The real problem with the New Zealand economy

 The New Zealand economy is in damage control mode at the
moment. Let me give you some stats to paint the picture.

New Zealand is a trading nation – we earn US$37.9bn a year
from our exporters.

Dairy exports have risen from 5.9% of all exports to 13%
between 1995 and 2010. In that same period, the number of dairy cows in New
Zealand doubled

We export most of our goods to Australia (21%) followed by
China (15%) then the US (9%) and Japan (7%).

One company, a collective although really a multination
corporation, accounts for most of that export revenue. Fonterra, which grew out
of a merger of the New Zealand Dairy Group and Kiwi Cooperative Dairies in
2001, has lead that charge and now controls one third of the world’s dairy
trade, exporting 95% of its output.

We are, as an economy, totally reliant on one company for

This, then, is the heart of the matter. Forget the grubby
pipe and the botulism. Put aside the PR debacle of sitting on the
news for months and then holding a press conference with no information.

That we are utterly reliant on one source for our income is
the real catastrophe here.

In the same time period – 1995-2010 – the internet
revolution came and swept all before it, yet ICT related exports are worth a
of dairying. How did we miss this opportunity?

Diversification is the name of the game and we as a nation,
as an economy have, to mix my farming metaphors, put all our eggs in one basket.

This is the real issue revealed by the dirty pipe. Not that
there’s an issue with process in one factory in the Waikato, but that we are utterly
exposed to an issue with process in one factory in the Waikato. That we are
utterly exposed to one industry for our place in the world.

We need to diversify. We need a concerted government-level
drive to build up our other export earners.

Traditionally, New Zealand has made its money off the land
and the sea. We’ve harvested trees, whales, gold, coal and seals. With the
advent of freezer ships we moved into sheep and beef and yes, dairy goods.

We cannot simply remain reliant on the good weather and
remoteness of our islands in order to survive. We have to do more and we have
to do it now. Arguably we’ve missed the internet revolution and all that could
have come from that, but I’m convinced it’s not too late, but we have to act
and we have to act now.

Forget low-value manufacturing – we simply can’t compete
with China or India. Forget mining – we love our clean, green (well, green at
any rate) environment too much to dig up the national parks looking for oil and
uranium. If there’s any one answer to this issue, it’s ICT.

(EDIT: Hattip to David Farrar at Kiwiblog for the above link to The Economist’s piece on Estonia. We should be doing this) 

We need to encourage our students to go into ICT fields of
study instead of accounting and management.

We need to build an export market that grows much faster
than the 11% year on year we see today.

We need to encourage more investment and more
entrepreneurship in ICT areas and not be too afraid of spending money on
businesses that ultimately don’t succeed.

We need to change the tax laws to encourage ICT developers
to do more.

We need to spend more on R&D (currently we are spending
less than the OECD average. That’s no way to get ahead).

We need to invest more in our ICT infrastructure – from our
national deployments of fibre infrastructure to our international needs with
submarine cables, but also our electricity sector to power all these devices.

We need to do these things because the alternative is that
our global economic output is entirely in the hands of a pipe cleaner in the
Waikato earning, I’m going to say, minimum wage. I’d like it to be a touch more
secure than that.

TUANZ calls for a national digital architecture

Telecom is laying off a large percentage of its workforce and as awful as that is for those involved, the company needs to do this to become competitive in the marketplace.

We have the government investing over a billion dollars in the fibre network and a couple of hundred million in rural broadband, matched and exceeded by the industry’s own spend in the area, yet we don’t have any way of articulating just what that will do to the economy of New Zealand as a whole.

We have research which suggests that ICT will overtake tourism in terms of share of the GDP in the near future, yet we’re also told that only 30% of businesses have a website and a large percentage of business owners don’t see the benefits of digitising their companies.

We have some schools making tremendous use of technology in classrooms and other schools where parents lobby to ensure they don’t have to buy iPads for their kids.

We have politicians who still don’t understand the basics of how the internet works and who treat it as some kind of bargaining chip in negotiations with the US over trade access when ICT could become as large and as important to the New Zealand economy as dairying or dead animals.

If New Zealand is to take its place in the global digital economy we need to consider the ICT industry, the investment in infrastructure and in education and how we tie it all together, otherwise we will struggle to keep our heads up. We need to pull in the same direction and that takes coordination, it takes a strategy. It calls for a plan.

In 2008 TUANZ called for a national digital architecture to be formed, providing some kind of cohesion and coordination for the country as a whole and the time has come to revisit the issue. We need a plan to ensure we take advantage of the skills and experience we have, to invest in the areas that will provide a return and will provide growth in the economy. ICT is clearly the rising star, but we have to do more than pay lip service to it.

What would you like to see in such a plan?