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New Zealand Engineering 1998 May

The Foresight Project

Feature by Peter King

"Time present and time past
Are both perhaps present in time future,
And time future contained in time past.
If all time is eternally present
All time is unredeemable."

The opening lines of Burnt Norton,
from Four Quartets by TS Eliot

The Ministry of Research, Science and Technology is asking New Zealanders to think about time. Specifically, if we were looking back on the present from 2010 what could we say we did right and what did we do wrong? Are we approaching the future with any sense of ownership or is it bearing down on us like a car on a possum?

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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