New Zealand’s regions of opportunityLessons from the global Cities of Opportunity series

pwc.co.nz

November 2015

In 2014, PwC released its sixth Cities of Opportunity report, comparing the overall performance of 30 international cities. The study focuses on centres of finance, commerce and culture, and covers mature and emerging markets. As a result, we have a balanced sample of cities around the world. Unsurprisingly, global mega cities London and New York top the list, but smaller global cities like Toronto, San Francisco and Stockholm also feature highly.

What can the regions in New Zealand learn from the Cities of Opportunity studies? We are under no illusion about the differences between Tauranga and Tokyo, but we find the themes can be applied to towns and cities of all sizes in New Zealand.

One of the key messages from the report was that top cities are strong across the whole range of indicators, including intellectual capital, technology readiness, transportation and infrastructure, ease of doing business, sustainability and health, safety and security, among others. We found that no single factor advances successes more than others – it is the combination of factors which drives overall success.

We also found that in some areas of performance, small cities can perform as well as big cities. This is great news for regional New Zealand. Bigger populations go hand-in-hand with size of potential market, but our analysis shows that size or population does not necessarily correlate with quality of life factors such as:• health, safety and security• transportation and infrastructure• sustainability and the natural

environment• demographics and liveability.

To delve deeper into the liveability issues, PwC undertook a global staff survey1 of 15,000 employees focusing on the idea of liveability and what mattered most to workers.

Our survey showed that the most important factors when considering relocating to another city are the proximity to friends and family, employment prospects, and safety and security. Importantly, proximity to friends and family, and safety and security are applicable to cities and towns of any size. On the downside for regional New Zealand, employment prospects are more closely related to population size.

How can local government put these key learnings into practice?Developing into regions of opportunity will take a collaborative effort by councils, central government and businesses within the region. A recent report from the New Zealand Initiative2 discusses the idea of using special economic zones in regions to boost foreign investment and assist new enterprises to start up within a region, to meet national economic goals. This cannot happen without the directive from central government. However, there are other things which councils can do now to help regional New Zealand grow and become a region of opportunity. We consider the following steps will be a good start for councils.

1. Be ready – know what you offerWe know that top cities are successful across a range of indicators. So how can councils ensure they are providing residents and businesses with the right foundations for success? The first step is to understand your area’s strengths and weaknesses and not restrict assessments to purely a consideration of the economy. State-of-play assessments can help through the development of a broader understanding of the key dynamics of an area. In turn, they provide a useful basis to develop policy from, and address perceived weaknesses.In particular, do you know the status of your area’s:

• Economic base – which industries are contributing the most to your economy? How diverse is your industrial base? Which industries contribute to your comparative advantage? What is the role of technology in these industries? Is there associated job decline? What are the trends?

• Population base – which areas are growing most rapidly? Are there areas facing population decline?

• Skill base – what is the skill base of workers in your region? Does the skill base match the direction of growth? What are the institutions which support growing skills in the region?

• Connectivity – what are the links between industries and between areas in your region? How accessible is your city from other regions?

• Environmental base – what are your environmental assets? Are they being utilised effectively? Are the social costs of their uses understood?

• Collaboration base – how well do businesses work together, even as competitors, to grow the regional economy?

State-of-play assessments at a regional level are a great start but understanding your area at a sub-regional level can also highlight important features for tailored policy responses. For example, PwC recently undertook sub-regional analysis on the geographic dispersion of certain types of businesses in Auckland. Figure 1 shows the number of businesses involved in warehousing and storage in Auckland. The analysis highlighted the location of these businesses within the Auckland region and showed their concentration within areas, which will be useful for developing economic and transport policy. Similarly, understanding population growth or decline at a sub-regional level can be useful for planning community services and service delivery. This is particularly important given the fiscal constraints which councils operate within. For example, funding community services (eg recreation centres) can be prioritised in high-growth areas.

Figure 1: Geographic distribution and concentration of businesses in warehousing and storage in Auckland

2 or fewer

3 to 4

5 to 8

9 to 16

17 or more

Mangere South

Albany

Ormiston

Whenuapai West

Hingaia

Manukau Central

Wiri

Greenhithe

Brem

ner

Pare

mor

emo

East

Highbrook

Penrose

Waim

a

Ambury

Westlake

Chelsea

Gre

enm

ount

Hillpark

Number of businessesWarehousing & Storage

PwC, Statistics New Zealand0 6 123km

±Businesses per CAU

2 or fewer3 to 45 to 89 to 1617 or more

Source: PwC, Statistics New Zealand

1 PwC, Cities of Opportunity 6: We the urban people (2014) available at http://www.pwc.com/us/en/cities-of-opportunity/2014.html

2 NZ Initiative, In the zone: Creating a toolbox for regional prosperity (2015) available at http://nzinitiative.org.nz/Research/Special+Economic+Zones.html

Warehousing and storage businesses per Census Area Unit

2. Have a people strategy to promote liveability and attract talentRegional New Zealand has a wealth of liveability benefits, including its natural environment, safety and security, quality of living and commute times. These factors are a great start but councils can do more to leverage these benefits. A people strategy, to attract and retain skilled workers to liveable areas, is also something that councils can do to develop their areas as a region of opportunity.

