Jim Anderton Speech To Cantab Manufacturers
Hon Jim Anderton
Deputy Prime Minister
Embargoed 6.30PM Friday, 7 April 2000
Canterbury Manufacturers Function
Mancan House, Cnr Cambridge Tce & Manchester St, Christchurch
Thank you for the opportunity to speak to you today.
I welcome the chance to set out some of the Government’s thinking on economic development.
I am a manufacturer myself. I spent fourteen years as managing director a manufacturing engineering company. I know what is involved in making raw materials come in the door, and go out again as a processed, high value product.
I’m making an interesting discovery as I travel around New Zealand in my role as Minister for Economic Development and Minister for Industry and regional development. Most of the rest of New Zealand is far ahead of the Government in taking a pro-active, partnership-based approach to economic development.
There is a very high level of awareness about the potential for co-operation among local authorities, private businesses and community organisations such as Chambers of Commerce, manufacturers and employers, and Maori economic entities.
In regions all over New Zealand, economic development partnerships are being formed to create and develop natural advantages. The aim is to stimulate business, employment and the economic well-being of communities.
The starting point of the Labour-Alliance coalition Government is to recognise the benefits of that approach and to commit Government to doing our bit as well.
We need to lift the performance of the New Zealand economy.
Our GNP per capita is falling behind other developed countries. It’s been falling behind for twenty-five years.
Our current account deficit is chronic. We have had twenty-seven consecutive years of failing to pay our way in the world. The deficit recently leapt to more than 8% of GDP.
Imagine if you ran your business that way!
The overseas deficit has in turn delivered a staggering overseas debt. We owe more overseas than the entire economy can produce in a year.
We import far more than we export. As a report I read recently bluntly put it, ‘Our appetite for high-tech imports is greater than our ability to pay for them.’
The rest of the developed world is moving much faster than we are to exports of sophisticated products and services.
Manufacturers are crucial to lifting our export performance.
We will continue to develop our commodity markets. New Zealand is still crucially dependent on commodity exports. And we’re very good at it.
But over time, world commodity prices are falling. Our future depends on developing more high-tech exports. Exports that depend on the creativity and skill of New Zealanders.
We need to transform our export base.
New Zealand is the lowest exporter of high-tech products in the OECD.
Our current levels of high-technology exports are similar to those of other countries a quarter of a century ago. We are losing, rather than gaining market share.
Nearly half our high-technology products are going to Australia. Australia is changing quickly, and we are not guaranteed the same level of success in Australia forever.
We import five times as much high-technology production as we export.
Even Greece, which is the next worst of all developed countries, imports a little over three times the value of its high-tech exports.
If we want to increase the incomes of New Zealanders and lift our overall economic performance, we have to develop far more high-value, high-technology industries. Products that people want to buy.
I want to quote from the conclusion of a commentary that was prepared recently by the Association of Crown Research Institutes. There is no political agenda behind it. It’s a simple statement of the way things are:
It says the economy as it is now cannot guarantee improved quality of life in New Zealand.
‘We must build knowledge-based exports by levering off endowments and creating competitive advantage. Government has a critical role. The narrow focus on efficiency over the last fifteen years has limited our ability to catch up with other OECD states.
‘We must change to improve our quality of life. If we don’t, it’s all downhill.’
In other words, ‘hands-off’ hasn’t worked. It’s time to try something new.
I want to stress that the approach we take will not be ideological.
Simply put, if it works, we’ll do more of it. If it doesn’t work, we’ll stop.
We have to be practical.
High-incomes are dependent on high-skills.
New Zealanders need to ensure that we produce more scientists, engineers and technologists.
I am certain that we won’t lift our standards adequately while we continue to punish students for their education with high fees. We will continue to lose our best and brightest overseas as long as they face the burden of a lifetime of debt in New Zealand.
We need to reform our approach to research and development. Neither the Government nor the private sector is investing enough by world standards in R&D and innovation.
There are a variety of ways we can lift our performance. The Government is committed to a review of the tax treatment of R&D. Industry New Zealand and public sector organisations need to be prepared to contemplate joint venture R&D partnerships. The rules covering universities and Crown Research Institutes may not encourage co-operation. We have been slow off the mark at encouraging industry clusters.
We already have some innovations under way.
We have created the Ministry of Economic Development to lead the Government’s new approach.
By the middle of this year we will have Industry New Zealand up and running.
It will enter partnerships with local authorities, community organisations and the private sector.
There is no magic bullet straight-jacket description of the kind of partnership that Industry New Zealand will be involved in.
I sometimes think I’m being asked to identify the projects and regions that will receive money from a pool in Wellington.
That’s not the way it will work. The activities we will support are limited only by the creativity and imagination of New Zealanders. Good ideas will get backing.
The kinds of ideas that work will be job-rich. They will be high-tech, high-skill and based on sustainable or renewable resource use. They will harness the creative potential of New Zealanders.
Industry New Zealand will not only invest in new enterprises. It will also be seeking small companies that employ three, five or ten people and seeking to lift them to a new level, where they can take on ten, twenty, fifty or a hundred staff.
Industry New Zealand will provide seeding capital. Its level of investment will rise to $100 million a year. Some might say that is only a small proportion of the GDP of New Zealand. So it is crucial for the private sector to lever off Industry NZ investment.
[Topoclimate] – Southland.
Of course, growing businesses invest in themselves. Businesses that expect to expand retain profits and build capital to grow their productive capacity. Our reliance on more business investment is one part of the strategy New Zealand needs to lift our very ordinary savings performance.
Venture capital and direct development grants are not the only form of assistance that will be provided. There need to be loans, as well as training assistance packages or assistance with marketing and management expertise.
Currently, the economy is heavily dependent on small firms employing less than five people. We need them to expand.
The Government has already announced a business incubator strategy to develop small initiatives. Its designed to assist businesses with good ideas get off the ground, find venture capital, link with expertise and develop into bright new industrial innovators.
Other initiatives are also under way.
The Government has announced a modern apprenticeship programme to lift the skills of young people and benefit businesses at the same time.
Only this week the Government announced rules relating to competition laws.
It will be harder for companies with a dominant market position to block the emergence of innovative small competitors.
I was disappointed to hear this initiative criticised here in Canterbury by the Chamber of Commerce.
We need to remember that most firms in New Zealand that have dominant market positions are not New Zealand owned. Petrol companies. Banks. Telecom. Their profits are going overseas, and worsening our current account deficit.
They are blocking the emergence of innovative New Zealand owned businesses.
When the Department of Justice in the US prosecuted Microsoft, it showed that Microsoft was using its dominant position in the software industry to block the emergence of new software companies.
If the US Judge is right, then virtually every business and most households around the Western world have probably paid more for computer software, and possibly had access to lower quality software, because Microsoft restricted the entry into the market of better alternatives.
If the market is fair, there is nothing to stop a New Zealander developing a new Windows programme.
Competition law has to encourage innovation. And preventing competitors from entering the market doesn’t assist innovation.
In New Zealand right now the Government has begun an inquiry into the 0867 issue. Fresh new companies that make the Internet free, are being cut off by Telecom. We’ll see about the merits of that case soon.
Change is under way in building new strength into our economy.
Industry New Zealand will have a key role in developing the new productive capacity of New Zealand. But it will only do so in partnership with others in the community.
Manufacturers will be particularly crucial. The productive, complex, high-technology, high-value output of manufacturers is crucial to our economic future.
I know that manufacturers here in Canterbury, as well as around New Zealand, will participate fully in realising our vision for the future.