Nz Marine Cluster May 12 Ppt

Adam Ireland
Ani Satchcroft
Ben Mayson (NZ)
Malte Janzarik

NEW ZEALAND‘S MARINE CLUSTER
May 8, 2009

Contents

New Zealand

Marine Cluster

NZ… a small, isolated island where sheep outnumber people

Located… nowhere (Fun) Facts…

Population
China

• Human: 4.2m
Auckland
• Sheep: 40.1m
(pop: 1.3m)
Australia
Prosperity
• Think: S. Korea or Israel
• GDP per capita: $29,220
Economic Drivers
Distance (by air) from:
• Dairy, Meat, Forestry, Fishing
• Sydney – 3 hrs Wellington
(capital, pop: 400k)
• Singapore – 10 hrs
National ‘icons’
• Los Angeles – 13 hrs
Christchurch
• London – 23 hrs (pop: 400k)

Moderate historical prosperity growth driven by increases in
workforce participation and employment

Economic Performance: Drivers of Real GDP per capita Participation Rate (%)

70%
68%
66%
Average p.a. growth 64%
Employment Growth (%) 62%
• ‘86-96: 1.0% 1986 1992 1998 2004
4
• ‘97-07: 2.1%
- 2
Real GDP (% chg) 0
-21986 1992 1998 2004 Unemployment Rate (%)
8%
-4
6%
12%
- 4%
10%
Real GDP p/c (% chg) 2%
x 8%
6%
0% 4%
Labour Productivity (% chg)
-2%1986 1992 1998 2004 2%
6
0%
4
1986 1992 1998 2004
2 % 4
0
2
-21986 1992 1998 2004
Population Growth (%)
-4
0
1986 1992 1998 2004
3
-2
2
1
0
1986 1992 1998 2004

Employment gains are positive, however, little progress has been made
on the more important driver of economic progress: labour productivity

Source: OECD; EIU

Labour productivity low by international standards

Low Labour Productivity… …With No Sign NZ Is Closing The Gap

Labour Productivity Labour Productivity
vs. GDP per capita (PPP): 2007 Growth: 1983-2007
(US$’000, PPP)
GDP per capita

60
Period 83-87 88-92 93-97 98-02 03-07
Average 1.2% 1.8% 1.1% 1.8% 1.0%
Norway
50 US

Change in labour productivity (% p.a.)
4.0%
Ireland
Canada
40 Average
Australia 3.0%
(83-07)
UK Germany
Japan France G7
OECD average 2.0%
NZ
30
Australia
($32,664)
Greece
Korea NZ
1.0%
20
Poland 0.0%
Turkey
Mexico
10
-1.0%

0 -2.0%
10 30 50 70 90 1983 1987 1991 1995 1999 2003 2007
$40.30/hour GDP per hour worked
(US$/hour)

NZ is lagging its OECD peers in terms of
prosperity due its low labour productivity

Source: OECD

NZ has a number of unique and valuable endowments…
isolation coupled with a tiny population are the major negatives
New Zealand: National Endowments

x
Favorable… Not so Favorable…

• Huge distance to markets, particularly
• ‘Clean and green’ image
the most attractive (Europe, US)
(perception and reality)
• Tiny population, low density
• Good climate for agriculture
• Unlike Australia, for example, NZ has
• Southern Hemisphere location
few significant natural resource
provides off-season growing
deposits (minerals, oil etc)
opportunities in serving Northern
Hemisphere markets
• High rainfall, and Southern Alps
snowmelt provide good conditions
for inexpensive Hydro-power (70%
of electricity supply)
• Large ocean territory: 7th largest
exclusive economic zone (EEZ) in
the world

