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Reinventing Paradise By Rod Oram February 2011 We New Zealanders have the potential to become a role model for

other nations, succeeding where they and we fail so often today on many social, economic and environmental issues. We could become the first country to earn a First World, sustainable living from our natural environment; through myriad small, entrepreneurial and international companies; supporting and being supported by a just, multi-cultural society. We would build the great attributes of our people and land into a new New Zealand. It would look much like our nation today but bolder, stronger, more certain of its contribution to the worldand more successful. We would remain, of course, very much ourselves. Who would ever want to be a pale imitation of some other nation? We are shaped by who we are as a people, what we are physically as a country and where we are half a world away from major centres of population. Our difference is our gift to the world. We are inventive and creative; enterprising because of our remoteness; enlivened by our distinctive cultures; in touch with our land and sea; small but still able to efficiently run a full-service nation. In a fast-homogenising global culture in which one product, one country looks ever more like another we are an attractive alternative, offering a different way to lead our lives, to nurture our world. But do we believe it? Do we believe our potential as a people and nation is so great? History tells us we should. We have always been over-achievers, as James Belich shows in Paradise Reforged, the second volume of his New Zealand history. The fact that New Zealand authors have published internationally some 1,500 novels between the 1880s and 1990s is just one of his many examples. And we were once a wealthy nation until we neglected to evolve our economy when the worlds changed dramatically. We have had to scramble from the 1980s onwards to catch up. But at best we have only slowed our decline. We continue to slip into the bottom third in the rankings of developed countires. Australia continues to pull ahead of us. Its GDP per capita is now 30% greater than ours. So, we still have a long way to go before we are a wealthy nation again. Of all developed countries we are the most dependent on our natural environment for earning our living.

That is where our future still lies. But we have much to learn about how to earn a First World living from it. But why should we bother to rise to these tough challenges? After all, we are more or less happy with our lot, judging by opinion polls. We arent bad for a little country, are we? is a widely held view. Note the question mark. The doubt is justified. Complacency is dangerous. We are rapidly losing our ability to pay for the healthcare, education, science, research, infrastructure, environmental standards and other First World comforts we expect. And it will get harder, if only for demographic reasons. Over the next 40 years, the proportion of New Zealanders over 65 years old will rise from one-in-eight today to onein-four. Reflecting a bigger population, the number of people over 65 will treble to almost 1.3m. As a result, healthcare and superannuation costs will rise dramatically, according to longrange Treasury forecasts. Each will double to around 11% of GDP, up from 5.5% each in 1996, placing a heavy burden on the shrinking pool of taxpayers still working. We are already feeling the strain. Within 10 years, our slipping standards of education and science will no longer support an economy capable of competing on the world stage. In a very real sense, we are running on empty. We are failing to earn a good enough living in the world economy to invest in and maintain those standards. There are two main reasons: low value commodities still account for some 60% of our exports; and our exports have remained stubbornly stuck for the past three decades at around 30% of our economic activity. Many business and political leaders, including the current government, believe our very best opportunity is to supply more food to the world. After all, they argue, thats what were best at now; and the worlds population is likely to increase by 50% to over 9bn people by 2050. World food production needs to grow by 50% by 2020 and 100% by 2050. This, though, is fatally flawed analysis. Even if food prices double, that boost would only reduce our wealth gap with Australia by one-third. But prices wont double. Much greater supply will moderate prices, thanks to politics prompted by food riots and famine, science driven by necessity and efficiency, and a vast increase in land farmed driven by opportunity in countries such as Brazil, the former Soviet Union and the US. Worse, our ability to increase our volume of production is severely limited by our geography and high land and labour costs. Quite simply, there is no future in commodity food farming for us. Nor is there much of a price premium from offering great quality, food security, traceability and branding.

