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Address to the Top Exporters Club conference

Hon Steve Maharey
4 December 2001 Speech Notes

Connecting Tertiary Education with the Real Economy – the Challenge of Change

Address to the Top Exporters Club conference. Banquet Hall, Parliament Buildings, Wellington.


Thank you for the opportunity to meet with you today.

My comments today will be in two parts – firstly I want to talk about the Government’s approach to tertiary education and training reforms more generally, and then I want to talk specifically about some of the challenges in export education in particular.

When I talk about the tertiary education and training system in general, I am talking about virtually everything that happens in the post compulsory education and training system, and a good deal of what happens on the margin between the schools and the post compulsory sector.

The scope of the sector

Let me start with that last point first – what happens at the margin, and let me start with an event last week that probably didn’t make it into the news media, but should have.

It was a celebration of achievement. It involved a Wellington school that we almost drive past on our way in to the City from the airport – Rongotai College. And it involved two new programmes the Government has introduced – Gateway, which is a programme that encourages schools to link up with businesses to provide unit standard based vocational education and training in the workplace, as part of the senior secondary school programme.

And the second programme is one that I hope you are aware of – Modern Apprenticeships; work-based and mentored vocational education and training, targeted at young people, and leading to nationally recognised qualifications.

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And the event last week – a young man by the name of Heemi Tupaea, who is the second person to start in the Gateway Programme at Rongotai and make the transition to a Modern Apprenticeship. He will be apprenticed to Steel and Moss Limited, Plumbers and Drainlayers . I wish them every success.

So what happens at the margin is important – Lockwood Smith was quite right to articulate a vision of a seamless system, and this Government has put in place the vocational education and training pathways to make that possible.

I have started with this example, not only to make the point that what happens on the margin between the schools and the post-compulsory education and training sector is important, but also to make the more important point that when we talk about tertiary education, it is short hand for tertiary education and training, and the tertiary system, is indeed a tertiary education and skills system.

It’s not just about universities, as important as they are to the intellectual and the commercial life of this country – the tertiary education and training sector needs to be seen as an integrated system spanning industry training on and off the job, interventions targeted at those who are at risk of dropping gout of the labour market, a polytechnic sector in touch with regional labour markets and local communities, adult and community education that is learner centred and relevant to the needs of our society and economy, and a university system that meets its obligations to produce graduates with cutting edge knowledge and competencies, and inquiring minds, and that is committed to knowledge transfer through networked and co-funded research.

So when we talk about the tertiary system, we are talking about an integrated system, but one that spans a wide range of educational and labour market needs and forms of delivery.

Re-connecting by ‘putting up’

Now let me issue a challenge to you. When I meet with business groups to talk about the tertiary education and training system, the refrain I hear most often is that it is dis-connected from the real needs of business and commerce.

It was one of the clearest messages that I took from the Knowledge Wave Conference earlier this year, indeed I recall that one of the more important recommendations that came out of that Conference was that a more effective working relationship be established between business and universities in particular.

There is another refrain in politics – ‘put up or shut up’. Let me clear, I don’t want you to shut-up, far from it, but I do want the business community to ‘put up’.

I think that the major weakness of our tertiary education system has been the absence of connectedness. The Government is committed to doing something about that. But we cannot do that by ourselves.

So in ‘putting up’ I want you to engage actively with the process of tertiary reform. In ‘putting up’ I want you to see in the dissemination of a draft Tertiary Education Strategy an opportunity to engage in a very practical and meaningful way in charting a future course for our tertiary education and training system – I want to say more about the Tertiary Education Strategy shortly.

A ‘connected’ sector

New Zealand needs a tertiary system that is outwardly focused on the world, able to meet the future development needs of our nation and distinctively ‘New Zealand’ in its style and tone.

We need a system that is ‘connected’ to New Zealand’s national development goals, and ‘connected’ with other sectors of society and the economy.

We must ensure that the tertiary system is responsive to the skill and research needs of business and other external stakeholders. This will require stronger linkages and networks between tertiary providers, other research providers, businesses, social services and healthcare providers, Maori and Pacific communities.