Note: Marine specific endowments addressed elsewhere

A mixed macroeconomic report card
Macroeconomic Performance Overview

CPI (% change p.a.) Current Account (% of GDP) x
15% 1983 1987 1991 1995 1999 2003 2007
0%
Low inflation since mid 1980s
10%
-5%
5%
-10%
0%
Persistent current account deficits
1983 1987 1991 1995 1999 2003 2007 -15%

x x
Long-Term Bond Yield (%) Exchange rate (NZD/USD, mthly avg)
25%
2.5
High versus OECD peers
20% Volatile Currency
2.0
15%
10%
1.5
5%
1.0
0%
1983 1988 1993 1998 2003 2008
1987 1991 1995 1999 2003 2007

Imports and Exports (% GDP) FDI (% of GDP) x
40% 8%
Decreasing over time
Exports 6%
Imports
30% 4%
Internationalisation of economy 2%
20% 0%
1983 1987 1991 1995 1999 2003 2007 1983 1987 1991 1995 1999 2003 2007

Source: OECD; EIU

Strong, business-friendly national institutions
Internationally Ranked(1) Institutional Highlights

Stable Politics Universities
Sensible Trade
• Multi-party, • 5 universities in
• Low Tariffs (2.7%)
moderate top 500 (global)
• FTA: China,
Singapore,
Thailand, Chile,
Independent Central
Health Care
Australia, ASEAN
Bank
(coming) • Cost-effective
• Pure Inflation
mandate • Ban on litigation
for personal injury
Non-distortive
Export Support
Efficient Legal
System
• NZTE
Weak Spots(?)
Robust Anti-Trust
Low Corruption • High Taxes, Big Govt
• Com Commission
• Ranked #1 • 30% corporate, 39% top
income bracket
• Govt: 40% of GDP
Labour Policy
• Underdeveloped/shallow capital
• Weak unions, markets
good flexibility
• Prevalence of SOEs
• Restrictions on Foreign Capital
(land, telco, airline)
Free Capital Flows

(1) Heritage Foundation, 2009 Index of Economic Freedom; this is another source in addition to the GCR, which tells a similar story
(highlights can be found in the backup section of the presentation)

High quality human capital, but not enough of it
…Partial Offset
Strong HDI But People Leave… From Immigration

% of College Educated • 87,000 permanent
Population Living O/Seas migrants in 2007
• 10,100 in net migration
(Select Countries, Rank)
• 24% on work
permits
1. US 0.7
2. Japan 1.0 • Government Policy
• Focus on certain
9. Spain 2.5
categories - skilled
16. Australia 3.7 Migrant Policy and
Active Investor
27. Italy 5.7
Migrant category
42. Singapore 8.0
• Source countries:
55. UK 12.2
• UK (26%)
• NZ is 19th in the world in … … • China (12%)
human development • India (9%)
65. NZ 17.0
• Citizens enjoy long • South Africa (8%)
healthy lives, excellent 78. Ireland 26.7
education access, and
high standards of living

Human capital is a strength, although retention seems to be an issue

Source: Human Development Index (UNDP), OECD

Poor prosperity, given relatively strong competitiveness metrics

Overall: GCI vs GDP p/c Macro (MP) vs …
GDP p/c, GDP p/c,
log scale log scale US
US
Ireland

S. Korea
NZ
NZ
Estonia

Low GCI High GCI Low MP High MP

Institutions (SIPI) vs … Micro (MICRO) vs …

GDP p/c, GDP p/c,
US US
log scale log scale

NZ
NZ

Estonia

Low SIPI High SIPI Low MICRO High MICRO

NZ’s prosperity lags peers with comparable GCIs. Is NZ’s
microeconomic environment the reason for this disparity?
GCI Ranking

Note: GCI = (Overall) Global Competitiveness Index; SIPI = Social and Political Infrastructure; MP = Competitiveness of Macroeconomic
Policy; MICRO = Microeconomic competitiveness; Source: Institute for Strategy and Competitiveness

NZ’s national diamond characterised by extremes… some areas
world-class, while others are more… emerging economy

New Zealand: National Diamond

+ Low trade barriers
+ Brand NZ: clean and green
+ Flexible labour policies
+ Low levels of bureaucracy
+ Strong antitrust
+ Strong prim/sec education
+ Good investor protection
+ Easy to start a business

