Special economic zones – special?

There’s been a fair bit of media flying around about Special Economic Zones (SEZs) in relation to their application in regional New Zealand.  Kicked off by another great piece of research from the NZ Initiative.

As Wikipedia puts it…In SEZs, business and trades laws differ from the rest of the country. To encourage businesses to set up in the zone…policies are introduced. These policies typically regard investing, taxation, trading, quotas, customs and labour regulations.

Financial incentives in my view generally don’t work with the only winner being business, who are being rewarded for shifting their business somewhere or entering into a market or industry.  Subsidies are only slightly better in that they are more targeted to industry or location type initiatives.  The problem with both incentives and subsidies is that money has to come from the public purse, I.e. Shifted from one part of the economy to the other.  NZ has very few incentives or subsidies after the market reforms of the last 40 years so to reintroduce them now would be interesting to say the least!

Special Economic Zones are widespread in China. They were set up among other reasons to transition certain geographic areas of Chinas economy into a more market focused economies and to act as a controlled test bed of policies.  In many instances the focus has been about attracting Foreign Direct Investment (FDI) and all the benefits that come from that. A huge spinoff has been the ability for provincial and local government and companies to enable homegrown industry to develop around the the foreign companies. Do not underestimate the importance of foreign investment on China’s economy or their Special Economic Zones.

I support Special Economic Zones in both the thinking behind them and the potential but before we roll them out in NZ let us answer these questions:
1.  Do we understand all the different parts of the economies and are they working together?  The Special Economic Zones I’ve seen did incredibly well at connecting all the parts of economies that need to which was easy to do with everything within a 100km, but that’s not too different to regional NZ is it?  It wasn’t just about taxes, planning or infrastructure.  It was innovation, entrepreneurship, industry development, education, the environment and more.
2.  Are there projects that are investment ready?  A key platform of Special Economic Zones is foreign investment, so who is spending time with investors to understand what investors want and is regional NZ ready for Special Economic Zones that could consist of largely foreign investors?


Starting out again – “what is the secret to growth?”

It’s been a couple of months since I’ve returned from offshore and I’m starting out blogging again.

I’ve tried to start again a couple of times and I’ll make no excuses, I haven’t “shipped”.   All sorts of questions have arisen: What to write?  How often? Will people keep reading?  Have I got the time, energy and passion?  

So here we go again.  My plan is to post topical insight and analysis once a week.  I will also invite guest bloggers.
If you’d like to guest blog or suggest future topics, please just comment or send me an email. 

First up this week, is the most common question people have asked me since I’ve been back – “what’s the secret to growth?”

It has incredibly difficult to summarise 6 weeks of immersive experience into an elevator pitch. However my response has been consistent – “it’s the people” that make the difference.  The simplicity may well disappoint people but that’s the reality.  There is no magic bullet – be very aware of people who claim there is one. 

This view reflects that anything is possible when you unleash people to be creative, relentlessly execute and learn from their mistakes.  It’s like the analogy of the talented athlete that doesn’t apply themselves – in the long run they will be outdone by a less talented athlete who works harder.  In an economic development scenario – the region with natural resources can be outperformed by a region without the same resources that executes better.  Of course underlying this is an interconnected web of things that if one or more is weak then it can affect everything else.  Over the next few weeks I will run through the “web” or pieces of the puzzle as I see them. And most important time matters – there’s no such thing as overnight success.

Interestingly, the principles of economic development are not too different to organisational development, so Jim Collins ‘Good to Great’ applies. The big challenges for economic development how to ensure alignment and collaboration across a range of sectors, locations and companies.  In a private company it’s clear who is responsible – the board and senior management, but in a region – who is responsible?