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© Forte Business Group Ltd, September 2006

business & economic development advisors A service of Forté Business Group Ltd, 73b Maxwell Road, Blenheim 7201, Marlborough, New Zealand ++64 274 967 821, Skype: tonysmale, [email protected], www.forte-management.co.nz

A paper to the OECD LEED Partnerships Forum by Tony Smale, Forte Business Development Advisors Vienna, Austria. September 2006

Networks and partnerships as economic development tools in New Zealand – 1999 to 2005 with special reference to the Marlborough Region – a practitioner’s perspective Executive Summary This paper was prepared by Tony Smale, who at the time was Chief Executive Officer of the Marlborough Regional Development Trust (MRDT). The Trust was the Economic Development agency for the region of Marlborough at the north eastern tip of New Zealand’s South Island. Marlborough, while larger than some small countries, has a population of just 46,000 people, presenting some special challenges. The MRDT was formed in 2000 by which time Marlborough was experiencing increasingly acute labour and skill shortages. This influenced the MRDT’s view of economic development, convincing it that it must adopt a broad, strategic, systems based approach. With demographic trends meaning a decreasing proportion of the population of working age, a focus on yield and productivity is considered essential. The MRDT encourages the application of innovation to reduce the dependence on labour. From 1984 to 1999, New Zealand had been the only OECD country without an economic development policy. The election of a new Labour government in 1999 espousing “third way” economic principles led to the adoption of the OECD LEED model and the creation as its principle tool, the Regional Partnerships Programme (RPP). The New Zealand model varied from the original in two important regards. First, New Zealand did not have a history of partnership development, especially in an economic development context. Second, while theoretically a “bottom up” model, the application in New Zealand is more prescriptive than the original. The Marlborough RPP is a partnership between central and local government and the MRDT. It has been particularly successful in leveraging the RPP funding programmes and is often held up as a model EDA. It is distinguished by a number of factors. First, it’s model maintains that the EDA does not have to do all the economic development in the region and that economic development is of interest to and the responsibility of all residents. Second, it has established a set of strategic principles or policies that guide all of its work.

The MRDT was influenced at an early stage by research showing that a region’s prosperity was strongly influenced by its innovativeness, and that was in turn influenced by the degree of interconnectedness. Without any particular theoretical base, the MRDT conceived the notion of the Relationship Clusters model. This tool allowed the MRDT to map and manufacture linkages within the community and ultimately between the community and the rest of the world. While simple in concept, the model is an essential element in the MRDT’s application of attention economics and network theory. A thirteen point typology is applied to assess the success of the RPP, leading to three main conclusions. First, the partnership model in New Zealand is very young and will take time to mature and realise its potential. Second, it is important for the partners to appreciate and learn to accommodate the cultural differences between the partners, especially when large and small organisations are involved. Third, for the RPP to succeed with the smaller EDAs, administrative models that reduce the administrative burden must be found and adopted. Finally, it is noted that as the partnership model is more widely adopted, problems of proliferation are arising. To ensure success it may be necessary for the Government to fund the regional partners to ensure the resources necessary for the regional partners to properly engage with an increasing number of partnerships. A.

DEFINING REGIONAL/ECONOMIC DEVELOPMENT

The only widely agreed aspect of defining regional development is that it is a “process”. Many programmes that have been labelled economic development should arguably be defined more narrowly as, for example, “employment creation”. Understanding what the process is, and its scope is critically important. The Marlborough Regional Development Trust (MRDT) has suggested that economic development agencies (EDAs) could be categorised by a combination of the breadth of their focus, from narrow (eg employment) to broad (regional development), and from tactical to strategic, and that agencies could be mapped accordingly on a matrix diagram. The MRDT is broad and strategic in its focus. It is informative to examine some definitions. The Economic Developer Association of Alberta (Canada) has adopted the following: “The process of developing and maintaining suitable economic, social and political environments, in which balanced growth may be realized, increasing the wealth of the community.” The Economic Development Administration of the US Department of Commerce uses: “Economic development is fundamentally about enhancing the factors of productive capacity – land, labor, capital and technology – of a national, state or local economy.” while the American Economic Development Council (1991) states: “Economic development is a process that begins when a community makes itself ready to accommodate the retention, startup, location, or expansion of an enterprise. It occurs when a local economy is vitalized by the creation of one or more jobs, an increase in community wealth, or the useful distribution of capital that arrives from outside sources.” Rowe, J.E. (2005) in Economic Development in New Zealand provides the following with reference to economic development:

