10. Performance of the Focal Sectors: Biotechnology, ICT and the Creative Industries
- In addition to its existing efforts in major sectors such as agriculture, forestry, fishing and tourism, through the growth and innovation framework government is focusing its efforts and engagement with the private sector in three sectors:
- biotechnology
- information and communications technology (ICT)
- the creative industries.
- Several themes are apparent from the sector-related indicators:
- The sectors have impacts across the economy, not just in their specific areas. This, in part, explains the difficulty of obtaining data for these sectors. There are strong parallels with the tourism sector, for which a 'satellite' account has been established within the national accounts.
- Export growth has been very strong in ICT and the creative industries. The export performance of biotechnology is more difficult to assess.
- The estimated size of the sectors varies between biotech (contributing less than 1 percent of GDP currently) through the creative industries (around 3 percent of GDP) to ICT which is estimated to be 4.3 percent of GDP.
- This picture is not complete. Further work is required to ensure the availability of data to measure progress and the impact of these sectors on the economy as a whole.
Biotechnology
Why is it Significant?
The term biotechnology broadly refers to a range of technologies that involve processing biological materials or processing material by biological processes. A distinction is made between 'traditional' biotechnology processes such as fermentation used in the preparation of beer and bread and 'modern' biotechnology, such as the development of vaccines or bio-informatics (the electronic management of biological data such as gene sequencing).
Biotechnology has the potential both to be a large industry in its own right (such as through pharmaceutical developments) and to improve productivity and add value to products in other sectors of the economy, particularly agriculture, forestry, horticulture and other food and beverage production.
How Does New Zealand Perform?
Statistics on biotechnology have not been routinely collected in New Zealand. This is largely because biotechnology has been seen as a process applying across a range of sectors, rather than an industry. Nevertheless a (Modern) Biotechnology Survey was conducted by Statistics New Zealand for 1998/99 as a benchmarking survey. The statistics used in this section are drawn from that survey and from the work of the Biotechnology Taskforce.
Based on the 1998/99 Biotechnology Survey:
- 180 enterprises were involved in modern biotechnology in 1998/99
- the industry generated income of $475 million
- 2,700 people were employed in the industry
- 67 percent of biotechnology employees held a graduate or post-graduate degree
- 56 patents were granted to biotechnology enterprises in 1998/99.
Based on a separate survey undertaken by Biotenz, the Biotechnology Taskforce estimates that there were $250 million worth of biotechnology exports in 2000.
The Biotechnology Taskforce also identified 40 'core' biotechnology companies and 350 companies in the biotechnology 'community' (i.e. including legal advisers and patent attorneys). This number is reasonably low when compared to other countries of a similar size, as demonstrated in the following chart.
Number of Core Biotechnology Companies
New Zealand's comparatively low numbers of biotechnology companies is consistent with low levels of R&D, particularly private sector R&D.
What Does This Mean for New Zealand?
In order for biotechnology to facilitate growth in other sectors of the economy, the biotechnology industry itself needs to grow. Biotechnology presents exciting opportunities to New Zealand to build on and add value to areas in which it already has an established comparative advantage. The Biotechnology Taskforce has been considering opportunities for and impediments to growing the biotechnology sector and has set objectives for its growth. These are identified in the Taskforce's recently released report71.
Information and Communications Technology
Why is it Significant?
New information and communications technologies have had an immense impact on the economies of all countries over the last quarter century. They have led to efficiencies in existing business practices and the creation of entirely new areas of business. In addition to changing the way most business is done, the information and communications technology (ICT) sector has grown into a substantial sector in its own right. Therefore, the ICT sector can contribute to economic growth directly, and provide opportunities for efficiencies and opportunities in other parts of the economy. Indeed, some analyses of productivity suggest that ICT use has been a key productivity driver in the United States and Australia72.
The use of the term ICT is relatively new, with the ICT sector being an agglomeration of the communications sector (dominated in New Zealand by telecommunications providers such as Telecom and TelstraClear) and the information technology (IT) sector (which ranges from small software development firms to massive multinational hardware and software producers).
How Does New Zealand Perform?
OECD figures suggest New Zealand ICT use is very high, while exports of ICT products are low but growing steadily. The following table shows ICT intensity in selected countries (including the OECD average). The data uses ICT expenditures as a percentage age of GDP divided into different areas of expenditure. New Zealand has the highest figure in the OECD at 10.6 percent of GDP, with figures high in all areas, particularly telecommunications.
ICT Expenditures
The following OECD tables show that, in contrast to New Zealand's high use of ICT, New Zealand's exports of ICT are low on both an absolute and comparative basis. Exports of ICT equipment do show a high level of growth, but from a low starting point73.
