Prime Minister Helen Clark said yesterday that the Cabinet had agreed to lend Right Hemisphere up to $US8m ($NZ12.2m) over three years to keep the joint-venture company and its staff in New Zealand.
The loan follows the departure of several other New Zealand-based companies overseas and is being made against the advice of Treasury, which says it is unfair to others and not a good investment.
Right Hemisphere, a computer graphics company, was founded in New Zealand but now has a significant part of its business based in Los Angeles. The company had warned it would have to completely relocate overseas if it could not find new investors.
The company designs software for several US military suppliers, including Black Hawk helicopter manufacturer Sikorsky Aircraft, Bell Helicopter, Halliburton, the principal supplier to US armed forces in Iraq, and Lockheed Martin, the world's largest defence contractor.
In a surprise move, the Government has agreed to an interest-free loan on the basis the company stays in New Zealand for three more years. If it does not, it will have to pay 25 per cent interest on the money. The Government believes the investment will pay off in downstream benefits.
The move has infuriated the founder of regional airline Origin Pacific, which folded this year under intense competition from majority Government-owned Air New Zealand after the Government refused to help bail it out.
Robert Inglis said his company had asked for half as much money as Right Hemisphere, and on a fully commercial loan basis.
Dunedin-based computer graphics company Taylor Made said the Government loan was highly unusual.
With 10% of that money I think we could take Geekzone to the next step. I'd love to get an interest free loan, and we would be creating job positions!
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