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“The goal of economic development is to create new jobs, investment and improve the wealth of individuals and the community.” The MRDT maintains that focus on creating jobs per se is a legacy from a past economic period and there are questions of causality, ie focusing on creating a “habitat” in which the desired types of businesses can prosper, will more probably create sustainable jobs, if that is the objective, than seeking to create jobs in the first instance. Marlborough around 2000 started to experience labour and skill shortages, and most regions in New Zealand joined that trend over succeeding years. There is an OECD wide demographic trend for a net decrease in the available labour force1 and this is extremely important. Put simply, it means, that to maintain an ageing population in an acceptable level of prosperity, creating jobs is no longer the issue (although of course it remains so for a number of countries and regions), but instead economic development must focus intensively on productivity issues. That focus cannot be on driving more of the same production from the diminishing population (and other resources). It must be about discovering and cultivating whole new value and revenue streams. New Zealand has tended to uses its legendary innovativeness to cushion the effect of declining commodity prices rather than to create new high yield revenue streams. In Marlborough’s case, the labour and skill shortage is now so acute, that innovativeness must be used to drive the development of business models that require less jobs per unit value output. The MRDT concludes that economic, social, environmental and cultural elements are so strongly interlinked, that its goal is to facilitate increased yield from all four elements. It state’s its vision for the region as: “To realise the region’s potential as ‘the centre of opportunity’ to become a model high yield community, where all residents are able, if they choose, to enjoy an exemplary quality of life (health and wealth) as fully fledged citizens of the global village.”

B.

HISTORY OF ECONOMIC DEVELOPMENT IN NEW ZEALAND

Successive New Zealand governments in the mid-1980s and early 1990s transformed the New Zealand economy with broad reforms intended to instil new efficiencies by exposing domestic markets to greater competition locally and internationally. The fourth Labour government (1984 – 1990) and fourth National government (1990 – 1996) both aimed to focus the role of central government on providing macroeconomic stability and a policy framework of market competition within which individual producers and consumers could make their own economic decisions (Dalziel & Lattimore, in Rowe 2005). The catch phrase during this period was the creation of “level playing fields”. The New Zealand interpretation of “level playing fields” was effectively, zero government intervention. Regrettably, it can be argued in retrospect, that amongst many lessons that can be drawn from this era, two with particular significance to economic development practice are: • New Zealand’s trading partners and global competitors were much less “enthusiastic” (some might say “zealous”) about adopting this concept of “level playing fields” than was New Zealand. • That market forces are very good at seeking the point of lowest cost production, and/or exploiting competitive/comparative advantage, but have scant regard for communities’ aspirations. This new approach was in stark contrast to previous regimes, from either side of the political spectrum, that had engaged in highly interventionist strategies. In keeping with the theory underlying the reforms there were no explicit regional development policies during that period2. At this time, New Zealand was 1

According to the OECD, during the first 25 years of this century, in the OECD, 70 million people will exit the workforce while only 5 million will join it. (www.oecd.org) 2 Although the government did maintain a small suite of grant programmes and a network of Regional Development Councils/Business Development Boards until 1993, largely it is considered, for political reasons.

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the only OECD country without an economic development policy. This model was paralleled by the Marlborough District Council (MDC) where the policy position was to limit economic development intervention to minimising transaction costs between Council and the community. Regional economies were expected to benefit from general policies to achieve macroeconomic balance, while any attempt by the government to assist one region over another was categorised as “picking winners”3, something the government steadfastly avoided. The November 1999 general election resulted in a centre-left Labour-Alliance coalition government espousing “third way” principles. Alliance leader Jim Anderton became Deputy Prime Minister and was appointed to the newly created post of Minister of Economic Development. This post was a new one, signalling both the new government’s altered economic focus relative to its predecessors and the importance it accorded economic development. Responsibility for delivering the government’s largest regional development policy, The Regional Partnerships Programme (RPP), was given to the new Crown entity, Industry New Zealand, that was later merged with TradeNZ to form NZ Trade and Enterprise (NZTE). As the name suggests, the new programmes were to be based on regional partnerships. The “regions” were largely self defining. Although New Zealand has only 16 official regions, 26 “regions” (possibly more correctly described as “communities of interest”) are recognised under the RPP. Each partnership is made up of the central government (Represented by NZTE), local council and community – represented by an Economic Development Agency (EDA). Ironically, given the primacy of this partnership, there are no formal partnership agreements. EDAs in New Zealand vary greatly in their focus, size, and organisational structures, ranging from departments within local councils to independent community trusts and corporations. Their funding bases vary equally, from less than a hundred thousand dollars per annum and 0.4 full time equivalent staff to multimillion dollar operations with over one hundred staff. They do not receive direct operational funding from government but are eligible to apply for $89,000 for strategic planning on a three yearly cycle, the same amount annually for “capability building”, and each three years for a Major Regional Initiative Grant of $1.8 million. (Ref www.nzte.govt.nz). There is no effort to apply a per capita formula relating financial support to population. The EDAs operate greatly diverse portfolios of public:public and public:private partnerships. In order to fulfil it’s economic development policy initiative, and to meet an exceptionally tight time frame, the New Zealand Government adopted and modified the existing OECD LEED model. However, the model implemented in New Zealand varies in a number of important ways: •



