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The MoU also provided a commitment by both parties to grow the screen sector in New Zealand and to build a long term and productive relationship between the government and Lightstorm and 20th Century Fox.

About 90 percent of the live action crew on the sequels were expected to be New Zealanders and at least one official red carpet premiere would be held in New Zealand.

Avatar director Cameron and producer Jon Landau would also serve as founding members of a new screen advisory board, which would provide advice and guidance to New Zealand screen and film makers looking to succeed internationally.

Joyce said the new incentives for film production, which would be finalized early next year, followed increasing international competition for film productions.

"In recent months there has been a sharp downturn in international production activity in New Zealand for both film and TV. This is due to a combination of factors, including increasingly generous grant rebates and tax relief offered by other countries," he said.

"To support and develop our screen sector, the government is altering our screen production incentives to both encourage more mid-sized locally-driven productions and attract more international productions while our own domestic industry develops- - without engaging in a 'race to the bottom' mentality."