New Zealand is in danger of becoming irrelevant to increasingly dynamic Asian economies, warns NZIM Northern chief executive Kevin Gaunt. “Too few of our business leaders understand what is going on in Asia and are making little effort to learn. It will be to our collective cost,” he warns.
“The changes taking place in countries like China, Vietnam, India, Malaysia, Singapore, Hong Kong, Taiwan and even Mongolia, isn’t in our mindset. Some of those economies are becoming real power houses of growth,” says Gaunt. “It is way beyond anything that is happening here or even, for that matter, in Australia.”
And as if to prove Gaunt’s point, the IMD World Competitiveness Yearbook has released it 2011 ranking of the competitive performance of 59 economies. And yet again, New Zealand has slipped place and now ranks 21st. Last year we dropped five places from 15. And, while the trans-Tasman gap is still wide, Australia’s competitive performance fell four places from 5th to 9th.
“It is not happy result,” says Gaunt. “But to be honest, it is not surprising.” Countries like Hong Kong, Singapore, Taiwan and Malaysia all rank in the top 20, three of them in the top five. Others Asian economies will soon move up the ranking.
It is not that New Zealand managers aren’t capable of operating in the Asian market, or any other markets for that matter, says Gaunt. It’s simply that they are still not making sufficient effort to understand and gear up to meet the reality of the opportunity. “We need to understand what the market opportunity is and how we must compete to take part in it.”
New Zealand must seriously consider what it takes to become globally competitive. “The lessons from which we can learn and, the evidence of what factors are critical are all there,” says Gaunt. “But the mindset is not. And this year’s IMD competitiveness survey is simply more evidence of how New Zealand’s global performance across number of measures is going backwards.”
NZIM partners with IMD to compile the New Zealand data used to build the global survey.
This year, America clawed its way back to share first place with Hong Kong as the world’s two most competitive economies. The US economy slipped from top spot to third for the first time last year. Singapore, which was last year’s most competitive economy, dropped back to number three this year, overtaken by both Hong Kong and the US.
The recovery of financial markets pushed the US back to the top with Hong Kong, according to Professor Stephane Garelli, director of the IMD’s World Competitiveness Centre. “Sweden jumped to fourth place (from sixth last year) highlighting the competiveness of the Nordic model,” he added. “Germany climbed six places from 16th to 10th, thanks to buoyant exports and more flexible labour market.” And lessons lie in both these results, according to Gaunt.
This year, New Zealand’s performance slipped across all four competitive measures. Our economic performance ranking fell from 31 to 33, business efficiency dropped two places to 24, Government efficiency fell from five to eight and the country’s infrastructure performance dropped one place to rank 23rd. The cumulative result was one point drop in our overall competitiveness.
This year’s survey grew with the addition of the United Arab Emirates’ economy. It came in at number 28.
Gaunt thinks the comments made this year by Professor Garelli were, from New Zealand standpoint, somewhat prophetic. “The world of competitiveness is becoming more national,” said Garelli. “World Competitiveness 2.0 is characterised by greater self-reliance of countries. It increasingly emphasises re-industrialisation, exports and more critical look at delocalisation. This trend is triggered by the rise in commodity and transport prices and higher labour costs in emerging economies. National champions are favoured everywhere and borders re-surface – again!” he said.
“New Zealand’s business and political leaders must understand that no one owes us living and, that unless we make serious effort to earn our way by competing effectively we will continue our slide toward third world status. Listening to the other AAMO delegates at this year’s conference it was clear that, while they have great respect for New Zealand, they are out to compete,” said Gaunt.
The competitiveness survey ranks countries on their ability to create and sustain enterprise competitiveness. It ranks the 59 countries on more than 300 criteria grouped into its four competitiveness factors of economic performance, business efficiency, government efficiency and infrastructure. And this year IMD and NZIM identified five challenges facing New Zealand in 2011. The first is recovery from the high costs (about $15 billion) of Canterbury’s February earthquake, which is still having significant impact on the country’s slowly recovering economy.
The other four challenges, three of which remain the same as last year, included the need to:
• Initiate long-term growth by improving access to capital and world markets;
• Encourage savings, create incentives and boost productivity through taxation reform;
• Build nationwide ultra-fast broadband network to underpin growth;
• Address education gaps and skills shortages in limited population environment.
“Sadly, New Zealand’s international competitiveness continues to decline,” says Gaunt. “We may have improved three places against Australia but that was not of our making – rather it was because their performance slipped by an even greater margin than ours.
“New Zealand’s business leadership must get its collective head around the global changes that are taking place and to realise that there are trading opportunities out there, particularly in Asian markets. We must be more disciplined and committed in our approach to finding and developing those opportunities,” he said.
“The big issues for New Zealand are still our mediocre economic performance, our inability to attract investment funds, our corporate tax rates, unemployment legislation, the brain drain and the high cost of some communication services, such as mobile technology, is an ongoing concern.”
Gaunt thinks management lacks the kind of international experience needed to compete effectively. “Unfortunately we seem disinclined to help managers grow their global understanding and experiences. Organisational leaders and the government must develop more positive attitudes toward better and more sustained management education and training, starting at the secondary school level and continuing through trade training. The relationship between enhanced productivity and economic performance is linked directly to greater management capability. We now have the research in last year’s government-sponsored/McKinsey Management Matters study to verify that. What remains is to act on the study’s findings,” says Gaunt.
New Zealand managers need more and deeper conversations with their Asian counterparts, says Gaunt. He wants NZIM to help build relationships through AAMO that will encourage more effective management conversations and learning exchanges. He thinks NZIM’s ethos of practicality can work to its advantage by getting New Zealand management involved with other countries and using their management organisations to facilitate the process.
“I think we can share the experiences of what is and what is not working for them [management in other Asian countries] to build management capability in their markets and share that knowledge with New Zealand,” says Gaunt.
“New Zealand is small market but for some reason it is seen to be an important player in Asia. We are well respected. And Asian business people are already here. We need to better understand what opportunities all that presents.” M
Reg Birchfield Life FNZIM, is writer on leadership and management. [email protected]