The New Zealand model was developed at a much faster pace. New Zealand, perhaps because it draws heavily on its pioneer roots for its sense of identity, has a propensity to want to do things in a hurry. And thus it is with the RPP. By any standards, the New Zealand programme is young, barely adolescent. Many, if not all of the challenges identified in this paper can be traced in one way or another to that lack of maturity. LEED had existed since 1993 and grew out of the earlier (1982) Programme for Local Employment Initiatives. As a consequence, the gradual convergence of values and culture that is likely to have occurred in the original model, is not yet present in the New Zealand model. There are advantages to this nouveau approach. For instance, the Marlborough RPP is not encumbered with legacy strategies from the past such as “creating jobs”. The LEED model is “bottom up” with a strong emphasis on the importance of the local approach to development. “There is no single model of how to implement local development or of what

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This term continues to be used disparagingly to describe economic development, eg Dominion Post Newspaper, Wednesday 18 January 2006 Cheerleader for Community Enterprise, even though modern economic development does not attempt to “pick winners”.

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strategies or actions to adopt.” (OECD 1999:29) While also conceived as a “bottom up” approach, the actual implementation, and especially the approach to funding, is relatively prescriptive. While this has benefits from an accountability perspective, it remains to be seen as to what its impact is on the effectiveness and sustainability of the RPP. A structured approach includes key tasks based around completing a strategic planning exercise grounded in the local community and theoretically reflecting its aspirations. Projects drawn from the strategy can receive Capability Building funding support, to quite literally build the region’s capability and capacity to grow its economic sustainability. Major Regional Initiative funding is also based on the strategic plan. C.

THE MARLBOROUGH REGIONAL PARTNERSHIP

The following is extracted from Rowe (2005) pp99 – 100. “The Marlborough region has been very successful under this programme (RPP). Not only was its proposal for the Wine Research Centre of Excellence in Blenheim one of the first MRI projects completed, it was the first region to have a second MRI proposal approved (The Marlborough Aviation Heritage Centre and Park)…. In 1999, the Editor of the Marlborough Express, Brendon Burns, launched a series of public meetings throughout the region under the heading of ‘Focus Marlborough’, chaired by Vern Harris. These meetings gave a mandate for the creation of a new organisation to provide ongoing leadership and co-ordination of regional development. A steering committee was formed, which in 2000 set up a community trust known as the Marlborough Economic Development Trust (MEDT), with the strong support of the Marlborough Chamber of Commerce. The Trust Deed described the objects of the Trust as ‘generally to undertake economic development initiatives for the benefit of the public of Marlborough (but also for other persons from New Zealand or overseas) with the aim of improving the real standard of living and the quality of life of the Marlborough Community’(Clause 4.1). After calling for nominations from the public, the steering committee selected six trustees: Nick Gerritsen, Vern Harris, Peter Johnstone, Brian Kerridge, Dorothy Piper (later replaced by Liz McElhinney) and Tony Smale (chairperson). These Trustees were prohibited by the Trust Deed from acting as representative of any particular sector or group in the community in order to focus on their commitment to regional partnership. This principle was considered very important when the Trust was established, and was rigorously observed in meetings of the Trustees. Thus there already existed a strong community initiative for regional development when the government’s regional partnership programme began in 2000. Rather than setting up a new structure, the Marlborough District Council (MDC) agreed to work with the Trust and the subsequent close working relationship between the MDC and the MEDT effectively became Marlborough’s regional partnership.”

