Category Archives: Opinion

The Great Wall

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It’s hard to separate last week’s contrasting media images of scuffles by pro-Tibet protesters from those of a proud NZ government delegation kowtowing to the beaming Chinese trade mandarins. So does anyone really believe that the freshly inked free trade agreement (FTA) will bring a flood of economic opportunities to the doorstep of the average New Zealander? China’s determination to protect the image of the Olympic flame at the cost of other nations’ sovereignty is instructive. They built the Great Wall for a reason didn’t they?

I’m not surprised that details of the agreement were kept under wraps until the day of the signing ceremony, some of the concessions made are real shockers. For starters the dairy products component is phased in over 10 years and China even then has an ejection seat clause should they decide that their own dairy industry is threatened. Estimates of the dollar value benefit for New Zealand vary, but appear to be in the vicinity of $200 million per annum, which frankly seems like peanuts in the face of a massive $3.7 billion trade deficit.

Secondly, since when did an FTA ever proscribe rules on migrant labour? “Working holiday” and general category visas for sought after trades are to be broadened immediately for Chinese entering NZ, but there is no reciprocity. Not that I would want to live and work in the most polluted nation on Earth, but tell me how this is fair. However, I look forward to reports of a flood of highly experienced plumbers, hotel chefs and software developers gushing forth from China eager to plug critical gaps in our labour force. The Qualifications Authority will have a field day navigating the rules on equivalency. Given the number of migrant doctors, lawyers and university professors already prowling Queen Street in taxis, one has to wonder where this new influx will actually end up.

So at first glance the FTA looks a bit like it was cobbled together rather more with a sense of urgency than any overriding economic logic. But wait there’s more! It turns out that, having already signed the agreement, our parliamentarians now finally get the chance to discuss it in Select Committee and debate it in The House. What happens if the bill doesn’ t pass? What if the weight of public submissions is against the Bill? Talk about potential for losing face.

The FTA is certainly a historic document and I agree that it will open other doors in the future and (probably) bring a net gain in export trade value to New Zealand, as advertised. As well, a ratchet clause levels the playing field if any other nation negotiates a better deal, therefore going first is not neccessarily a disadvantage. And if the WTO round falls flat, it is highly likely that APEC will set about developing a regional FTA that will now have to favourably include New Zealand. So perhaps I’m being a little unfair. The FTA seems very much like a strategic neccessity. But in our haste to supplicate Beijing could we have possibly overlooked too much detail?

On the technology front, the Prime Minister has curiously fingered software exports to China as a growth opportunity for New Zealand under the FTA. But industry leaders have indicated that the ICT sector is not thinking that way at all. Unless the FTA somehow enshrines and guarantees the protection of intellectual property, China is about the last place I’d be wanting to export software to right now. So if our much hyped knowledge based goods and services are out of the equation, that just leaves us with flogging dairy commodities to China’s burgeoning middle classes. Great stuff, but how can I personally share in that opportunity? Oh right – Fonterra still hasn’t gotten around to listing – bugger!

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New Zealand Trade and Enterprise has an informational website and seminar events planned on the topic of trade opportunities with China. Key outcomes of the FTA can be found here.

What if Google Ruled the World?

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The debate over Google Knol vs Wikipedia continues to rage unabated before Knol has even been launched. But the real issue is the gradual spread of Google’s tentacles.

Google have clearly signalled their intent to drive new revenue streams from owning online content. And what better way to quickly build up a rich cache of material than to invade Wikipedia’s domain? But Knol differs from Wikipedia in that the focus is on authorship, so it’s more like a blog/wiki mashup.

Wikipedia is a wonderful project, but it has always suffered from a credibility gap. With crowd-sourced content we can never be certain where the boundary between truth and folklore lies. Knol addresses that to a certain extent through the use of accredited subject matter experts. How much editorial influence will be vested in individual users is not clear at this stage.

Some commentators have already predicted a disturbing dystopian future in which “content and advertising become indistinguishable”. But in the “co-production economy” I thought we were supposed to be able to subvert and avoid vested interests and traditional media?