- Lack of rivalry/intensity
- Brain drain
- “Kiwi” lifestyle = leisure-focused
- Low foreign language skills Context for Firm
x x - Job security/safety net valued
- Lack of scientists/engineers
Strategy and - Low foreign ownership and
- Weak R&D/innovation
Rivalry international tech transfer
- Infra gaps (roads, rail, telco)
- Weak capital markets

Factor (Input) Demand
Conditions Conditions

+ Awareness of the need for + National passions have driven key
Related and
cluster development international successes e.g. sport
+ Efforts to push cluster policy Supporting
- Historic trade relationship with UK
to a regional level
Industries
x led to a focus on primary products
- Weak clusters - Demand seldom drives innovation
x - Few specialized input or anticipates trends
suppliers, high reliance on - Govt procurement not advanced
imported inputs

Relatively undiversified economy… dominated by agriculture
NZ, Exports Portfolio By Cluster: 1997-2007

Share Of World
2.5
Exports, 2007 (%)
Processed Food (Dairy)

2.0

1.5

Agri Product (Meat)
Fishing

Marine(1)
Tourism

Forestry
Furniture
0.5

Communications

-0.5 -0.3 -0.1 0.1 0.3 Change in Nation’s Share
Of Exports (%, 1997-2007)

Two of NZ’s key clusters, dairy and tourism, are doing well,
however, majority of other clusters are losing ground

(1) Relative position of the marine cluster estimated based on data we have collected and interviews conducted; the International Cluster Analysis
definition includes commercial shipbuilding, which distorts the true position of NZ’s marine cluster, which focuses on boats for private use.

Four main recommendations to address NZ’s key challenges
Issues Being Addressed
Recommendations More Detail On Actions

1 • Lack of successful clusters • New cluster policy
Institute a
• Lack of strategy at a cluster level • More $$, more focused
New Cluster
• Lack of collaboration • Private sector driven
Programme
• Lack of effective cluster policy • Collaborative, Decentralized

• Low labour productivity • Kiwisaver compulsory
2
Encourage • Lack of capital intensity • Tax reform: property
Investment • Lack of investment (domestic/FDI) • FDI policy reform
• Low savings rates

3 • Barriers to ‘easy’ trade • Privatize all ports
Mitigate • Inefficiencies at NZ’s ports • Streamline customs
Distance • Inability of NZ firms to • Open skies
internationalize • Focused help from NZTE

4 • Weak infrastructure: electricity, • Infrastructure spend
Alleviate
roads, rail, telco • Skilled immigration
Factor
• Human capital gaps • Graduate retention
Bottlenecks
• Tertiary education reform

For a more comprehensive understanding of all the major
issues and recommendations please see the full written report

NZ’s marine cluster generates NZ$1.9B(1) in sales annually…
Major Segments In The Cluster Recent Cluster Performance
CAGR
(03-08)
Superyachts Racing Yachts Total Sales (NZ$m)
Total 7
1,905
• >25m • Sail
Other 15
1,641
1,548
• Sail or • For Racing 5
1,366 Inflatables
Motor competition 2
Refit 10
Trailer Boats (3)
Launches 17
Launches Trailer Boats Superyachts 4

• 8-25m • 3-8m Equipment 6
• Sail or • Motor
Motor 2003 2005 2006 2008
Exports
Imp/Exp (% of Sales)
(%)
Inflatables/RHIBs Equipment
100% Superyachts
• Sails, masts, Most internationally
• Inflatable
Racing
winches, competitive segments
Yachts
• Motor
electronics,
interiors…
Equipment
Refit/Maintenance Other Services
50%
Inflatables
• Repair • Fuel, marinas, Refit
Launches
facilities insurance, Trailer Boats
charters,
Other
retailing… Imports (%)

50%
(1) Segmentation and data as per the New Zealand Marine Industry Association; NZ$1.9B equivalent to US$1.1B
Size: total sales (NZ$m)
at current exchange rate of 0.567US$ per NZ$

