Economic development at the Global Coalface - Spch
Hon Jim Anderton
Minister of Economic Development
Economic development at the Global Coalface.
6.30PM Monday, 9 February
Crown Plaza, Auckland
I would like to acknowledge Professor Ian Shirley, Professor Xavier Greffe OECD; Greg Clark, London Development Agency.
Economic development has become a major programme at the Institute of Public Policy.
It’s not that long ago, when the first economic development agencies were opening.
Governments back then rejected any role in economic development.
Now there’s a degree course in it!
It’s sometimes observed that no discipline is taken seriously until academics have invented a new jargon in which to discuss it.
Economic development really is a new field in New Zealand, although we are making plenty of progress at creating our own jargon.
The work of the Institute of Public Policy in expanding our knowledge of economic development is truly welcome.
You have had the opportunity to spend the day discussing economic development at the local level.
Most of you here have heard me speak on this topic before.
It’s worth restating briefly the need to build on our strengths at the local level.
The logic of local economic development has always been plain to me.
You could not have a strong national economy when one region after another was weak or in decline.
Equally our industrial performance has been sub-par for at least three decades.
We have been transforming our industrial base far too slowly.
Our dependence on primary commodities has provided a minimum level of national income.
But it has failed to increase in step with other developed countries.
Over time it will fall back still further.
We need to move up the value chain and develop high value new industries that depend on the talent and creativity of New Zealanders.
This coalition government’s strategy has been to work in partnerships with economic development actors at the local level, and with industry.
The aim has been to build on our strengths.
A generation ago, governments would take a ‘top-down’ approach to developing the regions of New Zealand.
They would pay incentives to move factories from one part of the country to another or subsidise businesses in order to keep businesses open that wouldn’t otherwise be viable.
The old strategy didn’t work.
It turned out there were good reasons why factories were located where they were.
It turned out that subsidies couldn’t prevent economic inevitability.
In the eighties and nineties, governments tossed away all of that – and rejected any involvement in the development of regions or industry.
That approach didn’t work, either.
Many regions, somewhat predictably, slipped into spirals of decline.
We seemed to be on a track towards becoming a ‘warehouse economy’, a cheap provider of commodity products.
Today’s approach is different from the past precisely because it begins at the local level.
It begins with the advantages of each region, and the potential of every industry.
Of course, in many regions, work was underway before central government arrived.
When I became economic development minister, there was already a network of economic development associations working in the regions.
We have learnt the best way to kick start development:
Work as a partner with industry and the community;
Identify blockages to development and work to overcome them;
Set out priorities for development and ensure the whole community is part of the process;
Ensure that priorities are built on the existing strengths and opportunities each region offers;
Commit to removing the blockages to development.
All 26 regions have managed to develop a detailed economic development strategy in the last two years.
The planning process itself has given many regions a significant boost.
When regions publicly express confidence that they have a future, it sends a positive signal to investors.
Who would invest in a region when even its leaders said it was dying?
There is a more strategic regional focus and an agreed economic development direction in many regions.
There is improved knowledge of a region’s strengths and advantages and more projects are aligned with these.
There are strengthened economic development networks and more collaborative approaches to projects.
There is improved co-operation and trust between groups and better understanding of other stakeholders’ goals and processes.
There is better co-ordination and alignment between central and local government resources.
Ten regions to date have successfully moved on from the strategy stage to Major Regional Initiatives.
Rotorua has a world-class wood-processing centre of excellence.
Hawke’s Bay chose food processing.
Waikato opted for an Innovation Park to build on the region’s science and innovation strength.
Southland chose a broadband project.
Marlborough has a wine centre of excellence.
Taranaki selected heavy engineering.
Northland has chosen tourism.
Manawatu has biotechnology commercialisation specialisation
The Nelson/Tasman region selected seafood as its top priority for development.
Wellington chose the film industry.
Now every region of New Zealand is in positive growth mode.
The National Bank’s regional trends survey showed that economic activity rose across the entire country in the three months to September.
A consumer confidence survey shows people feel more confident than at any time in the last fifteen years,
I don’t have any doubt that we can be optimistic about the future of our regions.
But we cannot we be complacent.
Although our performance at the moment is strong, we need to lock in further growth and development.
The focus needs to be firmly on our readiness to go global.
Local economic development that creates good, lasting jobs and higher incomes relies on high value, high skill exports.
We need to attract more high value production from the rest of the world into New Zealand.
The protest movement long ago coined the useful phrase ‘think globally, act locally’.
So for local economic development the most important question today is, ‘What can we do at the local level to assist our companies to go global?’
When you ask well-run New Zealand companies why they aren’t exporting, the answers are revealing.
Many would export tomorrow if they could tap into distribution networks.
For others, there are concerns about skills and capital.
There are many skilled entrepreneurs who don’t want to contemplate going global, because the potential risks of being a small fish in a world-scale pond outweigh the returns.
We need to work at every level on ways to overcome these barriers and lift our sights.
We all have a role in this.
The coalition government, for example, merged two very successful agencies – Industry New Zealand and Trade New Zealand to become NZTE.
The merger better aligns our industry and regional development practice (and our priorities) with the demands and opportunities of global markets.
One very good example of a successful New Zealand-based company making global connections is the hi-tech company Navman.
It is a world leader in marine navigation products and one of our fastest growing companies.
Last June, 70 per cent of Navman was sold out to one of the world’s largest marine companies, Brunswick Corporation.
Critics were quick to say, ‘there goes another great company, lost to New Zealand.’
They lamented that Navman was going overseas for capital, instead of looking to raise it on the New Zealand share market.