As an example, Dunedin City Council and the Digital Community Trust are working towards leveraging quality of living opportunities after winning Chorus’ Gigatown competition. A current connectivity project is to provide wireless high-speed internet free of charge in key locations across the city such as the airport, in the Octagon, the stadium, library and museums. The service is being provided to the community as recognition of the importance of connectivity to residents, but also to increase entrepreneurial opportunities in the city.

In the global PwC staff survey, the provision of public services and public goods also features on the list of factors which attract skilled workers. A council’s role is to provide the best community services it can, subject to affordability constraints. To do that, it should start with a clear understanding of what services it already provides, in terms of the scope, scale and quality of the services. Once a council understands what it has and what it does, it can explore options to leverage them further and develop a plan to implement over time. Successful examples include rationalisation of disparate facilities onto a single site with enhanced amenity and services.

The other key element of the people plan is to have a focus on skills development within the region, making sure workers are equipped to contribute to the success of the region. For example the Eindhoven region in Holland recently adopted a leading strategy entitled Brainport3. The strategy notes that competencies like entrepreneurship, research and design, in addition to technical knowledge and skills, will enable workers to be permanently employable in the region. The strategy for the Eindhoven region seeks to encourage a broader range of players, from educators to employers, to play a role in ensuring that the region is ready to adapt to an ever-changing world.

3 Brainport Development, Revised Strategy Brainport: Next generation (June 2015) available at http://nextgeneration.brainport.nl/uploads/documents/BPNG_strategie_EN.pdf

3. Recognise that solutions may be collaborativeCollaboration among councils, between councils and businesses or between councils and central government is one way to deliver and achieve a shared outcome. Collaboration will be essential to develop areas as regions of opportunity. A council cannot do the task alone, particularly if it does not have the in-house resources or is not the best entity to pursue opportunities as economic growth is not delivered by councils but by private enterprise. In this regard, council may have a role in facilitating collaboration between businesses, in order for businesses to gain efficiencies in their supply chains or back-office functions.

Councils themselves can have a more direct role. Inter-council collaboration can be useful to develop the broader strategy to ensure that effort is focused on growing the size of the regional pie. This particularly applies where the regional or sub-regional economic boundary does not particularly align with the council administrative boundary, a common occurrence in New Zealand. In this regard, councils should start thinking about the value chains which are present in their areas and linkages to other regions along these value chains.

Collaboration between government and private enterprise presents new opportunities for councils, on ways to deliver community and business outcomes by partnering with private enterprise which has the skills and experience to achieve a shared result. Public-private partnerships and joint-ventures are examples of formal collaborative approaches. What’s important about these approaches is that the outcome and risk is shared, incentivising all parties with a vested interest to achieve success.

ConclusionWe’ve learnt from the PwC Cities of Opportunity studies that size and scale are not the only determinants of success for a city. We’ve also learnt that successful cities are strong across a range of indicators, and that no single factor drives success more than others. While New Zealand cities and towns are not global mega cities, we’ve learnt that there’s an opportunity for regional New Zealand to become regions of opportunity, advancing the prosperity of the provinces.

The best place to start is the status quo. Know what your strengths and weaknesses are, and develop policies to improve from there.

A people strategy is also key to developing as a region of opportunity. Consider how to attract and retain skilled workers. Also consider how to grow talent from within the region, and ensure that workers are well placed to respond and grow the region together.

Finally, councils should look for opportunities to collaborate with others. Collaboration can be in many different forms and with different entities. Collaborative approaches should ensure that each entity is invested in achieving shared outcomes.

Figure 2: New Zealand CEOs are looking to collaborate with governments across a number of areas.

Q: Which, if any, of these outcomes is your organisation focusing on collaborating with Government over the next three years?

39%24%

19%16%

A skilled and adaptable workforce

Developing an innovation ecosystem

Adequate physical infrastructure

Adequate digital infrastructure

Source: 2015 New Zealand CEO Survey

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