Julian Wood

By Julian Wood

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Get real about regional spending

If you put people in a room and ask them how to bring growth to New Zealand’s regions, someone will always bring up special economic zones as a silver bullet solution. The three mayors of the Far North, Gisborne, and Rotorua Lakes Districts as part of a proposal to tackle poverty have proposed just this, calling them “demarcation zones.” After all, special economic zones worked so very well in Shenzhen and Zhuhai, so surely they should work here. Unfortunately, these three areas would all in one way or another fly in the face of international research into the success of special economic zones worldwide.

The truth is that a lot of these special zones fail. They are quite problematic to get right. Zones can easily distort economic incentives, actually hinder overall economic development, and also because of a lack of transparency or accountability, be a way for self-seeking parties to spend a lot of money on their own interests.

Ones that do succeed typically have three pre-existing elements. First, the areas have to have “economic activity outside the zone [that] can quickly absorb new technology and ways of producing by learning from what is being done inside the zone.” Second, they need “a ready supply of suitable workers or value chain suppliers,” and thirdly they need to be in “areas close to international shipping ports or airports.”

In fact, in the research we have released today, entitled, Growing beyond Growth: rethinking the goals of regional development policy in New Zealand we highlight that it is too easy to gloss over the difficulties associated with regional development in general, not just special economic zones. Regional development policy, and especially place-based policy, can be an easy way for politicians to spend a lot of money for mostly political gain. We don’t have to go as far back as as Muldoon to highlight spending of this kind, just see National’s ten bridges in Northland.

New Zealanders and those living in these underperforming regions, including the (by my calculations) more than 34,000 students enrolled in schools within just these three regions discussed above, deserve better than to be just economic playdough used in an experiment. To constrain waste and provide New Zealand with sound regional development policy we need to rethink what we are currently doing.

We need to be transparent in our goal setting and to be clear about what we are trying to achieve. We also need to be clear about the wellbeing and economic trade-offs we might be making under particular initiatives. This will enable the evaluation of any policy change enabling communities to keep those initiatives that are working and cut those that are not. Otherwise we are just spending money on what seems like a good idea even if it is doing more harm than good.

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Julian Wood

By Julian Wood

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