75% of marine activity is located in Auckland or nearby regions

NZ Marine Industry Activity Auckland Cluster (examples)

Northland
4%
Gulf Harbour
Bay of Plenty
58% Marina
Auckland 6% (#2 in Auckland)

5%
Waikato
Hobsonville

3%
Taranaki

West Park Marina
4% (#3 in Auckland)
Wellington
Westhaven Marina Wynyard Point
(#1 in Auckland)
Alloy
Yachts
9%
Christchurch

3% Otago

SuperYacht Mfg Evidence of other Marine Activity Marinas

x% % of NZ Marine Industry Activity (2005)(1) Evidence of agglomeration
even within parts of Auckland

(1) Remaining 8% of activity not marked occurs across a variety of smaller regions
Source: New Zealand Marine Industry Survey, 2005; Googlemaps

The cluster competes in a global market that has
recorded solid growth… strongest gains at the top-end

Global Market: Size and Growth Global Market: Key Features

• The global pleasure craft market = • US and Europe are largest end-markets
US$18B (an estimated 90% of end-market
demand), US market more penetrated
and lower growth
• Growth of around 5% per annum on a
value basis between 1997 and 2007
• Market is fragmented, largest player
– Superyachts fastest growing (Brunswick, US) has 14% global share in
boat building

• Volume growth has been steady since
• Bifurcated market: cost / price
1970 with some cyclicality. Real value
increasingly important for lower/mid
growth driven by increasing average boat
segment (increased standardization), but
size
less so for higher end (custom yachts)

Long-term outlook looks good… although current economic
conditions obviously taking a toll (‘09 forecast to be down 50%)

Largest firms located in Italy, France and US
Global Recreational Boat Building Firms –market shares
France
Beneteau 6% Sweden
Rodriguez 3% Hallberg Rassy <1%
Couach <1%
Dufour <1%
Denmark
Danish Yacht <1%
Netherlands
Royal Huisman <1%
Turkey
Feadship <1%
Aegean <1%
Slovenia
Germany
Elan Marine <1%
Bavaria 2%
Hanse 1%
Luerssen <1%
China
US Holland Custom
UK
Brunswick 14% Yachts <1%
Sunseeker 3%
Genmar 5% Taiwan
Princess 2%
Catalina 1% Horizon Yacht <1%
Fairline 2%
Hunter 1%

Croatia
Elan <1% New Zealand
Lagoon <1%
Italy Alloy Yachts <1%
Ferretti 7% Cookson <1%
Australia
Azimt Benetti 6% Fitzroy Yachts <1%
Azzura Yachts <1%
Cantiere 1% Yachting Dev <1%
Seawind <1%
Aicon 1% Jarkan <1%
FIPA <1%
Perini Navi <1%
NZ is very much a niche player on the global stage

Source: ODDO Equity Research, June 2008; MoC team estimates

NZ highly ranked within lucrative superyacht segment

The Global Superyacht Market Superyacht Market Data
CAGR
(03-08)
14
• Superyacht orders have grown each year for last # of Orders By Size
10 years – although for 2009, global order intake 916
76m+ 14
down about 50% 61-76m 16
777
• Largest categories (61m+) have seen the rapid 688 46-61m 9
652
growth (>US$1m per meter to build) 37-46m 16
507
480
• Italy dominates the sector 30-37m 12
• Growing share for Taiwan, Turkey, China 27-30m 26

24-27m 18

2003 2004 2005 2006 2007 2008

New Zealand’s Position
% of Orders By Location(1)

NZ is 10th largest superyacht builder
• New Zealand (1.6%)
11 Other
• #3 in sailing superyachts (estimate: 15% global UK
6
market share) Taiwan
9
Germany
– Particularly strong in racing yachts 10
Netherlands
• NZ focuses almost exclusively on custom-built 12
US
yachts; very little activity in ‘production yachts’
• World-renowned for quality
Italy
46
– NZ’s largest superyacht manufacturer, Alloy
Yachts, has won 19 international awards
since 1991
(1) Of orders made in top 10 manufacturing countries; Note: of the 916 superyachts ordered in 2008, 60 were sailing yachts
Source: Showboats International

