ICT trade opportunities are a ‘niche’ says MORST

An opinion paper from the Ministry of Research, Science and Technology suggesting ICT will never be more than a niche business in New Zealand has attracted a mixed reaction from industry sources.

Some see the paper’s views as a surrender to continuing dependence on agriculture, but others see opportunities for ICT in application to the primary sector and its increasing post-processing component.

Xsol head John Blackham is in the former camp, labelling the report “a poorly produced piece of work that looks back to the past.”

“The primary sector, including products made from primary sector outputs, still generates 72% of our total goods exports,” the report says. “Unsophisticated wool, lamb, beef, cheese and butter alone were over 75% of the total in 1965. These fell to below 25% by 2005 [partly reflecting more post-processing of these commodities].” Other new primary sector items have largely replaced them, for example, wood and wooden products, milk powder, horticulture and fish.

“It would be a mistake to shift resources towards the standard global manufacturing model if that distracts us from building on our proven comparative advantages in favour of new sectors where our long-term sustainable advantage is unproven, except in certain specialised niches,” MORST says.

“No matter how promising a brand-new sector may be, steady smaller gains in an existing huge sector will count for more, over a long time.”

The report goes on to make comparisons in export volume between 1965 and today, which Blackham says is “totally misleading”.

Blackham says he has seen no sign that new industries in New Zealand are blindly following overseas models, as MORST suggests. “Every country has to forge its own way in the world” and New Zealand’s high-tech industries are doing that, he says. “If I have a criticism, it’s that this effort has been too half-hearted.”

The document emphasises how hard it is to get a toehold for manufactured exports and this is “quite sensible”, Blackham says, but this is far from the kind of opportunity the software industry sees. “What makes software successful is people and their brains. New Zealand is one of the best places to house happy brains.”

After pointing out the difficulties in selling manufactured goods in the face of international competition, MORST extols aluminium as a significant “energy-based export”, which Blackham sees as contradictory. New Zealand won’t make its fortune selling aluminium or aluminium ladders to the world, he says.

Having said the best opportunity for high-technology is in “existing sectors”, the report then points to “tourism, software and film special effects” as providing some of the best opportunities for service-based exports. “It contradicts itself in several places,” says Blackham.

ITANZ chief Jim O’Neill takes a less sceptical view of the report. “I don’t have much of an issue with it. Our industry is a good one, but, let’s be realistic, we’re not going to generate a New Zealand Microsoft or Oracle.”

The ICT industry might profitably take MORST at its word and seek to be part of the effort to add value to primary produce, he says. That would parallel what ITANZ has been trying to do, with its Centre for Advanced Government Applications, seeking to export software originally developed for government agencies. “That could be a blueprint for what we could do in other sectors of the economy such as dairy and fishing.”

Garth Biggs, head of the HiGrowth Project, formed to stimulate growth in the ICT industry, says that while “I absolutely understand the need to support primary industry, I would have liked to see MORST take a more positive view of ICT.”

Biggs points out that primary-industry exports will always be affected by trade tariffs and import quotas. By comparison, trade in high technology is much freer. “There’s no one out there obstructing exports from Navman because they need to protect their domestic GPS industry.”

Economic development minister Trevor Mallard says the MORST report does not signal a change in government policy from three years ago, when ICT was identified, along with biotechnology and the “creative industries”, as one of three potential engines of growth.