5.5 Global connectedness
Global connectedness, within the New Zealand government context, is a term used to refer to as the actual flow of factors (such as the goods, services, capital, people knowledge, ideas and technology) between countries. This compares with openness, which is the absence of formal or trade barriers to factor flows. Global connectedness allows us to take advantage of the larger international market and access the latest technology and ideas. Access to technology, knowledge and ideas is likely to be a key element in improving New Zealand’s productivity performance. In terms of the growth accounting framework this can be considered as part of multi-factor productivity.
The OECD sees the large size of migration flows to and from New Zealand as important because of the connections maintained by immigration and New Zealand expatriates with their countries of origin (OECD 2003b). This increases the opportunities for exchanging knowledge and ideas which the OECD notes can be a powerful driver of innovation.
New Zealand’s physical distance from the rest of the word is a barrier to exchange. Treasury has done some work investigating whether migrant stocks offset the effects of distance, by presenting detailed data on New Zealander-born people overseas, and overseas-born people in New Zealand (Bryant and Law 2004). The paper suggests a need to temper expectations about benefits from the New Zealand diaspora, but also suggests a potentially important role for immigrants to New Zealand. There is a large pool of New Zealand citizens currently overseas, many of whom will return to their native country (Lidgard and Gilson 2002). When they do so, they will bring new ideas, higher human capital and international networks – all positive for New Zealand growth.
In regard to the diaspora, Bryant, Genc and Law (2004) estimate there were almost 460,000 New Zealand-born living outside New Zealand in 2001, of which 80 percent were living in Australia.[14] Their findings suggest that the number of New Zealanders in other countries is much smaller than is often assumed. The United Kingdom, for example, is home to less than 60,000 New Zealanders. It may be possible for New Zealand to tap into the networks and links of the diaspora, although a cost-effective option for doing so is not obvious.
Sustained productivity growth may come from increased access to, and incentive to develop, new technology, knowledge and ideas. Direct people-to-people contact can be key in accessing and adapting these. Migration facilitates international contacts and is a way to access larger and more varied stocks of capital and labour. Larger markets can increase productivity through larger scale production which permits specialisation, economies of scale and learning by doing, and through stronger incentives to innovate, for example through allowing the recovery of the fixed costs of innovation and competition that provides incentives to maximise efficiency and innovation.
There is evidence that the productivity of the native population may be improved by the presence of migrant workers. Some of the literature suggests that expatriate workers employed by foreign multinationals transfer labour market skills to native employees (Lloyd 1996, p77). There does not seem to be a quantitative estimate of the extent of skills transfer from temporary residents to local workers but if a significant relationship exists then this adds weight to the argument that the presence of skilled migrant workers can increase the productivity of native firms.
Immigration is one way to improve links from New Zealand with the migrant’s country of origin.[15] This can be done at an individual, organisational or governmental level. Improving global connectedness can facilitate greater overseas market access for New Zealand businesses, improvement in exchange of new technologies and processes and improving the New Zealand Inc image overseas. Greater market access can be achieved through improved export penetration for firms with multilingual, multicultural sales people and management with multi-country contacts.
The literature suggests that there are significant links between past immigration and the growth of exports (Lloyd 1996, p80) One study suggested that the employment of East Asian workers by Australian firms increased the East Asian export orientation of firms. This was attributed to assets of the East Asian employees such as knowledge of appropriate business ethics and practices, personal contacts with other East Asian peoples and specific cultural knowledge. In addition to export orientation being improved when native people from the export markets were employed, there was evidence of an increase in outward foreign direct investment towards that country as well (Lloyd 1996, p81). Lloyd accepts that more research is required to separate the various effects that may be involved in increasing exports and improvement in other global links, such as the general rapid market growth in Asia. He concludes that immigration may have a “strong effect” on trade and direct foreign investment patterns.
The evaluation of the Business Investor category in 1999 indicated that some Business Migrants were involved in exporting and importing businesses, with exporting going mainly to the country of birth of the Business Investor. These activities improve New Zealand’s global connectedness through trade with a range of countries mainly throughout Asia but also including Fiji, USA, United Kingdom and Australia. This will also improve wider international linkages that New Zealand has with the world.