The NZ cluster centres on boat building
Upstream Related Clusters
The New Zealand Marine Cluster
Other Services
Tourism
(e.g. Finance)

• Industry Assoc (MIA)
Institutions for Fishing/
• Export Group (NZ Marine) Commercial
Other Equipment collaboration
• Training Org (BITO) Boats

Downstream
Design

Marine Events
Launches
Boat Building & Yachts
Composites
Boating
Consumables &
Racing Yachts
Inflatables Other Services
Electronics

Marinas
Super Yachts
Trailer Boats
Interiors
Refit &
Maintenance
Masts &
• Trade Promotion (NZTE)
Winches
Government • Local Government (ARC) Yacht
Institutions • Universities (Auckland) Management
• Industrial Research Ltd
Sails &
Rigging

Limited Exports Significant Exports

Support provided by public and private
institutions for collaboration
Key Institutions : NZ Marine Cluster

Institutions For Collaboration Government Institutions

• 500+ members; 50% of industry
• Support for NZ Exporters
Marine
• Fees: $400-$1200 per firm NZ Trade & • Global network of offices
Industry
• Data collection on industry Enterprise • Formerly responsible for
Association
• Newsletter on industry
overseeing NZ cluster policy
• Fosters collaboration at sub-
cluster (e.g. CPC standards
• Local government authority
scheme for trailer boats) Auckland
Closely • Regional development strategy
• Provides ‘business’ workshops Regional
linked(1) • Infrastructure/zoning issues
Council Two cluster specific initiatives(2)
•
• Represents Exporters
• 100 members; 85% of exports
• Yacht Research Unit
Runs “Yacht vision”: 1st int
•
• Centre for Advanced Composite
conference for yacht designers Auckland
NZ Marine Materials (CACM)
• Assists at global boat shows,
University
other exporter opportunities (e.g.
Millennium Cup)

• Administers Marine • Government funded R&D entity
Boating Industrial
Apprenticeship scheme (600 • collaboration with Marine firms
Industry Research
currently, ~100 graduates p.a.) (e.g. in composites)
Training Org Ltd
• 75% government funded

(1) BITO is a division of the Marine Industry Association; NZ Marine is a separate organization but shares facilities with the MIA
(2) AucklandPlus, the economic development arm of the ARC is overseeing the Hobsonville marine precinct and the marine sector feasibility study

History of cluster closely aligned with competitive sailing
achievements and major yachting events
Competitive Sailing Milestones

1987 1995 2000
1990, 1993 2003
1984
• NZ launches 1st • Team New • America’s Cup held in • Auckland again hosts
• NZ wins
• NZ wins 2 gold and
Americas Cup bid Zealand win Auckland, Team New
Whitbread Round America’s Cup. Team
1 bronze medal at
when event is hosted America’s Cup Zealand successfully
the World race New Zealand loses to
Los Angeles
in Australia after defend title
(and wins again Alinghi, skippered by a
Olympics – first
Australia’s win in ‘83 in 1993) New Zealander
medals for 20 years

Industry Milestones
1992 1994 1996
1991 2003
1986 2000
1979 2006
1987
• Southern • Alloy Yachts • Inaugural ‘Yacht • MIA (est 1965) • Millennium • 8 out of 10 • Southern
• High Modulus • Alloy
• High
wins New Vision’ run by NZ takes out office Cup launched America’s
Spars
instrumental in
Modulus Spars merge
Yachts
Zealand’s first Marine space and
founded produce in Auckland to Cup
founded as developing with largest
employs 1st
Show Boats
their first showcase New syndicates NZ
composites for
surfboard
professional
International
carbon Zealand Super use
New Zealand’s first
mnfcturer competitor –
officers
Award for
fiber spar Southern
America’s Cup Yachts Marten
Super Yachts Spars rigs
challenge Spars

