Tim Gibson: Export message we need to hear

COMMENT

New Zealand last week topped the World Bank's list of the best countries to do business in - offering the best environment for commerce and investment.

In the past few years it has also been declared one of the world's most entrepreneurial nations, the third most free economy and the third least corrupt.

On top of this has come international recognition for our ability to innovate, our low business costs, labour market flexibility, the ease with which businesses can be set up and our ability to embrace technology.

Judging by its performance in international measures of business environments, New Zealand is a good place to own and run a business.

It's certainly the case at the moment as we enjoy one of our most sustained bursts of economic growth.

This has halted our decline in living standards compared with the nations which we like to consider our equals and, at last count, we were 21st in the OECD in terms of gross domestic product per person.

This is still some way off the Government's target of getting us back into the top half of the 30-nation OECD.

And even at the rate we're growing, that target is a long way off, especially when you factor in that the rest of the world is getting into gear and we may be about to slow down.

Many feel that something is still missing from the formula needed to produce economic growth consistently better than the OECD average.

Various suggestions have been made about what that missing factor is.

The point raised by the World Bank report on our attractiveness as an investment destination, and the slew of similar international reports, is that we shouldn't be looking to our business environment as the solution.

Certainly it can be improved, but it is a source of international competitive advantage for New Zealand, not a major barrier to it.

The reasons New Zealand has performed so badly on the economic front for so long are much harder to deal with.

First, we have a bunch of natural disadvantages that few, if any, other countries have to cope with.

We have a small population and we are a long way from the rest of the world.

Second, a high proportion of New Zealand businesses don't aspire to high growth and don't understand what is required to be a successful exporter.

And, in another generalisation, we undervalue entrepreneurs and businesspeople, which may contribute to a lack of ambition on their part.

These issues are important, as our attitudes will help determine how we overcome our natural disadvantages.

For a country that depends on exporting, we are alarmingly bad at it, compared with the rest of the developed world.

Between 1960 and 1997, the real value of our exports increased 400 per cent; the rest of the OECD averaged 800 per cent.

While the rest of the OECD moved into more lucrative value-added exports, ours remained skewed towards low-priced commodities.

We got left behind by products based on ideas. Now we are trying to catch up.

Commodity-based exports will make a contribution, but alone they will never deliver the above-average growth we need.

But as a nation we remain attached to commodities, and uncomfortable with businesses based on ideas.

Trade in knowledge-intensive products requires businesses to be in tune with what the consumers of the world want.

Unlike exporting a commodity, the business in New Zealand has to think of the end users, to get into the head of the world consumer.

And this is what too few of our businesses are good at. Managers remain focused on New Zealand-based production and on processes to reduce costs. They get a shock when they take their product to the world to find that it's not wanted, or if it is, they are bad at selling it.

Also, many businesses are not good at plugging into international networks that can open doors to sales, partnerships and investment.

Our insularity and modesty are getting in the way of our economic objectives.

Some New Zealand businesses have been able to use the good business environment at home as a launching pad to export success.

We can look to these businesses to show how it is done and see how we can help others on the way.

The essential ingredients are a desire to grow, understanding global consumer desires, developing international relationships, honing selling and marketing skills and a single-minded pursuit of adding value.