Outcome Five: A dynamic business environment fostering innovation and international connections

The business environment is affected by global economic, social, technological and demographic trends as well as domestic factors such as culture, social norms and more formal influences like regulation. This makes the right connections critical to successful innovations.

Our role is to create a business environment that will encourage innovation. To achieve this, MBIE strives to make it easier for businesses to work with government and reduce barriers for businesses to secure investment opportunities.

New Zealand’s strict lockdown rules in Alert Level 4 meant that it was one of the most closed economies in the world during that time. However, the success of the restrictions on health outcomes means that New Zealand is now one of the least restrictive jurisdictions.

An example of how people were able to adapt is that despite the restrictiveness during Alert Level 4, broadband usage climbed in that time, largely due to the increase in video conferencing.

The ability to work from home (WFH) has increased considerably in recent times with the availability of reliable video-conferencing. Accessibility to high levels of data has also been crucial. By March, at the start of Alert Level 4, 91% of the planned ultra-fast broadband (UFB) build had been completed meaning the sudden surge in WFH and data demand was able to be catered for.

What we're working towards

Performance measure	Indicator	Current trend	Desired trend	Commentary
Increasing the proportion of businesses exporting	Percentage of firms exporting	Increase	Increase	The percentage of firms exporting improved to 25.6% in the year to August 2019, up from 24.0% in 2018.
Increase in firms collaborating internationally for innovation	Percentage of firms collaborating internationally for innovation (This performance measure is not an official statistic. It has been created for research purposes from the Integrated Data Infrastructure (IDI) managed by Stats NZ.)	Steady	Increase	The percentage of firms collaborating internationally for innovation in 2019 was 4.3%, very similar to the result of 4.2% in 2017 and a small decrease from the decade high of 4.7% in 2015. The 2019 result is close to the 10-year average (from 2009 to 2019) of 4.2%.
Increase in firms reporting innovative activity	Firm innovation rate	Steady	Increase	In the year to August 2019, the total innovation rate was 46%, very similar to the previous result of 47% (year to August 2017). This indicator is a measure of the proportion of businesses that innovate. Innovation includes developing and implementing new products, business processes, and marketing methods.
Increase business research and development expenditure	Business expenditure on research and development as a percentage of GDP	Increase	Increase	Business expenditure on research and development as a percentage of GDP increased from 0.73% in 2018 to 0.79% in 2019.
Increase access to ultra-fast broadband	Percentage of households and businesses able to connect to ultra-fast broadband in New Zealand	Increase	Increase	The percentage of households and businesses able to connect to ultra-fast broadband in New Zealand increased to 82% in the quarter to March 2020, up from 75% in the quarter to March 2019.
Increase business dynamism	Average five-year growth in employment in new businesses (This performance measure is not an official statistic. It has been created for research purposes from the Integrated Data Infrastructure (IDI) managed by Stats NZ.)	Increase	Increase	The average five-year employment growth rate for the period 2013–2018 was 28.2%, slightly higher than the growth rate for 2012–2017, which was 27.9%.
Increase capital intensity	Net capital stock per capita	Increase	Increase	Net capital stock per capita (an indicator of New Zealanders’ wealth) increased to $142,886 in the year to March 2019, up 1.5% on the previous year, which is consistent with a five-year compound annual growth rate of 1.1% over the 2014–2019 period.
Increase productive capital investment	Proportion of net capital stock that is not residential	Steady	Increase	The proportion of net capital stock that is not residential buildings (an indicator of productive capital investment) remained at the high level of 56.5% in the year to March 2019, which is about the same as it was the year before (56.4%).
Increase early stage capital investment	Capital investment in early stage companies (The methodology for this indicator has been refined since the MBIE Statement of Intent 2018–2022. The refined version directly uses the start-up investment estimated by PwC’s Startup Investment magazine as proxy for capital investment in early stage companies.)	Increase	Increase	The capital investment in early stage companies, estimated by PwC’s Startup Investment magazine, was $128.7 million in 2019. This is a 10% increase from $116.9 million in 2018.
Improve quality of foreign direct investment (FDI)	Potential direct economic impact (pDEI) multiplier: ratio of pDEI to FDI	Decrease	Increase	The pDEI multiplier, measured by the ratio of pDEI to FDI, was 3.5 in the year to June 2020. This is a 10% decrease compared to the ratio value of 3.9 in 2019. pDEI is a tool used by NZTE to estimate the potential benefits to New Zealand from the investment deals that it facilitates. The pDEI multiplier is a proxy of economic impact to dollar of FDI attracted (FDI quality).
Maintain position in the World Bank Ease of Doing Business Survey	Ease of doing business ranking	Steady	Steady	New Zealand ranked top in the World Bank Ease of Doing Business survey in 2019 for the fifth consecutive year. The Ease of Doing Business survey assesses the regulations of 190 different nations for the ease with which business is done.

Note: The opinions, findings, recommendations and conclusions expressed in this report are those of the author(s), not Statistics NZ. Access to the anonymised data used for these measures was provided by Statistics NZ in accordance with security and confidentiality provisions of the Statistics Act 1975. Only people authorised by the Statistics Act 1975 are allowed to see data about a particular person, household, business or organisation, and the results in this report have been confidentialised to protect these groups from identification.

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