REGIONAL SURVEY Managing the Dichotomy – Bay of Plenty’s primary challenge

Ten years ago, the absence of over-population, traffic congestion and spiralling property prices made the Bay of Plenty region attractive. Fast-forward decade and the region is faced with preserving the essence of what attracted the influx of newcomers while capitalising on new opportunities.
Population flow and unique economic engine, underpinned by horticulture’s $1.5 billion annual contribution, explains much of the higher employment and GDP growth experienced by the region. At least that’s the conclusion reached by economic forecaster BERL (Business and Economic Research) after analysing the region’s latest economic data. Not surprisingly, BERL figures show notable upturn in performance between 1999 and 2004.
But when it comes to reading anything meaningful from the number crunching, the devil is certainly in the detail. closer look at BERL’s recent research reveals region comprising two diametrically different parts. At 18 percent, the region’s population growth (now 261,000) grew faster than the New Zealand average (14.6 percent) over the past 10 years.
But most of that growth has been limited to Tauranga and the western Bay of Plenty. Currently growing at around four percent per year, the Tauranga and western Bay of Plenty population alone is expected to jump from an existing 140,000 to around 200,000 by 2021. Assuming that growth rate continues, Tauranga will become the country’s fourth largest city by 2012. In fact, the number of people living in Tauranga – as proportion of the total region – has jumped from 33 percent to 39 percent, while Rotorua’s population has correspondingly declined from 30 percent to 26 percent over the past 10 years.
While total population is growing faster than average, at 3.47 percent the region’s year-on-year GDP only just exceeds the national average 3.39 percent. Based on these numbers it comes as no surprise to discover that in 2004 the region’s per capita income was only 86 percent of the national average ($29,041) – down from 88 percent in 1994.
Why is the disparity widening? The answer is twofold. Firstly, the flood of migrants, including significant number of non-working retirees, is effectively splitting GDP across larger number of people (many of whom aren’t contributing to employment). In fact, 60 percent of the Bay of Plenty’s net gain in migration between 1996 and 2001 (+8600) was over the age of 45. Secondly, the region’s industry structure is currently geared toward relatively slow-growing sectors.
Total employment grew by 32 percent in the 10 years while the number of people employed within the region by agriculture grew by only seven percent.
Unfortunately, agriculture accounts for 15 percent of full-time employees (FTEs) (eight percent nationally) and for only 13 percent of the region’s GDP (8.2 percent nationally).
By comparison, property services, which makes the largest contribution to GDP ($860 million or 13 percent of the region’s total GDP), only grew employment by nine percent over the past 10 years. At the other end of the scale, at 13.1 percent, the number of people employed in business services within the region significantly under-reflects the national average of 18 percent. But the significant increase in those working within the business service sector within the region over the past 10 years (3.5 percent to 5.33 percent) reflects the older population bias within the region’s demographics.
According to Adrienne von Tunzelmann, president of the Tauranga Chamber of Commerce, people and businesses locating within the region pose major infrastructure challenges and sub-set of business support issues. Lifestyle has clearly attracted very small businesses into the region. But on the flipside, von Tunzelmann argues that unaffordable cost structures (which prevent value-add manufacturing), spiralling land costs and traffic congestion, plus dearth of training providers is disincentive for larger business contemplating relocating into the area.
According to Tom Stewart, operations manager of Trimax Mowing Systems, proximity to the port isn’t the only advantage of being locally based. Since he established the business in Tauranga to service the kiwifruit boom of the early 1980s, growing number of support services are now available locally. In fact, he says the availability of contract manufacturing – for example in machining, turning, contract guillotining or press folding for steel plate – lets the firm get on with the core business of making fine grass mowing equipment.
He attributes the growing clustering effect around contract manufacturing and within other industries – notably food and beverage – to the major population growth in recent years.
Papamoa-based wind-yacht maker Blokart International is also benefiting from the availability of local suppliers. Having leveraged off the growing pool of lifestylers and holidaymakers, the company now exports 60 percent of its product offshore. But while the port is nice and handy, Blokart’s general manager Geoff Garaway says it’s the access to contract manufacturers in Tauranga, Rotorua and Hamilton that adds most value to the business. “Having close access to most of our suppliers makes our job of assembling components lot easier.”
For von Tunzelmann, who is also principal of local consulting practice McKinlay Douglas, one of the big questions for the region is whether population growth should be taken for granted.
A big danger, she adds, is that people will relocate here only to find job opportunities limited, wages less competitive and housing prices on the rise. “So we have to actively manage this dichotomy. The trick for the region’s future growth is to set these dynamics in balance. Another issue is how much of the future is spent consolidating what we’ve already got or developing different industry structure.”
To von Tunzelmann, creating deeper job market means transforming the present industry structure from family-owned SMEs to larger, more commercial operations, especially within the agriculture, horticulture and light manufacturing sectors. The region’s burgeoning retirement community arguably represents untapped potential for the aged-care sector. But to von Tunzelmann there’s also an opportunity to draw on the expertise lying dormant within that community.
According to von Tunzelmann another big challenge facing the region is attracting skilled people while salaries remain uncompetitive compared with the main cities. She says there’s also risk in leaving the region’s larger employers such as the Port of Tauranga, TrustPower, Affco, Zespri and Pacific Coast Health to grow the employment talent pool. Regional initiatives at the New Zealand Job Expo in London last October have seen 30 skilled migrants placed in employment locally. It’s also understood another 80 skilled migrants have committed to coming on reconnaissance later this year.
Collaboration between local government and private enterprise has already resulted in numerous projects under the “Smart Growth” and other regional initiatives such as “Smart Economy”. Ross Stanway, CEO with one of the region’s economic development agencies Priority One, says these include plans to accommodate larger population through greater residential developments in areas like Tauranga’s Pye’s Pa and Papamoa East. “Unless long-term planning occurs there will be dire consequences for infrastructure and residential growth patterns.”
Meantime, on the commercial front there are long-term plans to develop around 600 hectares of land for combination of business and commercial activities. Owing to the port’s proximity Stanway expects to attract, amongst others, businesses engaged in both exporting and process manufacturing. Included amongst these initiatives are business developments at Papamoa Junction, Kati Kati, Te Puna and Rangiuru.
But like von Tunzelmann, Stanway says there’s widespread recognition that residential and commercial development places serious strains on existin