Category Archives: Economy

No Public Funding For Runway White Elephant Please

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777lotrThe debate over whether or not public money should be invested in the extension of Wellington International Airport’s (WIAL) runway is starting to heat up. Despite project studies only being released to the public this week, city councils across the region have already indicated they will provide financial support towards the $330 million cost. At present central government has said it will not support and some local body councillors are already starting to feel uneasy about the overall proposal.

The Wellington City Council (minority shareholder in the airport), Wellington Chamber of Commerce and WIAL have been enthusiastically promoting the supposed “economic benefits” of the project. But the real reason the extension is needed is because the current length is sub-standard even for short-haul jet operations. WIAL is essentially asking taxpayers and ratepayers to co-fund capital works. Given that WIAL parent company Infratil earned a staggering $453 million last year and reportedly has a $1 billion war chest, why are public funds needed at all? Surely WIAL can make it’s own business case and access funding itself?

Adding 300 metres to the runway will not make it safe for wide-body aircraft.  “Long haul” flights are not coming to Wellington any time soon and here’s why. Firstly, medium haul, mid sized airliners are actually being phased out across the Asia-Pacific region as we speak. My understanding is that the last Qantas 767 has already gone and Air NZ has a small number remaining with limited lifespans. Asian airlines no longer operate these types. Air Asia and Jetstar withdrew A330s from Christchurch and Auckland, because they could not make a profit. In any event, an A330 would not be able to operate fully laden, even from an extended runway. Truly “long haul” aircraft such as A380, A340 and B777 are unlikely to be operated because of weight and size limitations.

The 787 Dreamliner is often touted as the saviour of long thin air routes. Again, it will not be possible to economically operate this aircraft out of WLG, even with a longer runway. Extending the runway will not remove the nearby hills. Aircraft take-off restrictions are governed by the climb performance under instrument flight conditions with a failed engine at the takeoff point. Long haul operations (10-16 hours) require huge fuel loads and substantial take-off weights. Take-off performance is a function of aircraft weight, engine power and ambient conditions, NOT runway length. Aircraft will be payload limited even with the runway extension in place. This is a really important point that most commentators and the media have missed.

There are many other reasons why investing in a runway extension is a bad idea. Not the least of these is that the airlines refuse to commit. You can be sure that Air New Zealand is not going to undermine it’s cosy hub and spoke operation that is based in Auckland and it’s not clear that any Asia or U.S. based airlines are at all interested. Some passengers complain that travel via Auckland or Sydney is onerous. But can you name any city under 500,000 population in North America that has direct air links with London or Hong Kong? Hub and spoke operations are the norm elsewhere in the world. There are many other investments that Wellington can make as a city and a region in order to promote economic development.

Unsurprisingly, there is zero information on the WCC or WIAL websites about the public consultation process. But the media are reporting the following information. There will be three public open days where people can meet one-on-one with the experts who prepared the reports. The open days will be held at Chaffers Dock Function Centre on December 2 from 12pm to 3pm, at SPCA Fever Hospital in Mt Victoria on December 3 from 5pm to 8pm, and at the Brentwood Hotel Conference Centre in Kilbirnie on December 5 from 12pm to 3pm.

Postscript: There is now a dedicated website providing links to information from the consultants who were paid by the project supporters to provide reports. The site also contains information about public presentations and how to make a submission.

Paul Spence is an ardent supporter of regional economic development, a commercial pilot licence holder and a technology sector company director based in Wellington.

A Year Of Global Entrepreneurship?

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It’s Global Entrepreneurship Week this week, with a focus on encouraging young entrepreneurs to step up all around the world. Unfortunately GEW seems to have bypassed New Zealand this year – but not to worry – there’s still a great deal happening in the start-up, tech and innovation space.

But lately I’ve become a little less optimistic that we are heading in the right direction in terms of supporting a high tech business start-up culture. Can start-ups really be artificially manufactured and then massaged into life, like characters on a reality TV show? Why are our academic institutions still failing to commercialise publicly funded intellectual property?

Admittedly incubation has had a somewhat chequered history in New Zealand to say the least and the jury is still out on whether intense “accelerator” programmes can work well in a small, distant and (relatively) capital poor market like ours. But who’s calling the shots on public investments in technology these days? Disturbingly, the New Zealand government’s 2015 science investment round still does not even mention a specific category for ICT. This raises questions about priorities, especially given that ICT companies have a demonstrably shorter development cycle than biotech and manufacturing.

