Issue 3 - November 2016 Waikato really does mean businessIn 2014, a partnership of Waikato’s civic, business and Māori leaders launched a new economic development strategy for the region – Waikato Means Business. Its first annual report has just been released. So let’s take a look at how it’s doing. Waikato Means Business has a vision ‘…to improve standards of living in the Waikato region, where all people, communities and businesses reach their potential.’ To realise this vision, the strategy has two overarching, 20-year goals: to increase median household incomes to above the New Zealand average and to grow ‘value added’ output per person by 2.8 per cent per annum. Raising household incomesAs you can see from Figure 1 (source: Stats NZ), Waikato has actually dropped off the pace in the last five or six years. Over the period of 1998 to 2010, median household income in the Waikato region averaged about 97 per cent of the New Zealand figure. But in recent years, the gap has widened, with the average falling to 93 per cent over the five years to 2015. Clearly, we have some catching up to do. The median income of Waikato households has matched the New Zealand figure a couple of times over the past two decades, but this has been the exception, rather than the rule. There is no one reason for this, but it is worth noting that the New Zealand median will reflect the influence of big cities – predominantly Auckland, but Wellington and Christchurch too. Cities tend to have higher levels of capital intensity and productivity and this could be expected to show up in household income statistics. Given this, achieving the goal of surpassing the New Zealand median will be a big ask. Growing GDPInfometrics regional data shows that, on average, real GDP per capita in the Waikato has grown by around 1.2 per cent between 2000 and 2015 (blue line in Figure 2). Waikato Means Business aims for real per capita growth of 2.8 per cent per annum over the next 20 years (red line). Averaging that rate of increase over several decades will require a real step change in the Waikato economy. Plan of action
This is where Waikato Mean’s Business’ Strategy Implementation Plan comes in. In its first year (2015/16), the strategy identifies a set of strategic priorities and areas of focus, as well as some associated key actions. Several other projects were also started in the first year of the strategy, including piloting a Secondary Schools Employer Partnership programme, and developing a Māori Economic Development Agenda and Action Plan. Other priority projects include:
Measuring our progress
So, there is plenty of action, but how can we tell whether the strategy is actually helping to achieve its ambitious goals? This is not a simple matter. Firstly, untangling the effects of the projects from other drivers of economic activity in the region is difficult. Secondly, the benefits of some of these projects will take time to show up and therefore it’s a little early to tell. The current annual report tells us what work is underway, but we’ll have to wait and see the results over the coming years. In any case, while it has set itself some very ambitious goals, Waikato Means Business has a highly capable and committed Steering Group that is well positioned to guide the way towards them. Green growth: economic development that lastsWhile the goals of Waikato Means Business are worthy of aspiring to, we also need to be mindful of how we measure ‘the economy’. Growth in ‘gross domestic product’ is all well and good, but as we discussed in the last edition of Making Sense, it’s only part of the story. If we lose sight of the bigger picture, we can unintentionally end up undermining the very productive capacity that our objectives depend on. In recent years, this has been increasingly recognised by governments, businesses and the community, and it has given rise to the concept of ‘green growth’. The idea underpinning green growth is that, while it often has in the past, economic growth doesn’t have to result in the environment being run down. If we want to be able to keep improving our wellbeing, we need to make sure that our “…natural assets continue to provide the resources and environmental services on which our wellbeing relies.”[1] The Waikato region has the good fortune to have a rich stock of natural resources such as soils, water, climate, the coastal environment and all the ecosystem services they provide (such as food production, water supply, recreation, assimilation of pollution, and protection from hazards). This ‘natural capital’ underpins the economy that has developed in the region including sectors such as agriculture, horticulture, energy, forestry, seafood, tourism and recreation along with all the service and processing industries needed to support them. These industries rely on the inputs of capital and labour for their existence, and to enable growth. ‘Capital’ can come in a variety of forms – artificial/built capital, human and social capital, financial capital and natural capital. Any good business with an eye to the future recognises that, if it fails to invest to maintain or improve its capital base, then maintaining profitability (let alone achieving growth) becomes problematic, perhaps impossible. Natural capital is no different. It will depreciate or degrade over time just like any other type. Where it can be different is in whether it is replaceable. You can usually buy a new machine if one wears out, or train up a new worker, but replacing eroded soils or a polluted lake may not be possible. This ‘green growth’ approach is by no means new – the definition above comes from 2011 – nor is it particularly radical. Some examples illustrate how the idea is becoming ever more mainstream:
The Waikato Means Business strategy identified environmental constraints as a key challenge for the region. It also recognised our natural assets as a key opportunity. Understanding what we get from our natural capital and how our future growth depends on it will be critical to achieving our longer term objectives. [1] OECD, 2011. Towards Green Growth: A summary for policy makers. http://www.oecd.org/env/towards-green-growth-9789264111318-en.htm Services from natureIf we are to take account of how our economy depends on the environment, we need to better understand exactly what natural capital we have, and what sort of services it provides. To this end, the Waikato Regional Council has been undertaking a project to characterise freshwater ecosystems in the region. This has involved assessing and mapping some freshwater ecosystems and the economic benefits they provide. The results will be presented in a web-map tool, linked to an underlying database of the associated services and values. Thirty-eight freshwater ecosystems were sampled, covering a range of different types (such as rivers, streams, lakes and wetlands), situated in a variety of landscapes. Freshwater ecosystem services were estimated using internationally recognised assessment frameworks[2]. Not all ecosystem services can be appropriately measured in monetary terms, but in some cases, it is possible (if somewhat controversial!) to assign monetary values to some of the benefits of a natural resource. Where such estimates were available from published information, some information was included for indicative purposes. The screenshot below gives a sense of the kind of information the tool will provide. The database behind the maps can be sorted or searched for any of the attributes, such as type of ecosystem (streams, rivers, lakes, wetlands), or categories of ecosystem services (provisioning, regulating and maintenance, cultural services). [2] The Millennium Ecosystem Assessment (MEA) and the Common International Classification of Ecosystem Services (CICES). While the results should be taken as indicative, they do make clear that the region is endowed with freshwater resources that provide water for a large part of New Zealand’s primary sector, and a significant proportion of the population (much of Auckland’s water supply comes from the Waikato catchment). Although more difficult to put a dollar figure on, crucial services come in the form of habitats for the invaluable flora and fauna, recreational and cultural values. The results from this project can be the basis for taking an ecosystem services approach to managing natural resources by showing the range of services they provide. This will ultimately help the Waikato Regional Council to fulfil its statutory obligations to manage water (and other) resources. But it could also be developed into a tool to help us find the path that we need to take to achieve the region’s economic goals, and prove that Waikato means business. |