Achieving Our Outcomes
This section describes the outcomes we seek to achieve and the types of output we will deliver in order to achieve them.
A. Economic Development Activities Are Better Aligned Across Central and Local Government
Rationale
The promotion of economic growth requires a comprehensive "whole of government" approach. The more that policies are aligned across government departments, Crown entities and local government, the greater the likelihood of raising New Zealand's ranking into the top half of the OECD and maintaining that standing.
The Government has given the Ministry a leadership role in facilitating alignment in pursuit of economic development and this is reflected in the prominence given to our Alignment outcome. In this context, we define alignment to be the:
co-ordination of policies and/or services delivered by different agencies to ensure the most cost-effective achievement of common or closely related outcomes
Like most departments, the Ministry already does a lot of work with other agencies on areas of common interest. We work jointly with other organisations to achieve many of our Business Environment outcomes, and we also work to influence and inform other agencies working on economic development issues. Examples of our joint activity include working with the newly-formed Trade and Enterprise New Zealand (and a number of other Crown entities) providing policy advice that helps guide their operations. It also includes joint policy development with other departments - such as the Ministry of Foreign Affairs and Trade and the Ministry of Research, Science and Technology - and our work on regional partnerships involving local government.
Our influencing role goes wider than this. Policies in the areas of tax, education, social policy and the environment - to list only a few - all have a major impact on the productivity of firms (and hence growth). The same thing applies to local government: firms are heavily influenced by local government transport and economic development policies, and by the implementation of legislation such as the Local Government Act and the Resource Management Act. All of these areas are clearly the responsibility of other agencies and the Ministry respects the primacy of their expertise and accountability. However, on behalf of the Government we have an interest in ensuring that the economic development agenda is given due consideration by agencies working in these different fields.
B. New Zealand's International Connections Facilitate Increased International Trade, Foreign Investment and Knowledge Transfer
Rationale
As the Government's Growth and Innovation Framework emphasises, international connectedness is an important enabler of growth. This is particularly true for New Zealand, because the domestic market is small and distant from global markets. Trading internationally not only gives firms access to larger markets: it also can lead to productivity improvements as businesses embrace new technologies and production methods in order to compete with foreign firms. Foreign direct investment (FDI) can also generate domestic productivity improvements.
FDI in New Zealand is an important source of improved management practices, new technologies (many of which are developed overseas) and marketing and distribution networks. It is also possible that increasing FDI may raise aggregate investment and help deepen capital markets in New Zealand.
Government has an important role in enabling and facilitating international trade, and in encouraging FDI when flow-on effects are important. The domestic regulatory regime, and the extent to which it is not co-ordinated with the regimes of our trading partners, can create transaction costs that impede business integration, exporting and foreign investment. There are also high costs associated with the early stages of exporting, and risks associated with rapid scaling-up of output and finding new markets. Some of these impediments to exporting can be reduced efficiently by:
- government-to-government negotiation to reduce tariffs and other barriers to trade, and to achieve closer market integration;
- government activity to promote trade (e.g. "Brand" New Zealand) and to co-ordinate and support the work of firms in establishing international business-to-business links and entering new markets; and
- government facilitating increased knowledge flows by actively pursuing international linkages.
The Ministry aims to ensure that, where appropriate, the regulations governing business in New Zealand are aligned with those of our major trading partners, reflect international best practice, and promote growth in our economy. The Ministry also aims to improve firms' capability to undertake export activities. This work is encompassed under outcomes C and D, below.
C. Businesses Are More Capable of Innovating and Making the Most of Market Opportunities
Rationale
As is discussed above, innovation and entrepreneurial behaviour are fundamental drivers of success and productivity improvement in firms of all sizes. For firms - or individuals - to be innovative and entrepreneurial they need to be able to identify opportunities, and have the capability to translate this knowledge into commercial success. This is partly about having effective connections and business networks (see Outcome D) but it is also crucially dependent on the knowledge and skills of the entrepreneurs and business-people themselves.
Government can help by supporting development of these skills, for example by offering education programmes and information targeted at the needs of different groups. These include:
- people seeking to enter or re-enter the workforce, or to change or upgrade their skills;
- entrepreneurs wishing to start a new business;
- existing business owners and managers who want to improve their general expertise in management, marketing or accessing finance; and
- businesses wishing to make the jump into export markets.
In our policy advice and our work with other agencies, the Ministry seeks to ensure that the provision of information, training and mentoring programmes meets the needs of those in the business and wider communities. We also seek to generate the maximum net benefit to New Zealand from the government's investment in these activities, for example by emphasising resource provision to particular types of firm or sector.
D. National and Regional Networks Enable Improved Knowledge Transfer and Co-Ordination of Economic Activity
Rationale
The discussion under Outcome B highlights the importance of effective connections to facilitate trade and knowledge flows across borders. The same is true of domestic economic activity. Firms can perform better if they can easily access information about new ideas and technologies, market opportunities, and suppliers. While government may not be well placed to provide much of that information, it can facilitate the development of networks and connections between organisations and individuals. These can enable knowledge and information to flow and help to co-ordinate business activity - and related government services.
