, he said.

The report makes 60 recommendations designed to create a “healthy environment for investors” and to get markets “to act as an engine for growth,” he said.

Only about a third of New Zealand’s 200 companies are publicly traded compared with two thirds in Australia, Cameron said. Agriculture companies, financial institutions and utilities are underrepresented.

Agricultural Cooperatives

Accordingly, the government should consider ways in which state-owned companies may offer shares to the public, he said. The stock exchange should make itself more attractive to agricultural cooperatives such as Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter.

New Zealand could become an “agricultural capital markets hub,” using its knowledge in industries such as dairy and meat, to be a base for global trading of commodities and related derivatives, Cameron said.

Members of the taskforce include Mark Weldon, NZX chief executive officer, and Jonathan Ling, chief executive officer at Fletcher Building Ltd., the nation’s largest building products company.