For a long time I’ve been something of a lone voice (I’d like to think somewhat akin to the little boy in “The Emperor’s New Clothes”) crying foul about the economic development direction we seem to take in this country.

Part of the reason I co-founded bizchat was because I saw that everyone, from central Government to private enterprise, is forgetting what is in fact the largest proportion of wealth creation in this (and other) countries – sole operators and businesses at the micro end of the SME description.

I have the utmost respect for those who determine their path is to build a high growth, rapidly scaling business. But I do bemoan the fact that everyone else seems to be forgotten in the process.

I’m biased of course, being co-owner of a small business that, while being somewhat boring in that it still actually manufactures physical products – still keeps 15 or so people employed and has done profitably for going on two decades.

And just so you see that I’m not in total denial – I’m also involved in a number of businesses that seek a different trajectory – with large global aspirations.

A couple of years ago when the (ultimately doomed) Buy Kiwi Made campaign was in full force. Icebreaker CEO Jeremy Moon and I went head-to-head on National Radio “discussing” his contention that companies manufacturing offshore should be permitted to leverage the Buy NZ Made brand. While I was against the BKM campaign (I saw it as an attempt to coerce consumer to buy NZ made product, generally out of some kind of guilt) nevertheless I didn’t think for a moment that it should be broadened to include those sourcing 100% of their product offshore.

So news last week that iconic New Zealand brand Fisher and Paykel is having a Chinese bailout to the tune of 20% should have, in my view, been cause for a hint of sadness – after all this was a New Zealand success story that had been proud, in recent years, that its decision to move much of its manufacturing offshore would enable it to become (and remain) competitive on an international level.

Instead it seems we’re all holding this up as some sort of success story – even our Prime Minister, John Key, wined and dined the Chinese on his recent visit in an effort to lubricate this deal.

So we now have a situation where a New Zealand brand manufactures offshore, where the profits from its (assumedly profitable) trading head offshore, and where more and more of its operational management is also handled overseas – so my question, as always, is what’s left for us here in Enzed?

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

  • I agree, but in some ways this might be our future…not trying to be provocative…just real.

    We certainly need to more than export logs and meat as a nation, and if we get into the Intellectual property business, which effectively you are when you outsource production, then hopefully we retain the lions share of the profit…

    in reality there will be a middle ground… but i share you pain

  • I laboured long and hard over how to rationalise the F&P move. It will be interesting to see how the company fares in the future with an elephantine cornerstone shareholder. I do wonder if Haier will not simply gouge out their IP and then eleminate F&P as a competitor. We have seen this many times before, and not just with manufactured goods.

    The difficulty is that F&P management were left with few choices, placing them in a weak negotiating position. Taxpayer financial support would have raised complaints of favouritism and market distortion; not to mention being philosophically abhorrent to a National government.

    There is a huge amount of capital sloshing around Asia-Pacific at present and we can expect to see more buyouts in the future. The trick is how to turn this around and make it a positive for the NZ economy.

  • I think the term “rape” is a bit strong for this particular transaction, it all sounds more or less consensual. Agree that BKM was a bad idea (tho I always did have a soft spot for Rod Donald), and that trying to get stuff not made in NZ to have rights to the label an even dumber idea. We live in an increasingly globalised world, if the assets are not of “strategic importance”, ie infrastructural (is that a word?), we ought not really care all that much where the money comes from or goes to. In practice tho, people do, and that also should be taken into account.

  • I agree completely.

    F&P have some fantastic products and I think it’s incredibly sad they they should have to sell 20% to a competitor in order to stay afloat. Perhaps the management hasn’t been quite as good as the product development dept. – cue a dilbert cartoon.

    I’m a little confused as to National’s approach to creating an innovation economy, what is their thinking behind cutting R&D and funding for business incubators. I’m still waiting for the punchline.

  • Rob, that is the worrying thing. They appear completely disinterested in creating an innovation economy. In fact the PM has publicly derided the idea. They are led by a monetarist who has never built anything in his life at all and can only see as far as pandering to the farming electorate. They really do not grasp the consequences of this non-strategy.

    But why are more people not speaking up?

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