A New Zealand curiosity is the habit of prescribing plans or targets for industries or the economy. The Soviet Union and India used to have 5 and 10 year plans, eg for steel production. They were not good models.

The recent draft report of the Information and Communications Technology (ICT) Taskforce is a planner's document. It wants to see the ICT industry account for 10% of GDP in 10 years' time, up from 4.3% today. The target for employment is 125,000 jobs compared with the current figure of 41,000. To achieve these goals, 100 new ICT companies with annual sales of $100 million each are said to be needed.

The report acknowledges that the Taskforce is not a policy-based group – it comprises industry representatives.

That is a pity. The report suffers for lack of a policy framework.

An industry or a country is not a company. It can make sense for individual businesses to set targets: those running them can direct resources to implement their plan. Their success will be determined in the market place.

For an industry or a market economy there is no such thing as a business plan. No one in an ICT industry of nearly 8000 firms can direct its resources, let alone dictate the fortunes of the wider economy. That is why successful economies rely on decentralised decision-making in markets. Their governments focus on the framework within which firms operate.

Moreover, the Taskforce's targets look implausible and incoherent. They envisage an ICT sector proportionally larger than that of the United States , and exports equivalent to those of two dairy industries.

They also imply low levels of labour productivity growth in the industry – less than 1% a year if the economy grows by 3% a year. On this basis investors might be unwise to put resources into ICT when productivity growth in industries such as agriculture has been much higher.

Managers should be focusing on profitability or economic value added, not firm or industry growth for its own sake.

The Taskforce makes some useful points on commercial realities, such as access to capital and the management problems ICT firms encounter once they reach a certain size.

It also makes some points on policy that are sound, such as the need for skilled immigration, the case for relaxing rules relating to tax losses, and the rejection of R & D tax subsidies. It mentions the problem of rigid pay rates in the education sector which make it difficult to attract relevant teaching staff, but fails to note general problems of employment law, regulations and taxation. Low taxes and business-friendly labour laws have been key factors in Silicon Valley 's success. The problems of ICT management in the public sector are also treated lightly.

For more information, contact:

Roger Kerr
Executive Director
Ph: 04 499 0790
Email: rkerr@nzbr.org.nz

David Young
Communications Manager
Ph: 04 499 0790
Email: dyoung@nzbr.org.nz

Web: www.nzbr.org.nz