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Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: Failures make us look third world

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The national infrastructure plan will hopefully put an end to Telecom and Transpower's woes but it doesn't go far enough

Next year's Rugby World Cup is one of the top five infrastructure priorities. Photo / Sarah Ivey
Next year's Rugby World Cup is one of the top five infrastructure priorities. Photo / Sarah Ivey

Any overseas investor looking to the Wall Street Journal for news about New Zealand could be forgiven for thinking this country is slipping towards third world status.

The repeated failures of Telecom's XT mobile network and the Transpower outage that resulted in electricity being cut to the country's commercial capital were, to put it kindly, more like what you might expect to occur in South America or parts of Southeast Asia.

Infrastructure failures do occur. But in Telecom's case the excuses tendered by chief executive Paul Reynolds (who either doesn't know what caused the failures or is simply using confusion to obfuscate what critics claim is the failure to scale up the XT network fast enough to meet escalating demand) verge on a Monty Python skit.

The absurdity of Transpower needing to call in police assistance to protect its workers when they went on to an irate farmer's land to fix the electricity transmission company's pylon was also bizarre.

Both these failures exposed the fragility of some of the nation's critical infrastructure: Telecom does not have a back-up network for its XT service which will automatically kick in when failures occur. Neither was Transpower able to divert power to Auckland through an alternative route.

Hopefully, such failures will become a thing of the past as New Zealand adopts a more focused approach to infrastructure planning at Government and private company level.

Prime Minister John Key has identified first-class infrastructure as critical to his goal of ensuring New Zealanders' living standards catch up with those Australians enjoy by 2025.

Key believes a lack of investment over a number of years resulted in infrastructure deficits that have "clogged the arteries of the New Zealand economy".

Yesterday, Infrastructure Minister Bill English released New Zealand's first national infrastructure plan.

As expected, the plan - which contains a snapshot of existing public and private infrastructure developments plus future developments that are expected to be executed over the next 20 years - could be read as a stock-take of already decided projects.

But English makes the point that it is a living document which will be further developed as Governments - at central and local level - prioritise decisions.

The minister has reaffirmed the Government's five key infrastructure priorities are broadband, electricity transmission, regulatory reform, roads of national significance and Rugby World Cup 2011.

The plan also identifies three emerging priorities: reviewing the electricity market, agriculture irrigation and getting better procurement and management of the Government's physical assets. These all deserve to be on the priority list.

But the plan doesn't deal aggressively enough with other issues that deserve to be well up the list, such as how to forge agreement between central and local Government on how they will jointly tackle infrastructure priorities - for instance, Auckland's need to plan for another harbour crossing which is expected to be required in 10 to 20 years.

Associate Infrastructure Minister Steven Joyce expects such decisions will be top of the list when central government gets down to discussing Auckland's future infrastructure needs with the new Auckland Council. But this will not be plain sailing.

Even though the Rugby World Cup is on the Government's infrastructure priority list, Cabinet ministers were not able to effect an accord with Auckland's existing mayors over their plan to plop a "party central" on Queens Wharf. There will inevitably be tensions.

The plan's Treasury authors offer little guidance on the mechanisms that should be used to get central government to agree priorities with a new city that will have considerable economic heft of its own.

The New Zealand Council for Infrastructure Development has identified key priorities for the regional infrastructure plans that it believes should be developed to run alongside the Government's plan.

The NZCID's key priorities for an Auckland regional plan include: Demand management practices - fixing leaky water pipes, home insulation, smart electricity metering, more natural gas, recycling and reducing transport demand through mechanisms such as ride-sharing; implementing region-wide priorities such as the Three Waters final strategic plan, securing electricity transmission capacity into the city, increased generation near the main load, completing the Western ring route, rolling out broadband fibre to the home, electrifying the rail network, placing more development along key transport nodes and introducing a quality transport network.

A CBD development plan which clearly sets out the demarcation between future port development and the Auckland waterfront development; identifying and securing land for necessary water pipes, electricity transmission networks and substations; liquid fuels installations telecoms facilities, airport and seaport linkages, the CBD rail loop; an eastern corridor, Waitemata Harbour crossing, regional conference centres, quarries, corrections facilities, universities and reserves are also priorities.

The NZCID's list indicates there will be considerable overlap between central and regional Government on infrastructure. Where the plan does fall down is on its reliance on the "distributed decision-making power of a competitive market" for the provision of infrastructure - particularly where ports are concerned.

Some members of the Government's infrastructure advisory board wanted the plan to recommend rationalisation of the country's ports to remove excessive duplication and reduce domestic costs for the exporting sector.

The plan does mention that investment in port infrastructure should be based on the expected direct returns from that investment. But most ports still have a significant proportion of local government ownership and, in some cases, shareholders were investing in them for regional development objectives rather than strictly commercial reasons.

English and Joyce have made it clear they want to let the market prevail. But there is growing pressure in Auckland's business circles for the Government to get involved in the debate over Ports of Auckland's future footprint as it expands.

Rail also ought to be on the priority list. It is seen as critical to moving growing quantities of export-directed freight such as milk powder, coal and wood, steel and aggregates to ports. But not all parts of the network will be viable and at this stage KiwiRail does not produce sufficient revenue to forgo its Government subsidies.

Overall the infrastructure plan is a credible first effort. Pity more of it wasn't implemented in the golden days before the Government's finances became squeezed.

- NZ Herald

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