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Regions must play to strengths

By Phil O'Reilly, April 2016

There’s no denying it: some of New Zealand’s regions are struggling and attempts to improve their economic situation are yet to work. So, what is keeping some areas from sharing the good fortune of our better performing towns and cities?

Experience shows successful regional development needs three things: First, the conversation has to be led by the local people who have the most at stake in the success of their region.  Secondly, development has to focus on the unique opportunities and challenges for that region. Finally, local government understands and facilitates the central role of the private sector in leading economic development.

Of course, not all cities are doing well and not all regions are doing poorly. But there are a number of areas that aren’t prospering like some of our urban centres. Northland is a good example. Northland has an average household income of just $72,000 compared to $101,000 for the average Auckland household. The region has a GDP of $35,000 per capita, compared to Wellington at $67,000 per capita.

This isn’t good enough. But, even though the numbers look bad, it’s not a reason for central government to wade in. We will only make headway by identifying who is best-placed to respond. A government official in Wellington won’t be as well-equipped to understand the needs of an area like, say Dargaville. The people with the biggest interest in making a town like Dargaville successful will be the people who live and work there. At best, Wellington will offer a partial solution and at worst could actually send some regions backwards.

My experience has been that local conversations about regional economic development are sometimes led by local government, sometimes local MPs, or local business people – or a combination of all three. Conversations between these groups take discipline to make them fruitful. But that discipline is the most important success measure when it comes to regional economic development. Each of these groups need to tread carefully so that local government doesn’t end up strangling or competing with local businesses either by accident or design.

Designing a good regional economic development strategy means focusing on a region’s unique characteristics. Too often, regional economic development strategies don’t pass what I call the ‘twink test’: If you blank out the name of the region and read the strategy it wouldn’t be clear which region you were reading about. 

Everybody seems to want a small business incubator or more high tech or a more liveable town.  If a regional economic development strategy for Marlborough isn’t looking at the future of Sauvignon Blanc then that strategy won’t be fit for purpose. Likewise, a strategy for Northland needs to look at tourism opportunities, and how to get young, unemployed Maori men and women more involved in that sector. 

Regions need to make choices. They need to ask themselves what are the small number of things we are going to be famous for? How are we going to define our success? And what investment choices do we need to make to get there?

Any economic development strategy also needs to be flexible enough to support new opportunities and be open to the incredible dynamism of technology and entrepreneurship. Just look at the transformation that’s taken place in Wellington. Who would have guessed, 15 years ago, that Wellington would be home to a thriving, world class movie production industry? It has seized an opportunity and run with it.

Of course, central government does have a role to play in supporting regional economic development. It can negotiate free trade deals that support small businesses in regional New Zealand.  The education system and pathways from school to work also need to be effective throughout New Zealand.

Central government is already putting more energy into gathering better information for local actors. But more needs to be done - the research needs to be more accurate, focussed and become more valuable over time.

There are some good examples of central players building a better understanding of the distinct needs of different regions. Senior staff at MBIE, for example, are taking part in a programme where they ‘adopt’ a region: travelling there often and getting to know the issues and the players. These kinds of bridges will help link authentic local efforts to influential friends in the capital who can bring everything from policy discipline to co-investment to the table.

But Government could do more.  It could build the capacity of local players to engage more effectively over the long term.  That doesn’t mean paying for meeting room hire or attendees’ expenses. It's about making ongoing data available and improving the capability of participants to interpret that data and act on it. Regional actors also need to be made more aware of what central government is doing through its business growth agenda, investment approach to welfare and so on. 

Regional economic development is about regions making good, even obvious choices and then implementing them brilliantly to achieve more successful, organic and locally-led economic development. We need to empower regional actors to come up with solutions that are then supported by central government.  Central government’s role is in empowering regions to make their own logical, well-thought-through choices and then ensuring they are held to account for them.