Section 4: Business Environment Outcomes
This section describes the outcomes we seek to achieve. We cannot achieve these outcomes on our own: many of them require contributions from Crown entities and other departments. However, the Ministry does have a major role to play in achieving all these outcomes, either through developing policy for implementation by other agencies, or through the services provided by our own Business Services branch.
Economic development is a complex business, and our Ministry undertakes a wide range of activities in order to promote it. We have chosen to portray this breadth of activity in the range of business environment outcomes to provide clarity of focus for our staff.
This section concludes by outlining the work that the Ministry is doing to research and evaluate the impact of its work on the business environment.
Outcomes and Their Rationales
| Outcome A - | Economic development activities are better aligned across central and local government |
| The more that policies affecting growth are aligned across government departments, Crown entities and local government, the greater the likelihood of improving New Zealand's growth prospects. For information on the important alignment issues and our priority work in this area, see Strategic Priority 1: "Facilitate the alignment of economic development activities across the public sector". |
| Outcome B - | New Zealand's international connections facilitate sustainable economic growth through increased international trade, foreign investment and knowledge transfer |
| International connections enable growth. This is particularly true for New Zealand, because the domestic market is small and distant from global markets. For information on the importance of international connections, the issues New Zealand faces, and the priority work we are doing in this area, see Strategic Priority 2: "Improve international connections, particularly with Australia". Note: this outcome is shared by the Ministry of Foreign Affairs and Trade. |
| Outcome C - | Businesses are more capable of innovating and making the most of market opportunities |
| Innovation and entrepreneurial behaviour are fundamental drivers of success and productivity improvement in firms of all sizes. For information on our priority work in this area, see Strategic Priority 3: "Stimulate enhanced entrepreneurial and innovative capability of NZ firms". Note: this outcome is linked to MoRST's outcomes for the Research, Science and Technology Sector. |
| Outcome D - | National and regional networks enable improved knowledge transfer and co-ordination of economic activity |
| The international connections outcome above highlights the importance of effective connections to facilitate trade and knowledge flows across borders. The same is true of domestic economic activity. For information about our priority work in this area, see Strategic Priority 3: "Stimulate enhanced entrepreneurial and innovative capability of New Zealand firms". |
| Outcome E - | Businesses and consumers have access to reliable infrastructure services at reasonable cost |
| Provision of infrastructure is critical for growth because services provided using network infrastructure, such as electricity, gas, water and transport, underpin all aspects of economic and social activity. For information about our work relating to infrastructure, see Strategic Priority 5: "Businesses and consumers have access to reliable infrastructure services at reasonable cost". |
| Outcome F - | Business regulation is easy to comply with, and balances the costs it imposes with the benefits to the community |
| Regulation affects incentives for economic activity. It is often difficult to find the appropriate balance between the goals that regulation seeks to achieve and the costs it imposes . For information on our work on the regulatory environment, see Strategic Priority 4: "Improve the regulatory environment for business". |
| Outcome G - | Businesses and consumers use information held by the Ministry, or required by laws it administers, to help them make well-informeddecisions |
| Information on businesses and markets is necessary to create confidence in those markets, to ensure that participants can make good investment and purchasing decisions, and to minimise undesirable conduct such as fraud. The Ministry advises on the law that creates obligations on market participants to disclose information. This is part of ensuring that markets work effectively, and so is closely related to work conducted under outcome H below.
We also manage a range of databases and provide information on a variety of different topics to assist people to make well-informeddecisions. We target some of our information provision through dedicated media channels, such as Pacific community radio. We are also increasing our use of technology to place much of this information on the internet, thus improving access and reducing the costs of that access. |
| Outcome H - | Business and consumers have confidence in the integrity and effectiveness of markets |
| For markets to work effectively, businesses and consumers need to have confidence in their integrity and effectiveness. For businesses, this means having confidence in the rules and institutions that govern the business environment, including investment. For consumers, this means having confidence in the products and services they purchase, confidence in the parties with whom they transact, and confidence in the market rules and institutions that govern their transactions. Without this confidence, businesses and consumers are less likely to participate actively in markets, or will spend time and effort protecting themselves against unknown dangers. The Ministry provides advice on a broad range of consumer and investor issues relating to market regulation. |
| Outcome I - | Māori realise more of their economic potential |
| The most effective way that Māori will realise more of their economic potential is through increased educational achievement and labour market participation. The Ministry's work to enhance the general business environment is likely to have a relatively smaller impact - particularly because of the small size of the Māori business sector. However, there are certain characteristics of the Māori community and the structure of Māori businesses - for example the tradition of tribal ownership of assets - that may provide opportunities for a more tailored approach by the Ministry to certain applications of business regulation. The Ministry has allocated to one of its Directors responsibility for leading the identification of these opportunities and building our capability to address Māori economic development needs. |
| Outcome J - | Intellectual property rights support investment in innovation and the sharing of ideas |
| Intellectual property laws underpin innovation in New Zealand. By ensuring that people who generate innovative business ideas can benefit commercially from them, these laws provide incentives for continued innovation and invention. Innovation is also generated through access to knowledge and ideas, and building on the work of others. Legal protection for intellectual property must take account of all of these factors, by aiming to reward innovators while encouraging the dissemination of new ideas.
