Economic transformation - growing our prosperity

Speech to opening of Economic Development Association of New Zealand (EDANZ) conference, Dunedin Convention Centre

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The Labour-led government sees raising the incomes and quality of life for all New Zealanders as central to our work.

The government's focus on economic transformation reflects our commitment in this area. It recognises that while we can all celebrate a period of sustained, strong economic growth, there are still significant challenges in the New Zealand economy.

We are committed to working with industry sectors and regions to build on our successes to date - and to work to further transform New Zealand into an economy that is export led, innovative and high wage.

It is widely accepted that one of the key challenges for New Zealand is our sluggish productivity rates relative to our comparator countries.

There is no simple reason for our productivity performance, and remedying it requires a co-ordinated and deliberate approach across government.

Our economic transformation agenda is aimed at overcoming some of these barriers, through five complementary and linked themes: globally competitive firms; world class infrastructure; innovative and productive workplaces; environmental sustainability; and Auckland - an internationally competitive city.

Today I intend to outline how I see regional economic development fitting within this 'bigger picture', and I want to start a process of dialogue with you around what regions can do to support these national objectives.

Regional economic development can and does make a strong contribution.

The Regional Partnerships Programme, run by government agency New Zealand Trade and Enterprise, has been an important part of re-connecting the government with regional economic development.

It has enabled regions to achieve a lot of success. Every region has developed a strategy, and we now have 19 Major Regional Initiatives around the country.

I think there is now a much stronger recognition within regions of the need to have a focus on strategic planning, a focus on core strengths of the economy, and not just on serving local needs.

Many regions are looking at the value that can be added through facilitating collaboration between for example, science and the key industry sectors in your region. For example, Food Hawkes Bay and the Centre of Applied Engineering in Taranaki are linking business with education to build on their regional strengths.

The six years of the Regional Partnerships Programme have also seen significant changes in government policy. There are now a wider range of government programmes and services delivered in regions. These cover a range of activities from skills and training through to broadband.

On top of this the Local Government Act has provided much greater scope for communities to set the priorities for their regions.

A major impetus of the programme when it was first introduced was also the low growth and low employment that certain regions were experiencing.

There was a need to make sure regions and their communities were not being left behind, and that local solutions were found for local economic problems, with a more productive use of local resources and local strengths.

We are now really seeing the fruits of that work - and some of those regions are now surging ahead. The National Bank survey for the year to June, for instance, shows Northland growth at 2 per cent, Gisborne at 3.7 per cent and West Coast at 3.7 per cent - compared to Auckland on 0.9 per cent, Wellington on 2.5 per cent and Canterbury on 1.9 per cent.

So for all these reasons, plus our growing understanding of the constraints on the economy from a national perspective, it is now essential that we bring our regional economic development policy up to date with today's environment.

Regional economic development should be seen as a blending of local needs and goals with the national priority to transform the New Zealand economy.

Yes, you have a responsibility for the economic wellbeing of your communities, but you also have a role to play in New Zealand's international competitiveness.

Given the economic challenges facing New Zealand, and what we know about what is required to lift our overall standard of living, it is essential that the government's investments in economic development are made with an outward focus - and an eye to success when it comes to competing in the global marketplace.

I want to build on the momentum established through the Regional Partnerships Programme, as I think there is an important regional contribution to our international competitiveness.

Therefore I am proposing some changes to the way the government approaches and supports regional economic development.

Regions have a key role in developing a business environment that supports the development and retention of highly productive, outwardly focused, and globally competitive firms.

For instance, businesses need good quality infrastructure, a skilled workforce, and support for entrepreneurship and innovation - at the local and at the national level.

A key role for regions will be to assess what can be influenced at the regional level and how you can make best use of the range of other government activities and support available.

Priorities will differ - in some cases it may be increasing participation in the labour market, or improving infrastructure, or supporting the development of clusters of firms.

The key point is you need to develop a strategy and prioritise and focus. We want these strategies to be living documents that help shape a range of activities in your regions.

The Ministry of Economic Development has just released some draft strategy guidelines to help you develop powerful strategies, and I would encourage you to have a look at their website for this draft material and comment on it.

Enhancing your regional business environment means involving and influencing a range of local players and will require a lot of collaboration within and between regions.

Local government is an obvious key contributor, and it is therefore critical that your local council takes an active interest in regional economic development, so that strategies can be implemented in part through local government plans.

In order to make it count from an international perspective - and that is the game we are in - scale is critical.

I think you will all agree 26 regional partnerships are too many for a country the size of New Zealand. It is certainly too many for government to participate in, if the relationships are to be of the quality that I expect.

There is an argument that each region should have at least 100,000 people in it. I am not suggesting that we simply base our policy on arbitrary figures, but collaboration and scale are two key elements, and this requires moving to fewer regions.

I think having about 14 regions is more appropriate and that in many areas the regional council boundaries work.

This is a big proposed change for the Regional Partnerships Programme, but one that I believe is essential if regional economic development is to take the next step upwards and really make its mark on how we do as a country offshore.

The policy change does not mean that the government thinks there should be the same number of economic development agencies. That is a local issue.

The government has no role in dictating what arrangements will work - you know better than us, and we don't want to cut across established linkages.

What we do want to see is that where government support is offered it is offered with national as well as regional benefits in mind and this is what drives the requirement for scale.

A lot of you have worked closely with New Zealand Trade and Enterprise over the past six years and this government agency will continue to play an important role.

But I would like to see more regions working closely with some of the other government agencies. For instance the Tertiary Education Commission, the Department of Labour and Ministry of Social Development have a number of regionally based staff who are actively involved in advising on, and assisting with your labour market needs.

At the regional level an Economic Development Agency should be particularly well positioned to understand the aspects of the business environment in your region that need improvement, and which public or private sector partners are best placed to facilitate this.

Partnering and collaboration is just as, and perhaps even more important than funding for projects.

The Major Regional Initiative process has proved a great success in building collaboration and sharpening the focus on what matters for your regions. But to support economic transformation, we need very high quality projects that support both regional strengths and national priorities.

Therefore I intend to introduce contestability into this process, to ensure that we are supporting the very best projects from a national perspective.

This will involve a pool of funding, decision-making probably twice a year, cross-referencing to other areas funded by government, including the Centres of Research Excellence, Tertiary Partnerships for Excellence, Foundation for Research, Science and Technology funding and the Internal Affairs facilities.

It will mean a shift from a regional entitlement approach to one where the contributions your region can make to national priorities is a much more important factor.

To summarise, government is not interested in telling you how to do regional economic development. But I want to see how we can better translate national level goals like transformation of the economy down to regional level actions.

Regional economic development needs to be seen as an ongoing process of boosting the quality of the business environment in each region.

There is significant detail still to be worked through, and I see this speech as the start of that process. I also recognise that any changes will take time.

I am interested in your feedback - Ministry of Economic Development officials have a stall here so please take the time to visit and pass on any views you have on what operational aspects of the programme you feel could be improved.

I note that this conference is titled as "the EDA of the future". Both local government and economic development agencies face significant challenges in undertaking regional economic development and it is great to see the sector thinking about where it wants to position itself in the future.

ENDS

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