Steps to make our cup runneth over

Trevor Mallard

Trevor Mallard prides himself on his strategic thinking.

"A lot of my jobs have involved developing strategies," he says. "I've mainly been dealing with issues and problems as part of my political career and it's likely that, in a career outside of politics, I would have ended up doing that sort of thing as well."

The appointment of one of its top troubleshooters to the Economic Development portfolio may signal the Government increasingly regards the task of transforming New Zealand into "a high-value, innovative export-led economy" as a tough nut to crack.

Half a decade on from the first Knowledge Wave conference, the economy shows precious few signs of dismounting from the sheep's back or weaning itself off the cow's teat. There is still a long way to go in transforming the economy into the kind of model most commentators agree we need to ensure our future security and prosperity.

So what's Mallard's vision?

"Part of it is business needs to be a bit more strategic than it has been. We do have a lot of quite small businesses. People have been good at their trade or their area of selling or the particular niche they work in, but we haven't necessarily been that good at being strategic and expanding and, especially for those businesses that are successful, retaining them."

Mallard believes "somewhere between 85 and 95 per cent" of the responsibility for securing our economic future rests with businesses themselves and the Government can only act "around the margins".

"The decisions that are made in the boardrooms or by owners are the ones that are really going to make the difference."

However, Government does have key roles to play. Among them is giving businesses forums like the newthinking06 conference this week in Auckland at which they can develop "a common direction".

The Small Business Advisory Group this week gave the Government a slender pass for its efforts to improve the lot of the small and medium-sized enterprises that make up about 85 per cent of the economy.

The group said the Government was talking too much and not getting on with the job.

Was newthinking06 yet another feelgood but, ultimately, lightweight gabfest?

"Having spent time there watching people who are involved in venture capital talking to people who are involved in biotech, and people who are involved in the UK, US and Middle East markets talking to people who are involved in incubators who are thinking about exporting, no I don't think it was," Mallard says.

"One of the things we lack an understanding of in New Zealand is the value of making contacts and using them.

"I've been to some of the talks here and they're valuable but what I think is probably more valuable is the vast number of connections that are able to be made between people who have got ideas and those who can finance them and those that can work through the marketing of those ideas offshore," says Mallard, who finished his week by flying to Los Angeles to attend Monday's Oscars ceremony.

But morale-boosting conferences aside, most businesspeople would agree a far more practical way of helping their businesses grow is the kind of company tax cut that Mallard's predecessor in the Economic Development portfolio, Jim Anderton, proposed.

But Mallard says a straight cut in the business tax rate is "probably the least efficient way of trying to change the shape of business in New Zealand".
Instead, he would prefer to see measures that would help to address New Zealand's comparatively woeful spending on research and development.

"It's important that we do have a taxation system that gives more encouragement to doing the extra research as opposed to taking on another low-income worker."

The last Budget saw a move to increase depreciation rates. "That I think could be seen as a good step, sort of necessary but a long way away from being sufficient."

Meanwhile, as a former Education Minister, Mallard also believes a rosy economic future depends on more investment in education, particularly at each end of the spectrum.

"We've had, at least up until recently, quite a long tail of especially poor and Maori and Pacific Islanders who have pretty serious literacy problems. We've made some progress on that but, as a country, we just can't afford to have that tail if we going to develop positively.

"Right at the other end, we haven't had the people go on to do research degrees at the level that I think is important and, until recently, we haven't been good at attracting overseas researchers here to be part of New Zealand teams."

Work to address that includes the establishment of six centres of research excellence. In addition, international PhD students are now able to work and study here under more favourable conditions for them and their families.

"These sorts of things are long-term investments. Someone might be here for three or four years to do their research but it might be 10 or 15 before it's actually being commercialised."

Mallard believes there is room for more lateral thinking in raising capital in New Zealand. He would like to see if there is a place "for something that's even more risky than the [NZAX] alternative market and with low costs and, obviously, a consequential lower level of prudential supervision".

While non-committal on the recent suggestion that companies raise capital and have shares traded on the internet auction site Trade Me, Mallard says some sectors are not well served by the established capital markets.

"I think it's fair to say that 1987 drove a whole lot of people out of the equity market here." But he thought it "incongruous" that people spend so much on horse racing and Lotto. He'd like to see them taking a punt on high-tech startups instead.

"If we had some better instruments, money could be channelled into some of these higher-risk, higher-return investments."

As Minister of Economic Development, some hands-on experience in commerce has surely got to go a long way but Mallard has never been in business himself.

However, as a long-time MP, he's made it a practice to visit small and medium-sized businesses in his Hutt South electorate. "Out of that I think you do get a sense of how things are going and what the specific issues are."

And his six years as Associate Finance Minister have seen him acting as "a spare set of ears and eyes" for Michael Cullen and meeting business groups, including people involved in bigger businesses and the finance industry. In other words, people who it's safe to say are not generally part of Labour's core constituency.

"While I think it's fair to say there's a perception that National is friendlier to business, there's certainly no reluctance on the part of leading business people to make contact, have discussions and make policy suggestions."

He also points to his family background - his father was a sharebroker. "I went to the sharebroker's office before I went home from the hospital when I was born." When he did go home, it was to rugby and league stronghold Wainuiomata. He moved back there in the early 1990s and must surely be getting some kudos from his neighbours for his efforts in helping secure hosting rights for the 2011 Rugby World Cup.

Mallard was "absolutely elated" on hearing of the win. He estimates the tournament will generate $400 million in extra economic activity. "I know it will make a big difference to the country, in spirit, in sport and economically."

TREVOR MALLARD

* Born June 17, 1954, in Wellington.

* Married to Stephanie, one son, two daughters.

* 1974: BCA Victoria University.

* 1976: Teacher training at Wellington Teachers' College.

* 1984: Certificate in Continuing Education at Waikato University.

Parliamentary career

* 1984-1990: MP for Hamilton West.

* 1993-present: MP for Hutt South.

* Since 1999: Various ministerial portfolios including Education, Energy, State Services.

* Present portfolios: Economic Development, Industry and Regional Development, State-Owned Enterprises, Sport and Recreation and Associate Minister of Finance.

* Interests: Walking, mountain biking, reading thrillers, watching movies.

Key business roles for Government

* Trade agreements:

"There are some things that only Government can do and trade access is one of them. Free trade agreements are going to be important for our future."

* Improving the tax environment:

"We've had a much more pure approach to business tax than most like countries and I'm not convinced that that is the best way. We need to ask ourselves the question around how can we shape a taxation system which encourages business to be more productive."

* Helping businesses to work together:

"Businesses within industries or within sectors often don't work closely together enough and we don't take a New Zealand Incorporated view of what is possible. Government can be useful at bringing groups of people together."

* Aiding the commercialisation of research and innovation:

"In New Zealand, we've been quite backward in that. Much of the research is done within Crown entities and universities. Getting that out has not been good. Government can take some leadership there."

* Improving access to capital:

"We have a pretty immature approach to seed and venture capital in New Zealand as a result of not having a lot of private equity around the place. Government can also take some leadership in developing those markets."