Dialogue: High-tech the way for us to stay in the First World

By JOHN BLACKHAM*

Deutsche Bank's economic forecast for New Zealand projects that the only way for the country to reverse its increasing level of debt is to earn more. This, it concludes, is unlikely given that we are a commodity-dependent economy.

The alternative is to spend less and suffer a further fall in living standards - reductions in healthcare and other social services - and to continue our progress towards becoming a Third World country.

The only way to alter this picture is to lift the real value of our exports dramatically. It is insane to take comfort from an imaginary lift in agricultural export revenues caused by a devaluing dollar that puts us all in the international poorhouse.

To retain our best and brightest, we must be able to give them both the challenges and rewards that they can find in other countries.

Until we reverse our financial fortunes we will increasingly be seen as a source of cheap labour and, consequently, attract the low-paid jobs that other First World countries don't want.

When I arrived in New Zealand 25 years ago, one English pound cost $1.50. It now costs more than double that amount.

We, the New Zealand taxpayers, have just paid for a former Israeli Chief Scientist, Yigal Erlich, to come here to tell us how his programme dramatically improved Israel's fortunes.

Why don't we listen to him? His words were simple - invest in areas that provide a very high return, earn a lot of export revenue. Then we can own our own country instead of selling it piece by piece.

Yes, of course use technology to improve returns from agriculture. But those returns will at best be measured only in tens of percentage points.

Stimulating our latent high-technology sector, as happened in Israel, will provide the hundreds of percentage points increase in wealth that Israelis (and others) are enjoying.

That high-tech is valuable today does not put down our world-leading agricultural sector. It is just a fact of the life of global demand.

So how do we do it?

It's easy.

We copy the mechanisms that have been used elsewhere and which have been proved to work in New Zealand on a very limited scale in the form of Technology New Zealand.

These are:

Distribute grant money but at a much higher level than today. Israel invested $750 million for a population of five million, so for us let's be conservative at $300 million.

Grants are repayable with interest, so it doesn't end up costing all that much. Give money only where the outcome is to be exported.

Focus on the high-tech area - biotechnology, telecommunications, software and electronics - where the returns are highest and, as in Israel, the value can be realised through a public share offering on a liquid market such as Nasdaq. Israel has more than 100 companies listed on Nasdaq.

Establish a venture capital seed fund that focuses on boosting our nascent venture capital industry.

In Israel, $100 million was used to establish 10 new venture capital funds that have today, just six years later, created 50 funds in total - so many, in fact, that they now invest overseas.

The importance of this is that it reverses the demand from one of start-up companies looking for cash to one of venture funds looking for start-up companies and stimulating their establishment.

This bread-on-the-water strategy attracts people to venture into the entrepreneurial, high-technology arena. While some of the money will be lost, overall it creates the demand and stimulates the growth of new export-focused businesses.

In Israel, from a start just six years ago, this policy has in the first 10 months of this year alone created new economic value of $35 billion. That would pay off almost half of New Zealand's total foreign debt and transform our nation.

So why don't we do this? What is stopping us? Just one thing - the lack of a national sense of purpose, the ability of the nation to play as one team. We are all on the same side, so let's pull together.

We need, however, to recognise that the international game has changed. We now need to field a high-tech team to bring back the honours. Let's encourage them as we have encouraged our agricultural team in the past.

Let's play the high-tech game, as Iceland, Ireland and Israel are doing, and let's beat them. We can do it. We have our own brand of Kiwi innovation and ingenuity on our side.

Giving everyone in New Zealand the highest standard of living in the world is possible. Given New Zealand's ability, it is even easy. All we need to do is give it a go.

Do this and our children will flock back. Running a global business from New Zealand in the Knowledge Age will not only be possible, it will be highly desirable.

As one homecoming New Zealander said the other day, he had returned for "lifestyle, lifestyle, lifestyle."

* John Blackham is the founder of the New Zealand Intellectual Capital Foundation.