The real road ahead

In despair about the diving dollar? Well, it ain't going to get any better until New Zealand's business and political leaders make a concerted effort to get this country on the path to being an information- rather than commodity-based economy. That's the view of economist Dr Howard Frederick, a businessman and academic who recently took up the Chair of Communications at Victoria University.

In despair about the diving dollar? Well, it ain't going to get any better until New Zealand's business and political leaders make a concerted effort to get this country on the path to being an information- rather than commodity-based economy.

That's the view of economist Dr Howard Frederick, a businessman and academic who recently took up the Chair of Communications at Victoria University.

"The OECD countries that are performing the worst at the moment are those that rely mainly on commodities — Norway, Canada and New Zealand. Commodity-driven companies have brought the whole economy down. A good example is butter sales to Russia. We have to reduce our dependence on a non-sustainable resource-based economy built around things like forestry, fishing and agriculture, andincrease the percentage of GNP being generated by a knowledge-based information economy."

Unlike some academics, Frederick is not content to simply sit back and lecture us. Instead, in his role as founding director of the university-owned New Zealand Internet Institute, he will be delivering the message to politicians as well as providing practical help to businesses wanting to take advantage of electronic commerce.

According to Frederick, the government needs to make some urgent changes to economic, education and immigration policies or despite New Zealand's advantages, it stands to fall behind more forward-thinking competitors.

"New Zealand has all the prerequisites to distinguish itself as a knowledge economy except the education sector. There is a real market failure there. There is no ISP willing to service the school market, and teacher training in information technology is inadequate. The education sector is the weakest link in New Zealand's attempt to profile itself as an information society."

The weakest link, but certainly not the only problem.

"The other big market failure is the monopolistic behaviour of a certain large telecommunications provider. You can't have a competitive market where 99.9% of residential customers are with one company. In the telco market, the most conservative approach is light regulation. The analogy is a boxing match — take away the referee and you have extreme sport."

A third problem area is unconsolidated political leadership, says Frederick. "There are some leaders who get it right, but the political parties have no information policy. They are still stuck in freezer ship era policy. In any reasonable country, you would expect to have a national office on the information economy. Here, that is not going to happen, so that's a niche the New Zealand Internet Institute will fit into."

He believes the Ministry of Research, Science and Technology's Foresight project is a worthy initiative, "but to be successful, it has to resonate in parliament. MPs have to support it, critique it and adopt it as part of their political platforms."

Frederick also advocates urgent changes to immigration policy to favour knowledge workers. "Every knowledge worker generates eight jobs in the neighbouring economy. The knowledge industry has a huge multiplying effect, whereas a manufacturing job creates just three other jobs in the economy."

"We also need to work on a savings policy to put more of New Zealanders' own money into high growth, high- tech companies. And we need to change the culture of the finance industry to attract venture capital."

Central to economic growth is helping small and medium-sized companies take advantage of electronic commerce to compete on a global basis with much larger rivals.

"The predicted growth rates in electronic commerce range from 100 to 1000% per year over the next five years, so as a company, you can probably get 5% of new revenues through economic commerce today, and 15% to 20 % in five years time. But you have to capture a niche market, which not all Kiwi products can do. Differentiation in the world market is the main thing. You have to be an en-trepreneur and a gap-filler, using information tools to identify global market niches and then filling them. Capturing markets is largely an information problem, not a distribution problem."

The small size of most New Zealand organisations is no disadvantage, either. "In fact, there is a great advantage to being a small economy or a small company," says Frederick.

"Instead of being like a large, centrally-driven oil tanker, it's better to be like a fleet of small sailboats."

For companies who are sold on the message but unsure where to start, the New Zealand Internet Institute will be profiling itself as a test bed for business.

"We'll provide objective assessment of electronic commerce solutions, set up experimental electronic malls and help with digital signature and secure transaction problems. The institute, and the university, also want to be involved in helping businesses develop their strategic plans.

"I see the institute's role as being a demonstration centre and reference site for business. We want to be an advocate for small and medium businesses, who have the highest growth rate chances for the next century. That includes initiatives like making contact with venture capitalists in California, which is probably more important than the Beehive."

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