R&D needs shot of political resolve

By Yoke Har Lee

Between the lines


Welcome to New Zealand, where the Government wants to sit in the driver's seat but doesn't want to drive the economy.

Such a hands-off approach to industrial development policy is rare indeed.

Foreign investors visit New Zealand but leave wondering what the pay-off of such a policy could be if our innovative companies end up so starved of support.

S.C. Hong, chairman of Taiwan's largest venture capital company, Hotung Investment Holdings, recently visited New Zealand. He told a weekly financial paper that of the 20 or so companies he visited, only one or two were at the stage where his fund might invest in them.

There could be simple explanations: these companies might not fit Hotung's investment criteria; or they are not good at telling their story because they were unaware of the key factors venture capital providers assess.

Much more likely, the companies were not yet ready for investment. Thanks to the lack of a domestic venture capital industry to nurture start-up companies, they were not of a size to be taken seriously by international venture capitalists.

According to people familiar with Mr Hong's previous trip to New Zealand last year, he offered some advice to the Government on what was needed to nurture venture capital development here. His words fell mostly on deaf ears even though Hotung has invested the equivalent of $600 million elsewhere in the world in venture funds.

Mr Hong went away this time probably feeling sorry for our innovative companies. Despite having good products, they find it hard to win financial backers.

There are two options: to watch them leave - either to seek risk-taking investors abroad or to be sold to foreign owners, thereby relegating New Zealand to a backwoods economy. Or we can start nurturing these companies and hope to retain them when they are ready to manufacture for the world.

New Zealand's high-tech industries offer high potential for job creation and better living standards, but they will remain stunted unless some critical factors are brought to bear.

These include raising the level of private sector investment in research and development; ensuring the education system feeds enough skills to sustain industries; finding better ways to manage these innovative companies; and ensuring New Zealand is attractive for global manufacturers to produce here.

We also need business people of the stature of Sir Angus Tait (Tait Electronics), Jim Watson (Genesis Research), Garth Cooper (Amylin Pharmaceuticals) and Neville Jordan (of the former MAS Technology) who believe in New Zealand's future to pressure the Government to get sensible.

The Government is making noises about changing its stance in a new industrial policy next month. But after nine years in office and so close to an election, this is akin to a death-bed conversion.

However, heavy lobbying for real change over these crucial last few weeks might help give the Government resolve.