Exports of ICT equipment, 1990-2000 ($US million)74
| |
1990 |
1995 |
2000 |
Annual Average Percent Growth |
| Australia |
605 |
1624 |
1389 |
8.7 |
| Ireland |
5115 |
11095 |
24833 |
17.1 |
| New Zealand |
28 |
92 |
122 |
15.5 |
| Norway |
540 |
759 |
833 |
4.4 |
Exports of ICT services, 2000 ($US million)75
| |
Communication Services |
Computer and Information Services |
Total ICT Services Exports |
| Australia |
819 |
421 |
1240 |
| Ireland |
328 |
5479 |
5807 |
| Japan |
821 |
1569 |
2390 |
| Korea |
387 |
11 |
398 |
| Netherlands |
1426 |
1152 |
2578 |
| New Zealand |
181 |
79 |
260 |
| United Kingdom |
2505 |
3684 |
6189 |
| United States |
4090 |
4900 |
8990 |
The figures currently available (which relate primarily to the IT sector rather than the ICT sector and include communications hardware but not communication services) show that the New Zealand ICT sector makes up approximately 4.3 percent of GDP. In the last few years the sector has grown steadily at a rate in excess of the economy as a whole. Export income from the ICT sector in 2002 was almost NZ$1 billion. The following chart shows exports of ICT hardware, software and services (excluding communications services) according to Statistics New Zealand's annual Information Technology Report.
New Zealand ICT Exports (NZ$ million)
The following chart shows the size of the New Zealand IT industry (in millions of dollars, excluding telecommunications) since 1997. The 'Total IT Sales' figures, which include an unknown amount of double counting of retail and wholesale sales, showed growth of between 3 percent and 15 percent between 1997 and 2001. In 2002 there was a fall of 4 percent. The figures for 'End-User Sales', which exclude export sales and other categories to avoid double counting, showed growth of between 4 percent and 9 percent between 1997 and 2001. In 2002 there was a fall of 5 percent.
Size of the New Zealand IT Industry (NS$ million)
What Does This Mean for New Zealand?
The ICT sector has the characteristic of being able to grow at a very high rate. This is clear from the experience of high ICT sector growth in countries such as Ireland and India. It is a sector that is built largely on intellectual property, particularly on the software side. This means that many ICT businesses can be located anywhere there is a supply of appropriately trained staff. As a result, ensuring that the market of appropriately trained staff is responsive enough to meet the demand of the ICT sector is likely to be the most important prerequisite for future growth.
Creative Industries
Why are they Significant?
The core creative industries sector has been defined as 10 industries including advertising, software and computing services, publishing, television and radio, film and video, architecture, design, designer fashion, music and performing arts and visual arts.
Like ICT and biotechnology, some industries within the creative industries sector have the potential to add value to a range of other industries. For example, the design industry can add value to manufacturing industries, such as whiteware and furniture, helping producers find market niches and making their products more competitive internationally. Many of the creative industries, such as film and fashion, also have the potential for significant export growth in their own right.
The creative industries are also important for branding New Zealand. They have the potential to present New Zealand as an innovative and vibrant country, helping to attract investment, open up new market opportunities, and attract and retain talented people.
How Does New Zealand Perform?
Industry Growth and Contribution to GDP
The creative industries sector grew faster than the economy as a whole between 1997 and 2001. The creative industries are estimated to have contributed around 3.1 percent to New Zealand's total GDP in the year ended 31 March 2001, compared with 2.6 percent in the year ended March 1997 (see the table below).
The contribution to GDP compares with Australia (3.3 percent) and the United Kingdom (5 percent).76
Export Growth
Creative industry exports grew rapidly (435 percent) between 1997 and 2001. This compares with total export growth in the services sector of 16 percent.
Productivity
Productivity (GDP per employee (FTE)) is low compared with the national average but highly variable across the sector77. For example, in 2000/01 GDP/FTE for creative industries overall was $71,821 but varied from $31,300 for music and performing arts to $100,000 for advertising. The national average across all sectors for 2000/01 was $81,227.
Value Added within the Sector
The largest sectors in the creative industries in 2000/2001 by value-added contribution were software and computer services (47 percent), publishing (15 percent), TV and radio (11.5 percent), film and video (7 percent) and architecture (6 percent).
Economic Contribution of Creative Industries
| 31 March |
1996/1997 |
1997/1998 |
1998/1999 |
1999/2000 |
2000/2001 |
| GDP/FTE ($)78 |
64,374 |
67,065 |
72,364 |
71,412 |
71,821 |
| Share of total GDP ( %)79 |
2.6 |
2.8 |
3.1 |
3.2 |
3.1 |
| Exports ($m)80 |
195 |
288 |
507 |
654 |
850 |
What Does This Mean for New Zealand?
While there is some, albeit limited, information on the creative industries sector, we have no information on the uptake of creative industries by other industries or the value that they add to the products of other industries.
The opportunities for growing two of the creative industries, design and screen production, and their contribution to other sectors of the economy, have been considered by two industry taskforces.81
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