The government has released the details of its first change in economic direction in 15 years, with the launch of its initiative designed to move New Zealand into the knowledge-based economy (KBE).
The Bright Future package, also referred to as Five Steps Ahead, was launched simultaneously around the country by Prime Minister Jenny Shipley and a number of senior cabinet members in a video-conference.
Bright Future is designed to lift New Zealand’s economic growth rate from 3%, government’s current estimated rate for the next three years, to around 5%.
The project will spend around $220 million over four years and targets education as well as research and development funding, taxation issues and reducing the level of regulation to encourage small business to prosper.
Broadly speaking there are five main areas of focus.
• Step one: learning to excel
This category covers the education sector and includes additional funding for “top teacher development” in the areas of science, maths, enterprise and technology as well as additional fellowships and study awards.
At tertiary level, up to $1 million will be available for awards and scholarships and an additional $10 million for doctoral level scholarships worth $40,000 a year each.
The cost of student loans will also be addressed, with up to 25% of interest being deferred while the student is still borrowing and up to 50% of repayments will go on the principle once the student is earning.
A task force will consider the best way “government [can] assist with enterprise skill development” and will report by June.
• Step two: generating good ideas
A New Economy Research Fund (NERF) will be set up with a budget of $36 million for “new ideas research” that will target “knowledge-based industries”.
There will be up to 125 fellowships for research and the issue of research and development tax deductibility will be looked at in March. Crown Research Institutes (CRIs) will also look to ways to reduce “barriers of commercialism to research”.
• Step three: funding bright ideas
The Government will help the Stock Exchange set up a separate board for small to medium-sized enterprise (SME) businesses to list on, along with an incubator programme to help business start-ups.
Changes will be made to the Securities Act to help reduce the cost of raising capital investment by relaxing pre-prospectus advertising requirements.
An online directory of capital investment sources will be available from the end of November. Investor conferences will be held to encourage overseas investors into the New Zealand market, targeting biotechnology, health and software industries.
• Step four: freedom to innovate
New laws will be run past panels of “small business people” to determine whether the law will help or hinder them in practice.
All new laws will have to consider whether or not to include a “sunset and review clause” which will terminate the law after a certain period.
A review of all existing legislation will take place to weed out up to 25% of regulations which are no longer needed and a number of initiatives to reduce tax will be introduced in months leading up to the election.
The Law Commission report into the changes needed to bring electronic and paper-based commerce into line will be released in October and will be implemented as soon as possible.
• Step five: encouraging a spirit of success
Government will form a new council, the Innovate New Zealand Council (INZC) to “develop shared views of New Zealand’s future”.
The PM will also give out annual awards of an unspecified nature “recognising excellence across society” but targeted at technology, enterprise, science and innovation.
Expatriate New Zealanders will be wooed back to New Zealand with a Web site and newsletter.
“What’s in our heads will be as valuable as what’s in our paddocks,” declared the initiative’s leader, the Minister of Enterprise and Commerce, Max Bradford, and while most of the audience seemed to agree with the minister’s comments, questions were asked about both the timetable and the amount of capital outlined.
“Overseas, research and development tax breaks are a way of life and they are in place now. Why do we need to research this any further? Why not simply implement it now?” asked one attendee at the Wellington launch site.
Other attendees were less than impressed with the focus purely on maths, science and technical skills rather than on education in general.
“Only nine out of every hundred school children go on to the technical schools,” replied Minister of International Trade Lockwood Smith, who said government isn’t ignoring the other aspects of education, but is keen on focusing on this area in this launch.
A number of speakers were alarmed that government is spending so much on health, social welfare and education without having adequate social research on the effectiveness of that spending or any mention of the social side of this new economy.
Smith would only say that government is looking at other areas beyond the scope of the Bright Future outline.