All of this is particularly important in New Zealand, with its lack of dense population centres and relatively "thin" markets. For example, relative to their competitors in many other developed countries, New Zealand firms have less opportunity to network with people working nearby in related fields, fewer domestic suppliers, and poorer access to specialised services and providers. Government promotion of networks can partly offset these natural disadvantages:
- nationally, by identifying opportunities for synergies between related businesses (and researchers), and co-ordinating connections between industry players; and
- regionally, by building partnerships between government, businesses and iwi to share ideas and co-ordinate planning. Local clusters of related firms can also help build capability, encourage knowledge transfer, and allow shared use of resources for activities such as marketing.
The Ministry of Economic Development provides policy advice on the provision of government support for networks, and is also actively involved in the creation of partnerships at regional level.
E. Businesses and Consumers Have Access to Reliable Infrastructure Services at Reasonable Cost
Rationale
Services provided using network infrastructure, such as electricity, gas, water and transport, underpin all aspects of economic and social activity. Infrastructure shortages, unexpected price increases, or costs that are unreasonably high can impede production and deter investment, thus causing a detrimental impact on our growth prospects.
Accordingly, provision of infrastructure is critical for growth and is likely to be particularly important in enabling the concentration and specialisation of economic activity (and thus high productivity growth) in our major urban areas, especially Auckland. On the other hand, because economic activity in New Zealand is dispersed widely over a challenging geography, cost-effective infrastructure is important throughout the country.
Infrastructure is costly and lead times in providing new investment are long. The regulation of infrastructure provision needs to balance the need to promote enough investment to ensure future security of supply with the need to avoid imposing undue costs by over-provision.
F. Business Regulation Is Easy to Comply with, and Balances the Costs It Imposes with the Benefits to the Community
Rationale
Regulation has an important effect on incentives for economic activity. Finding the appropriate balance between the goals that regulation seeks to achieve and the costs it imposes is difficult. The Ministry will work to reduce the cost of regulation to business, and to balance those costs that cannot be avoided against the benefits to the wider community and economy. Regulatory Impact Statements (RIS) and Business Compliance Costs Statements (BCCS) are key tools for identifying the compliance costs for business arising from new regulation, and thus helping to balance those costs with the net benefits.
As well as the regulation it is directly responsible for, the Ministry has leadership roles in regulation across government in terms of:
- peer-reviewing the development of RISs/BCCSs in relation to new regulatory proposals by other government departments; and
- ensuring that New Zealand's regulatory system balances the need to align our regulation with our closest trading partners against the need to ensure that our regulation reflects domestic circumstances.
In fulfilling these roles, the Ministry will seek to ensure that the needs of business, and the need to target regulation to the different circumstances of different types of businesses, are taken into account. This is particularly relevant in the case of regulatory issues that businesses have identified as creating high costs for them, such as the Resource Management Act, Hazardous Substances and New Organisms Act and climate change.
G. Businesses and Consumers Use Information Held by the Ministry, or Required by Laws It Administers, to Help Them Make Well-Informed Decisions
Rationale
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-informed decisions. We are increasing our use of technology to place much of this information on the internet, thus improving access and reducing the costs of that access.
H. Business and Consumers Have Confidence in the Integrity and Effectiveness of Markets
Rationale
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.
I. Māori Realise More of Their Economic Potential
Rationale
The participation of Māori in the economy, and the associated economic outcomes for Māori, are important issues for the Government and for this Ministry. Māori are an important group within New Zealand society, both in terms of numbers and their status as tangata whenua. Improving Māori economic outcomes will increase Māori incomes relative to others, and thus reduce disparities and enhance social cohesion. This, in turn, will make an important contribution to New Zealand's sustainable development.
Increased educational achievement and labour market participation are the keys to improving Māori economic outcomes. 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. Within the scope of our work, however, there may be opportunities for designing and targeting particular policy or regulatory settings more effectively to meet the needs or expectations of Māori entrepreneurs and businesses. To explore this issue, the Ministry is establishing a senior position with accountability for co-ordinating our work relating to Māori across the Ministry.
In its early stages, key responsibilities of this role will be to:
- test the scope for more effective design and targeting of policy and regulatory settings to meet the needs of Māori, through discussion with other relevant departments and stakeholders;
- identify specific areas where the Ministry can enhance existing policies and programmes to improve economic outcomes for Māori; and
- identify relevant capability issues for the Ministry.
J. Intellectual Property Rights Support Investment in Innovation and the Sharing of Ideas
Rationale
Intellectual property laws underpin innovation in New Zealand. By assuring 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.
Intellectual property laws need to take account of international standards, so that the rights of New Zealand entrepreneurs are protected overseas, and foreign firms feel secure in investing in New Zealand. They should enable access by New Zealand entrepreneurs to technology developments overseas, as New Zealand is a substantial importer of technology. Finally, the process for protecting intellectual property needs to be smooth, easy, quick and robust, to keep costs down and to reduce the time to market for new products and services.
The Ministry is currently engaged in a review of intellectual property law. It also offers fast-turnaround registration services to support entrepreneurial activity in New Zealand.
K. The Ministry's Management of Crown Resources Supports Business Development and Sustainable Growth
Rationale
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.
L. Government Encourages a Culture of Enterprise in New Zealand
Rationale
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.
M. Competition Regulation Promotes Dynamic and Efficient Markets
Rationale
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.
N. Businesses in New Zealand are Governed and Managed Responsibly
Rationale
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.
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