We can’t afford better health system,the education system we need and the social benefits we desire because we don’t generate enough dollars in our economy. Rich countries have better health and education systems and spend more on saving the environment, while poor countries do not. Any increase in expenditure per capita on funding the society we need – we want – is directly dependent on growth in GDP. Growth is not an option – it is necessity – if we are to be “world class”.
To increase growth in GDP, existing businesses and industry must improve their performance and the environment for business must attract new businesses. Business must improve its own performance and the Government must ensure an environment that helps businesses achieve their potential.
Internally, management capability is critical to business performance and there is increasing investment in management training and development. In pursuit of world-class management capability the New Zealand Institute of Management is introducing international benchmarking of management training and qualifications. And, with the support of the New Zealand Business Excellence Foundation, more businesses are adopting leading-edge management systems and operating frameworks to enable them to achieve world-class performance and to reach their potential.
But the Government creates the external business environment, both in the short and long-term, and here we are not world class. The internationally recognised IMD World Competitiveness Scoreboard ranks countries in terms of the environment in which businesses compete. In 1997 New Zealand was ranked 11th in the world. Today New Zealand is ranked 21st . IMD’s top three golden rules for country to remain competitive are:
1. Create stable and predictable legislative environment.
2. Work on flexible and resilient economic structure.
3. Invest in traditional and technological infrastructure.
For New Zealand to lift its competitiveness ranking Government must reinvent its role to one of enabler. We are part of global economy and international market place. If the environment created by our government is less favourable than the environments in the rest of the world then our businesses are disadvantaged and handicapped. Government too must have global attitude.
Government must ensure the infrastructure is in place for the New Zealand to embrace the knowledge economy and to grow. It must ensure we have high speed communication networks to every area and region (including rural areas) in New Zealand, tele-phone numbers and local loops publicly owned, and secure and adequate electricity supply for the future through long-term primary energy planning. We don’t have that today.
Local government also has key role in creating an environment supportive of business growth. Businesses will only be attracted to or remain in regions that are supportive of them and their employees needs, and that will enable them to develop and prosper.
Clearly there must be rules – civilized society cannot exist without rules. Government must perform the regulator role, but through effective yet non-invasive legislation, regulation and business supportive policies. In putting the rules in place government must avoid becoming competitor, constraint on business performance, imposing unnecessarily restrictive or burdensome compliance requirements or shifting risk to business.
Rules should be neither pro- nor anti- business. Nor should they favour large or small business.
Examples of key government policies today that could support business growth would be immigration and tax policies. These policies have the potential to address the key impediments to growth for the predominantly small businesses in New Zealand – the smallness of the market, the shortage of skills and the increasing tax burden as they grow. We need more people – to grow our home market and to provide skills and experience. Immigration is the solution – and that is government policy.
The Kyoto Protocol that calls for reduced greenhouse gas emissions is an example of Government pursuing an ideological agenda at the expense of business and social consequences.
The cost of compliance is another burden, and handicap, with particularly high impact on small businesses, the predominant business sector in New Zealand.
Of course many compliance requirements are fundamental to how business should conduct itself – safety and health regulation being an example. In New Zealand today these policies are being taken beyond the essential regulatory requirements and are unreasonably restrictive creating untenable risk to small business.
Management’s ability to encourage creativity and innovation from employees, to take measured risk and to capture opportunities, ensures our businesses are able to contend with the changes and challenges they face in world markets. But the changes and requirements imposed on business as the result of government decisions or actions are non-negotiable.
In setting the rules it is critical that Government creates an environment that encourages, enables and supports growth and in which innovation and achievement flourish. If it does so New Zealand can be world class in every respect.
Doug Matheson is chairman of NZIM National Board and company director.