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If New Zealand wants to increase productivity and export high value-added products, it needs to transform into a science and tech-driven economy, argues Dr Murat Üngör
On March 11, 2020, the World Health Organisation declared Covid-19 a global pandemic. The outbreak has had negative impacts on global economic activity and international trade.
Lockdown measures in particular took a toll on global production and trade across the globe. The global economy contracted by 3.1 percent and the world merchandise trade volume fell by 5.3 percent in 2020.
Diversification of trade partners, signing new trade agreements, and strengthening existing agreements are important steps forward for the New Zealand economy. However, there are many areas to be improved for long-term economic growth and for a better functioning economy in the post-Covid 19 world.
To combat the economic effects of the pandemic, New Zealand has embraced multilateralism as a means of economic recovery, moving towards a variety of trade and partnership agreements, including:
- The Digital Economy Partnership Agreement, signed by New Zealand, Chile and Singapore on June 12, 2020
- Formally launching negotiations with the United Kingdom (UK) in June 2020 towards a free trade agreement (FTA), followed by an agreement in October 2021 on the key elements of this agreement
- Signing the Regional Comprehensive Economic Partnership (RCEP) on November 15, 2020 along with 14 other countries
- Signing an agreement with China in January 2021 to upgrade their existing FTA
- Hosting the first fully digital Asia-Pacific Economic Cooperation (APEC) forum during 2021
There is also a window of opportunity for New Zealand to strengthen economic ties with rapidly advancing Asian economies. New Zealand was the first developed country to commence FTA negotiations with China back in the 2000s.
Accordingly, China has become New Zealand’s most important export destination. As the Chinese economy reaches maturity, new emerging giants have started to record very rapid growth rates.
Bangladesh and Vietnam are two of the fastest growing countries in the world. New Zealand entrepreneurs and policy makers should act quickly to develop and strength the relations with their counterparts in these fast-growing countries.
In terms of areas to improve upon, New Zealand should first expand its exports beyond dairy and tourism. A good is example is high-technology exports, which are products with high research and development (R&D) intensity, such as in aerospace, computers, pharmaceuticals, scientific instruments, and electrical machinery.
According to the World Bank data, high-technology industries accounted for only 9.9 percent of all manufacturing exports from New Zealand in 2019.
The corresponding figure was 17 percent in Japan, 18.9 percent in the United States, 21.5 percent in Australia, 23.5 percent in the UK, 30.8 percent in China, and 32.4 percent in South Korea.
Secondly, New Zealand should increase its productivity to the levels of its peers. New Zealand’s labour productivity has historically lagged those of Australia, the US, and other comparable developed countries. Labour productivity in New Zealand decreased from almost 92 percent of the US level in 1950 to below 62 percent in 2019.
But the question remains, how is New Zealand going to increase its productivity and diversify its exports with high value-added products?
In my opinion, it should develop and implement a vision and strategic plan to gain competitive advantage in the production and exports of high-technology goods and knowledge-intensive services.
It must also invest more on pure scientific research. Technology and innovation cannot be thought of separately from pure scientific research. There would not be computers without abstract mathematics and theoretical physics. More pure research will beget technology, and technology will beget innovation, which will lead to higher productivity and long-term economic growth.
I am not simply suggesting pouring more money into basic research. Rather, I am arguing the necessity of carefully designed policies where the importance of critical and emerging technologies is explicitly appreciated by the stakeholders.
Quantum computers and emerging new quantum technologies are showing huge promise for global expansion. Australia sets an example. A 2020 report by Australia’s National Science Agency estimates Australia’s quantum technology industry could generate over $4 billion in new revenue and 16,000 new jobs by 2040.
A policy brief from the Australian Strategic Policy Institute discusses that the Prime Minister should appoint a minister for such technologies, because these new technologies will not only reshape technology, but also shape a geopolitical power balance. The AUKUS partnership between Australia, the US, and UK will provide a technological edge for Australia in the Asia-Pacific region.
New Zealand should not miss the opportunity of investing in more fundamental basic research, which will bring technological innovations and new growth possibilities.
The word tourism appears several times in the “The Research, Science and Innovation Report 2021” of the Ministry of Business Innovation and Employment, whereas the word quantum does not appear at all. This must change.
The sectors and technologies of tomorrow should be identified, and investment should be channelled towards them.
New Zealand should transform itself into a society that embraces cutting-edge science and technology more than it has to date. This will be a key part of building the future of Aotearoa.
* Dr Ungor declares he has no conflicts of interest.
