Dialogue: Smart people, smart nation

It's time we invested in highly motivated people, says ANDREW HARMOS*.

For as long as I can remember, Alastair Cooke's Letter from America has provided thought-provoking and topical commentaries on America's economic, political and social life.

I wonder how he would describe New Zealand to an American audience, especially our recent history and achievements.

In today's terms, he might observe that we are not recognised globally for all that much, but note that our people are pretty comfortable with their lot.

Do we know the world is changing? Nations are competing for economic prosperity by grabbing the ideas, knowledge, people and resources needed to deliver that prosperity.

Our friendly social historian might challenge any perception that size or geographic remoteness should limit our potential. Our land mass is slightly larger than Britain, four times the size of Ireland, 10 times the size of Israel and 400 times the size of Singapore. Britain has about 15 times our population for roughly the same amount of space. Ireland is about one-quarter our size but has about the same population, Israel has about 50 per cent more people and Singapore has much the same as us.

Our population growth rate is low and our per capita gross domestic product is the lowest, by a significant margin, of all those countries. Cooke might say that by international standards we are somewhat under-populated. He might also observe that, unlike those other countries, we haven't changed much over the past 10 years.

Our under-performance according to these statistics makes us less relevant than we have ever been. Cooke might quickly home in on two big issues - our lack, over time, of a sensible immigration policy and our need to create something he might simply call "the right environment."

Look at the US and its period of "selfish unselfishness" - the first half of the 20th century. Something like 20 million immigrants, desperate to escape their home countries, entered the US to make a fresh start. This significant investment in highly motivated people, and its momentum over time, has contributed hugely to the country's prosperity and cultural diversity and the enduring benefits have been undeniable.

Cooke might also draw attention to Australia - a nation that has benefited from seeding an under-populated country with diverse cultures and highly motivated immigrants.

Today more than 130 of Australia's 200 highest net worth individuals are first-generation immigrants.

For Australia, history may show that Paul Keating's greatest contribution was his commitment to immigration based on skill and contribution, and his active recruitment - not just processing - of immigration applications. As Prime Minister, he personally invited around 100 outstanding contributors to resettle.

In New Zealand, immigration is an emotive issue. Some would strictly control it to preserve opportunities for New Zealanders here and those wanting to return from abroad.

But immigration can also create an environment that encourages those young, expatriate New Zealanders essential to this country's future economic and social prosperity to return home. They are not beating down the doors to come home right now.

We would not risk being overwhelmed by immigrants even if we were committed to a more active immigration policy. What we need is a policy that targets sufficient numbers to make a difference to the nation's growth and prosperity.

That, Cooke might observe, is the second part of the equation: creating an environment of opportunity, sufficiently different from anywhere else, for New Zealand to meet its goals and compete credibly with other nations.

Auckland isn't Sydney, so it shouldn't try to compete on the same terms or for the same things. It's a great place to live and this lifestyle must be preserved through continued investment in infrastructure, but it needs more.

Auckland needs two or three major new reasons to attract opportunities and people - such as an Opera House, a Darling Harbour or an associated Convention Centre. It needs to be part of a well-organised campaign to get noticed and become relevant.

Wouldn't it be great if people wanted to be here for more than just lifestyle or family reasons? What if we offered the vibrancy and opportunities that made the decision to come here much easier for those we value and want to attract?

Why not use our "Kiwi ingenuity" to brand ourselves? Let's pick areas we can develop into international centres of excellence. Which ones will let us create a high-value economy, a national vibrancy and a prosperous society? And how can we render irrelevant the tyranny of distance?

Like Taiwan (semi-conductors), Finland (mobiles) or Singapore (finance and high-tech), we could seize one or more of the high-value, knowledge-based sectors and develop our own world-beating capabilities.

Words like "tech" or "biotech" are too broad and hackneyed, but within these are niches of enormous potential, like photonics and bioinformatics. Here the world's knowledge is in its infancy and there is a huge opportunity to establish research, development and education-based partnerships between the private sector, Government and universities.

Let's get the world's best teachers and researchers in those fields here, with the right compensation, facilities and opportunities for research and development. Students, corporations and employers would follow.

We must recognise just how serious the competition is for the best people and opportunities. Queensland representatives routinely try to lure away our businesses - even those with no natural connection with Australia. Like it or not, New Zealand will have to out-compete the others to get going.

We might have to provide concessions to attract our first few wins, but the momentum will build. Ireland has done it, and Israel, Finland and Taiwan. There's no reason why we couldn't do it as well, but it's urgent. Most other nations know that to succeed in the modern business world they need the critical mass of a motivated population in a stimulating and vibrant environment that encourages success and prosperity.

Australia knows this. Having dropped its corporate tax rate to 30 per cent (3 per cent below ours) to lock in its other advantages, the Howard Government recently announced an $A2.9 billion ($3.5 billion) commitment for a "smarter nation."

The aim of this strategy is to ensure that Australia's research base - the backbone of any nation's innovative capacity - remains strong and internationally competitive; to retain and attract talent; and to turn Australian ideas into incomes and jobs by harnessing the skills of those in business, universities and politics.

The beauty of this is that an innovation package doesn't have to be financed by tax increases. The American experience shows that, with a growing population and a viable domestic economy, tax decreases will encourage strong economic activity and reinvestment. Paradoxically, they should result in no less a tax take. That, Cooke might suggest, is a pretty astute election manifesto.

So wake up New Zealand. Ask our leaders to focus on these pressing and real issues and opportunities, rather than the minutiae which so often dominates our attention.

* Andrew Harmos is a senior partner in Russell McVeagh's corporate practice group.