All parts of the diamond contributing to success…
however, key fragilities also evident
The New Zealand Marine Cluster

+ Many firms (>1,000)
+ Significant differentiation
+ IFCs present
+ Skilled workforce + Govt support for cluster

- Brain drain - Small # of well-known firms
Context for Firm
x - Skills shortages - Highly fragmented, sub-scale
Strategy and
- Infrastructure/zoning issues
x - Lack of ambition/risk-taking
Rivalry - Reluctance to invest
- Lack of business acumen

Factor (Input) Demand
Conditions Conditions

+ Skilled sailors
+ Commercial boats/fishing
+ Competitive sailing success
Related and
+ Tourism
+ Highest boat ownership in world
Supporting + Safety / quality standards
- Weak capital markets Industries
x - Cluster gaps (e.g. engines,
- Tiny local market overall
advanced raw materials)
x - Negligible local mkt at high end
- Loss of global marine events

Endowments
+ High quality harbors - Distance from major European markets
x
+ Friendly climate for boating
+ S. Hemisphere (counter cyclical for refit)

Four main recommendations to help upgrade the cluster
Issues Being Addressed
Recommendations More Detail On Actions

1 • Gains to be made by sharing • Govt support to upgrade demand
existing expertise
Expand on • Broader scope/mandate/ ambition for MIA
Strengths • Success stories that can be • Increase MIA membership
replicated • Focus expansion on high value:freight areas

• Consolidate the industry (fewer, larger firms)
• Extreme fragmentation
2
• ‘Step-change’ in collaboration championed
Consolidate & • Sub-scale manufacturing
by MIA and industry leaders
Collaborate • Lack of business skills
• Address availability of financing
• Lack of investment, duplication
• Actively seek out FDI

• Leading firms encouraged to diversify
3 • Capabilities exist that could have
activities (including offshore investments)
Expand into applications outside of marine
• Govt matching of investments that broaden
New Areas cluster
scope of cluster into ‘related’ industries
• Actively seek out FDI / JVs

• ‘Open minds’ to the possibility of production
• Cluster is relatively narrow in scope
4
manufacturing out of NZ
• Long-run potential of custom niche is
Move Beyond
• Leading firms to leverage custom
capped (small market)
Custom Boats
capabilities into production manufacturing
• Custom capabilities (e.g. brand) can
translate into production market

For a more comprehensive understanding of all the major
issues and recommendations please see the full written report

Main Conclusions

• The New Zealand marine cluster has
overcome geographic distance from key
markets to become world-class within some
niche, high value-add sectors

• These successes need to be leveraged to
build competitiveness across the entire
cluster, and further develop supporting /
supplier industries

However….
• Key macro weaknesses, and major
deficiencies within the national diamond,
are inhibiting the growth of New
Zealand’s marine cluster and the wider
economy – many of these problems are
too large for individual actors… strong
leadership and collaboration will be
necessary if they are to be overcome

Supporting Analysis

26

Extensive consultation with the industry

Interviews Conducted Data Collected

• Seventeen interviews • NZ Macro Data (‘85-’09)
conducted
• Marine Industry Data (‘03-’08)
• To promote free and frank
• Global Data (various)
dialogue we opted to keep the
identity of our interviewees • Other various…
anonymous

27

Backup

Issues we observed: New Zealand

Potential Solutions
Key Challenges Facing New Zealand

• More aggressive, creative efforts to
Geographic isolation
1
Endowment
bridge the gap

• Focus on diversifying economy
Currency (NZ$) volatility
Macro 2

• More vocational training; linked to
3 Lagging labour productivity cluster policies

• Launch a new cluster policy,
4 Underdeveloped private sector; cluster policy correcting for previous failures

• Bolster Kiwisaver scheme
5 Underdeveloped capital markets
• Eliminate tax distortions: property

• Remove tax disincentives
Micro Attracting FDI; promoting outward investment
6
• Lift managerial talent
• Link with cluster policy