D.

THE DIFFERENT TYPES OF PARTNERSHIPS

Forte suggests that a typology of partnership types can be constructed in addition to the accepted public:private and public:public partnership descriptions, aiding understanding of the partnership functions: •

Macro:micro partnerships. Used in the same context as “macro” and “micro-economics”. The MRDT classes the Regional Partnerships Programme partnership as a macro-partnership as it crosses over the entire organisation and region. All the other partnerships are micro. 5

• •

Central Government:Local Government. Formal:informal. Sometimes the degree of formality is a reflection of the stage of development but can also reflect the emerging culture of the relationship. Money:knowledge. While money is essential for the MRDT to operate, the value of the knowledge and networks the partners bring frequently outweighs the money. (And not overlooking the fact that in some partnerships the MRDT is providing the money resource so not all partnerships are about raising money for the MRDT.) Agency:collaboration. The degree to which the partners work together versus on behalf of.





In examining the nature and structure of partnerships it is relevant to constantly ask the question “Does the relationship really constitute a partnership or is it more of the nature of an agency agreement for one party to act on behalf of the other?” This is an important distinction. E.

THE MARLBOROUGH RPP - EXPERIENCES AND CONCLUSIONS

Two defining characteristics of the Marlborough model of economic development are that, first, the Trust is not expected to do all of the work of promoting local regional development (Dalziel and Saunders, 2003). Instead the MRDT has adopted what it named the Relationship Clusters Model that maps out a web of connections in the community, and that it aims to cultivate. The Relationship Clusters Model is examined in Section F below. Second, it is assumed that regional development is of interest to, and the responsibility of all citizens, whether or not they choose to participate and/or benefit. This section refers to the Marlborough Regional Partnership consisting of NZ Trade and Enterprise, the Marlborough District Council, and the Marlborough Regional Development Trust. Dalziel et al (2003) identify 12 success factors for regional partnerships and these provide an appropriate frame work and context in which to discuss the Marlborough partnership. Dalziel and Saunders in Rowe (2005) state, with reference to the 12 factors: “The first three describe a sequence of key tasks that it is typical for a successful partnership to undertake when it begins its work. The next five factors describe characteristics of the way in which partners are chosen and operate within a successful partnership. The final four factors describe important influences on success as a partnership continues to develop over time." 1.

A sound assessment of the local economic environment Upon its formation the MRDT identified that it should establish a base line of the region’s current financial performance. From a statistical information perspective this proved to be highly problematic. Much of the available official statistics were either out of date, aggregated to a point of uselessness, or so inaccurate as to be on occasions comical. Economic studies prepared by individual sectors used such disparate underlying assumptions that direct comparison was impossible. None the less, a statistical summary entitled Marlborough Today was published.4 From that, admittedly somewhat crude document, a discussion document entitled Marlborough Tomorrow - Opportunities for, and constraints to development in Marlborough was published as the first step in an extensive community consultation. The document was deliberately provocative, and, accepting the need to provide leadership, rejected the fashionable “clean sheet” approach to consultation, and instead provided a series of propositions on how the region might develop and discussed potential barriers to that development. It aimed to introduce a completely new way of thinking about the future, seeking to move away from the

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Subsequent to this a Ministerial Review has been conducted of New Zealand’s collection and processing of statistical data.

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widely accepted paradigm that the future would look pretty much like today, and to succeed, all Marlborough (and New Zealand) needed to do were the same things only bigger, better and faster. This proved to be a particularly successful exercise and the MRDT was able to claim a public mandate from this process, and it and subsequent similar exercises have remained the foundation of the organisation’s mandate and legitimacy. 2.

Long term strategic planning The consultation process identified four key areas that continue to provide the underlying framework for strategy to this day. They were: • Workforce issues – “We do not have enough people to realise our potential or even support what we already have.” • Social inclusion – “Not everyone is equally equipped to participate in what the region has to offer.” • Infrastructure – “Issues of transportation and communication into and out of the region.” • Water, energy and climate change. “We need a more sophisticated and ‘holistic’ approach to the way we think about and manage our resource.” The MRDT embarked upon a strategic planning exercise (that is, it consciously embarked upon a planning exercise vis-à-vis “writing” a strategy) that has subsequently been reviewed favourably by various parties. The initial work was undertaken by an external consultant, but completion of the first, and the two subsequent editions of the strategy were produced internally. (refer http://www.mrdt.co.nz/progress-marlborough/regional-development-strategy) The strategy development was significantly influenced by the Chairman’s previous experience in regional development (1986 – 91), in particular understanding the things that did not work, and a board member highly connected into the global investments market. The strategy was distinguished by taking a genuinely high level and strategic view. The strategy is underpinned by a number of principles, some drawn from the consultation process, and some from the expertise and vision brought by the Trustees. They are: • • • •

