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New Zealand Engineering 1998 May The Foresight Project Feature by Peter King
The Foresight Project is the brainchild of Ministry chief executive, Dr James Buwalda. In part it is yet another review of the way government spends the taxpayer's dollar on research, science and technology, but Dr Buwalda's aims go further than that. His object is stimulate thought and discussion on how New Zealand should develop itself as a society and industrially. "I mean you look at all the indicators and you don't see an economy that could congratulate itself about much. The dollar's falling, interest rates rising, growth is stalled, balance of payments negative, the stock market going nowhere; it's not a picture of vibrancy. When you look at other countries with the same sort of features as us you soon come to the conclusion we could do a lot better with what we have," he says. He draws parallels with successful smaller nations like Finland which have managed to make their economies high technology and high margin based. "They have the same size of population, same sense of isolation, same dispersed population. In the 1960s their economy was 70 percent timber exports with 30 percent manufacturing exports, now they've got companies like Nokia and a very strong manufacturing base. The only significantly negative thing about Finland is that their youth suicide rate is even worse than ours." Dr Buwalda suggests the difference has come from societal attitudes. "Our problem is that our geography indulges us. When things get rough we have a tendency to go off to the beach. We switch off. When things get rough for countries like Finland [such as Stalin's famous bill for services rendered during World War Two] they switch on. They respond." Crisis? What crisis?
Dr Buwalda says New Zealanders have been able
to ignore a sense of crisis and we have allowed ourselves to coast on the
coattails of other Western nations, with a tendency to extract value rather
than adding it. "There is a difference," he says. To work towards a future of high technology, high
margin industry we will have to rethink our industries with the future
in mind. Dr Buwalda says the difficulty with thinking about the future
is a propensity to perpetuate existing structures. "We had a meeting of the top people in the food
and fibre industries. One hundred and eighty CEOs etc as part of Foresight
in Agriculture. We recognised we were at a crossroads. What we started
to realise was that we were dealing with how to establish brand leadership
in three, high margin sectors: entertainment, health and fashion. Now sure,
it might take a bit of time to convince a sheep farmer in Gore he's part
of the fashion or entertainment industries but that is essentially what
he is contributing to." But if perpetuation of existing structures is
reinforced anywhere it is in government. Can we expect to see Vote Fashion,
Vote Entertainment or Vote Health Products replacing Vote Agriculture any
time soon? " I think if you took it to Cabinet right now they'd laugh their
heads off, but if you take change proposals to Government with the support
of the various constituencies then you'll get taken far more seriously,"
he says. Not only that. Go to most Crown Research Institutes
and you won't see much evidence of participation in the entertainment or
fashion industries either. "Take AgResearch, I can pick up the phone and
talk to either the chairman or the chief executive at this sort of strategic
level and have a perfectly sensible conversation. I'm not so sure I'd get
that if I were to do that in the tea room. The challenge for that chief
executive and the chairman is to manage a long-term transition while at
the same time keep the Institute operating as a business. It's not going
to happen overnight," Dr Buwalda believes that what Ministries need
to be serving up is more "smart policy". That is, policy that anticipates
change, issues challenges and questions itself more thoroughly on its own
assumptions. But to achieve this policy needs input. That is where the
Foresight process of industry group consultation comes into play (www.morst.govt.nz/foresight/involved/sector.html). Consultation
In practical terms the Foresight process is coming
down to a number of meetings of industry leaders in various "sectors".
These "sectors" can be any group which wishes to call itself a "sector".
The input the Ministry is seeking is an answer to four questions: • How significant will your sector be in 2010
? • What outcomes contributed? • What competencies were required? • What investment was needed? The deadline for these inputs is 31 October 1998. Always interested in any shifts of the wind which
may affect their funding Crown Research Institutes and other Foundation
for Research, Science and Technology funded bodies have been quick to nominate
themselves as coordinators for their sectors' Foresight efforts. Already
the Building Research Association has held a construction sector Foresight
session and the Institute of Geological and Nuclear Sciences has spearheaded
the petroleum exploration session. The Manufacturers Federation will have
hosted its Foresight meeting on 23 April. But what of industries which
have never had any significant input from Vote Science? When one looks
at New Zealand's sunrise industries (such as they are), the electronics
industry, the wine industry or the software industry one sees a pattern
of very successful private sector investment without much significant public
science input. Take a look at very new industries such as the large bird
industry (emus and ostriches) or the internet based industry (Hotdog, Dnews
or 7am) and once again Vote Science has not contributed much. If these
are the sunrise industries why do sunset industries like wool and sheepmeat
claim such a huge proportion of Vote Science and will the Foresight Project
do anything to change this? Manufacturers Federation spokesman Gilbert Peterson
certainly hopes so. "We certainly support the aims of Foresight and the
last thing we want to see is this becoming just another giant talkfest,"
he says. Mr Peterson says the restructuring of the DSIR
into industry sector businesses has not delivered any stronger relationship
between industry and science. He says the focus of CRIs remains on the
Foundation for Research, Science and Technology and the priorities given
the foundation remain largely science production driven rather than market
driven. "We have enormous respect for the skills and expertise
contained within the science community but for many of our people that
expertise is not accessible. We have to do more than just align industry
and science, they have to become integrated," he says. Orientating New Zealand industry so that not only