The Ministry is responsible for intellectual property policy and also offers fast-turnaround intellectual property registration services to support entrepreneurial activity in New Zealand. |
| Outcome K - | The Ministry's management of Crown resources supports business development and sustainable growth |
| Crown resources that the Ministry has particular responsibility for, such as the mineral estate and the radio spectrum, need to be managed and allocated to maximise opportunities for economic development. The Ministry advises on the management of these assets and allocates the rights to utilise or exploit them, taking into account the Crown's commitments under the Treaty of Waitangi. |
| Outcome L - | Government encourages a culture of enterprise in New Zealand |
| Culture has a strong influence on the behaviour of individuals and firms. New Zealand has a track record of innovation and creativity, but there is also evidence of what some commentators refer to as the "tall poppy syndrome", which may act as a constraint on our growth potential. The Ministry seeks to support and enable the efforts of entrepreneurs, and to celebrate their spirit of enterprise, to help encourage a culture that is more supportive of business. Work to better understand the impact of culture on entrepreneurship is considered more specifically under SP3. |
| Outcome M - | Competition regulation promotes dynamic and efficient markets |
| Businesses can start and thrive, and consumers get a fair deal, when anti-competitive behaviour is restricted and firms compete for business in well-functioning markets and under transparent rules. The Ministry works to ensure that markets are regulated fairly and effectively, and that the competitive process is protected in a way that promotes dynamic markets. |
| Outcome N - | Businesses in New Zealand are governed and managed responsibly |
| Businesses, their managers and directors need to be accountable to their stakeholders. Regulation both prescribes this accountability and ensures that shareholders have the information they need to hold managers accountable. The Ministry advises on the rules that establish accountability and promote responsibility, and the institutions and powers required to ensure effective monitoring and enforcement of these rules. |
Research and Evaluation
The economy is a complex system, and it can sometimes be difficult to establish robust empirical links between particular policies and improved economic growth. There are many variables involved, and because it can take years or even decades for the impact of some policies to become manifest, many external factors come into play. Hence there is always going to be some degree of judgement involved in deciding on the best policies to pursue. This underlines the importance of an ongoing process of research and evaluation to support our focus on "managing for outcomes".
The Ministry is focusing its evaluative activity on three broad areas.
Indicators of Growth and Innovation
The Government is developing a broad suite of sustainable development indicators covering social, environmental, cultural and economic outcomes. An initial set of 17 economic indicators was set out in the 2003 Growth and Innovation Framework Benchmark Indicators Report. The Ministry's role has been to work with other agencies to agree the indicators to be used, and then prepare the report using data collated by Statistics New Zealand, the OECD and other national and international agencies.
The indicators are intended to:
- track progress towards the Government's goal of returning per capita income to the top half of the OECD;
- paint a picture of the economic environment that results from actions taken by businesses, sectors, regions and central and local government; and
- pick up signs of broad structural change in New Zealand's economic performance, including productivity, investment and trade.
The indicators measure change in per capita income growth, but more importantly in the factors that underpin these changes. This suite of indicators is still evolving, and currently includes measures of:
- investment in knowledge and knowledge creation;
- translation of knowledge and ideas into commercial success;
- integration with the global economy as reflected in trade and investment flows and the ability to attract and retain skilled and talented people;
- production and export of higher value-added products and services; and
- performance of the enabling sectors identified by GIF as being of particular importance.
Research
The Ministry has well-developed hypotheses about how our work impacts on the business environment and the outcomes that we seek to achieve. These are based on the theoretical and empirical growth literature and on our own practical experience of economic development. Improving our understanding and our judgement requires ongoing research into which policies and programmes are likely to work best to improve growth. This can help government to develop new policies and to re-focus existing policies. Over the last two years the Ministry's research capability has been augmented by the creation of the Medium Term Strategy Group. This Group has developed high level econometric and research capability, and is focusing on research associated with the Ministry's Strategic Priorities.
Focused Evaluation
Where practical and cost effective, the Ministry also needs to evaluate which policies and programmes are producing good results in practice and which are not. These learning processes help us to ensure that our resources are placed in the areas where we are most likely to be effective in promoting growth.
The Ministry has an ongoing programme of focused evaluation across its activities, and we are taking steps to improve our ability to support this programme. For example:
- the Ministry of Consumer Affairs has recently established a dedicated research and evaluation capability; and
- the Ministry's Research, Evaluation and Monitoring Unit (part of the Industry and Regional Development Branch) is building up best practice knowledge based on experience with industry and regional development programmes, and uses this knowledge in its evaluation of programmes delivered by New Zealand Trade and Enterprise.
Together with the development of GIF indicators and the Ministry's strategically focused research programme, this work is building our understanding of what policies are most effective in improving the environment for business.
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