'NZ must punch above its investment weight'

By MARK FRYER

Budget moves to attract foreign investment are a step - but only a step - in the right direction, says the author of the Government's report on the issue.

Alan Jackson, managing partner of the Boston Consulting Group in New Zealand, said foreign investment had the potential to play a big part in turning the country's economic performance.

"But if we don't invest in attracting those opportunities, we won't get the rewards," Jackson said.

BCG was contracted by the Government to look at how to attract foreign direct investment (FDI), and its report formed part of the Innovation Strategy package released in February.

The report concluded that when it came to attracting FDI, the biggest problem was New Zealand's lack of size.

"The entire capitalisation of our stock exchange is about equal to Safeway Stores in the US," Jackson said.

"So we have to seek to let people know about us or we're not even on radar screens. The challenge to attract some of these companies to establish nodes of their international networks in New Zealand is extremely competitive."

What BCG recommended was that New Zealand set up a world-class investment agency which by 2006 should have a budget of $50 million and a staff of 150.

What the Budget has announced is that the two existing investment agencies will be merged to form Investment New Zealand, with an initial budget of around $15 million, including a $4 million Strategic Investment Fund.

"If you look at what they're suggesting, obviously it's a step in the right direction," says Jackson.

In particular, he welcomes the fact that the search for FDI will be tightly focused rather than a shotgun approach.

But as for the funding announced: "In the first year it's close-ish. When you go to 2004-2005 they're starting to fall behind."

And as for the $4 million investment fund: "You've got to ask whether that's going to have much impact in many situations."

Jackson noted that, by contrast, last week's Australian Budget boosted funding for Invest Australia by A$11 million ($12.9 million) to A$44 million ($51.8 million).

"The question I would ask is: if we're a fifth or the sixth the size of Australia, is this going to get us a sixth of the result?

"I think the answer is: New Zealand has to punch above its weight if it's going to be heard."

Jackson believes that a bigger investment in attracting FDI is not only necessary but would be money well spent.

"It's like, if you put a quantity surveyor on the site, your investment gets payback," he says. "It's not just money down the drain.

"But you have to make the investment to get the return."

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