• Lift skilled immigration
Brain drain
7
• Leverage skilled diaspora

Weak basic infrastructure
8 • Upgrade roads, rail, telco

Backup

Strengths we observed: Marine cluster
Core Strengths Of The Cluster Opportunities

Open economy, flexible labour policy
1
Macro • Resources focused on genuinely competitive niches,
firms can more easily hire and fire as needed

Competitive sailing expertise and success • Continued support for competitive
2
sailing; leverage this for the cluster
• Brand champions for NZ
• Actively seek out marine events

• Lift competitiveness of sectors that
3 Local demand conditions
serve local demand; step-change in
• Boat ownership supports cluster’s critical mass even if
consolidation or cooperation
product is imported and high-end demand is absent

• Best practice sharing
A few world-class firms
4
• Encourage more foreign leaders in
Micro • Alloy Yachts, Southern Spars and a few other
the industry to relocate to NZ, and
world-class firms (superyachts, equip/components)
local firms to grow international
connections

• Coordinated effort to leverage
5 Pockets of real innovation
these capabilities beyond marine
e.g. wind farms, aerospace

6 • Bolster apprenticeship training
Skilled (and relatively cheap) labour force
schemes (#’s, quality, consistency)

Backup

Issues we observed: Marine cluster
Key Challenges Facing The Cluster Potential Solutions

• Satellite sales offices; web tech
Geographic isolation
1
Endowment • Offshore manufacturing
• Links with tourism

Industry fragmentation • More aggressive collaboration push
2
among smaller firms; expand scope
• Sub-scale manufacturing, capital access, lack of
• Consolidation
business skills, R&D, vulnerability to business cycle

• Supplement custom with production
Limited to custom boats, low volume production
3 manufacturing; e.g. utilize
superyacht capabilities to enter
yachts/launches market
Micro
Skills shortages, skills retention
4 • Step-change in apprenticeship #’s
• Management and commercial skills particularly lacking • ‘A call home’ to NZers overseas

• Dialogue with local banks
Underdeveloped/shallow supporting industries
5
• Seek FDI from foreign clusters
• Capital markets

Infrastructure uncertainties
6 • Develop plan beyond Hobsonville;
strong leadership and clear vision
• Debates about zoning and competing land use have
delayed development in key industry locations

Coordinated response required, led by industry and
strongest firms, supported by government at all levels

Factor conditions not bad… some notable
gaps in human capital, infrastructure and finance Overall
Ranking = 19
Factor (Input) Conditions: NZ’s Position 2009

Competitive Disadvantages
Competitive Advantages
Relative to GDP per Capita
1 66
(Low) Brain drain
(Low) Number of procedures required to start a business
1 50
Availability of scientists and engineers
Protection of minority shareholders’ interests
3 44
Quality of electricity supply
Doing Business , Getting Credit Legal rights index (WB )
4 39
Quality of domestic transport network: business
Internet users per 100 population
6 39
Quality of telephone infrastructure
Ease of starting a new business
7 35
Quality of railroad infrastructure
(Low) Burden of customs procedures
7 33
Quality of roads
Doing Business, Paying Taxes (Low) Payments number (WB)
7 31
Mobile telephone subscribers per 100 population
Soundness of banks
8 27
Financial market sophistication
Tertiary enrollment
13 26
Financing through local equity market
Regulation of securities exchanges
13
Domestic credit to private sector
15
Quality of math and science education
17
(Low) Time required to start a business
18
Quality of air transport infrastructure
18
Personal computers per 100 population
19
Quality of port infrastructure
19
Internet access in schools
19
Ease of access to loans
19
Quality of the educational system
22
Change up/down of more
Venture capital availability
23
(Low) Burden of government regulation than 5/10 ranks since 2001
23
Quality of scientific research institutions 31
Note: Rank versus 74 countries overall. New Zealand ranks 25th in 2008 PPP adjusted GDP per capita and 15th in Global Competitiveness
Source: Institute For Strategy and Competitiveness, Harvard University (2009)