• •

The quality of life in Marlborough is non-negotiable. That is, strategies that risk compromising the region’s quality of life will not be considered. The region must be able to prosper on a sustainable basis, not just within a national context but also, and possibly more importantly, within the so called “global village”. That to survive, the region must be innovative and that innovativeness is directly related to its degree of connectedness. That to participate in the knowledge economy the region must have the capacity to generate and leverage novel knowledge as well as draw knowledge from a broad network of sources. That strategies must be aimed specifically at increasing the yield from all activities in the region (economic, cultural, social and environmental). That market forces are generally good at developing opportunities once the correct environment is established, so the role of economic development is to create a business friendly environment (or “habitat” as it is referred to in the strategy).

These could apply to any community aspiring to prosper in the modern world, but, none-theless, distinguish the MRDT in that they constitute a set of guiding strategic principles or policies. Early editions of the strategy were deliberately broad and drew some criticism locally for lacking focus, but rather than lacking focus, the strategy was, and continues to, adopt a systems approach. That is, it is founded on the premise that “everything is connected to everything else” 7

and therefore, in considering any initiative, it is necessary to incorporate as many of the impacting and impacted elements as can be identified. This is an important philosophical distinction, as, although it increases the planning and implementation complexity, the MRDT strongly advocates such an approach. As the three editions of the strategy have evolved, they have become more focused as the various initiatives have converged and aggregated into larger, integrated projects. A feature of this process was a deliberate decision to not conduct a further consultation process prior to adoption of the strategy, instead having confidence in the original consultation process. This has proven to be a successful approach with no criticism forthcoming. The Progress Marlborough strategy is generally viewed as the region’s development blueprint and has been incorporated into official local government plans. 3.

Clear and well defined objectives The MRDT made a deliberate decision to separate its strategy document (public communication tool) and its business plan (internal control document). As such, the strategy contained quite high level outcomes that did not meet the usually applied SMART (Specific, Measurable, Achievable, Realistic, Timebound) criteria, albeit that they are specific. Arguably, despite all the management logic underpinning the requirement for clear and well defined objectives, regional development exists within an environment impacted by so many intangibles and variables (eg Reserve Bank policy drives the exchange rate that is currently the most significant macro influence on export business profitability), and outcomes are so elusive to measure that it is impossible to apply the SMART criteria without often reducing strategy to tactics. The net effect is that frequently where objectives are clear and well defined, they relate to outputs rather than outcomes.

4.

Structures of the partnership Dalziel and Saunders in Rowe J.E. (2005) note the importance of the “way that partners are chosen”. In a macro-sense, the partners are prescribed by the RPP. That is, NZTE, the local council, and the EDA. However, the partnerships outside of the RPP have been a crucial element in its success and are discussed in Section F. A decision must be made about who will participate in each partnership, according to a number of sometimes contradictory criteria such as inclusiveness, availability, flexibility, balance, and effectiveness. (Dalziel and Saunders in Rowe,2005) This can often result in large and complex governance structures. The MRDT by passed these issues by adopting a commercial model. Board numbers are limited to seven and selected for their individual and collective competence and are strictly nonrepresentative in nature. This is a key to the organisation’s success. The Trust Deed contains a person specification and the appointments process must give regard to that description and also aim to provide a balance of competencies. The Trustees (Board members) are appointed via two processes. Three are appointed by the Marlborough District Council (Referred to in the Deed as the “Funders Committee”), four by a representative appointments committee. The District Council has a policy that neither staff nor elected representatives may be members of other organisations (in their Council capacity), so no Officers or Councillors serve on the Board. The Council is required under the Trust Deed to consult with the Chairman of the MRDT prior to making appointments. The appointments committee that makes four of the appointments, is made up of representatives of a number of community and business organisations. 8

The Trust Deed states that “… the Appointments Committee and Funders Committee shall have no other power to give directions to or exercise control over the Trustees or any other part of the Trust’s activities.” This theoretically provides a level of independence that is rare (but essential) amongst EDAs. For the most part, this requirement is honoured. The MDC has multiple roles in that it is simultaneously responsible for appointment of Board members, is a funding agent, and partner. It meets its fiduciary responsibilities through a funding agreement based on the Trust’s annual business plan and associated reporting regime. (See later reference to NZTE’s multiple roles – Section 6).

