By David Hargreaves
Another week, another Government strategy.
It is always difficult to work out how seriously the launching of yet another Crown-led, ‘into-the-future’ style vision document should be taken.
Mr Sceptical here has long-since been of the view that Ministers actually gauge the success of these strategy documents by the number of photo-opportunities they provide for the Minister in question. Minister talking to local government officials. Minister opening new resource centre. Minister hanging upside down from a bungy chord, etc, etc.
But I choose to take anything sponsored by the Minister of Everything Steven Joyce relatively seriously since he is this Government’s No1 go-to guy. Things he pushes tend to happen.
So, what then to make of the new NZ Investment Attraction Strategy, apart from the achingly obvious need for a more snappy title?
- The attraction of high-quality foreign direct investment in areas of competitiveness for New Zealand;
- The attraction of overseas investment in research and development, especially encouraging multinational corporations to locate their R&D activity in New Zealand; and
- Expanding New Zealand’s pool of smart capital by attracting individual investors and entrepreneurs to New Zealand.
More specifically the targets within those aims (in same order as above) are:
- Facilitating investments with a potential direct economic impact of $5 billion over three years;
- Attracting at least 10 new international companies to do research and development work here over the next five years; and
- Increasing the amount of capital investor and entrepreneur migrants bring to NZ from $3.5 billion to $7 billion over three years.
I don’t have much to say about the first target, since it looks pretty nebulous both in terms of how you might go about achieving it and, crucially, how the success of the aim/target might actually be measured. Consider those economic impact reports that are furnished whenever feel-good expenditure such as that on the recent cricket world cup is incurred. These reports always leave the question in my mind as to just how the ascribed benefits can be directly sheeted back to the event in question. Did 30,000 people buying popcorn on this day really pump $12 million into the economy? Wouldn’t have a clue. Such things come back to the perennial “how long is a piece of string” question.
Courting the rich
Okay, leaping in quixotic fashion to the third aim/target, attracting wealthy investors, I have to say I’m extremely dubious of this particular strategy. The theory sounds good. Get Johnny Foreigner-Moneybags to come here and then set up a business, which will thrive and employ multitudes of Kiwis.
I confess, I’m not sure what qualitative work has been done in following up on high net worth individuals (well, we know what Kim Dotcom’s been doing, but he’s just one) and what they do with their money once they are let into the country. But it seems to me that it is a bit of a leap in faith to think that someone who has built up a successful business in another country will then move here and pump large amounts of what they earned previously into a new venture in this country. And be able to succeed.
The other point is, just because someone’s rich, doesn’t mean they are entrepreneurial. A lot of wealth and businesses are inherited. There’s nothing to say that someone who owns a large business offshore is going to be able to successfully start one here, because their business overseas might be going well despite them, not because of them!
It seems more likely to me that the preferred course of action for any of these high worth individuals that might be attracted here would be to pump money into existing assets – and yes, that means particularly property – and to hold these as passive investments, IE not generating a heck of a lot of a value for the economy. Plus, there’s always the question around how much of the money made by such individuals actually stays here, and how much might end up back in the investors’ country of origin.
National shows its colours
Transplanting rich people here is undoubtedly a quintessentially National Party way of doing things, but I would need to see compelling proof that such a strategy wouldn’t just lead to such negatives as even more pressure on Auckland property prices and leaving Kiwis out in the cold.
It is very much a top-down strategy. It implies the kind of flawed, ‘trickle down’ thinking that was espoused (ironically by the Labour Party) in the 1980s. The reality is that the rich are very good at holding on to their money – not at spreading the love. There’s no reason to think that transplanting a load more squillionaires into Parnell would see the wealth shared out.
Surely, if there is a real benefit to be found in using migration, it would be in identifying talent, not money. How about if you were able to bring in a load of early-twenties versions of Trade Me founder Sam Morgan? Yes, people with big ideas. In the modern economy businesses can go from being worth nothing to billions in next-to-no time. Imagine if we could harbour creation of another handful of Trade Me-type successes? How good would that be?
The real trick would be how to identify these people with great ideas. But, look, we can do whatever we want with our immigration policies. Why not have a very pro-active interview and screening process and attempt to identify (preferably young people) who are possessed of real entrepreneurial flair? I think there would be far more merit in such an approach.
NZ, the R&D surrogate
Okay, hopping back to aim/target number two, because this is the one I wanted to finish on, this just seems, frankly, bizarre.
Figures compiled by the OECD suggest that as a nation we are not exactly a star when it comes to spending on research and development. Apparently our levels of Government contribution are pretty good, but we lag in business spending.
I’ve got to say, at first flush this proposed initiative by the Government looks like a rather cute scheme to get our business spending on R&D figures looking better. But where would be the real benefits to the country?
You invite multi-national companies into the country to do R&D here. Okay, there is an employment kick-back and the potential of Kiwis learning new skills. But there’s nothing in the draft proposals that suggest New Zealand would get even a small share of the intellectual property that’s ultimately created. No, it appears this would be sucked out of the country just as soon as the multi-national is good and ready.
It’s like being a surrogate mother. This country goes through the difficult gestation period and then the ‘child’ is handed over for someone else to raise, nourish and grow.
It’s all IP
The new economy is all about intellectual property, surely.
So, Is this new strategy really how we want to sell ourselves as a country? “Here, you come and develop ways of making yourselves very rich in our country and then you can clear off when you’ve finished using us.” Bad plan.
We need to be creating that intellectual property ourselves, for ourselves. And if the Government can’t think of ways in which it can encourage that, it would be better off butting out altogether.
So, that’s this week’s strategy. I give the Government about 1.5 out of 10 for this effort.
As a country we are still looking for a broad strategy that clearly defines an identity and a place in the world for New Zealand moving into the future. We need one. Badly.
Regrettably, the search goes on…