does it produce processed agricultural product but, as with the Danish
dairy industry, also sells the equipment which manufacturers use to produce
that product is where the Federation sees manufacturers adding value on
to the primary production base. "People don't appreciate that last year we exported
$11,000 million worth of fabricated metal (including electronics) compared
to $10,000 million worth of primary products. Manufacturing has overtaken
agriculture as our primary export earner and the scope for growth is still
large." But what of industries which don't even exist
yet? Take a look at the Silicon Valley experience. The principal drivers
in California have been excellent universities and engineering schools
at Stanford and Berkeley, some Department of Defense funding, and an investment
industry which traces its roots back through the golden age of Hollywood
to the Californian goldrush. Two world leading industries have grown because
private investors thought they could make money, not because a government
department was giving money away. While the Manufacturers Federation believes
too much would be lost were the MoRST annual budget just turned into lower
corporate tax rates, one has to question the value of research which makes
no appreciable difference to national industry. At the market end of the equation is Trade New
Zealand. David Espie, strategic development manager, says Trade New Zealand
is encouraging companies and sector groups to participate in Foresight
because its scope goes beyond science to provide a bigger picture of the
future, of which science is a part. "The other good thing about this is the way groups
are self-defined. That allows us to get away from the rigid definitions
of sectors which have characterised the past." Mr Espie is another who recognises changing the
way science dollars are invested is an uphill battle. "Where a traditional industry exists it typically
has the mass which can identify specific areas suitable for government
research. In less structured, less well defined industries people don't
even consider the possibility. Even the transaction costs to generate a
common set of priorities can be prohibitive," he says. Another problem for younger industries is time
priorities. If a company has a choice between attending a Foresight meeting
or meeting a customer offshore the offshore customer wins every time. Public
sector time scales are also a problem. "If you have a project where the
bidding process starts in 2000, work gets underway by 2003 and the first
usable technology doesn't become available until 2005, that is a very long
cycle for some new companies."
Technology
This is the reason Trade New Zealand has focused
increasingly on programmes to assist businesses to create industries based
on novel designs using existing or OEM technology. While Mr Espie agrees
that one needs to be able to understand these technologies to begin with
if one is to use them (particularly so in biotechnology), he says one must
look at the opportunities created by technology within a global context. Another of Trade New Zealand's hot topics is the
importance of the regional business cluster. Mr Espie points out that all
over the world there are good examples of regions where competing companies
locate themselves around a common set of educational, physical and infrastructural
resources to create a strong localised industry. In New Zealand Mr Espie
says a few regional industries are starting to materialise such as the
electronics industry based around Christchurch, the agritechnology industry
in Hamilton, the forestry industry in Rotorua, the wine industry in various
centres, but especially Marlborough, and the deep sea fishing industry
based in Nelson. But no matter how one examines the subject the
biggest issue is venture capital and capital development. Clusters, technology
re-exports, serendipitous discovery, none of it goes anywhere unless there
are patient, deep pocketed investors who are able to help a good idea grow
into a multi-billion dollar firm or lose the lot without. It is a problem
Dr Buwalda is highly aware of. "In Britain it's been interesting to see how academics
have started to become successful entrepreneurs ever since the portfolio
restrictions on investment by superannuation and insurance funds were lifted
in the early 1990s. Our academics are every bit as entrepreneurial but
they direct their effort at consultancy because they don't have access
to investment capital." While Dr Buwalda acknowledges that it helps to
have the City of London at your doorstep it should not be forgotten that
world capital markets are becoming increasingly global. He points to the
example of MAS Technology choosing to list on Nasdaq rather than the NZSE
because the analysis of technology stocks was more likely to be better
quality. Dr Buwalda says he personally would not invest in the stock market
in this country and suspects many other people in his position are equally
unimpressed with the performance of that institution.
Scope
That said it is highly unlikely that Vote Science
is ever going to become a venture capital fund. Instead, Dr Buwalda believes
science investment will be part of creating a knowledge infrastructure
which will attract private sector investment. "Take a look at petroleum exploration. Now mostly
what these guys are looking for are stable government, clear policies and
a good level of understanding about the geology of the country. If New
Zealand can deliver those things they will come here to look for oil or
gas if they think there is money to be made." But of course good geology is not going to deliver
investment alone. This example requires clarity on issues such as resource
consents and Treaty of Waitangi issues as well. Other examples might include
the question of the liability of directors under the Companies Act 1993,
or the relative power of the Commerce Commission to take on the heavy lawyers
of deep pocketed opponents. All of these, like venture capital, are vitally
important to the scenarios that sector groups will be considering as part
of their Foresight work but have nothing to do with science or the Ministry
of Research, Science and Technology. Dr Buwalda says if such issues do materialise
as part of the Foresight Project then all the Ministry can do is present
them to the relevant government agencies to handle.What seems to be clear
is that the Foresight Project is generally regarded as a valuable, if somewhat
ambitious, undertaking. By focusing on the future its scope is inherently
broader than science.If Foresight is to be made to work the private sector
must do more than simply be consulted. It must take over and drive the
process. Whether Government is ready for that is another matter.
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