Is New Zealand asleep at the wheel?
By Conor English, Chief Executive, Federated Farmers of New Zealand
There are points in time that make a strategic difference. Hindsight identifies decisions that are made or not made that can have lasting impact. When Britain joined the old EEC in 1973, we failed to respond quickly. Thirty seven years later our meat industry is still ‘eurocentric’ with its associated concentration of risk. In 1975, the incoming National Government threw out Labours compulsory super scheme and replaced it with “pay as you go”. In my personal view, 35 years later, our capital markets and economy are suffering from a resultant lack of savings and capital depth. In the mid 1980s we had a Government, which said agriculture was a sunset industry and Wellington would become a Zurich of the South Pacific. Over quarter of a century later, Wellington’s airport is incapable of handling long haul aircraft. Wellington has been asleep at the wheel.
Internationally, the fall of the Berlin Wall in 1989 saw a seismic shift in European geopolitics – a strategic turning point for the globe. Similarly, events on September 11, 2001 further changed the world. Yett it was the strategic response to these events, particularly the monetary and fiscal policy response, which has had a lasting impact on New Zealand’s farmers today.
Former US Federal Reserve boss, Alan Greenspan, was heralded by many as a financial wizard. He was the architect behind a loosening of monetary policy, significantly after September 11. This, when combined with Bill Clinton’s loosening of banking regulations in 1999, saw the afterburners glow on a sub prime fuelled credit growth throughout America and other economies. Asset values climbed and everyone felt wealthy and confident.
But this largess couldn’t last and the bubble burst, with the fall of Lehman Brothers on September 15 2008. Europeans and Americans who had borrowed and spent way beyond their means, now have to face up to the unwelcome reality that there is no free lunch – if you borrow money, someone has to pay for it and someone has to pay it back. At the same time Asian economies had generally lived within their means and saved instead of spending like there was no tomorrow. This has led to a big shift from the West to the East in terms of wealth and economic power. This is not a new thing. Last century saw a similar shift from the British to the American ‘empire’.
Right now the demand channel for protein is strong and in this, the trend is our friend. However, the credit channel is weak. We need capital to grow and develop but our capital markets here in New Zealand are shallow, thin and expensive. Players from other nations are right now looking at the convergence of these two issues and what opportunities it may present for them. But what about for New Zealand? Are we asleep at the wheel?
I believe we are at another point in time where we need to take a strategic view. Our challenge is not just how we can capture more wealth for New Zealand from the physical products we produce and sell, but also from the Intellectual Property (IP) around our systems and the know-how involved. What can we patent? How can we monetise our systems? That’s what many who seek to invest in New Zealand agriculture system are after. Like Xero, or Microsoft, they are looking at how they can leverage that IP for greater profit.
I believe we need to formulate an ’agricultural intellectual capital strategy’. Currently our Government funded research capability is under ‘renovation’. We’ve already lost Nufarm to the Australians and John Nathan’s Glaxo in the 19th century to the British. Both started in Bunnythorpe out of physical primary production. Are we selling genetics IP without thought to how we get a long term return? Overseas capital is now looking at assets here. Maybe it could be beneficial if it enhances our ability to implement an Ag IP strategy that captures benefit for New Zealand and our farmers. Finland’s Nokia, with 123,000 employees in 120 countries, is an example of what success might look like.
We need to focus on the strategic issues that matter. Are we asleep at the wheel, like Wellington was when it forgot to extend its runway for long haul planes? Only waking up to realise the world has passed us by and a real opportunity lost? Let’s not sleep. Let’s find a solution so that our future generations can benefit from our Kiwi ingenuity.