Tim Gibson: For growth in the economy, it's time to plant the foot

Opinion

The case against Government grants to business in last Friday's Herald editorial was based on the belief that business investment decisions are best left to the invisible hand of the market.

No successful economy in the world has blind faith in the market.

In these economies grants are relatively uncontentious, perhaps because they have had time to fully bear fruit, while in New Zealand they are relatively new.

Clearly, we ignore market signals to our peril, but the problem for New Zealand exporters, far removed from international markets in terms of distance, size and history, is receiving those signals in the first place - they don't have perfect information.

This is why our economic growth has fallen behind in the past 30 to 40 years. As other OECD nations picked up on increased consumer-driven demand for value-added products and services, we remained stuck in the commodity mode that had been historically so successful.

I'm heartened that the editorial allows that the odd project might deserve Government assistance.

My argument is that we are dealing with a broader issue that requires much more than the odd grant.

New Zealand's size and relative isolation impose a set of challenges on our exporters that is unusual in the world.

These include the size of the leap they face from the small domestic market to international ones, limited knowledge of potential markets, the high fixed costs of exporting and the lack of awareness among international buyers of what our businesses have to offer.

The level of uncertainty involved in these issues is often too high for private sector investors, but we need to lift our export performance if were are to improve our standard of living.

This situation means businesses are at times taking too long to develop international critical mass and recognition. If we are to achieve the Government's target of returning to the top half of the OECD in terms of income for each person, we need to put our foot down on the accelerator.

The challenge we face is to help businesses to get better information to reduce the uncertainty and risk associated with exporting and increase the likelihood of private-sector investment in exporting projects. At the same time we need to be able to prove that we are making best use of taxpayers' money.

The Office of the Auditor General and the Herald have rightly picked up that we need to do better regarding accountability. The Audit Office report confirmed what we knew, which was that our administration of grants historically was not up to standard, but under New Zealand Trade and Enterprise there has been a significant improvement.

Since our inception in mid-2003, we have had to balance a number of priorities including improving processes, managing business as usual and being responsive and proactive in helping businesses.

It also needs to be remembered the Audit Office simply looked at how grants are administered, not their effectiveness or our effectiveness. Grants mean we can speed up export growth by helping to inject into a business greater information through mentoring, market research and encouraging collaboration.

Speed is of the essence from our perspective. If a business starts a project sooner than planned, then we consider that our support is likely to be a good use of taxpayers' money.

There are indications that our push to help exporters to become focused on value-added products and global connections is paying off with exports becoming less sensitive to the exchange rate. Our challenge is to continue to build significantly on that success.

* Tim Gibson is chief executive of the Government agency, New Zealand Trade and Enterprise.