NZ 11th best country in the world for supporting and enabling dynamic growing businesses

The Grant Thornton Global Dynamism Index ranks 50 countries based on 22 indicators

New Zealand is the 11th best country in the world for supporting and enabling dynamic growing businesses  according to the Grant Thornton Global Dynamism Index (GDI). However, the global ranking of 33rd  in the economics and growth driver confirms that New Zealand needs many more growth companies. Given our population and the size and scale of our economy  relative to its land mass, the unanswered question is, can we improve our position within the next 10 years?

Singapore is currently ranked No. 1 with neighbours Australia in 6th place and the United States 10th.

Mark Hucklesby, National Technical Director of Grant Thornton New Zealand, said the ratings portray New Zealand’s ability to support dynamic growing businesses in a good light, providing significant comfort on how well placed we  are to support growth out of the financial doldrums. What makes Grant Thornton’s Index different is that it draws not only on basic GDP data, but also upon indicators from a variety of sources including: the Economist Intelligence Unit (EIU), the World Bank, Thomson Financial, UNESCO and the views of 406 senior executives in 50 countries who were asked to identify what environmental factors they believed impacted the growth of their businesses.

“Senior executive involvement allowed us to weight each aspect of business growth according to its perceived relevance. Rather than provide a measure of an economy’s success during a period of high economic turbulence, this iteration provides a true illustration of the strength of each economy as a place for dynamic businesses to flourish,” he said.

“The results are a positive indicator of the way we do business in this country, although the figures do identify a couple of areas of concern for the New Zealand economy,” he said.

“Five areas were identified as holding the key drivers to an economy’s dynamism - business operating environment, science and technology, labour and human capital, economics and growth and the financing environment. Within these groups, there were 22 key data points that were analysed to generate the index rankings.

Singapore leads the world with an index rating of (72.1) followed by Finland 70.5, Sweden 69.6, Israel 69.3,  Austria 66.1, Australia 65.6, Switzerland 65.1, South Korea 64.6, Germany 64.8, United Stated 64.1 and New Zealand 63.9.

“New Zealand performed best in the Labour and Human Capital driver where we were ranked fifth in the world. We were seventh in Financing and Environment, ninth in Business Operating Environment, but 26th in Science and Technology and 33rd in Economics and Growth.

“We only spend 1.3% of total GDP on Research and Development compared with an OECD average of 2.4% and upwards of  5% for some Scandinavian countries, therefore, finding us at 26th in Science and Technology and 33rd in Economics and Growth comes as no surprise. The knock on effect of New Zealand’s very poor record in R&D is that our growth prospects have suffered.”

However, Hucklesby said that it was  pleasing to see the Prime Minister John Key and Science and Innovation Minister Steve Joyce last month exhorting more spending on R&D and backing these statements with a plan to put aside $166 million over the next four years to establish a new advanced technology institute to encourage more innovation in the manufacturing and services centre.

“I see that this is planned to be a one-stop-shop to connect high-tech firms to innovation and business development expertise and support within the centre, around the country and internationally.

“However, this can only be viewed as  a start. We actually need a paradigm shift in the way we deal with many of our exported products. It is a topic that has been discussed in New Zealand for decades, but we still send a large proportion of primary goods overseas with little or no value added. And that is only one area where R&D could benefit the country. Biotech is another good example.”

Global observations

The release of Grant Thornton’s 2012 GDI comes at a time of continuing global economic uncertainty. In Europe, the severe austerity measures being used to reign in huge budget deficits appear to be choking  growth prospects. In the United States, growth and job creation remain slow whilst the return of polarising partisan politics is preventing any meaningful  discussion of how to tackle the growing mountain of government debt. In Japan, anemic growth rates were compounded by the devastating earthquake and tsunami of March 2011.

Growth prospects are healthier in emerging markets. Indeed, over the next five years the IMF expects emerging market economies to grow at around 7.8% per annum, compared with 3.2% per annum in mature  economies. However, even these markets are now wrestling with their new status and facing a growth slowdown.In India, the government is battling corruption scandals, high inflation, a declining rupee and a marked slowdown in growth. In Brazil, growth tailed off towards the end of 2011, and the government is now rapidly cutting back interest rates in a bid to boost industry.

Turkey is currently running a current account deficit of more than 10%, which is being financed with potentially dangerous inflows of  “hot money”1 from abroad. Even in China, the target growth rate has been cut and the full extent of the level of the bad debt taken on by local government as part of the large 2008 stimulus programme has yet to be determined.

The 10 economies which sit at the top of the GDI are varied, showing that there are many paths to dynamism. There are three economies from Asia Pacific – Australia, Singapore and Korea; a further five are from Europe – Austria, Germany, Finland, Sweden and Switzerland; the United  States from North America and Israel from the Middle East.

