Dialogue: Summit needs to provide unity, vision for economy

By ALASDAIR THOMPSON*

The lean, mean and highly competitive economic machine we have turned ourselves into has been looking a bit emaciated lately.

Since 1996, we have shown less confidence in ourselves than in greener- growth prospects overseas. Our younger and skilled people are staying overseas longer than they used to.

Our investment overseas in equities went up $25 billion between 1996 and 2000 to reach $45 billion. At the same time, overseas ownership of our equity assets went up $42 billion to reach $52 billion. The 1998 figures from Australia showed New Zealanders living across the Tasman are younger and earn a third more than Australians and most other ethnic groups. Kiwis are sought-after overseas and paid well.

New Zealanders have lost a lot of confidence in themselves. It's time to get it back.

The sudden slump in investor or business confidence about April this year was probably inevitable. The arrival of the new employment relations law was an extra trigger.

But the confidence fall had more to do with our rapidly growing current account deficit, the rising price of oil and the strengthening United States dollar. In addition to the three-way onslaught, the Government's interventions were seen as unhelpful by business.

The Employers and Manufacturers Association tried to warn the Government about the imminent risks on March 30, before the employment bill was introduced, when "strong" economic growth figures were being celebrated. We said the growth was unsustainable because our debt was growing far faster than the economy. "Call off the party," we said. Last year's growth was based on consumption fed by imports, not on investment in sustainable export and import replacement ventures.

When the Prime Minister announced she would host the business summit on October 24, the association warmly congratulated her. In the same way, we welcomed her hurry-up of the export guarantee scheme and the Government reviews of electricity, telecommunications and monetary policy.

The association made a substantial contribution to ensuring the new employment law could work, in practice as well as in theory, by pointing out the many flaws in the initial bill. We opposed the removal of competition from workplace accident insurance and we have steadfastly reminded the Government that it promised to treat research and development in the same way as other business costs.

On balance, our contributions this year have been positive and, despite not being invited to next Tuesday's summit, the association is keen to help to prepare for New Zealand's renaissance.

Unlike Ireland, we have no European agricultural subsidies to divert into buying high-tech investment start-ups to supply nearby European markets. Unlike Singapore, we have no vast, mandatory superannuation funds to subsidise the picking of high-tech winners. Unlike Finland, we have no Nokia mobile phone wave to ride and unlike Australia we have limited mineral wealth to tap when the coffers run low.

There is no economic model for us to bolt on to the New Zealand experience through which to maintain our high standards of living. This, however, is a good thing.

But the lists of our strengths and opportunities and the worthy advice perpetually on offer by overseas experts amount to very little if we have no confidence to invest our own skills and money in them.

A vision of where, why and how the country's economic development will occur has to be articulated by our political and business leaders. It has to be comprehensive, so we can all sign on to it and it will attract investors only to the extent it is credible and authoritative.

Wish lists saying we must do better, spend more on education, expect the Government to spend more - or less - on this or that activity won't do. More lists of our opportunities and advantages, or ad hoc policy tinkering won't help.

Elements that create cohesion or generate synergies between New Zealand's wide variety of economic experience is where the Government's business summit should look for answers. What New Zealand has more than elsewhere is an enormous range and diversity of environments and experience packed into a small, discrete and accessible location. Our greatest asset is the extent of the possibilities open to us to explore, and within reach "at the back door."

New Zealand is a microcosm of the developed world. Our social and physical environments lend themselves to devising technical solutions for the large, cumbersome and wealthy markets in Europe and the Americas. Our farms, forests, mountains, rivers and seas are where the "problems" of the world can be identified and unique solutions researched and developed. Market trials of new technology can take place here with lower and more easily managed risk.

The industry sector common to all those activities, and clearly the critical pivot for success, is our information and communication capability. Our new economy could develop across a whole range of communications technology, software and multimedia firms using our farms, food processing, manufacturing skill, forests, marine and mountain environments and, above all, education services and lifestyle as their test bed.

Products such as meat, milk, wood and byproduct wastes should be prioritised as secondary to the systems developed for their management, processing and transport.

If we are to capture the full value of our primary products, we must invent or adapt the means for their processing and manufacture into high-value goods. The systems and technology we invent or adapt will be the basis for maintaining our prosperity.

We have developed our own economic model for replication to achieve this. The results are evident in examples such as electric fencing for pasture and stock management, the Hamilton jet boat in response to the South Island's braided rivers, and many types of advanced packaging to increase growers' margins.

We hope a unifying and coherent economic development strategy or vision, which embraces thoughts like these, will emerge from the summit.

All of us want and expect to contribute to our economic recovery. The challenge to the Government and our business leaders is for them to spell out a credible way each of us can put our shoulders to the same wheel. And, yes, expect a hefty profit in return from the investment.

* Alasdair Thompson is chief executive of the Employers and Manufacturers Association (Northern).

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