Thu, 01/03/2007 - 01:00 | by admin
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As a small country remote from the world’s main markets, New Zealand is often held up as a model for Chile. But can the two countries, which are so different in many other ways, really be compared? That was one of the questions that bUSiness CHILE put to David Skilling, chief executive of the New Zealand Institute, during his recent visit to Santiago sponsored by New York-based Dalberg Global Development Advisors.
Skilling, who holds a Ph.D. in public policy from Harvard University, worked as a principal advisor at the New Zealand Treasury before joining the New Zealand Institute, a non-partisan think-tank that focuses on long-term development issues. He warned that, although much can be learned from international examples, it would, in his opinion, be wrong for Chile to attempt to replicate the ‘New Zealand model’ or, indeed, any other model. But, that said, he admitted to having been struck by a number of similarities between the two countries.
What are the similarities? How valid is it to compare two countries that are at very different stages of development?
It’s true that New Zealand has a much higher income level than Chile but, despite that, some of the broad themes underlying current debate in both countries are very similar. They have both experienced strong economic growth over the past several years and they both have pretty high-quality basic policies and institutions and there I’m referring mainly to fiscal and monetary policies.
The difference is that New Zealand has probably taken this further in, for example, labor market policies. Chile also obviously has more ground to travel in terms of its education system, public-sector management reform and aspects of its tax system.
What’s the secret of success for a small country?
Well, in New Zealand, we’re trying to work out what’s our place in the world. It’s no longer sufficient just to have an advantage in the primary sector; we’re up against countries like China, India and many of the high-tech economies and we’re wondering how to compete and what’s our niche in the world. One of the things I’ve been trying to communicate during this visit is that a small country has to be quite strategic about what it can bring to the global economy that is distinctive and gives companies and people and capital a reason to want to locate there. If you look at countries like Singapore, Ireland and Finland, they’ve all been very clear about what they’re about.
And where is New Zealand on that?
To be frank, it’s a conversation that’s still at the very early stages. Over the last twenty years, we’ve gone through a process of very extensive economic reform based on the belief that creating a level playing field and getting the government out - into the role of creating a stable environment and guarding against distortions - are the key to prosperity. Now, we’re talking about moving up the value chain as regards primary products and also trying to think a little more creatively about what sectors and activities we want to be in, and about the geographic aspect of the question. What does Asia mean for New Zealand? What markets offer real potential in terms of free trade agreements and so on?
I don’t make any claims that we’ve got the answer or that we know what to do, but I think there’s now a sense that this strategic conversation - about our strengths and weaknesses, challenges and opportunities - is starting to happen.
So in a way you’re thinking about the country as if it were a company?
You don’t want to push that analogy too far because a country is about more than just GDP but, in terms of the thought processes and disciplines that you would impose and the questions you would ask in a corporate context, there are things that a country - and, particularly, a small country seeking a coherent strategy - can draw on.
This all sounds a bit like central planning...
Certainly, in New Zealand, the idea of having a clear strategy as to what you want to do and being a bit more deliberate about it sometimes strikes people as being prescriptive. I also understand that, in Chile, there are doubts about how deliberate it’s really necessary to be and there’s the idea that let’s have a level playing field, get taxes down and all will be well. But the countries that have been successful have had clear strategies and it can be a low-tax, low-regulation strategy like Hong Kong.
How important is collaboration between the government and the private sector?
It’s absolutely essential. This is not something that can be left to governments. If you’re going to sustain a strategy over years and decades - and that’s what we’re really talking about here - you need everyone to buy into the basic vision, although this will evolve over time. And you have to remember that, because this is a long-term issue, politicians are often really quite reluctant to embark on a course that can be risky because it involves doing things differently. It’s often easier for groups from the private sector or civil society to start this type of debate.
And where do you think Chile ought to be going?
I’m hesitant as an outsider to improvise, but a couple of things spring to mind. One is that, although I know Chile regards itself as isolated and as an ‘island state’ because of the Andes and so on, it does have a not insignificant market on its doorstep and this provides potential in terms of attracting business as a platform for Latin America.
But, more broadly, the thing I’m incredibly impressed by is Chile’s free trade agreements. If it isn’t the best performance in the world in this field, it has to be close to it. For instance, there’s currently a 45% tariff on kiwi fruit imports into South Korea but, under Chile’s free trade agreement, that will be going down. So unless New Zealand gets one too, Chilean exporters will have an edge over us.
Now, in terms of Chile marketing itself as a country, it has reasonably low costs, law and order and a good policy foundation. That means it can tell other countries and companies that if, for example, they want to get into Asia from Latin America, then Chile is the place to go. In this sense, its strength is more in the ‘Irish’ approach because it can use its advantage in the free trade game to position itself as an investment platform. And, from an outside point of view, I’d say that looks like an enormous asset.
