Sir Paul Callaghan: Our strength lies in the weird stuff

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Fisher and Paykel Healthcare dominates the world market in respiratory humidifiers and sleep apnoea devices, exporting $500 million a year and employing over 2000 people. Photo / Supplied
Fisher and Paykel Healthcare dominates the world market in respiratory humidifiers and sleep apnoea devices, exporting $500 million a year and employing over 2000 people. Photo / Supplied

The Green Party announced last week a policy of focusing significant government investment in the area of "Clean Technology".

In their document they correctly quote me as saying that New Zealand needs to be a smart country where talent wants to live. As part of that view, I strongly believe that we have to protect and restore our environment.

Surely, then, I should support the Green Party suggestion. On the contrary, I oppose it wholeheartedly. Let me explain why.

In the global marketplace, export success comes from being the best in the world at what you do. We are brilliantly successful at dairying, but sadly we cannot scale up this industry because of the risk of further environmental damage. And so we must export high value products packed with knowledge.

Indeed we do so already and our top 100 technology companies export around $5 billion per annum, half as much as dairy.

To match Australia's per capita GDP we need 10 times as many of these environmentally benign businesses.

So what are we good at? New Zealand is 0.2 per cent of the world's economy. In other words, the world's economy is 500 times bigger than our own. As a result, we tend not to succeed in highly obvious technologies like cell phones, computers, flat screen television sets or energy technologies.

Indeed, the higher the profile of a new wave of industry the less likely it is that New Zealand will be world leaders in it, for the very reason that anything that sounds pretty important to the world will attract the attention of the big technology investors, the General Electrics, the Samsungs.

What we excel in are the niches, the little pieces of the world of technology where the big players can't be bothered, but which, because of the 500 times factor, can be huge for us.

Fisher & Paykel Healthcare dominates the world market in respiratory humidifiers and sleep apnoea devices, As a consequence it exports $500 million per annum and employs over 2000 people.

Our brilliance has been in the "weird stuff" that the big players don't think to exploit.

So here is the risk. Politicians latch on to fashions, and the latest fashion is Clean Technology. Ten years ago it was Biotechnology. There is a huge danger in the application of political bias to the "smart economy".

My view is that to succeed, New Zealand businesses need to be the best in the world at what they do. I do not care what they do, so long as it is legal and not morally objectionable.

There is absolutely no reason why we can expect to be best in the world at Clean Technology. Indeed, our major wind turbine manufacturer has struggled to sell products and NZ energy companies like Meridian buy their wind turbines offshore.

The irony here is that the country with the biggest environmental problems will probably be the world leader in Clean Tech, namely China.

Let me quote from the Green Party document: "Boost government R&D funding through a combination of tax credits and grants costing $1 billion over three years. R&D in clean technology industries would be prioritised, specifically in areas where we enjoy a competitive advantage, such as: sustainable agriculture, organic farm production, fisheries management, forestry management, renewable energy generation, and conservation."

This is exactly the mistake of the past 10 years, prioritising according to some perceived international trend - then Biotechnology, now Clean Tech. And the Green's idea of a Clean Tech line-up is remarkable.

Putting aside the paradox of organic farming, unscientific to the core that it is, the rest is an absurd list.

It is absurd, in particular, because we have proven particularly dreadful at developing advanced knowledge-based industries or leading technologies in any of those areas.

Our dairy industry exports milk powder, rather than developing new products. Our forestry industries send raw logs offshore and despite the past capacity to invest in processing, have shown no inclination to do so.

Our conservation story is hardly an example to the world - we turned two-thirds of our forest into greenhouse gas and destroyed hundreds of species of fauna in the process.

And while we are quite good at geothermal, we have developed no renewable energy technologies that no one wants to buy.

On the contrary, look at where we are actually good. The accompanying list shows our 20 top technology companies ranked in descending order of export value (a total of over $4 billion per annum). Not one is remotely a Clean Tech company, except in as much as they are all environmentally benign.

That latter, in my view, is all that matters - that and being the best in the world at what they do and hence viable and profitable.

So the evidence suggests what we are actually good at is not at all what the Green Party would like us to be good at. What we are good at is a result of brilliant entrepreneurship and business expertise. Such genius does not follow politicians' prescriptions.

I saw the waste of the last 10 years when we biased our science "system" to chase the Biotech fashion. We should not make the same mistake again.

Of course, I am for cleaning up the environment. That's the basis of the "Place where talent wants to live" mission statement. But cleaning up the environment will be a consequence of prosperity improvements.

So long as we remain poor, we are destined to let the possums destroy our forests.

Leading the way
NZ's technology top 20

1. F&P Appliances
2. Datacom
3. F&P Healthcare
4. Tait Electronics
5. Temperzone
6. Gallagher
7. Douglas Pharmaceuticals
8. Rakon
9. Moffat
10. Schneider Electric
11. Methven
12. Allied Telesis
13. Glidepath
14. Dynamic Controls
15. Navman Wireless NZ
16. Weta
17. Skope industries
18. TruTest
19. NextWindow
20. Orion Health

* Sir Paul Callaghan is professor of physics at Victoria University. His Chancellor's lecture on making New Zealand a place where talent wants to live can be seen online: here.

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