Can New Zealand become the next Silicon Valley?

The tech biz is growing but there is a pressing issue holding the country back

Can New Zealand become the next Silicon Valley?

New Zealand’s tech industry is growing with the likes of Microsoft splashing $100m on land for its new data centre.

The country has led the way in responding to the COVID-19 crises and there has been a steady influx of Kiwis returning home.

More than 50,000 have returned home this year and a survey of 15,000 expats by KEA found 49% are planning to return in the next two years.

The so-called ‘reverse brain drain’ was hailed as a boost for New Zealand’s economy with many of those returning expected to bring back skills gained overseas.

It was hoped returnees could bring in much-needed tech skills, as well as more forward-thinking approaches and entrepreneurial drive.

The influx has boosted calls for New Zealand to create its own Silicon Valley, drawing talent from places like American and Europe.

But when it comes to previous migration trends, a report by the New Zealand Institute of Economic Research found the country’s existing policy has done little to improve the low levels of productivity.

“New Zealand has continued to experience disappointingly low productivity, both when measured using GDP per hour worked and in terms of multi-factor productivity,” wrote NZIER associate Julie Fry.

“This is frustrating for policy makers and their advisers, as policy since the mid-1980s has been explicitly directed at improving economic growth.

“This is especially true when it comes to immigration policy. A long succession of policies has had increasing productivity as an explicit or implicit aim. But they clearly have had zero net effect.”

Read more: Budget 2021: Closing skills gap a top priority for Singapore

The report found that while current policy had brought in large numbers of ‘perfectly nice immigrants’, the influx had little impact on GDP per capita.

“To date there is no evidence that attempts to attract highly entrepreneurial migrants to New Zealand have been successful,” the report found.

So why has NZ failed to attract entrepreneurs, despite having the policy in place to allow them to relocate?

The report points to the country’s geographical position, far from the epicentre of the global economy, as one factor.

The other is that among NZ’s most profitable businesses there is a prevalence of farmer-owned cooperatives and privatised state-owned enterprises – both of which are risk averse and unlikely to expand globally.

Read more: Australia's tech skills gap putting $10bn economy growth at risk

Instead, mass migration has continued to foster NZ’s low-skill, low-wage, low-growth economy.  

The report found that despite closed borders and the halt on migrant workers arriving, Kiwi businesses had adapted to the changing labour market.

It said that once borders do reopen, the government should rethink policy, rather than rely on mass migration as it had before.

The recommendations included:

  • Limiting the arrival of migrants whose skills are a similar or lower level than locals
  • Maintain provisions for high-skilled workers or entreupenuers
  • Reduce the employment rights of fee-paying students and reduce the capacity of working holiday visa makers
  • Use the skills, experience and connections of migrants to expand frontier firms and leverage growth markets

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