Recession boosts ICT's strategic value to NZ
- 21 July, 2008 22:00
New Zealand has been “stoked” by a decade of consistent economic growth, but potentially “stuffed” by uncompetitive wage and salary levels and inadequate business investment, said financial journalist Rod Oram, speaking to the Gen-i-organised Radar 08 series of seminars.
In a disturbing set of graphs, Oram illustrated how we may have trouble avoiding not only a recession but a potential economic catastrophe.
Businesses needs to invest much more in plant, technology and people including, most crucially, ICT. But they aren’t, Oram said, showing a Reserve Bank estimate of an expected slide in investment.
Despite this shortcoming, corporate profits have continued to soar. There is clearly scope for making industry more relevant to world markets, more efficient and more sustainable — and ICT can play a major role, he said.
How do you persuade an investment-shy industry to invest in ICT, the technology of which managers have perhaps most suspicion and least knowledge? That’s a difficult question, Oram said, and there is no blanket answer.
“You can only approach it on a case-by-case basis. When ICT experts see an opportunity, they should make a good case and take it to management.”
One problem with New Zealand industry, he said, is that factories are very small by world standards and the most advanced and economic equipment is getting larger. Offshore manufacture therefore appears a logical answer — garment maker Icebreaker, for instance manufactures in Shanghai, using a small share of a large plant.
ICT is necessarily “the nervous system” of such an arrangement.
Industry is constrained chiefly by a lack of time and inadequate knowledge of how to remedy its ingrained problems, Oram said. The temptation is to moderate activity to suit our limited resources, “pull in our horns, sit on our hands” and risk crashing the economy rather than piloting skillfully through the bad times.
New Zealand needs to become more “engaged with the world”, forming mini-multinational companies with some of their functions based overseas or supplied by overseas partners, Oram said.
Crucially, and in keeping with a general theme of the Radar conference, the country needs to embrace the international move towards sustainability and lowering carbon emissions.
“ICT has a role to play in all this,” Oram said, alluding to re-tooling with more modern equipment for greater efficiency, the necessary role of high-bandwidth communication for international operations and such innovative developments as Icebreaker’s “Baa-code”.
By entering a code on the product into a website, the buyer will be able to see which farm — and, in due course, which individual sheep — the fibre came from.
Such transparency of information is increasingly in demand and will be an important competitive advantage, Oram said. With significant tax credits now available for research and development, New Zealand companies are increasing their R&D investment.
ICT is a crucial part of running such R&D activity.