The current crop of start-up programmes seem overly focused on creating opportunities for early stage investors, rather than advancing regional economic development. The focus should be in providing local foundations for high value, globally scalable businesses. For example, the most promising of the recent Lightning Lab alumni almost immediately relocated to the United States. But perhaps I’m missing the point? The departure of Lightning Lab itself from Wellington also underlined for me precisely why public servants and executives in suits should never be allowed to meddle with “innovation” initiatives.

Maybe none of that matters, because ultimately it’s the educational and motivational opportunities that are most meaningful. The various initiatives on offer also raise the profile of entrepreneurship as a career option. That’s important because it’s clear that the continuing lazy media obsession with sporting and entertainment “heroes” does little to encourage our young people into business at present.

What is encouraging however, is the fact that techies and start-up fanatics have become a lot more self-organising lately and are just getting on with it. I daresay the majority of interesting tech start-up companies of the future will probably get going in the same old way they have done historically – with a couple of mates bouncing an idea around over a beer and then raising some cash AFTER they get customers on board. Those companies will be thinking global from day one if they are smart. Global entrepreneurship should be the focus all year round.

Want to keep in touch with the best tech and start-up events? Make sure you sign up for the New Zealand edition of the free weekly Startup Digest.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

Tunnel Collapses. Good Call Minister!

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hollyfordAs you may be aware, Minister of Conservation Nick Smith this week delivered his decision on whether or not to grant a concession to Milford Dart Limited for construction of an eleven kilometre, one-way bus tunnel between the Dart Valley and Milford Sound. One has to sympathise with the Minister who frequently has to make such rulings and whose decisions are not always popular.

However, it beggars belief how such a ridiculous proposition even got as far as the Minister’s desk in the first place. Proponents of the tunnel who energetically cite how it will reduce travel times to and from Milford Sound seem to have missed the point. Tourists come to enjoy New Zealand’s scenery, not to sit in a dark tunnel. Others have championed how the plan will bring new economic life to the region – when in fact it is likely to kill small towns like Te Anau that rely on passing traffic. Milford Sound itself is physically constrained and simply cannot grow any more, so that argument also falls flat.

Smith used some sound reasoning as to why he declined the project. Uppermost in his mind seems to have been concerns about exactly where millions of tonnes of earth would be deposited after it was dug from the tunnel and that it was not consistent with the park management plan. Even ignoring the fact that the economics of the venture don’t actually stack up; there are much more important, but less tangible, reasons for filing the plan in the waste paper bin.

Despoiling our greatest national park (and world heritage area) for highly questionable commercial gain, would simply be a crime against all New Zealanders. We should keep our special places intact. Good call Mr Smith and deep shame on Tipene O’Regan and his fellow directors of Milford Dart who, given their connections, you’d think might have had more respect for the intrinsic value of a relatively untouched region.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

 

 

Will The Real Wellington Please Stand Up

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wcc2Our Prime Minister laid bare his regional biases when he implied recently that our Capital city is a hopeless economic case. But Mr Key would do well to remember that the regional economies are subsidising the infrastructure build up elsewhere.

Wellington may have lost a few corporate head offices, but its economy is a lot more diverse and robust than that. Let’s look at what’s really going on in Wellington in the context of high value, export oriented, knowledge based business activity. According to economic think tank Infometrics, in 2011/12 the overall number of businesses in Wellington actually grew slightly, whereas in Auckland the number dropped considerably. More importantly, Wellington has the highest GDP per capita of any New Zealand region. This is hardly surprising when we look at the emerging economic players.

Activity in the screen and digital sector grew twice as fast as the New Zealand economy generally, with film, animation, gaming and software delivering a billion dollars to the region annually. Wellington has the highest intensity of knowledge based businesses per capita, a busy port, two universities bursting with fee-paying foreign students and an enviable and growing tourism profile globally. Wellington also boasted the highest number of New Zealand companies in the Deloitte Asia Fast 500, an international benchmarking initiative that identifies high growth ventures across Asia-Pacific.