But there is another important principle at stake here. If Google both owns the content and controls the search hierarchy, that seems like a great deal of power to concentrate in the hands of a single corporation. Will Google rise to be the most powerful media outlet in say another ten years? In war, the victor gets to rewrite history. That’s a concern here too.

Unsurprisingly, Microsoft is again making serious overtures to Yahoo. (Microsoft’s new CFO, ex-pat New Zealander Chris Lidell, is rumoured to be driving the purchase proposal.) MS clearly needs to shore up its offering in the face of Google’s incessant assault on its patch. We will probably end up with an online content and advertising duopoly. Either way, the dim flame of unfettered “citizen journalism” and freedom from vested corporate interests is likely to be snuffed out. Webstockers might like to chew over this possibility whilst they dine out at Google’s expense this week.

ICT Minister Pulls out Plum from Pre-Xmas Pudding

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Way back in August I wrote about the difficulties being faced by those charged with developing a unifying industry body for the ICT sector and I predicted that ICT-NZ might continue to struggle to gain traction.

Last week Communications and Information Technology Minister David Cunliffe drove the final nail into the coffin of ICT-NZ by announcing the establishment of an ICT industry super body that will also mop up whatever remains of the Digital Strategy funding pool. No doubt this move will provide fuel for conversation over the tea cups at this week’s Digital Summit. At the very least the industry should feel slightly chastened that the Minister himself has had to intervene to find a solution.

The structure and governance arrangements for the new body will be critical to its success. Without proper buy-in from key industry players it will be doomed to circle like a rudder-less ship on a stormy political sea, just like its predecessor. It will also be neccessary for it to articulate a much clearer value proposition to potential members and partners.

Having the government facilitate and partially fund such a body is a departure from the accepted wisdom generally promoted by the economic development ministry however. The ministry has been opposed to public funding of industry networks for quite some time, although the intellectual rationale behind this thinking has never been made clear.

So the government will certainly want a payback on its investment and the new body is expected to provide sectorial advice, be involved in research and manage the Digital Strategy programme. Precisely how industry growth issues will be tackled has yet to be announced.

On balance this is a good outcome. It creates the opportunity for a fresh start and cements government committment to having ICT as a central plank in economic development. But the proof of the pudding will be in the eating.

Movie Subsidies Need More Analysis

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With the Australian government now offering movie producers a whopping 40% rebate on any local expenditure, New Zealand movie-makers, concerned about an exodus to the west, are looking for parity.But can anyone name another industry that receives such exorbitant handouts?

Peter Jackson and his peers certainly deserve the many accolades they have received for bringing a world class industry to our doorstep, but does that mean we have to heavily subsidise it with public money? The industry already receives a 15% rebate for local spend under the large budget screen production scheme. Post-production work performed in NZ also qualifies.  In addition, the film industry has been the beneficiary of government largesse in the form of large grants towards sound studio facilities in both Waitakere and Wellington. The government funded NZ Film Commission also provides co-funding for selected feature films.

The Film Commission claims that 2 million New Zealanders went to see a locally made production of some sort in the last year, so there is no question that the industry is in good heart. Of course part of the reasoning behind providing this support is that it showcases New Zealand scenery and exports our culture to the rest of the world. But I can’t think of any “large budget” local production that has done this since Lord of the Rings (although there has been several smaller budget projects). Animated productions like Halo or Tintin certainly do not showcase New Zealand, although they do help to maintain the resident skill pool.

The bottom line is that there needs to be a full economic analysis before any increase of public investment in the film industry. I’d love to know how many permanent full-time jobs have actually been created for actors, animators and technical support crews over the last five years. My understanding is that many of the crew positions are sub-contracted to itinerant workers on a part-time basis, some of whom depart the country between gigs. What has been the net increase in the tax base as a result of the growth of this industry? Given the complex nature of foreign controlled licensing and distribution, what is the actual export return from a NZ-made feature film?