The truth is we are poor at creating value from what we do in agriculture, tourism and our other main economic activities. Even more troubling is our inability to capture the value we do generate. For example, of all the profit to be earned from selling lamb to British consumers, UK supermarkets take about 70% leaving the remaining 30% to be shared by international shipping companies and New Zealands meat processors and farmers. Yet, our opportunities to participate in the global economy have never been greater. The increasing inter-dependence of national economies means we have access to bigger, richer and more diverse markets than ever before. And for the first time in economic history, micro companies employing, say, a few dozen people typical of New Zealand businesses -- can participate. They can play to the world by tapping into technologies such as the internet and into global financial and trade systems. I know dozens of companies around New Zealand that fit this model: they trade in more overseas markets than they have employees. One example is Rocklabs, an Auckland manufacturer of mine laboratory equipment. Even better, the world wants what we can produce in abundance from our natural environment. This is not narrowly our traditional agricultural, fishery and forestry products. But rather, it is a broad definition embracing the likes of tourism, film-making, culture, education and many branches of technology -- in other words, anything shaped by our natural environment. For example, Airways, the state owned enterprise, has developed world leading technology for trans-oceanic air traffic control. Thats no surprise since it is responsible for running 1/15th of the globes airspace. The challenge of covering such a large area with few people drove it to create highly efficient software systems and management techniques. Airways believes that within a few decades, the whole of the worlds airspace will be controlled by three or four consortia. It plans to be in one of themand that its transoceanic air traffic control system will be the technology used. Crucially, these global opportunities also embrace our existing primary sector. We must continue to farm, fish, grow trees, vines and other plants. But we must shift radically from commodity food to bioactives, nutriceuticals, lactopharmaceuticals, renewable fuels from plants and a multitude of other high science products and ecosystem services from our natural environment. And rather than believing physical production here is our only outlet, we must also learn how to earn more from the science, intellectual property, services and overseas investment by New Zealand companies in these opportunities. But we can only realise such opportunities if we apply far more science and commercial skills to all we do. We have to produce highly sophisticated goods and learn how to

establish direct relations with consumers through excellent branding, marketing and distribution. None of this is easy. We are unique among nations in our goal of earning an excellent living from our natural environment and in doing it through small, entrepreneurial and international companies. While we can learn from other countries, we have to pioneer new business models and new skills. How, for example, can our small companies attract foreign capital to grow but without losing ownership control? How can small companies break into large markets like the US? How can New Zealand executives, who typically are skilled generalists capable of performing several functions simultaneously, relate to their highly specialised but narrow counterparts abroad? How can our companies turn their New Zealand base and identity into a strength rather than trying to hide them for fear of losing credibility? It is literally only in the last few years that ambitious New Zealand companies have started to develop these models and skills. Icebreaker in clothing, LanzaTech which makes ethanol from industrial waste gasses, Animation Research in realtime tracking systems for sporting events and Comvita in biooactives from manuka honey are just a few of the exemplars. When we have developed these models and skills -- and have many great successes to demonstrate their worth we will have made a crucial contribution to world business. We will show how small, entrepreneurial companies can succeed internationally by playing to the inherent strengths of their economies and cultures. No longer will the fruits of globalisation be harvested mainly by large companies from major economies. Interdependence will start working for many more people. While we face decades of endeavour to achieve these towering goals for New Zealand, none of it will happen unless we significantly change our view of the world in six significant ways. - Realism: We need to become far more realistic about the great opportunities for us in the world; about how hard but doable are the challenges; and about the serious consequences for not taking up these challenges. We will slide rapidly into economic anaemia and, as a result, social fragmentation. - Ambition: We need to be far more ambitious in the goals we set ourselves and in the standards we demand of one another. We have to be absolutely world class in all we do. We know we have succeeded when we earn a very good living at 90cUS to the New Zealand dollar. - Environment: We need to have real commitment to the environment. Our lip service to date has given us air, land and water which are unconscionably polluted for a country so thinly populated. It is scandalous, for example, that we are the only developed country with no fuel efficiency standards for vehicles or that intensive farming practices are still

damaging waterways. Our clean green image is a myth waiting to be exposed. If it is, our international reputation will be seriously damaged, perhaps irreparably. - Sustainability: We need to build a sustainable country, not just in the environmental sense but also in terms of economic, social and cultural values. Only if our businesses, our communities and our cultures work hand in hand in enduring ways will we realise our extensive, distinctive potential. - Commonality: We need commonality of purpose across all cultures and communities. This does not mean some grand, national strategy. Rather that we acknowledge each others aspirations yet find common ground on which we can build together a new New Zealand. This may not come naturally to New Zealanders. Too often, gain by one interest group comes at the expense of another. Moreover, our cultures serve us poorly when we try to resolve conflict within and between communities. Business and politics are particularly prone to letting unresolved tensions build within organisations until they wreak havoc on the people and institutions. - Leadership: We need a new kind of leadership. Historically, New Zealanders have responded best to dominant individuals. But two dangers arise: of being led astray; and of a lack of personal commitment within society to the leaders grand plan. Far better would be leadership that springs naturally from within each small group, business, industry, family, community or culture. These people, passionate about they can achieve, what they can contribute to New Zealand, about what New Zealand can achieve what it has to achieve these people would inspire and encourage the people around them, helping them find ways to maximise their own, and thus the nations potential. When we weave our dreams into a rich tapestry that boldly defines New Zealandand then make those dreams realwe will offer the world a better way to live. ENDS