The only business types that decreased in Wellington were insurance and financial services. That is hardly surprising when you consider that insurance companies have little interest in the Wellington market post Canterbury earthquake and finance companies have been dropping like flies everywhere anyway. No great loss. It’s also no secret that government services have been operating with sinking lid staffing policies for some time amidst austerity measures. But despite fear mongering by public service unions, the actual number of staff affected has been minimal. Government sector makes up only about 10% of the regional economy (about the same as tourism income).

Many of us have invested a huge amount of effort into building creative communities in our region that have underpinned the growth of high value, knowledge based businesses. In the context of a sluggish global economy, Wellington has held its ground relatively well, so it is certainly unfair to make comparisons with the other main centres, which have entirely different contexts at present. The government should also be reminded that the growing tax take in the regions is supporting spend-ups in other parts of the country.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

 

Tech Scene Blossoms In Sunshine State

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2013-04-16 16.09.21The annual pilgrimage to the West Island came around a little earlier than usual this year with the opportunity to attend TechConnect, a public conference for tech startups, investors and advisors held in the three main Australian city centres. I attended the Brisbane event and was pleasantly surprised to find a quietly confident and emerging local tech scene with a supportive community backed by real political commitment and publicly funded resourcing. Notably, some of the initiatives also address the opportunity of the national broadband roll-out.

Keynote speaker at TechConnect was Tyler Crowley, co-founder of This Week In Startups, professional pitch coach and advisor to governments looking to develop innovation ecosystems around technology. Crowley’s advice to start-up clusters was simple. Build a tech hub and identify a “documentarian” to champion the cause. He also recommended promoting more tech meetups and nailing down some sponsors to shout a few beers. Seems like we’ve been doing these things already in New Zealand, so it was encouraging to hear this and underlined our commitment at iwantmyname to support our community.

Brisbane’s start-up scene was abuzz during conference week because of recent news that Twitter had bought local company We Are Hunted. The acquisition was essentially a talent grab as Twitter works towards integrating music services into its platform. But such stories will certainly embolden the Aussie start-up scene which has produced a number of shining stars in recent years. Freelancer is a site that leverages the shift towards web-based out-sourcing and which has grown in leaps and bounds. Everyone agreed Freelancer CEO Matt Barrie gave the best talk at the conference and it wasn’t hard to see why the company was forging ahead so well. Barrie is no slouch in the academic area, with several Masters degrees and university lectureships in both network security and new venture development. He was named Australian entrepreneur of the year in 2011.

From taxi drivers to company CEOs, throughout my visit to the Sunshine State I constantly ran into ex-pat Kiwis who’d made the leap across and done well for themselves. A few years back we shared some office space with young upstart Chris Loh who had been working on developing a collective of iOS developer talent. Now he’s based at QUT’s Creative Precinct on the Kelvin Grove campus and just launched a Kickstarter campaign for a cool tablet based gaming system. Tyler Crowley alluded to crowd funding as the next important source of capital for start-up tech firms, mentioning that AngelList recently received SEC approval in the U.S. to offer opportunities to members through a crowd-funding app.

The paucity of start-up capital is a universal conversation topic and Australia is no exception. Venture capital intensity sits at about one eighth of that found in the United States. Odd considering Australia’s $1.5 trillion economy has one of the highest per capita GDPs globally. But why invest in tech, when you can dig wealth straight out of the ground in the Outback? One of the TechConnect speakers had the answer however – “good start-ups always raise capital”, said Jeremy Colless from Artesian Venture Capital, which works with university incubators and tech accelerators. “Generate real value and don’t come looking for investors until you have some customers on board”. That’s good advice.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

It’s Life Jim…

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Bernard Hickey’s curious opinion piece in the Herald this week reminded me of a famous quip from Star Trek. “It’s life Jim, but not as we know it.” Normally I enjoy Hickey’s rants, because he frequently questions the boring, unimaginative style of economic management and fiscal policy that we currently have to endure in New Zealand. The new Reserve Bank governor shows little sign of demonstrating any more initiative than the previous incumbent, so it’s important that the media stand up and heckle occasionally. But I’m going to call out Hickey on his stance regarding Auckland’s housing crisis, which sits a world apart from the situation across rest of New Zealand.

Advocating for high rise, in-fill housing in central Auckland is a bit like shooting the goose that laid the golden egg. The lack of housing in the region is because large numbers of  economic migrants have been increasingly attracted to Auckland due to it’s unique lifestyle and are arriving at a faster rate than can be accomodated at a time of low investment in housing. However, if the Auckland CBD is transformed into downtown Kowloon, with row upon row of identical, tasteless concrete apartments, the city will presumably become somewhat less attractive to migrants intent on escaping the very same kind of environment. There is a more obvious solution.