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5.

Legitimacy and Authority This is a crucial factor in the success of a partnership and/or EDA. The situation is closely aligned to the line and staff distinction within organisations, whereby the “staff” personnel rely upon “informal” authority, respect and credibility. Government and Councils in effect have formal line authority while the EDAs rely upon informal authority or authority “inherited” from their association with the other organisations. The MRDT’s legitimacy is drawn from three sources: •





Achieving and holding respect within the stakeholder and broader community. This is an interesting area. The MRDT is well regarded by the community at large and during its five years of operation has only been the subject of one minor public criticism, being caught up in a generic attack on Council spending in a letter to the newspaper editor. It does however struggle to convince some of its key stakeholders as to the focus of contemporary regional development (building human capital versus physical infrastructure). This is almost certainly related to the immaturity of the partnership and the difference in cultures brought to the partnership. Residual “mandate” from its public consultation process (renewed biennially). It is reasonable to state that this is a mandate that is “taken” rather than specifically given, however, the question has never been faced as to whether the MRDT has a mandate to act on behalf of the community so it can be argued that this is an effective approach. The Trust is recognised by the MDC as its proxy agent in regard to economic development issues and this is set out in the Long Term Council Community Plan5. This recognition is valuable, especially within the partnership.

6. Specialisation and co-operation Dalziel and Saunders in Rowe (2005) note that “There is some evidence that partnerships work best if each member of the partnership is able to specialise in its own area of expertise within an overall framework of co-operation with other partners.” There is certainly, within Marlborough at least, significant evidence of the benefits of cooperation. This is especially evident with the bringing to the partnership of the substantial resources of the Marlborough District Council. NZTE’s role though is more complex. While it is also intended to be a “partner”, it is simultaneously the “gatekeeper” for a suite of grant programmes for which it is ultimately accountable to Parliament. This places it in an extraordinarily conflicted situation. On the one hand, its officials seek to be “advocates” for the EDAs. On the other hand they are cast into an adversarial role in processing contestable funding applications and imposing of administrative burdens on EDAs. (There is some evidence for instance that the benefit:cost ratio of applying for contestable funds may be negative). This results in the use of language for example like “clients” to describe the partners. This is a particular issue for the smaller EDA’s where large amounts of senior management time is swallowed by grant application and administration processes. As a consequence, officials are in effect required to be “helpful, but not too helpful”. NZTE’s difficult position is compounded by their “audit” role in grant approval and reimbursement, using processes they themselves have designed, for RPPs of which they are partners in. Fizbien and Lowden (1999) argue that the principle advantages from forming partnerships lays in the potential to attract new resources, create productivity gains through complementarities and synergies, improve social services and to create new material and non-material assets.

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The principal planning document under the Local Government Act (2002)

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There is a growing consensus that networks and partnerships do have economic payoffs in terms of lower transaction costs (North 1990, World Bank 1997). A significant challenge arises when any organisations of greatly disparate size attempt to interact with one another. This is arguably not limited to interacting with governmental organisations but rather bureaucratic6 organisations in general, public or private sector. This is discussed further in Section 8.The culture of the partnership. While the RPP is based on very sound foundations, processes with less administrative “overburden” need to be found in order for it to fulfil its potential. There are recent indications of progress in this regard. 7.

Leadership within the Partnership The MRDT describes one of its central roles as providing leadership, especially in terms of change management. The MRDT’s view on leadership is one of collective responsibility – paralleling the position that regional development is the collective responsibility of the entire citizenry. Leadership can be divided into two roles. The first is the leadership of the MRDT organisation. Each of the Board members of the MRDT is a leader in their own right or they would not have been appointed. This could have led to a competitive environment, but instead a highly cohesive and collaborative culture emerged. It is not clear whether this was as a result of serendipity or some other factors were at play. Irrespective, that culture is so highly valued by the organisation that maintaining the culture is now recognised as one of the key functions of the Chairman. The second role is leadership of the partnership per se. This is a somewhat more challenging task as things have evolved. The three partners have profoundly different cultures, and given the youth of the partnership, these can lead to tensions. Given that the cultures are deeply grounded in the highly disparate modus operandi of each of the partners, it is improbable that an alignment of cultures can be anticipated. There is however a relatively high alignment between central and local government culture and this can lead to tensions as the EDA is framed as the odd one out. The leadership role must then arguably be assumed by the EDAs, accepting that there will not be a cultural alignment in the manner that the individual organisations operate, but with growing maturity and an acceptance that none of the partners should expect to impose their own culture on the partnership per se, that should not preclude a collaborative approach to realising agreed outcomes.