To achieve these challenges and shift the focus of our tertiary system to a more outward-looking direction requires an integrated and strategic effort by Government, the tertiary sector and key stakeholders such as the business community.

A programme of change

In April last year the Government established a Tertiary Education Advisory Commission. Included in its ranks were a number of exporters, Hugh Fletcher among them.

Two years work by the Tertiary Education Advisory Commission (codified in four impressive volumes) and by the Government reached a culmination: yesterday when I introduced the Tertiary Education Reform Bill into Parliament.

This Bill gives effect to the Government’s reform of the whole tertiary education system. It sets the framework for our tertiary system to enable it to meet the challenges of the 21St Century and anticipate and respond to our future skill development needs.

These timely and much needed reforms will lead to a more co-operative and collaborative tertiary education sector, which is characterised by excellence, greater specialisation of investment and less duplication of effort.

The Tertiary Education Commission (TEC)

There will be a new Crown Entity, dedicated to implementing a Tertiary Education Strategy – more about that in a moment. The Tertiary Education Commission (TEC) will come into existence on 1 July 2002. The new structure will embrace Skill New Zealand and the operational functions of the Ministry of Education.

The Tertiary Education Commission will positively impact on you by providing a more strategic and systematic approach to the way that tertiary education is funded and regulated. It will work closely with industry and the community to ensure their needs are met.

I will soon be calling for expressions of interest for the TEC Board. Clearly the success of TEC depends on attracting high calibre people to govern it.

The Tertiary Education Strategy

The new direction and policy framework for the tertiary education sector will be based on the development of a Tertiary Education Strategy. This is where the ‘put up’ part comes in. We haven’t had a tertiary education strategy as such in this country for a very long time. And to the extent that we have, it has been implicit in a competitive model that assumed we would get quality outcomes from a demand driven system in which the demand driver was an is student preferences.

That is going to change. We are going to have a tertiary education strategy that will be quite explicitly informed by national economic and social development goals.

We are going to have a tertiary education strategy that reconnects the tertiary education system.

One of the key change propositions that will feature in the draft Tertiary Education Strategy will be the need to build Stronger linkages with business and other external stakeholders. We must ensure that the tertiary system is responsive to the skill and research needs of the economy and society. Tertiary providers, other research providers, businesses, social services and health care providers, other external stakeholders and Mäori and Pacific communities will need to continue to build strong relationships and networks. Increasingly, this will need to include the development of shared strategies, the joint identification of future research and skill needs and the recognition of shared learning pathways. The movement of skilled people between the tertiary system, the science sector and business should become a common feature.

This is where you come in – this strategy cannot be a strategy of and for providers. It must be a strategy that is quite explicitly informed by the needs of end users – students in an immediate sense to a degree, but in a more developmental sense, the needs of stakeholders within the real economy.

I will release a draft version of the Tertiary Education Strategy before Christmas. The consultation phase around the Strategy runs until the end of February 2002. A final version of the Strategy will be approved in early April 2002. The Strategy will go on to become the keystone of the tertiary system.

So my message to you is, ‘engage with this process of developing a tertiary education strategy’, and encourage the sector and peak organisations of business and commerce to do likewise. This is an opportunity the likes of which we have not seen for some time.

As I said, I don’t want you to shut up – I do want you to put up, and it is, to paraphrase a well-known retailer, the ‘putting up that counts’.

Let me now turn to export education in particular.

Export Education – the background

We know that there are significant structural changes occurring in the global economy, with service and knowledge-based industries increasingly dominant. Two thirds of all business activity in the OECD is now in these sectors.

Education is a key component in this trend because it fuels the growth of other knowledge-based industries (through the creation of a skilled, innovative workforce and the dissemination of new knowledge), and education itself has become a major domestic and export industry.

As an export activity for New Zealand it also has benefits of being less affected than physical products by distance from markets, and it is a non-extractive, non-raw materials-dependent industry. Export education needs only people, knowledge and skills.

