Argument Over Cable Factory

Press, Volume CI, Issue 29916, 1 September 1962, Page 12

Argument Over Cable Factory

(Parliamentary Reporter) WELLINGTON. August 31. Arguments over the Christchurch telephone. cable factory marked today’s imprest supply debate in Parliament which was focused on the Government’s indus - trialisation policy. Mr M. Moohan (Opposition, Petone) said constant Government sniping at the Opposition over the establishment of the cable factory was giving the 140 employees of the factory a feeling of insecurity. Mr Moohan said the agreement for establishing the factory had been investigated by the Post Office, the Department of Industries and Commerce. the Treasury Department. and the Crown Law Office It had been stated the agreement allowed the company to pay a 15 per cent dividend to shareholders, but this was mcorrect After tax, the dividend would be only 7M» per cent The Minister of Finance was paying C per cent.. tree of tax for loan money. The agreement also provided for price control, insofar as prices could not exceed by 10 per cent, those charged in 1957 After eight years this agreement could be terminated, and the company eould tender with other world companies for the supply of cable to the Post Office. The cable industry saved New Zealand £200.000 a year in overseas funds, and it was no longer necessary for the Post Office to have £l4 million cap-tal tied up in cable stocks, because needs could be met within a few days Previously the Post Office had had to depend on overseas supplies, waiting months for delivery, and often holding up jobs because of a shortage Request to Finn The Labour Government had asked the company to canstder building its plant in the South Island and it had

agreed, finally deciding on Christchurch because of the availabrlity of Post Office engineers for consultations and the supply of labour. The company also provided 200.000 tons of railway freight a year, and freight was badly needed because the South Island railway system was losing £lOOO a mile The company was paying £ 123,000 a year in wages and employing permanently 140 New Zealanders. It also spent about £90,000 on wooden drums for the cable and £34.000 a year on cable covering.

The company represented a Government investment of £lO million It had a great future in New Zealand, in Australia, and in Asia, said Mr M'oohan. The Minister of Justice (Mr Hanan) said he had always understood Mr Moohan to be looking after the interests of the workers However, the agreement the Labour Government, in which Mr Moohan had been a Minister. had made with the cable company-—and the agreement, because of a change of Government, was available for publication—provided for a review of prices at two-yearly intervals to proceed on the basis that any net taxable income of the company in New Zealand should be sufficient to return at least 15 per cent, on the shareholders' funds. Even Czarist Russia would not have tolerated such an agreement. Mr Hanan said but it was entered into by a Socialist Government here. Monopolies

The agreement resulted in the establishment of one industry in the South Island, but the Opposition said nothing of the other eight monopoly industries it had allowed to establish themselves in the North Island mainly round Auckland. There was. however, the aluminium industry project in the South Island for which oreliminary steps were taken by Mr H Watt (Opposition Onehunga). Minister of Works and Electricity in the last Labour Government

Only, said Mr Hanan, the present Government had gone a good deal further. It had assured the parent company. Conzinc Rio Tinto of Australia, that if finance from the World Bank was essential to build the Manapouri power station, which was necessary for the indus-

try, the Government would guarantee it. That guarantee was only possible because New Zealand had joined the World Bank and the International Monetary Fund, on the Government’s initiative. Yet. Mr A. H. Nordmeyer (Opposition. Island Bay). Labour's Minister of Finance, was recently reported as saying that the next Labour Government would take early steps to cancel the agreement to join these institutions, that it would free New Zealand from commitments to these institutions as soon as possible. Thus there was the position of a National Government trying to help a major South Island industry by guaranteeing a loan and a Labour Minister of Finance making a public statement that his party, if returned, would withdraw from the sources of finance.

What damage that would do if the investors, who would come in by the thousands. attached importance to it. said Mr Hanan. There were other factors, such as the Common Market and whether New Zea-land-produced aluminium could enter duty-free or on competitive tariff. Would Mr Nordmeyer now hedge and say he did not mean what was contained in the statement attributed to him? Mr Hanan asked. Talks With Alcan

Mr Nordmeyer had negotiated with Alcan some years ago in Canada, said Miss M B Howard (Opposition. Sydenham) and though the firm had been anxious to set up in Auckland, he strongly recommended they start their business in the South Island Aloan made extensive inquiries m the South Island and said they would, in no circumstances, settle further south than Christchurch. So there was no point in approaching the Dunedin City Council on power charges Speaking of the Christchurch cable factory Miss Howard said the city had a large potential for industry and the biggest of all the new industries had started in the South Island. Mr J H. George (Government. Otago Central) said the Labour Governmen' knew it was going to cost the Post Office so many hundreds of thousands of pounds more for cable if a factory were permitted in New Zealand

The factory was now a monopoly, as the Post Office

bad agreed to purchase 90 per cent, of its cable requirements and the prices could be anything. “All we know is that they will not be more than 10 per cent, higher than the charges by the company to the Australian Post Office for the first four years, and not more than 7J per cent, thereafter." said Mr George Treasury Report In a 1959 report to the Cabinet, the Treasury said the establishment of the telephone cable factory was not warranted as the Post Office could then, and for some years, obtain its cable requirements overseas at prices lower than those at which it could obtain cable in New Zealand The treasury recommended “hat the Cabinet reconsider the proposal on the basis that improved prices were available. but the Labour Government totally ignored this advice. A year later the Treasury reported that the time was still not opportune to set up a factory Mr George said the amount of overseas exchange saved was .difficult to determine, because of the cost of importing machines and material and the remission of profits overseas. Even the Department of Industries and Commerce said the likely saving was uncertain, and was not satisfied the proposal was the best that could be obtained.