The New Zealand Institute’s latest discussion paper “So far yet so close: connecting New Zealand to the global economy” provides timely reality check of New Zealand’s global competitive positioning and ability to lift our game in terms of participation in the global marketplace.
New Zealand’s remoteness from its global markets and geographical shape have always been challenge in terms of time and cost of transport to our overseas markets, and the adequacy of supporting domestic transport infrastructure. In the past, central government support has been needed to establish core infrastructure such as rail and roads, combined with supply chain innovation such as refrigerated shipping.
The authors suggest another paradigm shift is required for us to remain competitive in the global marketplace; involving new production and distribution models, and the development of virtual supply chains. They also propose that the use and efficiency of existing core transport infrastructure needs to be improved, in addition to the introduction of new supply chain innovation.
Air connectivity, in particular, should be an area of focus to support high-value, time-sensitive exports. But air freight in New Zealand represents only 16 percent by value of total cargo, compared with global averages of 35 to 40 percent. Strong and diversified tourism promotion will provide platform for greater physical connectivity to global markets, both for business travel and air freight capacity.
The authors argue that New Zealand should invest in offshore production and distribution business models to overcome the tyranny of distance by directly accessing more advantaged supply chains.
Also, New Zealand should ‘play to its strengths’ of creativity and innovation by developing high value, low (economic) weight goods and services to exploit this competitive advantage. They see move to virtual supply chains is potentially as transformational for New Zealand exports as refrigerated shipping was 125 years ago. Critical to achieving such transformation, however, is the establishment of world-class communications infrastructure in New Zealand.
From supply chain logistics and transport perspective such initiatives should be applauded. They add to, rather than subtract from, existing supply chains, and are rational response to the increasingly competitive global marketplace. Add environmental sustainability to this mix (the threat of carbon mile cost penalties, etc), and the urgent need for public policy and private sector initiatives to identify and exploit new products and services where New Zealand has comparative advantage is further reinforced.
There are various questions or challenges, however, which need to be addressed through suitable public policy and business initiatives. These include:
• While New Zealand’s remoteness might have bred level of self-reliance and innovation (the ‘number 8 wire’ fix it mentality), is the significance and scale of this creativity and innovation sufficient to provide comparative advantage vis-à-vis overseas markets? How do we promote creativity and innovation?
• How do we recruit, develop and retain the appropriate intellectual expertise in New Zealand to support the new business paradigms of offshore production and distribution, and virtual supply chains?
• Does the size of the New Zealand domestic capital market and increased foreign ownership enable such New Zealand centric business paradigm shift?
• How do we ensure that an investment climate in New Zealand is established which supports the provision of critical domestic transport infrastructure in the absence of publicly funded infrastructure?
• How do we establish collaborative approach to tourism development involving the major sector players, based on shared vision of target markets and funding, and with appropriate strategies to address heightened global sustainability concerns?
None of the above questions should detract from the overall thrust of the recommendations contained in the New Zealand Institute’s discussion paper. Rather, the authors’ recommendations should be actively embraced by business and the supply chain industry in New Zealand, and should be actively supported by coherent set of public policy initiatives implemented by central government.
Tony Gollin is president of the Chartered Institute of Logistics and Transport in New Zealand. [email protected]