But Navman has a different story.
When it started on day one in 1987, it was already a global company with a customer in the US for its product which was manufactured in Singapore.
Today it remains a global company with units in China, Australia, Christchurch and Auckland.
Eighty per cent of its activities are carried out here -- not through sentimentality, but because this is the right place for them.
The company’s founder, Peter Maire, wants to turn Navman into a seriously large global leader.
As it grows, it is always going to keep carrying out its activities in the best place.
That is why Navman grows.
The challenge for New Zealand is to be the right place for the company to base its activities.
The most important element of Navman’s growth was its need for global connections.
It manufactures marine electronics, in markets where boats are increasingly being designed with electronics built in – the same way you buy your car.
You need to be part of the design process from the beginning to achieve that.
Being part of a global leader like Brunswick will allow Navman to be plugged in.
It will also allow some of Brunswick’s world class technology to be transferred back to New Zealand.
We need world-class New Zealand companies to grow into world-scale companies.
New Zealand doesn’t have enough really big companies.
And we don’t have any world-scale companies in high-value sectors.
It is crucially important for New Zealand that we have the ambition to create a hundred and then a thousand significant, exporting technology companies.
It is a fairy-tale to suggest companies like Navman can grow into world scale companies without global connections.
Navman’s model won’t be the right model for all of our companies.
What will be common to all our exporters, however, is the need for global connections.
Think about the success of Nokia as a company, and you think of a great Finnish technology triumph.
Here is a firm that started out as a forestry company and successfully transformed itself into the world’s leading maker of mobile handsets.
Around 96 per cent of Nokia is owned outside Finland.
It is a multinational company, but a major part of its activities are still located in Finland.
Hundreds of small and medium-sized fast growing ICT-companies – most of them Nokia’s suppliers and partners – have grown alongside the company.
Finnish suppliers have internationalised alongside Nokia and R&D units have been established around the world.
These companies have been able to offer global services and win new clients because of these global operations.
We will also have to be aware of the need for New Zealand to be world class in everything we do if successful companies are going to locate here.
Important ingredients of our success probably include our exchange rate, our regulatory environment, our resource management laws, our tax rates and a pool of skilled workers.
It’s not enough just to be the best – we almost certainly need to have a brand that creates excitement and demand for New Zealand as a destination.
We should look at the wildly successful tourism industry – New Zealand has always been a beautiful place to visit; it took a great brand to generate considerable growth in the industry.
For some of our companies the barriers to global connections will be regulatory.
A couple of weeks ago I opened an extension to the Vita Power factory in Wanganui.
It developed with Massey University an extremely effective animal food supplement which is selling very well overseas.
The greatest barrier to its export growth is getting through the regulatory maze in potential overseas markets.
Then consider a small but innovative company in the South Waikato, Putaruru Welding.
It is making innovative, simple but very effective grapples for helicopters in the timber industry.
This is a company that is innovative and well run, but struggles to break in to international markets because it lacks critical mass.
Every region has stories like this.
The challenge at the local level is to work out how we can learn from these stories and help individual firms with great potential, promising industries and entire regions to go global.
NZTE is working with innovative New Zealand companies to help them overcome barriers.
One example is its Growth Services for rapidly growing companies.
It assisted the New Zealand Floricultural company, BLOOMZ, which was awarded first prize at the Amsterdam International Hortifair for its new calla lily 'Hot Chocolate'.
An NZTE advisor has been working with the company on its strategic planning.
NZTE works with companies like Applied Research Associates which developed a hand-held 3D-object scanner seven years ago.
It’s now opening up medical markets in Australia.
The scanner was first used by Weta Digital to create digital models for creatures in The Lord of the Rings.
Weta saw the potential for the scanner, which was ahead of its time.
Now it is being used in the treatment process of cancer patients in Western Australia.
It’s not only about exporting.
It’s also about attracting added-value services to New Zealand to be part of globally-integrated production chains.
EDS is now running specialised international call-centres from NZ.
Under their agreement with the New Zealand government, they will help some local companies to develop world leading technology.
The film industry has been stunningly successful at attracting international investment, skills and technology transfers.
Not only Lord of the Rings, or the Last Samurai.
Ask Christchurch about the success of its ‘film friendly’ programme in bringing India’s massive film industry to the South Island.
These are all examples of building on existing advantages at the local level to increase our global connections.
Economic development at the local level relies on knowledge of global trends and the ability to tap into international markets.
The valuable part of the global market is changing.
It is increasingly based around value chains – with elements of production based in many countries.
There are many communities in New Zealand that have had those global forces imposed on them, and suffered as a result.
We can’t shield them for ever, but we can make plans to ensure they can take up all the opportunities that global value chains can offer.
Making those plans prosper in the world economy is the fundamental challenge for local economic development today.
New Zealand is good enough to succeed in the world.
On Waitangi day I gave a speech about our national identity.
I referred to my belief that we are increasingly developing a single national identity – even as we witness sad attempts to create division.
I call that emerging identity ‘ngati kiwi’.
It is based importantly on our economic identity.
It is the distinct and unique creativity and talent of New Zealanders, as the basis for our industrial edge in the world.
We see it in our film, in our music and in our arts.
But we also see it in design of innovative New Zealand products - see my tie! (Michael Campbell promotes these on the gold courses of the world - Kia Kaha)
We see it in our confidence as we compete in the world.
It is a national identity based on the accumulation of success at the regional level.
In every sector and every town, we need to have confidence that we can succeed.
We need to have the confidence to go out into the world as New Zealanders, knowing that our identity will flourish and prosper as we plug into the opportunities the world has to offer.