Dialogue: Time to throw off cargo cult mentality

GILBERT ULLRICH* says that post-war Japan provides an example of how New Zealand can go about boosting exports.

There are a number of smaller firms that could conceivably be exporters in this country. Equally, there are also a large number of medium-sized organisations that could also be successful in the export arena. So why aren't they?

The answer is that export marketing is different and involves smaller firms in considerable expense that many of them can ill-afford at the outset.

Business conditions are not buoyant and many local businesses are struggling in our own small market, which is certainly not growing. Given larger markets, many of these firms could possibly flourish, but how will they make that transition to the world market when the local market is technically in recession?

We have sat here in this country saying that successive governments have tried to create a business-friendly environment. So why aren't the businesses capitalising on this to take their products to the world?

There are some grant systems in place that rely on independent business analysts' reports on the products or services. But by the time the small businesses have paid for the analysts' reports, any benefit from the grant has been used up. Small businesses are frankly cynical about these. In any case, grants themselves are not the answer.

The answer may be a combination of business and the Government producing a more specialised organisation that is seriously devoted to producing markets overseas for our products.

TradeNZ does its best, given that it is seriously underfunded, but possibly because of that it is in danger of becoming a bureaucracy. If you cannot do the work because you haven't the resources, your job becomes one of simply being apologetic to most of the people who ask you for help.

It is axiomatic, in any case, that Government departments which do not have performance criteria tend to become bureaucracies. Wouldn't it be better if there were a system whereby the businesses helped by such an organisation paid a percentage of their initial export receipts back to the body that created those sales.

We don't have a research and development tax break as other countries do, so the development of the product has to be financed by the company. It is unreasonable to ask for money upfront without results from the export specialist firm, which for the sake of a name we will call NZ Inc.

There is a precedent for such a body and it was put together in Japan to sell Japanese products after the Second World War. It actively sought out products to sell overseas, then took these products to foreign markets, with the pricing allowing for the marketing body itself to share in the successes.

Who could put together a NZ Inc. If it were a combine of large businesses, it might work but the Government might be seen as a more independent group to do such a job. There are issues here involving commercially sensitive information.

If it were done properly, it could conceivably eventually become a profitable body in its own right. As the markets became more established, it is possible that the firms doing the manufacturing might want to do the marketing themselves.

Firms such as Fisher and Paykel and Tait Electronics know the benefits of running their own export marketing services, but they must have started somewhere and they can do it only from the basis of a strong and burgeoning local market in the first place. Even companies such as these could benefit from representation in markets that are aside from their main focus.

The main criticism of the Government from business is that much of what it is doing seems to be ideologically based rather than the result of innovative thinking. The tendency seems to be to think in terms of handouts rather than incentives - a Government "in your face" rather than behind you offering encouragement imposing tax systems that are punitive to enterprise rather than fair and tolerant to new business.

To be fair, that tax criticism was also applicable to the previous Government but this one has not apparently considered change.

My focus is export. I have not really deviated from that over the past two years. Foreign investment is desirable but if we believe that foreign capital is going to save us, we are entering into a cargo cult mentality that is as short-sighted as it is dangerous.

We have the initiative and the genius here to be successful overseas. We do not need handouts. We need innovation from the Government to ensure that the products we can produce are given the maximum opportunity to reach markets that can use them.

Success breeds more success. If our non-export-oriented local companies can make money out of foreign markets, they will produce more and better products. Successful local businesses will also produce more injections of foreign capital.

We need export guarantee systems that are handled properly, so that individually successful companies are not sent to the wall through lack of experience with foreign exchange deals. Australia manages to do it; why can't we?

My case is so basic that it hardly bears repeating. A wealthy country can afford the social systems we all take for granted. Wealth-creation has to be the first priority of any government. But we can create wealth only by trading successfully on the world's markets.

* Gilbert Ullrich, managing director of Ullrich Aluminium, will take his ideas to the Prime Minister's economic forum next week.

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