Some big problems when you look at industry…
x
shallow or non-existent clustering a particular issue Overall
Ranking = 40,26
Supporting/Related & Demand Conditions NZ’s Position 2009

Supporting and Related Industry Conditions
Supporting and Related Industry Conditions
65
Local supplier quantity
21
Local supplier quality
56
Extent of cluster policy
Local availability of specialized research and training services 22
51
State of cluster development
44
Local availability of process machinery
42
Extent of collaboration in clusters
28
Availability of latest technologies

Demand Conditions
Demand Conditions
45
7 Government procurement of advanced
Stringency of environmental regulations
20 technology products
Laws relating to ICT
55
20 Government success in ICT promotion
Presence of demanding regulatory standards
27
Buyer sophistication

than 5/10 ranks since 2001

32

Overall, good context for rivalry… things to work on:
competitive intensity, FDI, investment incentives Overall
Ranking = 13
Context for Strategy and Rivalry Conditions NZ’s Position 2009

64
Quality of competition in the ISP sector
1
Strength of investor protection
56
(Low) Impact of taxation on incentives to work and invest
3
Prevalence of trade barriers
53
Business impact of rules on FDI
5
Strength of auditing and reporting standards
50
Intensity of local competition
6
(Low) Distortive effect of taxes and subsidies on competition
43
FDI and technology transfer
7
(Low) Rigidity of employment
34
(Low) Extent of market dominance (by business groups)
7
Regulatory quality
34
(Low) Tariff rate
8
Effectiveness of antitrust policy
32
Prevalence of foreign ownership
8
Efficacy of corporate boards
26
Pay and productivity
12
Low market disruption from state-owned enterprises
13
Intellectual property protection
13
Restrictions on capital flows
22
Cooperation in labour-employer relations


33

Context for rivalry may be fine…
-
NZ firms coming up short in practice, however Overall
Ranking = 25
Company Operations and Strategy Conditions NZs Position 2009

4 61
Value chain breadth
Reliance on professional management
11 49
Extent of incentive compensation
Willingness to delegate authority
16 41
Nature of competitive advantage
Prevalence of foreign technology licensing
24 33
Company spending on R&D
Extent of marketing
32
Control of international distribution
29
Firm-level technology absorption
29
Breadth of international markets
27
Capacity for innovation
27
Production process sophistication
26
Extent of staff training
26
Extent of regional sales


34

Impressive macroeconomic policy… spoilt by
worsening interest rate spread Overall
Ranking = 8
Macroeconomic Policy (MP) NZs Position 2009

1 45
Interest rate spread
Government surplus/deficit
1
Inflation
9
Government debt


35

Majority of SIPI world-class… centralization of
Overall
economic policymaking has to be addressed Ranking = 11
Social Infrastructure and Political Institutions NZs Position 2009

Competitive Advantages Competitive Disadvantages
Relative to GDP per Capita Relative to GDP per Capita
(Low) Malaria incidence Decentralization of economic policymaking
1 56
Secondary enrollment (Low) Wastefulness of government spending
1 30
Judicial independence 2
2
(Low occurrence of) Diversion of public funds
2
(Low occurrence of) Irregular payments by firms
2
Ethical behavior of firms
4
(Low impact of) Organized crime
4
(Low) Business costs of corruption Control of Corruption (WB)
5
Rule of Law (WB)
5
Voice and Accountability (WB)
6
Primary enrollment
8
Freedom of the press 9
(Low) Favoritism in decisions of government officials 10
Public trust of politicians 11
Life expectancy 12
Transparency of government policymaking 12
Efficiency of legal framework 13
Property rights 13
Effectiveness of law-making bodies 14
15
Quality of primary education
16
Health expenditure
17
(Low) Tuberculosis incidence Change up/down of more
18
Government effectiveness in reducing poverty and inequality
20
Reliability of police services
21
Accessibility of healthcare services
21
(Low) Business costs of crime and violence
22
Quality of healthcare services
22
(Low) Infant mortality
36

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