Film receives most favoured status because of the perceptions of glitz and glamour and because film producers are very good lobbyists. And what politician could resist an offer of front row seats on opening night?

Research Funding Equity Sought by CRIs

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Outspoken AgResearch CEO Andy West has this week raised the volume level over the ongoing debate on the issue of funding uncertainty for Crown Research Institutes (CRIs).

University based research organisations receive public funding based on periodic review of their output performance and through the Marsden Fund. The current arrangements mean that a university PhD project on “Bogan Westies” can theoretically get funding whilst a three year CRI study on bee mites or biofuel feedstock crops might not. The CRIs argue that this is unjust.

The sometimes humourous and occasionally “ACRI-monious” shouting match between Universities and CRIs spills into the public domain periodically. But the debate has a more serious side. It’s bad enough that universities are competing with each other for funding and students but it beggars belief that our national innovation system pits talented researchers against each other in Darwinian fashion. Inevitably some worthy research projects will miss out on resources.

For several reasons I’m entirely in favour of blue skies research that explores social issues or esoteric science which may have no immediate obvious commercial return. Firstly we need to cultivate a pool of intellectual talent across the entire research spectrum and not just in the physical and biological sciences. Secondly, non-commercial research sometimes has unexpected commercial applications and frequently involves building international linkages with agencies and researchers abroad, which can lead to profitable collaborations downstream. Finally supporting a diversity of research is the responsibility of any open and inclusive society.

But as AgResearch point out in their 2020 blueprint for agricultural sciences research in New Zealand, over half of our national income is derived from exporting agricultural produce. Is it fair then that agricultural research organisations feel so hard pressed obtaining secure and long term funding for research that underpins the growth and especially the sustainability of this enterprise?

Digital Strategy Not Just About Laying Fibre

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A while back I waxed on about how we needed some clear thinking around the Digital Strategy Summit. Now the economic development ministry has appointed a high flying former Telecom executive to manage the Digital Strategy policy revamp and talk up the strategy event to be held in November.

My concern about the summit event is that at $795+GST for registration (plus airfares and accomodation), the consultation process is aimed squarely at large corporate concerns. These firms are likely to be primarily interested in promoting their agendas in terms of either preserving the existing network hegemony or else positioning themselves for any government funded broadband rollout in the future.

The Digital Strategy was supposed to be about building capability around connection, community and content. But it is not clear if ordinary webizens will get access to the online forums and wikis being proposed. So I’d like to know who at the summit will be representing the wider community and the developers of digital content. If the summit fails to engage at grassroots level then surely it is over-looking the fundamental intent of Web 2.0?

There is some relief in sight however. TUANZ members are being offered a pre-summit event early November in order to collate their viewpoints. There is also now a report suggesting that a limited number of discounted places at the summit will be offered to “community organisations and young people”. The summit itself will be webcast, so interested parties and those of us without corporate charge cards can at least adopt fly-on-the-wall status.

Are We Overinvested in All Blacks Brand Culture?

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I’m not qualified at all to comment on the detail of the All Blacks embarrassing departure from the World Cup. In fact I don’t even follow the game very closely. What I do know is that as a nation we are far too psychologically invested in the fortunes of fifteen sportsmen.

The NZRFU marketing machine has to accept full responsibility for putting the team on such a high pedestal, in order to feather its nest with huge sums in sponsorship. In fact I’m surprised the team members have time to attend regular practice sessions given the demands to appear in a wide variety of TV commercials promoting airlines, credit cards, sportswear, food and beverages and even underpants. As an “iconic” brand the All Blacks have over-promised and under-delivered. It all looks rather like marketing hype gone mad.

But what concerns me most is that so much of our national self-esteem hangs on the All Blacks performance. New Zealand has so much more to offer than rugby, hakas and bubbling hot mud pools, but we cannot seem to move beyond these cliches. It’s cringeful at times. 

If our emerging technology companies could secure even a tenth of the media coverage and financial backing that the ABs get, imagine how beneficial this would be to the economy. What if our brightest science researchers could get proper long term funding sponsorship and didn’t have to head overseas to make a living.Then we really would have something to celebrate. We need some new heroes.

