TEN YEARS OF SME POLICIES IN NEW ZEALAND: A RETROSPECTIVE

1. TEN YEARS OF SME POLICIES IN NEW ZEALAND: A RETROSPECTIVE Roger Wigglesworth Ministry of Economic Development 3 September 2009

2. SMEs in New Zealand • Defined as: • personally owned and managed • owner/operator makes most of the management decisions • no specialist staff at management level • not part of a larger business or group of companies with access to managerial expertise. • Measured as enterprises with 19 or fewer employees

3. SME Structure and Dynamics • 97.1% of enterprises in NZ • 68% of enterprises in NZ have no employees • SMEs account for 30.7% of all employees • SMEs account for 40.7% of the economy’s total output (on deflated value added basis)

4. Lacking Large Companies

5. Framework for Intervention • Market failure • Conducive business environment • stable macro policies • enabling regulations • supportive systems of governance

6. Transformational Initiatives Enterprising Partnerships Fund Revamped Growth Services Fund TechNZ (Targeted) Beachheads Targeted and Tailored Policies Capability Building Enterprise Training Global Expert Mentoring TechNZ (Capability Building) BIZ Info Service Australia/NZ Biotechnology Partnership Fund NZTE Sector activities www.business.govt.nz Improving the Business Environment Venture Investment Fund Seed-Co Investment Fund Incubators Investment NZ Generic Facilitative Policies Intensity of Engagement with recipients Degree of tailoring of policy required. Providing a Stable Operating Environment Macroeconomic Policy Regulation Property Rights Tax Providing Key Inputs for Firms Education Entrepreneurship Infrastructure (e.g. broadband) Immigration Foundation Policies

7. Wider Support Stadium Development Broadband Investment MfE Sustainable Business Business Capability Partnership Te Puni Kokiri DoL Productivity Agenda + Numeracy and Literacy Nationally Significant Projects Job Summit Equity Proposal Provision of Information Access to Capital FIRM Capital Markets Development Taskforce Sector Activity Firm Internationalisation and Innovation Screen Industry Industry Training Organisations Research Centres of Excellence Research for Industry Tourism NZ Tax Credits for Forestry and Film Industries Investment Promotion Fund (MFAT) Export Credit Office Food and Beverage Taskforce Research Consortia Shanghai Expo Pre-seed Accelerator Trade Development

8. Other initiatives • Trade Agreements • Australia/NZ harmonisation • China FTA • Pacific Rim • APEC • Singapore/Chile trade agreements • Regulation reviews • Minister responsible for Small Business • Small Business Advisory Group – ‘voice’ in the policy process • Business Capability Partnership • Government + Business organisations as members • Developing management capability • Entrepreneurship education

9. The Broader ‘Government’ Engagement with Firms • Skill Development • Universities • Crown Research Agencies • Ministry of Education • TEC • Immigration • Accessing Capital • NZVIF • Kiwibank • Inland Revenue • ACC • Department of Labour • Statistics NZ • MED FIRM Regulatory Environment Inputs Business Assistance • Business • Organisations • EDAs • Chambers of • Commerce • Industry Training • Organisations • Government • Agencies • NZTE • FRST • Te Puni Kokiri • Private Providers • Training Providers • Accounting Firms • Mentors New • Zealand Funding NZTE funding

10. What’s not there … • Start-up funding • SME loan guarantee scheme • Succession planning • Industry subsidies • Differentiated rules and policies for SMEs • Exchange rate management

11. Outcome • 2nd World Bank Ease of Doing Business • 15th OECD Product Market Regulatory Quality • 24th (out of 133) World Economic Forum Competitiveness Report • “The country also has transparent and well functioning institutions … financial, goods, and labor markets are also highly efficient with excellent investor protections and legal rights … few obstacles to starting a business and very low trade barriers.”

12. Increasing enterprise numbers

13. Enterprise Births and Deaths 1995-2000/2001

14. Enterprise Births and Deaths

15. Composition of the increase

16. Self employment numbers

17. Business Registrations

18. Company Removals from Register

19. Insolvencies

20. Rate of High Growth Firms FIN NZ

21. NZ Paradox • New Zealand is paradoxically at the forefront of the OECD in adopting policies in many areas that have been shown to lead to high per capita income, and yet it still ranks toward the bottom end of the OECD’s productivity league. • This performance has many natural and hence unavoidable causes, such as the economy’s small size and geographical isolation. • But the root of the problem is a structural deficiency in the capacity to produce tradable goods and services. Raising productivity growth therefore remains the greatest medium term challenge. OECD 2009 Economic Survey

22. Evaluation Results • Firms receiving support under NZTE’s growth services have more sales and higher productivity than equivalent firms who have not been supported in this way • Firms that go through business incubators on the whole out-perform equivalent firms that do not • A significant proportion of the firms that attend enterprise training claim to have changed business practices as a result of that training • We are also looking now to see if interventions to assist hi-tech firms produce better performances in those assisted firms.