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Young Maori Leaders Conference

Young Maori Leaders Conference. Economic Resources Temuera Hall 17 June 2003. Growth increases choice health education welfare cultural security. Why Economic Growth?. The Human Element People how many? how smart? how motivated? Resources - land and capital

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Young Maori Leaders Conference

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  1. Young Maori Leaders Conference Economic Resources Temuera Hall 17 June 2003

  2. Growth increases choice health education welfare cultural security Why Economic Growth?

  3. The Human Element People how many? how smart? how motivated? Resources - land and capital Decreasing returns to scale What Generates Economic Growth?

  4. What creates economic growth? • More inputs (labour and capital) • Same things better - productivity • Better things - innovation Entrepreneur + Innovator = Growth

  5. Growth with more inputs Growth with knowledge Output Inputs Growth: Innovation

  6. 4000 Commodity Price Index 3500 New Zealand GDP US GDP Revolution? 3000 2500 2000 Evolution 1500 1000 500 0 Mar-60 Mar-65 Mar-70 Mar-75 Mar-80 Mar-85 Mar-90 Mar-95 Mar-00 Same things better and better things

  7. Generating Economic Growth Economic growth Productivity Labour quality Capital quality Individual incentives Macroeconomic stability Property rights & Governance Natural resources/geography Labour Capital

  8. 22 6 4 2 0 Take-off GDP per person in Western Europe, $’000, 1990 prices Volta’s electric battery (1800); electromagnetic telegraph (1833); first transatlantic telegraph cable (1858); Bell’s telephone (1876); Edison’s carbon-filament lamp (1878); Marconi’s wireless patent (1896) Mechanisation in farming; steam engines; Arkwright’s spinning machine (1769); Crompton’s mule (1779); bridge at Coalbrookdale, England, first structural use of cast iron (1779) First telescopes; Huygens invents pendulum clock (1658) Padded horse collar (around 1100); first recorded windmall with vertical sails rotating about horizontal axis (1185) Bessemer and Siemens-Martin (open-hearth) processes for making steel Gutenberg’s printing press Advances in large-scale hydraulic engineering; Languedoc Canal joins Atlantic and Mediterranean (1681) Invention and development of compass; year-round navigation in Mediterranean after 1250 Car powered by internal-combustion engine (1885); Henry Ford’s Model T (1908) Domesday Book shows 5,624 watermills in England south of the Severn Blast furnace Powered flight (1903) 1 1000 1050 1100 1150 1200 1250 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 Source: Angus Maddison Bold leaps forward

  9. The growth process Knowledge Experience SERVICE PROCESS GROW DIG

  10. It’s a small world • Globalisation: capital and labour free to move • Decisions made and judged on a global basis • Access to all investors and investments • Diversify or die!!

  11. CURRENT MAORI ECONOMY Typical Risks • Exchange rate • Commodity prices (price taker) • Nature (primary based) • Governance (property rights) • Skills (education) • Market and products (Doha round) • Regulatory changes (Kyoto, GE, RMA..) Agriculture 60% Forestry 10% Fishing 12% Other 18% Total 100% 82%

  12. Education attainment - skills Location Assets Property rights Governance Aggregation The will…? Barriers to Maori economic growth? • Natural Resources - rain, grass, ocean • Geography - isolated, small • Capital, Labour - average

  13. Maori Business Issues In Short: Generic business issue Systems & Processes commercial knowledge and experience • Common Issues: • Governance • Management • Accountability • Transparency • Communications

  14. Role of education Education • makes individual workers more productive - direct; • leads to the creation of knowledge - indirect.

  15. Role of education • “…the improvement in human capital seems to be a common factor behind the growth in recent decades in all OECD countries…. the increase in human capital accounted for more than half an extra percentage point of growth in the 1990s compared with the previous decade” OECD, 2001

  16. Narrow asset base - farm, forestry Commodity price-takers All assets in New Zealand Capital constraints Maori Economic Vulnerability

  17. Property rights - Collective Ownership Agreement on asset use Governance : creation or distribution? Individual incentives and accountability Fixed assets Access to credit Generating Economic Growth

  18. Individual Incentives Education - relative wages, opportunities Work effort - tax, welfare Openness - trade, ideas, people Regulatory environment - investment Saving and investment Generating Economic Growth

  19. Basic Investment Concepts Risk vs Return Growth / Income Capital Protection Liquidity Asset Allocation Time Horizon

  20. Managing Risk

  21. Active - Passive Economic Resources Structure Outputs Goals Values Do we need a Maori Bank?

  22. Business Basics • Business must make a profit • Profit to exceed lending rates • Cashflow priority • Comply with regulations • Know & manage risk • Global Marae

  23. Business Basics • Every industry sector has a benchmark • Doing things right (governance & mgmt) • Making a difference – People / ideas / experience • System and process • Supply & Demand

  24. Business Reality Top 10% • A good profitable Business: • Exclusive industry niche • Technology break through • Exceptional efficiency • Market dominance /scale • Sustainable

  25. Maori Business Reality Te Tahuhu Te Mauri • Value base • Cultural values (kauwae runga) • Uniqueness / character (kauwae raro) Te Ihi me te Wana • Key drivers • Commercial • Social / environmental • Cultural • Achievable outcomes • Realistic expectations • Know your cashflow • Identify & manage risk Te wero me te hua

  26. LTF - Investment Planning Goals & Objectives Analyse Investment Needs Risk Profile Investment Parameters Performance Monitoring

  27. Investment Planning Process • Process: • Understand current asset portfolio • Determine current & potential income streams • Identify core business • Identify current risks • Determine income requirements • Determine investment objectives • Develop risk profile

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