TEN YEARS OF SME POLICIES IN NEW ZEALAND: A RETROSPECTIVE
Roger WigglesworthMinistry of Economic Development
3 September 2009
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
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)
Lacking Large Companies
Framework for Intervention
• Market failure
• Conducive business environment– stable macro policies– enabling regulations– supportive systems of governance
Providing a Stable Operating EnvironmentMacroeconomic PolicyRegulationProperty RightsTax
Providing Key Inputs for FirmsEducationEntrepreneurshipInfrastructure (e.g. broadband)Immigration
Capability BuildingEnterprise TrainingGlobal ExpertMentoringTechNZ (Capability Building)
BIZ Info ServiceAustralia/NZ Biotechnology Partnership FundNZTE Sector activitieswww.business.govt.nz
Improving the Business EnvironmentVenture Investment FundSeed-Co Investment FundIncubatorsInvestment NZ
Transformational InitiativesEnterprising Partnerships Fund
Revamped Growth Services FundTechNZ (Targeted)
Beachheads
Foundation Policies
Generic Facilitative
Policies
Targeted and Tailored Policies
Intensity of Engagement with recipients
Degree of tailoring of policy required.
Wider Support
FIRM
Food and Beverage Taskforce
Tourism NZ
MfE Sustainable Business
Business Capability Partnership
Te Puni Kokiri
Screen Industry
Export Credit Office
Capital Markets Development Taskforce
Job Summit Equity Proposal
Investment Promotion Fund (MFAT)
Research for Industry
DoL Productivity Agenda+
Numeracy and Literacy
Industry Training Organisations
Shanghai Expo
Stadium Development
Nationally Significant Projects
Sector Activity
Provision of Information
Firm Internationalisation and Innovation
Access to
Capital
Tax Credits for Forestry and Film Industries
Broadband Investment
Research Consortia
Research Centres of Excellence
Pre-seed AcceleratorTrade Development
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
The Broader ‘Government’ Engagement with Firms
FIRM
GovernmentAgencies
• NZTE• FRST• Te Puni Kokiri
Business Organisations• EDAs• Chambers of • Commerce• Industry Training Organisations
Private Providers
• Training Providers• Accounting Firms• Mentors New Zealand
Business Assistance
Inputs
Skill Development
• Universities
• Crown Research Agencies
• Ministry of Education
• TEC
• Immigration
Accessing Capital
• NZVIF
• Kiwibank
Regulatory Environment
• Inland Revenue
• ACC
• Department of Labour
• Statistics NZ
• MED
NZTE funding
Funding
What’s not there …
• Start-up funding
• SME loan guarantee scheme
• Succession planning
• Industry subsidies
• Differentiated rules and policies for SMEs
• Exchange rate management
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.”
Increasing enterprise numbers
Enterprises in NZ
0
100,000
200,000
300,000
400,000
500,000
Year
Nu
mb
er
Enterprises
Enterprise Births and Deaths 1995-2000/2001
Number of Births and Deaths
010,00020,00030,00040,00050,00060,00070,00080,000
2001 2002 2003 2004 2005 2006 2007 2008
Year (as at February)
Nu
mb
er
Total births
Total deaths
Enterprise Births and Deaths
Composition of the increase
NZ Enterprise Numbers by Employee Count
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
Nu
mb
er
of
En
terp
ris
es 0
1 to 5
6 to 9
10 to 19
20 to 49
50 to 99
100 +
Self employment numbers
Income Source - Self Employment
550,000
555,000
560,000
565,000
570,000
575,000
580,000
2000 2001 2002 2003 2004 2005 2006 2007
Year
Nu
mb
er
Self employed
Business Registrations
Company Removals from Register
Insolvencies
Rate of High Growth Firms
0
2
4
6
8
10
12
Country
Perc
enta
ge o
f Hig
h Gr
owth
Ent
erpr
ises
Rate of HighGrowthEnterprises(Turnover)
Rate of HighGrowthEnterprises(Employment)
NZ
FIN
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
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.
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