WELLINGTON, Dec. 16 -- The New Zealand government Monday announced it had secured a deal with Hollywood movie house 20th Century Fox Film and production firm Lightstorm Entertainment to make three sequels to the global box office hit Avatar in the country.

Prime Minister John Key shook hands with Canadian director James Cameron and other Hollywood executives on the memorandum of understanding (MoU), which would require spending of at least 500 million NZ dollars (413.05 million U.S. dollars) on production activity in New Zealand, including live shooting and visual effects.

"The Avatar sequels will provide hundreds of jobs and thousands of hours of work directly in the screen sector as well as jobs right across the economy," Economic Development Minister Steven Joyce said in a statement.

"They will be a very big boost to the screen industry while we look to develop more New Zealand-sourced productions."

The MoU followed a separate announcement Monday by the government that it would boost screen production incentives for both overseas and New Zealand productions to encourage more film and TV to be made in New Zealand.

This included raising the baseline rebate of qualifying costs from 15 percent to 20 percent, while productions will get points for specific benefits to New Zealand, which could entitle some to an extra 5 percent rebate.

The new Avatar films would qualify for a total rebate of 25 percent, said Joyce.

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."