8.

The culture of the partnership To again quote Dalziel and Saunders, “Members of the partnership are likely to come from diverse working cultures. At the risk of reflecting historical stereotypes too rigidly, business leaders will be accustomed to operating in an entreprenuerial culture, trade unionists within a rule-based solidarity culture, local authority officials within a bureaucratic culture ….. If these differences are not acknowledged, however, they can also become a source of conflict and tension.” Differences in culture are one of the great quandaries faced by the RPPs, and ultimately may determine their success or failure. Special attention is therefore given to this section.

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Used in the correct sense of the word

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A number of key disparities exist between the partners both in Marlborough and commonly in other partnerships. • To a greater or lesser degree culture and “context”7 (Gladwell, M. 2000) determines an organisation or individual’s view of the world and behaviour. Local and central government agencies typically are conservative in their outlooks, adopt a view of the future based largely on the status quo, and change is made by “incremental gradualism”, ie tiny changes over a long period of time. Views within EDAs, depending on their own construction, range from close alignment to complete disparity. The MRDT for instance is of the view that commerce, society and politics are in a period of fundamental change, and failure to grasp that change will lead to economic and social failure. It has stated, and based its strategic planning on a belief that the world is in a period of change, at least as great as the industrial revolution (contributed to by a combination of the e-revolution, climate change, and China’s economic revolution). This view aligns with that of Dr Peter Drucker, but is divergent from the other two members of the RPP. As Dr Drucker saw it, the computer is akin to the steam engine, and the Information Revolution is now at the point at which the Industrial Revolution was in the 1820s. Drucker points out that the most far reaching changes of the Industrial Revolution came not directly from the steam engine itself, but because of what it made possible – the railroads. Similarly, he asserts that it is not the computer that is changing the world but that – "e-commerce is to the Information Revolution what the railroad was to the Industrial Revolution – a totally new, totally unprecedented, totally unexpected development. [emphasis added] And like the railroad 170 years ago, e-commerce is creating a new and distinct boom, rapidly changing the economy, society, and politics.” (Drucker, P. 1999) • Officials operate in a very difficult environment. On one side is the Public Finance Act, Parliament, and media demanding an essentially failure free decision making process, even though a major foundaton of the RPP is “risk sharing”. A major function of one partner, NZTE, however, is to effectively eliminate risk in order to avoid unfavourable public scrutiny for both the agency, programme and Minister. This does inevitably result in an element of tension between partners as a) it leads to a disparity in power within the relationship, and b) fundamental differences in culture and attitudes to risk taking. • Small and large organisations tend to have completely different cultures and capacity, even if their capabilities are similar. The typical EDA is staffed by two or three full time equivalents who have to be managers, administrators, finance raisers and do the actual work of the EDA. As a consequence, they tend to be fast and flexible. Bureaucracies by contrast have their own life rhythm – time frames, processes, and cycles. These are frequently at divergence with the needs of the EDA. This is a particular dilemma for a country with a small population and low population densities. For example, although at 12,484 square kilometers the region of Marlborough is larger in area than many small countries (it has one farm of 184,000Ha), its population is only 46,000 and the size and resource base of its EDA parallels its population. An argument can be mounted that such a small population and EDA lack the critical mass necessary to operate efficiently if not effectively. An equally strong counter argument is mounted that “localness” is such a critical factor in economic development that it overrides the critical mass argument, and further, the region’s potential is not determined by its current population (possibly a flawed assumption in earlier economic development paradigms). How well the LEED model translates from the highly populous European application to New Zealand’s low population and resource base, and how well it is being translated, remains to be determined.

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Research indicates that behaviour is highly determined by the immediate context in which the behaviour is occurring.

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9.