These 10 economies represent a diverse set of economic and political conditions but one thing binding them together is that they are regarded as having  industrialised, indicating that a dynamic business environment cannot be built overnight.

1’Hot money’ refers to speculative capital flows that can move very quickly in and out of markets.

Singapore, a small, open economy which industrialised rapidly in the 1970s and 1980s, sits at the top of Grant Thornton’s GDI. Singapore appears well-placed to act as a gateway for dynamic businesses from  mature markets seeking the greater returns on offer in the high-growth markets of Asia. Its economy comes top for financing environment globally, and sits no lower than 11th in any of the five categories.

Two Scandinavian countries come next, with Finland slightly ahead of Sweden. The Eurozone crisis has clearly hurt the economies of  both nations, but the GDI suggests that longer term growth fundamentals are  robust.

Both economies sit in the top three for both business operating environment and science and technology, with Finland behind only Singapore in terms of its financing environment.

Korea is the highest placed  member of the Growth-8, a grouping of the largest high-growth markets. However, China is the only other member of this group, which sits in the top half of the  index. Indeed India, Indonesia and Russia sit in the bottom ten, emphasising that dynamism is far more than just another measure of growth.

Overall Rankings

1. Singapore 72.1 6. Australia 65.6
2. Finland 70.5 7. Switzerland 65.1
3. Sweden  69.6 8. South Korea 64.9
4. Israel 69.3 9. Germany    64.8
5. Austria 66.1 10. United  States 64.1

(link to  complete list of 50 countries: www.globaldynamismindex.com)         

A. Business operating environment

(Foreign trade  and exchange regimes and controls; policy towards private enterprise and  competition; political stability; and legal and regulatory risk)

1. Finland  94.2 6. Canada 91.2
2. Ireland 93.4 7. Australia 90.7
3. Sweden 92.8 8. Luxembourg 90.7
4. Netherlands 91.5 9.  New Zealand 90.4
5. Denmark 91.4 10. Austria 90.1

B. Science and technology

(Broadband  subscriber lines per 100 inhabitants; growth in broadband subscriber lines;  R&D as % of GDP; total IT spending growth)

1. Israel 73.0 6. Japan 58.8
2. Finland 65.8 7. Denmark 56.4
3. Sweden 64.9 8. Taiwan 53.9
4. South Korea 61.0 9. Germany 53.5
5. Switzerland 59.0 10. UAE 53.2

C. Labour and human capital

(Labour  productivity growth; unemployment; school life expectancy; % of population  under 30.)

1. Argentina 72.5 6. South Korea 64.1
2. Slovak  Republic 72.4 7. Australia 63.9
3. Uruguay 69.0 8. Norway 62.4
4. China 67.4 9. Indonesia 62.1
5. New Zealand 65.6 10. Taiwan 61.6

D. Financing  environment

(Quality of  overall financial regulatory system; access of firms to medium-term capital;  growth in value of inward M&A deals; value of inward M&A deals; private  sector credit as % of GDP; inward direct investment growth; corporate tax  burden.)

1. Singapore 82.2 6. Poland 70.4
2. Finland 72.3 7. New Zealand 69.8
3. France 71.8 8. United  States 69.5
4. Austria 71.4 9. Israel 68.3
5. Chile 71.4 10. Slovenia 67.6

E. Economics and growth

(Real GDP  growth; private consumption per head; change in $ value of stock market index.)

1. Argentina  95.6 7. Nigeria 79.4
2. China 94.6 8. Turkey 78.0
3. Uruguay  82.3 9. Singapore 75.3
4. Chile   80.6 10. Colombia 73.8
5. India 80.0 11. Russia 73.8
6. Indonesia 79.8    

New Zealand Profile

  Rank/50 Score/100
Overall 11 63.9
Business  operating environment    9 90.4
Science and  technology    26 36.7
Labour &  human capital  5 65.6
Financing  environment   7 69.8
Economics  & growth  33 57.1

                  

Indicator scores grouped

Poor (scores <=33)

  • R&D as % of GDP
  • % of population under 30
  • Growth in value of inward M&A deals
  • Value of inward M&A deals
  • Inward direct investment

Modest (scores 33-66)

  • Growth in broadband
  • Total IT spending growth
  • Labour productivity growth
  • Private sector credit as % of GDP
  • Real GDP growth
  • Change in $value of stock market index

Good (scores >=66)

  • Foreign trade and exchange regimes and controls
  • Policy towards private enterprise and  competition
  • Political stability
  • Legal and regulatory risk
  • Broadband subscriber lines per 100 inhabitants
  • Unemployment
  • School life expectancy
  • Quality of overall financial regulatory system
  • Access of firms to medium-term capital
  • Corporate tax burden
  • Private consumption per head

Further enquiries, please contact:

Mark Hucklesby
National Technical Director
+64 (0)9 308 2534
M +64 (0)21 664 585
E mark.hucklesby@nz.gt.com