Key speech highlights high-tech manufacturing

By Shaun Hendy 12/02/2010

In his speech to Parliament earlier this week, John Key signalled that supporting high-tech manufacturing would be a priority for his Government.  As my colleague Richard Blaikie, Director of the MacDiarmid Institute, pointed out in his newsletter last week to MacDiarmid Institute researchers, New Zealand is becoming increasingly reliant on high-tech industry for our export receipts:

New Zealand’s high-tech industries are now our third-biggest exporter earners, outpacing wine and meat exports and sitting relatively close behind the dairy and tourism sectors.  This is according to the Technology Investment Network’s 2009 TIN100 Report, sponsored by NZTE and Ernst & Young, which says that technology exports rose 4 per cent last year to NZ$5.1b, compared to the dairy sector’s NZ$8.8b.

The Report, now in its fifth year, makes excellent reading if you are interested in the growth of New Zealand’s high-tech industries, and sits very well alongside the messages and stories that Paul Callaghan makes so eloquently in Wool to Weta.

You can get an executive summary of the 2009 TIN100 report here.  The full report is well worth reading if you can spare the $200, or you have a chance to look at it in a library.  Paul Callaghan’s arguments are also worth reading:  take a look at his Herald article here or buy the book.  As Paul points out, to catch Australia in per-capita prosperity, we would need to lift our GDP by US$30 billion a year.  We could increase the number of dairy farms five-fold, or we could quadruple the number of tourists … well, you can see why Alan Bollard might be a pessimist.  But back to Richard Blaikie:

The scope for future growth is enormous, and the TIN100 people have pulled out ’Ten Companies to Watch’ that grew combined revenues by a massive 34% in 2009 to a total of NZ$1.8b.  The high-tech growth potential is not resource limited as for our other important big sectors, and with the price-to-weight ratios of many products measured in dollars per gram (rather than dollars per tonne for commodities) the tyranny of distance to market is not a show-stopper either.

Can we turn NZ$5b in exports into NZ$50b?  It’s a tough ask, one which I doubt we’ll achieve by tinkering with the tax system, but it’s worth remembering that this is essentially what Finland did with Nokia in the mid 1990s.  As I have discussed in previous posts, the Finns took Nokia from a Fisher & Paykel-sized electrical appliance company to a globally dominant mobile phone company.

Now I don’t know what’s sufficient to turn an F&P into a Nokia, but it is clear from our patent studies that the Finns built Nokia on the intellectual grunt of a large cohort of engineers.  And I don’t know about you, but turning out 300 PhD engineers a year in New Zealand sounds a lot easier to me than quadrupling our tourist numbers (any room on your couch?) or quintupling the dairy herd (space for a cow or two on your lawn?).

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