Reversing NZ's decline in global competitiveness

New Zealand punches above its weight when it comes to education but falls flat in other areas. Photo / Brett Phibbs

This post originally appeared at Sciblogs.co.nz.

The World Economic Forum has just released its latest global competitiveness rankings for 2010-11. New Zealand has fallen from 20th to 23rd place, and is now seven places behind Australia. What puts us behind our competitors, and why are we slipping?

First, not all the news is bad. We are ranked particularly well for the quality of our institutions (3rd), education (5th) and a variety of efficiency measures. In fact, we are ahead of Australia in all these areas. You will be aware of these strengths if you have read my series on Philip McCann's analysis of the New Zealand economy.

However, where we rank poorly is in infrastructure (37th), market size (60th), innovation (25th), technological readiness (25th) and business sophistication (30th). We are behind Australia in each of these areas - well behind in some cases.

What do these indicators have in common? I would say scale - as you would guess if you have been following this blog. Market size obviously depends on scale. So does infrastructure, where costs are often measured by the kilometre: the higher the population density, the lower the cost per person for infrastructure.

What about innovation? There is now a lot of evidence that innovation depends on scale. For example, when adjusted for scale, I found that we perform on par with Australia in patents per capita. Our low population density and high spatial transaction costs for knowledge makes it harder to innovate than our neighbours in Sydney or Melbourne. Scale also appears to correlate with business spending on R&D (for which we are ranked 38th).

Of course, understanding the problem is not the same as fixing it. How might we compensate for our lack of scale?

I believe we need to build multi-institutional, multi-institutional networks in our science and innovation system.

Vote Research, Science and Technology (through the Foundation, FRST, soon to amalgamate with the Ministry) has only dabbled with this approach through consortia and platforms, typically restricting collaborative tools like these to areas that don't have a technological focus. Vote Education has been more brave, however, investing in Centres of Research Excellence (CoREs) that span the country (such as the MacDiarmid Institute).

If we are to arrest our decline in competitiveness, the new Ministry of Science and Innovation will have to address our lack of scale in technological fields.

How might we pick technologies in which to develop scale? At the moment, FRST relies on a competitive process to fund scientists and engineers at the project team level. There is no reason that such processes couldn't be used to pick the areas that could be taken to scale. In fact the Royal Society, and then TEC, used such a process to choose Vote Education's CoREs. I think this was a very successful exercise, revealing some areas of surprising strength such as nanotechnology. Could we exploit such an approach in Vote RS&T?

We should also take a fresh look at the make up of our Crown Research Institutes. At the moment, we only have one medium-sized CRI (Industrial Research Limited, IRL) with a focus on high-tech manufacturing, despite the fact that IRL supports one of the most diverse sectors in the New Zealand economy. Given the importance of manufacturing to the New Zealand economy, shouldn't IRL be one of our largest CRIs?

Finally, the World Economic Forum rates New Zealand very poorly for the availability of scientists and engineers (67th) and government procurement of advanced technology products (73rd). The lack of skilled knowledge workers is not just down to brain drain - we train very few engineers and physical scientists in the first place, as one example. This needs to be addressed, along with our government's reluctance to invest in New Zealand technologies. Could our investments in infrastructure take advantage of home grown technologies?

Dr Shaun Hendy is deputy director of the MacDiarmid Institute for Advanced Materials and Nanotechnology and a researcher at Industrial Research Ltd. View his work and that of 30 other scientists and science writers at Sciblogs, New Zealand's largest science blogging network.