Even us Wellingtonians understand that Auckland is (currently) the economic centre of gravity for New Zealand and we certainly endorse the assistance provided as Christchurch struggles to rebuild. Furthermore, with most of the present government senior cabinet members originating from either Auckland or Christchurch regions, it’s been clear for some time where the chief investment focus lies. In the meantime Wellington is languishing with one of the lowest economic growth rates of any region, despite its diverse economic base.

Business activity here in our region powerfully leverages a creative workforce and increasingly invigorates high value, knowledge based export businesses. Provincial areas such as Northland, Gisborne and Wanganui have mild climates and vast tracts of land available, yet are also struggling. Other areas such as Manawatu and Taranaki have held their own, thanks to the dairy boom. But the economic benefits of those returns are no longer shared throughout the community, because of the increasing trend towards corporate farming and centralised processing. What can be done to redress this imbalance?

Surely, if Auckland is bursting at the seams and Christchurch is still awaiting re-building, would it not make sense to actively redirect economic investment and migration to less favoured provincial areas, where it could do most good? Or is that too obvious to contemplate?

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

Old Industries Are The Pits

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Railways, coal mining and industrial scale manufacturing were all economic activities that had their origins in the 19th Century. This week has not been a good one for anyone employed in those businesses in New Zealand, with widespread redundancies having been announced. The reasons for the collapse of these industries differ, but they share the historical hallmarks of “creative destruction” as expounded by Austrian economist Schumpeter.

Schumpeter was remarkably prescient for a man of his time. Drawing upon the political organisational theories of both Marx and Weber he concluded that innovation was the primary driver of economic change and that every industry was subject to a cycle of emergence, ascendance and decay. He controversially proposed that democracy could never truly empower the ordinary citizen because the electorate were largely ill-informed or ignorant. His predictions that social democratic governments would emerge in the West (rather than socialist revolution) have largely come true.

None of this will be of any consolation to our miners, factory workers and railway engineers. But it does underline precisely why we need to be moving up the value chain through exporting our knowledge rather than relying upon filthy, dangerous and extractive commodity based industries. After more than a decade talking about it, the penny has finally dropped and the government is now attempting to reorganise commercialisation of publicly funded research and has been increasing the investment in research, science and technology. Bullish talk by government ministers about opening up more public land for mineral exploitation also seems to have faded for the time being. That’s why I spend a lot of my time promoting and supporting knowledge based entrepreneurship and emerging technologies and industries.

Paul Spence is a commentator, technology entrepreneur and is a co-founder of iwantmyname, a New Zealand based global Internet venture. You can follow him on Twitter @GeniusNet

Aussie Rules?

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My annual escape to the West Island always provides plenty of food for thought and this visit has been no exception. Australia is a nation of rule makers, a trait complicated by the fact that there are both federal laws and those laid down by state governments – and they sometimes do not align comfortably.

Australian Prime Minister Julia Gillard is under seige at present after ushering in new taxation regimes aimed at redressing both climate change and mineral exploitation rights. The Minerals Resource Rent Tax takes a small percentage of the billions of dollars of profits generated from mineral extraction and redirects it towards infrastructure projects and social needs. It’s a brave effort in wealth redistribution by a government with a wafer thin parliamentary majority. The new Carbon Tax creates an impost on the 500 largest polluters in the “Lucky Country” and will largely be passed on to consumers, although it will be rebalanced to a large degree by tax reductions for small business and low income earners.

In a bizarre move, the Queensland State government is in the process of taking the federal government to court, to oppose the resource tax. Queensland has been one of the biggest beneficiaries of the infrastructure spend up that has helped keep the Australian economy bouyant throughout the GFC. The Sunshine State is brimming over with new roads, bridges and public amenities such as the $2 billion regional hospital construction about to get underway north of Brisbane.

