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.