New Zealand’s unexpected journey can teach us much

In my column of November 26th, 2012, I wrote about an inspirational New Zealand entrepreneur, Len Hutchins. He is celebrated both for initiating his country's conservation movement and for his tourism company "Real Journeys". I was recently back in New Zealand for my son's wedding and, in between the celebrations, read with interest the current public discussions there about innovation and entrepreneurship in its economy.

New Zealand has a total population similar to Ireland’s, but has about three times the land mass. Both have well over a quarter of the population living in the capital city. Both have economies grounded in agrifood and tourism.

Ireland has a higher GDP, a far greater density of multinationals operating in its territory, and almost four times the level of foreign direct investment.

While Ireland has strong trade links to the EU and the US, New Zealand is rapidly growing its trade links with China. Agrifood and timber product exports to China are second only to the Australian market. China is its largest source of imports, led by equipment and computers.


Economic growth in GDP was 1.5 per cent in Ireland in the third quarter of 2013, and 1.4 per cent in New Zealand – in part driven by the rebuilding of Christchurch after the 2011 earthquake.

Both countries celebrate the natural beauty of their countryside, and both also have a very strong interest in the sports, arts and culture.

New Zealand has been highly successful in attracting large budget film productions – most recently The Hobbit: An Unexpected Journey. Such productions receive up to a 15 per cent subvention of their production costs from the New Zealand government, and in return have had a very substantial impact on promoting the country for tourism.

Nevertheless one morning over breakfast, I read that there is concern in New Zealand that other countries – including Ireland – are now competing hard for such productions. There is some criticism that the economic development minister Steven Joyce has been slow to respond to the deepest contraction of the screen industry in 20 years.

'Minister for Everything'
Steven Joyce was himself an entrepreneur before becoming a politician and minister. He started his first radio station at 21. He co-founded Radioworks, and over 17 years ultimately built a portfolio of 22 local radio stations and four national networks. He successfully sold his company in 2001, and entered politics. After the 2011 national elections, he became nicknamed the "Minister for Everything" – actually minister for economic development, for science and innovation, and for tertiary education, skills and employment.

In early 2013 under Joyce's initiative, Callaghan Innovation was formed as a government agency. It is named in memory of Sir Paul Callaghan, a New Zealand physicist in magnetic resonance. It is tasked with accelerating the commercialisation of innovation, with a staff of 400. It manages grant aid for business R&D and also has its own R&D facilities. It acts as a national resource to assist indigenous companies to innovate, both by providing access for them to scientific expertise and analysis, and assisting commercialisation of new ideas. Companies can receive grant aid to cover up to 20 per cent of their R&D costs. Last month alone, 31 companies received NZ$140 million in such grants between them.

The national apprenticeship system has also recently been overhauled and simplified. Numerous separate industry training organisations and 4,500 recognised trade qualifications have been rationalised down to just 14 organisations and 1,750 qualifications.

'Ultrafast broadband'
New Zealand is rolling out a nationwide "ultrafast broadband" scheme. However there is some controversy that current broadband prices are being deliberately inflated, so as to augment the agreed government grant for deploying the new optical network.

The government strongly financially supported the New Zealand entry in the extremely high-tech Americas Cup yacht races, held last September in San Francisco Bay under global TV coverage. In the finals, New Zealand had an 8-1 lead over Larry Ellison’s Oracle Team USA but, absolutely incredibly, ultimately lost 8-9.

One measure of the strength of a country’s innovative sector is the number of publicly quoted high-tech companies. Our Irish stock exchange has a noticeable paucity of technology companies. By contrast the New Zealand stock exchange, the NZX, not only has a reasonable number of technology companies, but many of them have had dramatic rises which in turn have dominated the stock market index over the last year.

Xero – which provides accounting software via the cloud – is the poster-child and rose 333 per cent last year to become now the fifth largest company on the exchange. Apparently an Australian hedge fund manager castigated some New Zealand fund managers as being “precious pearls” for wanting to remove Xero from the NZX stock exchange index. Apparently few professional fund managers hold the Xero stock, and have a concern that its dramatic rise is damaging the index.

For me the most interesting commentaries related to the fact that house prices, labour costs and employment are all rising so relatively high in Auckland that government now has active incentives for indigenous companies to promote regional growth away from the capital.

Many countries have carefully watched and learnt from our Celtic Tiger experiences. But, just now and again, it can be interesting to observe and learn from experiences from other economies similar to our own.