Prime Minister John key is promising funding of up to $150 million over the next five years to establish a new organsiation to promote the hi tech industry.

The announcement was made along with the release a report by the Ministry of Science and Innovation titled 'Powering Innovation' yesterday. The report is aimed at identifying potential in developing New Zealand's "high-value manufacturing and services sector" and recommends forming a new organisation, provisionally called Advanced Technology New Zealand (ATNZ). This would be based on Industrial Research Ltd, a Crown Research Institute in Wellington but with additional sites in Auckland and Christchurch.

"We will effectively double the size and capability of IRL, transforming it into an advanced technology institute with up to 700 staff and with a far greater reach than at present," Key says in a press statement.

"Estimates show the establishment of the advanced technology institute will cost in the region of $120 to $150 million over five years, in addition to IRL's current funding.This is an average of $24 to $30 million a year of additional funding, which the Government will pay for out of the new operating allowance in next year's Budget. We will earmark up to $80 million from the Future Investment Fund for capital spending in areas like new buildings and equipment."

The MSI report acknowledges difficulty in attracting and retaining staff with appropriate skills in advanced technology and its application to business "For example, it is estimated that New Zealand needs 2,000 -- 2,750 new engineering graduates each year, but in 2008 there were only 1,500," it says in the report.

This shortage stems from cultural and education system issues in New Zealand. There is a need to motivate more young people to retain science and mathematics at secondary school and to pursue science and technology education at tertiary level."

The panel charged with tackling the R&D challenges drew its conclusions from consultation with providers of R&D, research consortia and associations such as the Heavy Engineering Research Association (HERA); commentators; angel investors; companies in the sector; and representatives of industry sector bodies.

"Funding barriers relate not only to availability of investment funds but also, and very importantly, to how the investment of government and private sector funds is prioritised," the report says. ATNZ would receive core government funding but be expected to complement this with "at least equal funding from industry-linked contracts. It is expected that the level of industry contribution to project funding would range from half to two-thirds of the total contract value."

Treatment of intellectual property is identified as another area needing attention, with widespread fear in industry that confidential IP will "leak" if entrusted to research establishments. The report recommends "more flexible approaches to IP rights under which university or CRI IP or specialist knowledge may more easily be transferred to an industry partner or to a spin--out venture funded by external investors."

It also suggests giving R&D partners more of a financial stake in the benefits from commercialisation of the R&D. "In some cases, a researcher share of IP benefits of 50 percent or higher may be justified."