Learning from the Kiwi Experience
By By Ruth BradleyPrintSend to friend
As a small country remote from the world’s main markets, New Zealand is often held up as a model for Chile. But can the two countries, which are so different in many other ways, really be compared? That was one of the questions that bUSiness CHILE put to David Skilling, chief executive of the New Zealand Institute, during his recent visit to Santiago sponsored by New York-based Dalberg Global Development Advisors.
Skilling, who holds a Ph.D. in public policy from Harvard University, worked as a principal advisor at the New Zealand Treasury before joining the New Zealand Institute, a non-partisan think-tank that focuses on long-term development issues. He warned that, although much can be learned from international examples, it would, in his opinion, be wrong for Chile to attempt to replicate the ‘New Zealand model’ or, indeed, any other model. But, that said, he admitted to having been struck by a number of similarities between the two countries.
What are the similarities? How valid is it to compare two countries that are at very different stages of development?
It’s true that New Zealand has a much higher income level than Chile but, despite that, some of the broad themes underlying current debate in both countries are very similar. They have both experienced strong economic growth over the past several years and they both have pretty high-quality basic policies and institutions and there I’m referring mainly to fiscal and monetary policies.
The difference is that New Zealand has probably taken this further in, for example, labor market policies. Chile also obviously has more ground to travel in terms of its education system, public-sector management reform and aspects of its tax system.
What’s the secret of success for a small country?
Well, in New Zealand, we’re trying to work out what’s our place in the world. It’s no longer sufficient just to have an advantage in the primary sector; we’re up against countries like China, India and many of the high-tech economies and we’re wondering how to compete and what’s our niche in the world. One of the things I’ve been trying to communicate during this visit is that a small country has to be quite strategic about what it can bring to the global economy that is distinctive and gives companies and people and capital a reason to want to locate there. If you look at countries like Singapore, Ireland and Finland, they’ve all been very clear about what they’re about.
And where is New Zealand on that?
To be frank, it’s a conversation that’s still at the very early stages. Over the last twenty years, we’ve gone through a process of very extensive economic reform based on the belief that creating a level playing field and getting the government out - into the role of creating a stable environment and guarding against distortions - are the key to prosperity. Now, we’re talking about moving up the value chain as regards primary products and also trying to think a little more creatively about what sectors and activities we want to be in, and about the geographic aspect of the question. What does Asia mean for New Zealand? What markets offer real potential in terms of free trade agreements and so on?
I don’t make any claims that we’ve got the answer or that we know what to do, but I think there’s now a sense that this strategic conversation - about our strengths and weaknesses, challenges and opportunities - is starting to happen.
So in a way you’re thinking about the country as if it were a company?
You don’t want to push that analogy too far because a country is about more than just GDP but, in terms of the thought processes and disciplines that you would impose and the questions you would ask in a corporate context, there are things that a country - and, particularly, a small country seeking a coherent strategy - can draw on.
This all sounds a bit like central planning...
Certainly, in New Zealand, the idea of having a clear strategy as to what you want to do and being a bit more deliberate about it sometimes strikes people as being prescriptive. I also understand that, in Chile, there are doubts about how deliberate it’s really necessary to be and there’s the idea that let’s have a level playing field, get taxes down and all will be well. But the countries that have been successful have had clear strategies and it can be a low-tax, low-regulation strategy like Hong Kong.
How important is collaboration between the government and the private sector?
It’s absolutely essential. This is not something that can be left to governments. If you’re going to sustain a strategy over years and decades - and that’s what we’re really talking about here - you need everyone to buy into the basic vision, although this will evolve over time. And you have to remember that, because this is a long-term issue, politicians are often really quite reluctant to embark on a course that can be risky because it involves doing things differently. It’s often easier for groups from the private sector or civil society to start this type of debate.
And where do you think Chile ought to be going?
I’m hesitant as an outsider to improvise, but a couple of things spring to mind. One is that, although I know Chile regards itself as isolated and as an ‘island state’ because of the Andes and so on, it does have a not insignificant market on its doorstep and this provides potential in terms of attracting business as a platform for Latin America.
But, more broadly, the thing I’m incredibly impressed by is Chile’s free trade agreements. If it isn’t the best performance in the world in this field, it has to be close to it. For instance, there’s currently a 45% tariff on kiwi fruit imports into South Korea but, under Chile’s free trade agreement, that will be going down. So unless New Zealand gets one too, Chilean exporters will have an edge over us.
Now, in terms of Chile marketing itself as a country, it has reasonably low costs, law and order and a good policy foundation. That means it can tell other countries and companies that if, for example, they want to get into Asia from Latin America, then Chile is the place to go. In this sense, its strength is more in the ‘Irish’ approach because it can use its advantage in the free trade game to position itself as an investment platform. And, from an outside point of view, I’d say that looks like an enormous asset. 
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