EDITORIAL — New Zealand shifts to market economy — Right turn pays dividends

No one pretends it was easy. Even so, New Zealanders (or Kiwis, as they are affectionately called by their Aussie neighbors) have accomplished a remarkable turnaround from the brink of insolvency a decade or so ago. The country is not only producing budget surpluses but forging full bore ahead with privatization programs aimed at making the nation more competitive.

Politicians hope that foreign companies doing business in the Pacific Rim will view Auckland and other cities as good places to set up shop.

Politicians also are hopeful that recent reforms and structural changes will attract more foreign investment. The country has a small population (about 3 million people) and has never been able to generate its own capital requirements.

While New Zealand has yet to transform itself into an ideal destination for exploration and mine development (land access being one problem area), government officials are beginning to see that mineral wealth is an important source of export dollars and spinoff benefits for local communities. The presence of several operating mines has convinced most New Zealanders that mining companies can meet high environmental standards. As well, the Maori are now showing a keen interest in resource development.

New Zealand remains, however, a clear leader in economic and political restructuring. Many Canadians are familiar with the television documentary that aired several years ago outlining exactly how the country bounced back from crippling debt loads. The government had borrowed heavily to finance generous social programs and a large public sector that once controlled 25% of the nation’s gross domestic product.

Today, most public corporations have been sold or “corporatized.” The Post Office, while still government-owned, has been split into three competitive entities. The employees work under performance contracts. The post office is now producing profits rather than losses, and paying dividends and taxes to boot. Service is better and costs are lower.

Railways, a money-losing proposition in years past, were sold. Today, they make a profit, pay taxes and provide more services at lower cost. Not only that; the railway company once owned by the government recently expanded into Australia.

Air New Zealand has been privatized, as have the ports. Labor laws have been overhauled to such an extent that it now takes six times longer to stuff a container of wool in Australia than in New Zealand.

The civil service has been reduced and streamlined, and pay is based on performance. There are no agricultural subsidies paid to farmers, yet the nation exports a higher percentage of such products than any other nation relative to its population base. There is no capital gains tax. And not only are there budget surpluses; debt is being repaid. Taxation has been reduced, which puts money into New Zealanders’ pockets, thus providing a boon to local restaurants and service industries.

New Zealand used to be known as a worker’s paradise and an employer’s nightmare because the balance of power was so skewed in favor of unions and workers. Today there is a better balance, one which ensures that small businesses are not crushed by the weight of onerous labor laws.

New Zealand is a remarkable success story on many fronts. It has a pro-business attitude that is starting to pay dividends. All that is needed now are some efforts to ensure that exploration and mining companies, including domestic ones, can thrive and bring increased mineral wealth and export dollars to the nation, without compromising its “green and clean” environment.