Why technology is the key to N.Z.’s future prosperity

Press, 11 April 1989, Page 12

Why technology is the key to N.Z.’s future prosperity

John Blakely, executive director of the University of Canterbury’s Centre for Advanced Engineering, on an area the Govt must aid

HISTORY SHOWS us the importance of the Industrial Revolution, the impact of the invention of the steam engine and all industrial progress since that time, thus indicating just how important the creation of new technology has become to economic growth and raising of living standards in the Western world.

The economic success of many countries in recent decades has been based on the application of new technology. Examples are: • The rise of Japan and Germany in the 1960 s as they recovered from devastation and defeat in war;

• the success of some European countries in developing new high technology products in the 19705;

• more recently in the 1980 s, the rise of countries such as Singapore, Taiwan and Korea, largely based on success in manufacturing and exporting technological products. The long-term future prosperity of New Zealand will depend very heavily both on new scientific and technological developments arising from within our country, and the adoption of the latest developments available from overseas, in order to make products in niche markets for which there is a world-wide demand and hence to create economic growth and employment opportunities within our country.

It would be a mistake for New Zealand to rely on being able to import the latest technology from overseas for this purpose. It is essential that we maintain a repository of knowledge within the country if we are to be able to effectively compete on world markets.

We will have no indigenous technological base unless we keep key people in New Zealand doing research and development work and this will require a substantial increase in research and development expenditure. It will also require an increase in the number of skilled scientists and engineers with research experience both to carry out the research work and to pass on the results to other people. This implies additional funding to train such people within New Zealand.

This view is supported by Sir David Beattie in his chairman’s foreword to the November 1986 report of the Ministerial working party on science and technology, where he says, “I came as a layman in scientific matters to chair this working party. After some five months of reading numerous submissions, hearing many witnesses and having the advantage of reading many background publications, I have become convinced that a greater investment in research and development is essential for prosperity and social health of our country as we head towards the twenty-first century.”

There is not yet a wide appreciation within New Zealand of the importance of technology to our future, even though our standard of living is slipping steadily down the O.E.C.D. rankings. Traditionally we have relied upon primary production to maintain our standard of living. This tradition seems to have become part of the national culture which tends to denigrate the connection between industrial success and standard bf living. As a warning signal, the number of young people being educated at secondary school level in science subjects is actually static or falling, whereas if we are to compete with technologically advanced countries the number should be increasing markedly. Before the stock-market crash 18 months ago, people were actually saying that New Zealand did not need an industrial base to create employment or economic growth. Fortunately such comments now seem to have vanished from the news media.

Industry in New Zealand is at present in a state of serious decline and there seems to be little commitment by the Government actively to encourage New Zealand’s manufacturing sector to give it confidence for the future.

In withdrawing support from the manufacturing sector and opening up our market to foreign competition, the Government

seems to believe that this will in some way invigorate the economy. The problem is that most larger manufacturing countries do not withdraw all support from their industry. In introducing a ‘‘level playing field” the Government actually disadvantages local industry on its home market because overseas manufacturers exporting to New Zealand frequently obtain considerable support from their own governments.

The current spending on research and development in New Zealand is around 1 per cent of G.D.P. compared with the O.E.C.D. average of 2.06 per cent. Of particular concern is the very low percentage of research and development being done within industry in New Zealand (0.36 per cent of G.D.P.). Private sector research and development expenditure is extremely important because it tends to lead more quickly to innovative new products for export than public sector research and development which tends to be for longer term research.

One of the prime causes of the very low level of industrial research and development spending in New Zealand is a long history of highly protected local industry where there was no need to compete with outside competition on the home market or to produce manufactured products for export. Deregulation has changed this markedly in recent years, but industry has

not yet responded by investing a larger proportion of its turnover into research and development activity. Bearing in mind the relatively long-term nature of investment in research and development, the current high interest rates, and the present depressed state of manufacturing industry in New Zealand, it is hard to see a sudden turnaround coming in industrial investment in research and development without strong Government leadership.

The Swedish industrial success story over the last fifteen years is a very interesting example to study. Sweden is a country of only 9 million people, with rather limited natural resources and a history of relying heavily on its agricultural production, but in recent years its manufacturing success has been most impressive. Sweden comes under intense competition from many neighbouring European countries,, both within its home market and in export to other nations. There is virtually no protection of the home market for industrial products Or Government incentives for export. Hence industry has to stand very firmly on its own feet in Sweden.

In November 1988 in opening the first seminar organised by the newly established Centre for Advanced Engineering at the University of Canterbury, the Swedish Ambassador to New Zealand, Mr Kjell Anneling, emphasised the importance of research and development to economic health. He said that the Swedish economy had shifted in recent years from emphasis on primary production to more advanced high technology products.

Swedish spending on research and development now amounted to 3 per cent of G.D.P. and had expanded rapidly in recent years.

The result was low unemployment in spite of the retrenchment of some of Sweden’s traditional industries, including the shipbuilding and mining industries, which were forced to adapt to changing world conditions. Mr Anneling said that unemployment in Sweden was currently less than 2 per cent and the problem was rather a shortage of labour which had led to an overheated economy. Mr Anneling said that research and development had extended vigorously throughout Swedish industry over the past decade from just over 4 per cent of industrial value added in 1973 to more than 11 per cent today. The

sharpest increase had occurred in recent years. More than 20,000 people are estimated to be engaged in industrial research and development activity in Sweden and this figure has increased markedly over the last 10 year period, while the number of universitytrained research and development personnel has doubled.

New Zealand has much to learn from the Swedish model if we are to arrest the downwards slide in standards of living and the rise in unemployment. A key factor in turning around our industrial situation is to place more emphasis on research and development activity, especially within the private sector of industry. The Beattie Report in November, 1986, recommended that Government adopt a positive policy directed towards doubling New Zealand's over-all expenditure on research and development in the public and private sectors by 1993-94. Little action has yet been taken by Government to implement the findings of that report even though its recommendations would only increase New Zealand’s research and development expenditure from around 1 per cent to the O.E.C.D. average of just over 2 per cent of G.D.P., and countries such as Sweden are already spending around 3 per cent of G.D.P. on research and development and increasing this figure even further.

Perhaps just as importantly, the Government has to try to change the national culture. This does not see science and technology (and the accompanying research and development activity) as being of any importance to the person in the street. There is an urgent need for the Government to assume a much greater leadership role in science and technology than it has previously done in our history. As pointed out in the recent S.T.A.C. Report “A New Deal for Science” there is still no Government policy on science and technology. S.T.A.C. strongly recommends that we need such a policy as a matter of urgency. It is extremely important that the Government takes up this matter without further delay. If New Zealand is serious about wishing to create economic growth, new employment opportunities and to raise living standards then we must look at countries such as Sweden as our role model and as a first step, substantially increase our research and development effort.