Economic Healing

So just what is the "knowledge economy"?

Let's celebrate our achievements...

Healthy Crown Accounts topped a triple dose of good economic news last week. The Crown Financial Statements to September showed the surplus running at more than twice the budget forecast.

While we don't want to draw too long a bow from the fiscal data as it covers only the first three months of the budget year, the numbers certainly cast doubt on the 'doom and deficit' scenario so avidly promoted by those opposition MPs intent on 'talking down' the economy.

Earlier in the week we saw unemployment falling to a 12-year low and telecommunications giant Ericsson announcing a major New Zealand business venture with local soft ware firm Synergy.

The announcements are particularly encouraging as the Government is putting in place policies aimed at regenerating the economy and creating more jobs.

Likewise we are very keen to promote the sort of high quality greenfields investment that the Ericsson/Synergy venture represents.

For too long overseas investment consisted too often of foreign companies buying up existing New Zealand companies and assets rather than creating new jobs and growth. This meant that our current account deficit ballooned as profits were siphoned off shore.

One economist has described the current realignment of activity as a 'healing of the New Zealand economy". We are starting to experience the long needed lift of all our earning sectors in order to turn around our trade accounts and improve the balance of payments that will eventually feed through into a rising exchange rate and slightly lower interest rates.

So we make no apology for our hands-on practical programme of business assistance as we start now to reap some of the benefits of a more pragmatic approach.

The decision by Ericsson to choose New Zealand ahead of other countries is a vote of confidence in our economy and a tribute to the work of Industry New Zealand and Trade New Zealand.

The sorts of progressive programmes being run under the new Ministry of Economic Development (see next page) complement this Government's commitment to the knowledge economy.

Last week 500 companies attended a government e-commerce summit in Auckland. As part of our strategy to help the transition from the old economy to the new, the Government is committed to:

• leading by example with on-line government activities;
• communicating the significance of e-commerce to the wider public;
• working in partnership with the private sector;
• carrying out appropriate research;
• helping to build the e-commerce capability of business, individuals and the community;
• creating an appropriate regulatory environment with up to date laws, adequate infrastructure;
• making our official response to the telecommunication inquiry by the end of the year;
• introducing an electronic transaction bill;
• introducing computer crime legislation;
• promoting New Zealand's interest internationally;
• undertaking a major e-commerce initiative through Trade New Zealand to help small and medium exporters get hooked into the global economy

The message that has come through loud and clear from the summit is that partnership between business and Government is the key to success in the new economy as no single organisation or sector has all of the necessary skills and experience to make the rapid progress that is necessary.

So just what is the "knowledge economy"?

The Government is committed to transforming New Zealand from a commodities dependent economy to one where knowledge not only adds value but creates value.

I think some New Zealanders are struggling with the label "knowledge economy". Their perception is that New Zealand is more part of the 'old economy' rather than the new 'knowledge based economy' that we keep talking about.

The truth is that New Zealand is very much a part of the knowledge based economy already.

There is a tremendous amount of innovation out there, a very high level of IT uptake. We are world leaders in the levels of IT penetration and productivity across the Asia Pacific region.

New Zealand has the infrastructure in place to produce high-value, knowledge-based products and, as nation, we manage that infrastructure exceedingly well.

New Zealand also leads the way for being the only country in which the levels of IT penetration in small companies exceed that in large corporates.

And yet, there is a feeling among some that being part of the new economy must mean being Silicon Valley or that we must all be web site designers. That is not so. Being part of the new economy simply means that we apply information technology, new ideas, research and development to a broad range of economic activity.

For many New Zealand companies that means that the application of IT will continue to be based upon the continuous improvement and diversification in areas where we are already world leaders with innovative manufacturing and design and exciting developments in the primary sector.

Let's celebrate our achievements...The Ministry of Economic Development and Industry and Regional Development

Creation of the Ministry of Economic Development to allow Government to take a more active role in the New Zealand economy, particularly facilitating regional development and promoting sustainable economic growth. Funding for Economic Development, Industry and Regional Development of almost $332 million over four years in the 2000 budget. Creation of a new organisation - Industry New Zealand - as the vehicle for the co-ordinated delivery of services and programmes. Selection and creation of the board of Industry New Zealand. Launching of the Regional Partnership Programme, to revitalise provincial economies by boosting employment and helping to promote sustainable growth. Funding of $33.7million has been made available across three years through the Regional Partnership Programme. Regional Partnership Programme grants are available: Up to $100,000 for strategy development Up to $100,000 for building capacity Up to $2 million for major regional initiatives. 137 expressions of interest have been received for the Regional Partnerships Programme and regional organisations have requested grants totalling $109 million (from the budget of $33.7 million across three years). Industry NZ is co-ordinating communication between applicants from the same regions to work out the best possible partnerships between central and local government. Creation and launching of the Enterprise Awards Scheme in Industry New Zealand. Creation of criteria for the Enterprise Awards Scheme so that small businesses and entrepreneurs can apply for 50% of the total costs of a project, and the scheme will fund up to $10,000 in any one year. The first round of 22 Enterprise Award winners was announced in September 2000, grants ranged in value from $800 to $10,000. The second round of Enterprise Award recipients will be announced in this month. Creation of the Investment Ready Programme, also part of Industry New Zealand, to improve small businesses and entrepreneurs' chances of raising development finance. Running of 17 Investment Readiness seminars, which were attended by more than 500 business people. The deal broking component of the Investment Ready Programme attracted 65 Pre Appraisal Assessments forms, that were reviewed by the Deal Broking Assessment Panel. 49 businesses have been approved to receive a full day appraisal. Supporting industry - to date 280 clients are being assisted. Establishment of the Tairawhiti Development Taskforce in May 2000, made up of local people, runanga, agencies and government, to bring a "whole of government" approach to the development and initiation of a sustainable development programme on the East Coast. Established Local Reference Groups (LRGs) using local expertise and Secretarial Advisory Teams (SATs) using representatives from appropriate government agencies. The Ministry of Economic Development, Industry New Zealand and Trade New Zealand facilitated the establishment of a superyacht production facility in Whangarei. A local freight forwarding company used the BIZ Training Programme to develop a new strategic direction that included establishing a major new warehouse in Christchurch. The Ministry of Economic Development is working closely with the New Zealand Defence Force and other agencies to develop productive uses for the Hobsonville Air Force Base site , including building super yachts.