For richer or poorer: Kiwis really need to get out more

Dr Oliver Hartwich
The Australian
16 August, 2023

In New Zealand’s public policy circles these days, you cannot escape the buzz about Ireland. Whether in the corridors of power, at business gatherings, or even casual coffee catch-ups, Ireland is the talk of the town.

That may seem strange. It is not St Patrick’s Day, and the Rugby World Cup has not kicked off yet. But the reason is a recent business delegation visit to the Emerald Isle – a trip our organisation, The New Zealand Initiative, organised.

Three dozen senior New Zealand business leaders, all members of the Initiative, joined us for a week-long excursion to Ireland. But this was not a conventional trade mission filled with business card exchanges and handshakes. Instead, it was a study tour of a nation that has redefined success over the past thirty years.

Ireland is not the first country we have visited with our members, and there is a backstory to our trip.

It all began with a journey to Switzerland in 2017. At the time, we wanted to contrast the Swiss approach to devolution with New Zealand’s centralised system of government.

To our surprise, the interest among New Zealand business leaders was overwhelming. They came along to learn about local government on the other side of the planet! It certainly wasn’t business as usual.

In the end, we learnt about much more than just Switzerland’s councils and cantons. We travelled through a 57-kilometre-long high-speed railway tunnel 2,000 metres below the Alps, which was completed on time and within budget. We got to know the Swiss apprenticeship system at the factory of Stadler Rail AG. We heard from the CEO of Swiss Re about re-insuring earthquake risks.

This Swiss experience was planned as a one-off event. But we had not even left Zurich before members of our group asked where we would go next. There was an appetite for learning among our group, and we found it enlightening to compare how a different country found different answers to very similar questions.

And so, Denmark followed in 2019. There we discovered a great entrepreneurial spirit behind the country’s high tax rates and large state sector. And we were blown away by the quality of Denmark’s infrastructure.

Again, we were left inspired – be it by the Øresund Bridge connecting Copenhagen to South Sweden, Lego’s almost fully automated factory in Billund, the futuristic Amager Bakke waste-to-energy plant, or the Middelgrunden offshore wind farm, which, remarkably, is run as a cooperative.

So these trips were not sightseeing excursions but in-depth studies into the heart of these nations, seeking to understand what makes them tick, and finding applicable lessons for our country. And they were enormously inspirational.

Ireland was next on our list of countries to visit. Originally scheduled for 2021, Covid travel restrictions delayed our plans until late June this year.

This time, the one thing we wanted to understand was how Ireland got rich. In particular, how it got so much richer than us.

In the 1970s, Ireland generated roughly 80% of New Zealand’s per capita GDP. By the early 1990s, Ireland had caught up. As of today, depending on which statistic you use, Ireland is about twice as rich as New Zealand.

Ireland’s economic transformation is nothing short of astonishing. The question is, what propelled it?

There are two obvious answers: Ireland’s membership of the European Union, and low corporate taxes. And there is truth in both answers. Yes, Ireland has benefited from having access to the large economic market after it joined the EEC in 1973 (and the EEC’s various funds for infrastructure investment). And yes, Ireland’s low taxes have proven a magnet for corporates.

But it would be too simplistic to attribute all of Ireland’s economic development to these two factors. What we actually found on our visit was something rather different.

One of our speakers during the week, a senior executive of a large Irish agricultural company, put it best: “Ireland does not have business-friendly policies,” he said, “Ireland has a business-friendly culture.” If only we could say the same about New Zealand.

What we saw in Ireland was a country that embraces business. It is a country that had been poor for most of its existence but decided it did not want to be poor any longer.

And this is what motivated the Irish to create an environment in which businesses feel at home, welcome, and can thrive.

This is especially the case with regard to foreign direct investment (FDI). And it is in this area where the contrast with New Zealand was especially, and painfully, clear.

In a good year, New Zealand receives maybe 3 or 4 billion US dollars in investment from overseas. As a percentage of GDP, the stock of inward investment in New Zealand has barely moved for decades.

Now contrast that with Ireland. Ireland is these days home to over 1,000 multinational companies. They contribute significantly to the Irish economy. Collectively, they are responsible for 20% of private-sector employment and export approximately 90% of the country’s total goods and services.

We saw first-hand what FDI looks like. Intel’s plant on the outskirts of Dublin was otherworldly. Since 1989, Intel has invested more than €30 billion in this facility. The result is a mega factory of a kind that simply does not exist in New Zealand – not even close.

Perhaps even more astonishingly, FDI is wildly popular in Ireland. As Ireland’s business minister Simon Coveney told our group, he cannot visit even the smallest village in Ireland without being asked by the locals what he could do to bring foreign investors to their region. Imagine that in New Zealand – or even in Australia!

Especially after these years of Covid-induced travel restrictions, it is important for us in this part of the world to get out and travel. Not just for pleasure, and not just to do business. We must learn how other countries have become more prosperous than us. Then, we must implement those lessons here.

And that is the talk of the town here in New Zealand following our trips to Switzerland, Denmark and now Ireland.

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