America's Cup- Critics dealt body blow with Cup benefits to NZ

by Sail-World on 28 Mar 2014 The 34th America’s Cup Regatta in San Francisco delivered a range of direct and indirect benefits for the New Zealand economy, according to two evaluation reports released on Thursday (NZT).

Economic Development Minister Steven Joyce released both an independent evaluation of the Government’s investment in Emirates Team New Zealand and an evaluation of New Zealand Trade and Enterprise’s (NZTE) leveraging programme in San Francisco.

We also present an audio interview with an economist commenting of the accuracy of the reports.

'The economic benefit from our investment in Team New Zealand is considerable. From a $36 million taxpayer investment, the evaluation shows an estimated positive impact of $87 million to the New Zealand economy,' Mr Joyce says.

Team New Zealand obtained 66 per cent ($118.3 million) of their total revenue of $179.8 million from international sources. Team New Zealand needed to source at least $2 for every $1 of Government support and exceeded that with $3.68 secured for every $1.

In total $153 million or 85 per cent of the total campaign budget was spent in New Zealand.

Commenting on the reports , economic lecturer Dr Eric Crampton of the University of Canterbury, and author of the 'Offsetting Behavior' blog, said that he had had a brief look at the reports and they were more credible than most he had looked at. he noted that there was no multiplier effect in the reports - a device often used to inflate the economic impact in such report - through increased spending flowing into other parts of the economy.

The sponsorship money that was sourced from outside NZ amounted to $103million, was money that would not otherwise have been spent in New Zealand. 'It was net new spending that otherwise would not have happened.' A total of 710 people were directly engaged in the NZ boatbuilding industry as a result of this inflow, and a total 1234 estimated as the economic effect of having the boats built and other activities related.

'I have not seen huge obvious holes in it which I have seen in other reports of this kind,'Crampton said. 'I would more to the 710 direct jobs that were created, rather than the indirect ones.'

For the full interview on Radio New Zealand: http://www.radionz.co.nz/audio/player/2590662!click_here - the comments from Dr Crampton start at 5.45sec

'One of the key benefits of the America’s Cup challenge was the lift it provided to New Zealand’s profile, particularly in North America over the period of the regatta,' Mr Joyce continued.

'With New Zealand continually in the international media over the 55 days of racing, figures show that the tourism, education and construction sectors, as well as the marine sector also felt the positive impact of government investment.

'The reports show that New Zealand agencies successfully leveraged participation in the races to improve international awareness of New Zealand as an innovative place to do business. The recreational marine industry also enhanced its ability to attract and retain highly skilled and professional workers, wanting to be involved New Zealand’s campaign.'

The 212 companies that participated in the NZTE’s America’s Cup business leveraging programme also reported a range of benefits.

'New Zealand design, manufacturing, and technology were on display both on and off the water, and told a compelling story about who we are and what we can deliver. The audience reach of media coverage about New Zealand business was measured up to 86 million,' Mr Joyce says.

'Activity during the Cup has contributed to trade and investment deals so far worth $200 million for New Zealand and a further $120 million of new sales opportunities and investor interest.'

Following the regatta, the Government committed to an interim investment of $5 million to retain key team members for the next challenge. A decision on any further government investment will be made following the delivery of a business case by Team New Zealand to the Government.

'One of the things I have made clear to team representatives is that the Government must have confidence that a strengthened governance structure has been put in place before it will consider a further investment of taxpayers’ money in another challenge,' Mr Joyce says.

'I look forward to having the opportunity to evaluate progress in that regard.'

For more information on the America’s Cup evaluation report and NZTE’s leveraging programme evaluation visit: click here

Questions and Answers

How much Government funding was invested in Team New Zealand for the 2013 America’s Cup?

In May 2008, Emirates Team New Zealand (TNZ) and the New Zealand Government formed a Strategic Partnership Agreement, which required TNZ to raise at least $2 for every $1 of Government funding (capped at $36m), provided TNZ lodged a competitive challenge for the 34th America’s Cup.

What proportion of Team New Zealand income came from Government investment?
In total, TNZ raised $179.8 million. Government’s investment accounted for approximately 20 per cent of this.
The largest total source of funding came from overseas. This equated to $118 million or 66 per cent of the total income.

What was the total value added to the New Zealand economy by Team New Zealand?

Total value added to the New Zealand economy by Team New Zealand (EIA): $87 million.
Total value added by Team New Zealand and Luna Rossa combined (EIA): $106 million.

What was the additional employment generated by Team New Zealand?

Additional employment contributed by TNZ: 1,220.
Additional employment contributed by TNZ and Luna Rossa combined: 1,480.

What was the tax revenue generated by Team New Zealand?

Total tax revenue from TNZ: $38 – 40 million.
Total tax revenue from TNZ and Luna Rossa combined: $56 – 58 million.

Would these benefits have been achieved without Government’s investment?
The evaluation concludes that the positive economic benefits would not have occurred in New Zealand without the strategic partnership agreement between the Government and TNZ.

What was the purpose of NZTE’s business leveraging programme?

The programme was designed to successfully leverage New Zealand’s business, technology, food, wine, marine, aviation and tourism ties to the United States, and has helped forge meaningful business relationships for New Zealand companies.

During the programme, New Zealand companies and sectors hosted current and prospective clients, including a number of VIPs and High Net Worth Individuals, as part of deepening existing relationships and laying the foundation for future partnerships.

How much did NZTE invest in its leveraging programme around the America’s Cup?

The Government approved NZTE investing $3.9 million to support the America’s Cup Leveraging programme.

What were the results of the business leveraging programme?

Activity during the Cup has contributed to trade and investment deals worth $200 million for New Zealand and a further $120 million of new sales opportunities and investor interest.

What steps have been taken to ensure the independent nature of the evaluation of the strategic partnership agreement between Team New Zealand the Government?

Following a robust procurement process, Market Economics was appointed as the independent evaluator. They are a New Zealand research firm based in Auckland. Their work was peer reviewed by NZIER.

What investment has Government committed to Team New Zealand for the next America’s Cup?
Government has agreed to an interim investment of $5 million.

What is the purpose of this investment?

The interim investment will be used to retain key team members until a decision has been confirmed regarding TNZ involvement in the 35th America’s Cup.

Will Government invest further if Team New Zealand decides to enter the 35th America’s Cup?

A decision will be made following the receipt of a business case from Team New Zealand, along with the details of the 35th America’s Cup protocol.