Helius Therapeutics’ Paul Manning on five ways New Zealand’s economy could be diversified through innovation
1. Add value to the commodities we export
Almost all of New Zealand’s exports are commodities, so we should focus on how we add value to these products. At Helius we are growing a plant called cannabis. Today, it’s a valuable commodity because it’s expensive to grow in medical-grade conditions, we’re operating in a highly regulated market and we’re one of only a few companies licensed to cultivate the plant. But as the supply chain becomes commoditised, raw cannabis prices will inevitably fall. So, our point of difference is to add value to the plant. Rather than shipping commodities offshore to have the value added elsewhere, intensive local R&D will give way to the creation of new and novel New Zealand-made products.
2. Harness technology to support innovation
In today’s world, innovation and technology have an almost symbiotic relationship. Each can help to drive productivity growth by improving business processes and organisational effectiveness. Each can lead to new products and services, some of which will succeed and generate income growth, as well as benefit society. They reinforce each other by increasing the speed and flexibility of new business models. With strong technological infrastructure, New Zealand will be better positioned to innovate in business, especially in tech-based sectors.
3. Improve investment in R&D
Overall business expenditure on research and development in New Zealand currently sits at around 0.65 percent of GDP. Our previous government set a target to increase this ratio to one percent of GDP by 2018, but it appears this will not be reached. Private sector funding of R&D in New Zealand is one of the lowest in the OECD. Being a small country should not be an excuse. Other small, advanced economies like Israel, Denmark, Finland, and Sweden all spend between 2.0 percent to 3.5 percent of their GDP on R&D in terms of business expenditure, and these countries all have higher productivity than New Zealand. The government’s new Research and Development Tax Incentive will be an enormous help, and I highly recommend any Kiwi company looking to diversify through innovation to talk to the amazing folk at Callaghan Innovation about their grants programme.
4. Embrace advanced manufacturing
Advanced manufacturing presents New Zealand with a crucial opportunity to diversify exports. In particular, the design and manufacture of health products and technologies is a key comparative advantage for New Zealand. The need for technologies to deliver improved health outcomes is now greater than ever, but there are barriers to overcome. In particular, the challenges include increasing expenditure on R&D and gaining a first mover advantage on a global scale. I believe this will be especially true for New Zealand’s emerging medicinal cannabis industry.
5. Strive for smart capital in emerging sectors
We have relatively immature capital markets, and this has – to some degree – held back the diversification of New Zealand’s economy. Much of our smart capital is invested offshore. To push the boundaries on the world stage, we need to attract investment at home with novel thinking, quality design, strong brands and bold ambition. Helius attracted a $15 million investment led by Kiwi tech entrepreneur, Guy Haddleton who’s a founding investor in Xero and a co-founder of Anaplan. Anaplan just listed on the New York Stock Exchange, gaining a NZ$4.6 billion valuation. Guy has now joined Helius as our Chairman, lending his wealth of experience to help accelerate growth in New Zealand and global markets. As a team, we believe this is a great example of how smart capital should work. Recently, a growing number of high profile and respected international investors have also backed New Zealand companies. In the past year, foreign director investment (FDI) increased by 239 percent, so a future challenge will be maintaining this growth.