Paul Brislen: End unhealthy reliance on dairy giant

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We should follow Estonia's lead and build a future based on information and communications technology.

Fonterra controls one third of the world's dairy trade. Photo / Christine Cornege
Fonterra controls one third of the world's dairy trade. Photo / Christine Cornege

The New Zealand economy is in damage control mode at the moment. Let me paint the picture. New Zealand is a trading nation - we earn US$37.9 billion a year from our exporters.

Dairy exports have risen from 5.9 per cent of all exports in 1995 to 13 per cent in 2010. In that same period, the number of dairy cows in New Zealand doubled.

One company - a collective although really a multi-nation corporation - accounts for most of that export revenue. Fonterra, which grew out of a merger of the New Zealand Dairy Group and Kiwi Co-operative Dairies in 2001, now controls one third of the world's dairy trade, exporting 95 per cent of its output.

We are, as an economy, totally reliant on one company for wellbeing. This is the heart of the matter. Forget the grubby pipe and the botulism.

Put aside, for now, the PR debacle of sitting on the news for months and then holding a press conference with no information.

That we are utterly reliant on one source for our income is the real catastrophe here.

In the same period - 1995-2010 - the internet revolution came and swept all before it, yet exports related to information and communications technology (ICT) are worth a fraction of dairying. How did we miss this opportunity?

This is the real issue revealed by the dirty pipe. It is not that there is an issue with process in one factory in the Waikato, but that we are utterly exposed to an issue with process in one factory in the Waikato, and that we are utterly exposed to one industry for our place in the world.

Don't get me wrong - I think Fonterra has done a tremendous job in its market. Generally speaking, Fonterra has cornered the market and done so with a style I normally applaud, but to have the national economy as dependent on one company to the degree we see today is bordering on criminally negligent.

We need to diversify. We need a concerted government-level drive to build up our other export earners.

Traditionally, New Zealand has made its money from the land and the sea. We have harvested trees, whales, gold, coal and seals. With the advent of freezer ships we moved into sheep and beef and, yes, dairy goods.

We cannot simply remain reliant on the good weather and the remoteness of our islands in order to survive. We have to do more. Arguably we've missed the internet revolution, but I'm convinced it's not too late.

Forget low-value manufacturing - we simply can't compete with China or India. Forget mining - we love our clean, green (well, green at any rate) environment too much to dig up the national parks looking for oil and uranium. If there's any one answer to this issue, it is ICT.

We need look no further than Estonia to see how a small country can radically change its economic direction with tremendous results.

Since 2001, Estonia has moved from being a Communist buffer state to one of the more successful European countries and there's no reason why New Zealand cannot do the same.

We need to encourage our students to go into ICT fields of study instead of accounting and management.

We need to build an export market that grows much faster than the 11 per cent year on year we see today.

We need to encourage investment and more entrepreneurship in ICT areas and not be too afraid of spending money on businesses that ultimately don't succeed.

We need to change the tax laws to encourage ICT developers to do more.

We need to spend more on research and development (currently we are spending less than the OECD average).

We need to invest more in our ICT infrastructure - from our national deployments of fibre infrastructure to our international needs with submarine cables, but also our electricity sector to power all these devices.

We need to do these things because the alternative is that our global economic output is entirely in the hands of a pipe cleaner in the Waikato earning, I'm going to say, minimum wage. I'd like it to be a touch more secure than that.

Paul Brislen is chief executive of the Telecommunications Users Association of New Zealand.

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- NZ Herald

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