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Developing More Kiwi Global Champion Companies

7 August 2006

Developing More Kiwi Global Champion Companies

The New Zealand Institute has today released the fourth report in its series on ‘Creating a global New Zealand economy’. This report, ‘Developing Kiwi Global Champions: Growing successful New Zealand multinational companies’, describes a series of business and government actions that will create a more supportive environment around international expansion by New Zealand firms.

This report builds on the Institute’s previous report, ‘The Flight of the Kiwi’, which identified four solution areas to increase New Zealand’s international economic activity. This report provides more detailed analysis and specific recommendations on the first of these four solution areas.

New Zealand has always punched well above its weight in terms of developing international sporting champions. This success is due at least as much to New Zealand’s professional organisation, drive, and determination as it is to New Zealand’s intrinsic sporting ability relative to other countries. The challenge now is to achieve this type of international success in the business arena.

The report proposes four key actions that will contribute significantly to the development of many more Kiwi global champion companies. These are:

1. Changing the tax regime to make it more supportive of international expansion by New Zealand firms. We propose that firms be given financial support to assist in developing a presence in international markets through up to five years of limited tax credits. We also propose that the taxation of income from active international investments by New Zealand firms be aligned with standard international practice to ensure that New Zealand firms are not disadvantaged.

2. Implementing a bold savings plan. Increasing New Zealand’s household savings will make a significant contribution to developing Kiwi global champions by strengthening New Zealand’s capital markets and by providing more New Zealand-sourced capital for New Zealand firms as they expand abroad. To achieve this, we recommend a much expanded version of the government’s KiwiSaver scheme.

3. Encouraging international expansion by SOEs. New Zealand does not have many large companies capable of undertaking significant international investments. In response, we propose relaxing the current constraints on SOEs considering international investment. SOE governance and ownership should also be reviewed in this regard.

4. Improving corporate strategy around international expansion. Although public policy can and should be made more supportive of international expansion by New Zealand firms, ultimately success rests on the behaviour and performance of New Zealand firms. To better understand the factors that influence the success of Kiwi firms offshore, we undertook a joint project with McKinsey & Company. This project identified four factors as being important to the international success of New Zealand firms; a long-term commitment to international success; identifying and investing in competitive advantage; expanding offshore in steps; and having people on the ground in overseas markets.

This report provides confidence that there are meaningful things that can be done to increase the number and scale of Kiwi global champions.

Over the next several months, the Institute will release three further reports that provide more detailed analysis and specific recommendations on the remaining three solution areas: achieving real market access; connecting New Zealand to the world; and developing the New Zealand economy 2.0.

ENDS

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