Export education is rapidly changing within the international context and New Zealand cannot afford to be left behind.

New Zealand Education Exports

We have seen a remarkable growth from a base of a few thousand students per year in early 1990s to the situation this year, where 40-50,000 international students have spent part or all of year in NZ institutions engaged in export education.

In parts of the sector we have seen growth of up to 50% this year, on the back of overall growth across the whole of the export education sector of approximately 30% in 1999/2000.

The onshore education of international students in NZ now contributes around $800 million pa to GDP through expenditure on fees, accommodation and other goods and services.

And the sale of educational products and consultancy services is also increasingly important, as a number of those present in the audience today will confirm,

Export education is likely to contribute $1 billion to GDP within the next two years, and conservatively could double or treble in the next 10 years.

The benefits are many and include:

 a significant financial contribution to institutions and communities
 the creation of teaching and support jobs, with flow-on employment effects in other areas
 opportunities for enrichment and diversification of programmes
 the creation of relationships of lasting value for individual New Zealanders and the country as a whole

In very many ways export education is a success story, but there are some risks to balance the immense opportunities.

In particular, providers, and indeed the New Zealand community as a whole need to ensure that the quality of care and personal safety and security of international students is of the highest standard.

We need to ensure that the quality of the education provided to international students is, in terms of relevance and outcomes, of the highest standard.

And there are also commercial and reputational risks associated with a very fast growing market - financial risks stemming from rapid growth; under-investment; weak business planning skills; and possible overexposure in just one or two markets. The reputational risks are those stemming from poor delivery, with flow on effects for both our trade and our international relations.

Government Strategy

The Government is involved in export education because we want to foster economic growth and ensure risks managed, and we want to foster knowledge-based industries.

The Government has a direct interest as the ‘owner’ and/or funder of the majority of the institutions involved and we want to ensure synergy with both our broader education interests and goals and with our strategic positioning goals for NZ.

The Labour Alliance Government has contributed $3.8 million (GST incl) to national brand and marketing strategy development over four years.

And following the scoping of development issues, the Government has contributed $1.3 million (GST incl) in the current financial year for initiatives to address quality improvement, professional development, research, and information dissemination needs.


The export education industry has many players, for most of whom export is marginal to their main activity. Although there are signs of change, there is still a need for greater co-ordination and collective action in the industry.

It must be emphasised that the industry needs to make a greater financial contribution to the activities necessary to ensure sound growth. The Government has contributed – and it is now time for the industry to come to the party.

We need to ensure that there are opportunities for participation by providers and for efficient capacity utilisation throughout the sector, and in so doing ensure that export education does not inadvertently help to widen the gaps between institutions and communities.

And we need to diversify our markets – for educational and cultural, as well as business reasons.

While we need to aim high, we must also be realistic about our capacity and capabilities. Although onshore numbers are, in nominal terms, modest relative to competitor countries, in tertiary education we have a higher proportion of international students than the US – the biggest export education player in the world. In essence, as a small country and a small player in the field, we need to aim for a niche at the quality end of the market.

While recognising the costs and risks, we need to focus on growing our offshore education activity – i.e. offering our education programmes to students in their own – or third – countries. Offshore education is an area of rapid growth among our competitors (Australia has almost as many offshore international students as we have onshore). Greater collaboration and pooling of resources and skills among New Zealand providers could assist our growth in this area, and this clearly links back to my earlier comments about the need for greater strategic alignment between our tertiary education, and our national economic and social development goals, and the need to engender much higher levels of co-operation and collaboration within the sector.


There are immense challenges and opportunities posed by the reform of our tertiary education and training system. My invitation to you, as leading exporters, is to engage with the Government as we re-connect the tertiary education and training system – reconnect it to a strategy for economic and social development, reconnect it with the labour market, and reconnect it with key stakeholders in the real economy.

And in all of this, we need to hear your voice. We don’t want you to shut up, but as I have already suggested, it will be the ‘putting up’ that counts.


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