Opposition leader Tony Abbott is reveling in the negative media attention, with an election looming next year however. It’s payback time after being narrowly defeated at the polls last time around and therein lies the worry. Abbott is a conservative, former Catholic seminary student turned political hack, famous for rolling his predecessor in protest against his own party supporting a carbon emissions trading scheme. Abbott has a short fuse and a penchant for firing up the red-neck right. He recently called foreign asylum seeking boat people “un-Christian” for immigrant queue jumping and wants the Navy to turn back boats on the high seas by force ( a position that reportedly horrifies senior military analysts). His latest gaffe was to elevate the New Zealand government as a shining example of economic management, when all our performance indicators in fact remain below that of Australia’s.

It remains to be seen who will be making Aussie’s rules after the election in 2013. Whatever the outcome, we should take note of Gillard’s formula for addressing social and environmental concerns in the context of Australia’s windfall from the minerals boom. Our own government has recently backed away from acting likewise in terms of our wealth-creating but polluting commodity based primary industries. Perhaps we should review that stance in light of Australia’s approach.

Shifting The Economic Goalposts

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Economist Brian Gaynor’s recent article on why we will never “catch up” to Australia was another sobering reminder of the hard road that New Zealand has ahead. Invoking a sporting analogy by beating Australia may be a popular rally to arms, but it focuses public attention on completely the wrong set of goalposts.

Another sobering occasion was when we sadly learned of the passing of Sir Paul Callaghan, one of New Zealand’s most passionate science communicators and technology entrepreneurs. Sir Paul lived every moment and notably even turned his cancer treatment regime into an experiment. More importantly he was one of the most ardent promoters of science and technology commercialisation as a means of growing New Zealand’s economy.

“Sir Paul was a true public intellectual who earned the respect of everyone, including those who disagreed with him”, stated the government’s sternly worded Ministerial press release reporting news of Sir Paul’s death. Curiously, outside of Cabinet, I can’t name a single (intelligent) person who actually disagreed with his thesis that New Zealand urgently needs to ramp up economic growth through more investment in research, science and technology commercialisation, rather than continuing with an over-reliance on flogging unprocessed, environmentally unsustainable dairy commodities to the world.

To its credit, the government has finally moved to increase research funding and there are more frequent mutterings along the lines of “doing something” about uncovering intellectual property locked up within our many publicly funded institutions. But those of us who looked on frustrated over the last decade as the “Knowledge Wave” withered on the vine, are becoming more and more concerned that the opportunity to fully promote science and technology as an economic driver is disappearing.

Beyond pumping more cash into research, we need a huge cultural shift involving both governmental agencies and the public mindset. As clean-tech entrepreneur Nick Gerritsen stated at a recent seminar, “we need more millionaire scientists and fewer millionaire sportsmen”. With the loss of Professor Callaghan, I’m left wondering who will be brave enough to pick up the mantle.

You can follow the author on Twitter @GeniusNet

Attacks On Economic Agency Unfair

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Grow Wellington may have failed to trumpet its successes loudly enough, but it doesn’t deserve the criticism that is currently being heaped upon it as the seriously flawed Wellington regional economic strategy (WRS) has undergone review. The economic development agency has done a relatively good job of making a silk purse out of a sow’s ear within a recessionary environment in which the central government focus has been on other parts of the country.

It beggars belief that plans are afoot to abscond with $600K of the agency’s annual budget to fund the WRS office to “administer” the strategy. It’s not clear how creating another layer of bureaucracy will enhance the region’s economic performance however. Past complaints by the Wellington Chamber of Commerce demonstrate a deep ignorance of the outstanding network building and facilitation work that Grow Wellington has undertaken and the cheap attacks look like nothing more than a desperate attempt by the Chamber to remain relevant.

Last year’s Rugby World Cup was a pleasant distraction for some, but an economic fizzer for the region overall, as predicted by every study looking at the long term value of such large scale events. But sound academic research and global best practice has never been the basis for the regional economic strategy, a document that was prepared by local management consultants. At no time did the strategy charge Grow Wellington with researching and advocating on regional infrastructure and accordingly the organisation does not employ researchers or economists. One would have thought this was in fact the Chamber’s role, hence their criticism should be directed inwards.

Wellington needs better public transport, an infusion of entrepreneurial culture plus more and ongoing investment into productive and high value parts of the economy, including facilitating foreign capital. On the other side of the ledger, we also need to preserve the quality of life that we currently enjoy because this is the basis for skilled migrant attraction. Look around – at least half of the technology start-ups in the region have been created by recent arrivals. That is an economic success story that should be told far more often.

You can follow the author on Twitter @GeniusNet