Will NZ Miss the Pacific Cable Boat?

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Apparently Google are engaged in talks over investing in the Unity cable project aimed at spanning the Pacific Ocean with terabits of new bandwidth. It could turn out to be a wise investment on two fronts. Firstly there is obviously a return on the revenue generated by digital traffic. But secondly it ensures that the burgeoning middle classes of Asia-Pacific have ongoing high speed access to applications hosted in America, amongst which Google is aiming to become the provider of choice.

A lot of commentators are talking like Google is setting itself up as a telecoms operator but this is not true. Google may have the cash, but it does not have the expertise to contemplate such a project. The word is that Google are in fact talking to an Australian telco about the new venture.

 Unity is not the only initiative aiming to add capacity across the Pacific. Verizon are working on a project linking to China and North Asia and Southern Cross have just commenced a major upgrade of the cable that links Australasia to North America. All of which is good for consumers because as domestic networks improve, so the demand for international bandwidth increases.

The slow rollout of domestic high speed bandwidth is often upheld as the reason why we will never see a Google or a Bebo spring out of New Zealand. But it looks more and more like a U.S. centric hub and spoke kind of network, everywhere you look now. Naturally providers of innovative global digital content and services then look to the United States as the preferred site to host their offerings. I think that is why we do not yet see anything special built and hosted here in NZ, despite the fact that digital creativity abounds.

In fact there was a visionary project about five years ago called “First Light” that aimed to set up a direct NZ-Singapore cable. The project failed because of difficulty in negotiating “last mile” access at the Singapore terminal. In retrospect it is now clear that New Zealand missed a major opportunity.

Crunch Time for Buy NZ Made

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For the last few months I have been wondering why my favourite crunchy peanut butter just doesn’t taste quite as good as it used to. Then recently I heard a radio interview that mentioned how Sanitarium had shifted much of their operation to Australia and then subsequently outsourced peanut butter production to China. Sure enough – upon inspection I noticed three words in tiny print on the bottom corner of the label – “Made in China”. I recoiled in horror.

Now apparently because of sensitivities around trade barriers, there is some cautiousness about enforcing the labelling of some products with country of origin. So we now have (another) paradoxical situation. On the one hand the government has committed to pursue the “Buy NZ Made” policy, whilst on the other it feels obligated not to offend trading partners who are currently flooding the nation with cheap (but inferior) imported goods.

It sometimes feels like we are giving away our sovereignty when we look at how much of our consumer goods are now sourced from offshore. I actually don’t mind paying a few cents more for a New Zealand made food product that tastes better, because I know that it won’t end up in the waste bin half finished!

But is the “Buy NZ Made” campaign going to make a difference? I’m not sure that you can legislate to control consumer preference. Yes I would like to see more “NZ Made” labels on local products, so I can make an informed choice. But retailers have already got the message loud and clear from their customers and are voluntarily labelling goods anyway. And isn’t there already an existing organisation with a recognised logo? Why spend a bunch of my tax dollars reinventing the wheel?

The good news is that Sanitarium have just announced that they intend to recommence producing a line of traditional “more local” brand of peanut butter. I wonder if they appreciate the irony in the fact that it will still be manufactured in the Australian plant?

A Mighty Kauri Has Fallen

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The news of Sir Angus Tait’s passing will no doubt be greeted with much sadness throughout the New Zealand business community, but especially that of the Canterbury region. Tait was appropriately regarded as the founding father of the local electronics industry with his firm Tait Electronics rising to become an export pioneer and role model for many across the ICT sector. That Canterbury has a thriving technology sector is in large part due to the family of firms that arose from and clustered around Tait.

Even at the age of 88, Sir Angus was still actively involved in the business and was often called upon to speak at industry events, meet with business delegations and sit on various boards. Tait was also passionate about reinvesting into research and development and helped to broker linkages between academia and industry. Few individuals have played such a pivotal stewardship role in the technology industry and he will be sadly missed indeed.