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Local flexibility versus national guidance From a policy perspective this represents a considerable dilemma. Architect of the RPP, Economic Development Minister Jim Anderton is on record stating that New Zealand cannot have a strong national economy without strong regional8 economies. He was also very active in promoting the idea that the regions know best about how to take care of their own affairs. There is however a natural tendency for bureaucracies to have their own gravitational pull and there is a constant tension between centralisation and regionalisation. This is arguably a healthy dynamic, provided it is understood that a significant power imbalance exists and a reasonable equilibrium can be achieved.

In this context he is referring to the “regions” versus the “metropolitan” areas

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10.

Infrastructure investment This is an area of wide agreement amongst the partners in a general sense. There is some divergence in the view of what infrastructure is required in the modern world (Local Councils are based around physical infrastructure and this naturally influences their views, while EDAs tend to look towards ICT and human capital infrastructure), although there is good evidence that this divergence is closing. The Major Regional Initiative programme is the major mechanism for delivering infrastructure investment. That programme has funded projects from research centres to tourist trails, depending upon the identified needs of the region. NZTE is just beginning the process of reviewing early outcomes from the projects. This is likely to represent a considerable challenge as, examining the two examples above, the pay back on the research is at least a five year horizon, while the tourist trail is significantly impacted by New Zealand’s international fortunes. With regard to the MRIs, the EDAs literally act as agents for NZTE.

11.

Accountability and transparency EDAs within the partnerships by definition have dual lines of accountability. With regard to funding, the line to central government is tightly prescribed within contract agreements which are generally well constructed. Funding agreements between EDAs and Councils tend to have much greater variation, ranging from equally tightly prescribed projects and outputs, to a more general and flexible arrangement. The MRDT enjoys a more flexible arrangement based on adoption of its annual business plan by Council. The complication associated with this is however that the Council is providing possibly only one quarter of the funding but (understandingly) displays an expectation as if it is the sole or principal funder. This is a common source of tension within the Marlborough and other regional partnerships.

12.

Monitoring and evaluation “Several studies report that “new regionalism” is too recent for effective monitoring and evaluation systems to be devised, so this is an ongoing issue for policy advisors and participants. In part this is because regional partnerships are still a “black box” in understanding the precise way in which they can promote local development (OECD, 2001, p18) in Rowe (2005) Bartik and Bingham (1995) observe that amongst the main issues relating to evaluation of economic development partnerships are: • • • •

• •

Evaluations, where they occur, tend to be process rather than outcome focused. Outcomes are difficult to define. Due to the life cycle of firms [and economies] it is difficult to distinguish natural growth from growth resulting from an economic development intervention. Firm surveys suffer from the usual problems associated with subjectivity, respondent reliability, and self interest (especially if the firm is dependent on future funding from the programme being evaluated). Capturing the outcomes within a particular geographic area is difficult and leakage to other areas is an issue in many studies. There are issues about causality.

All of these issues that Bartik and Bingham note apply to Economic Development Partnerships in general, apply to the New Zealand RPP including the Marlborough Partnership. The issue of leakage is especially pertinent. For example, 80% of New Zealand’s aquaculture production is grown in Marlborough, but about 80% of that is processed outside the region. Which region therefore claims the output and to which region do official statistics attribute it? 14

In an environment where measurement has become a prerequisite for funding under many of the partnership schemes, this is problematic. The result has been the adoption of monitoring against agreed milestones. These almost invariably relate to outputs or processes rather than outcomes. The validity of measurement is then reliant upon the causality between the outputs and the intended outcomes. A high level of public scrutiny and a characteristic Kiwi impatience (expectation of results in unrealistic time frames) leads to measurement issues. As there is no real capacity to measure long term outcomes, there is a tendency to measure short term outputs and rely upon a causal relationship with long term outcomes that will be realised long after the end of the funding period. This tends to encourage a culture of micro-management that in fact is arguably contrary to achieving good “control” (statistical quality assurance theory). This short termism is further contributed to by New Zealand’s short funding horizons that are typically a maximum of three years. This is in strong contrast to Sweden, Norway and Canada where cluster funding for example, is for 5-10 years. Perhaps the largest barrier to this measurement requirement is the lack of resources to properly measure performance, the costs frequently exceeding available total project funds. This remains a significant weakness of the Marlborough and arguably, all the New Zealand partnerships. The most recent version of the MRDT’s business plan has adopted some specific regional Key Performance Indicators in the form of outcomes, most of which relate to performance relative to other regions. This is based on a stated assumption that “regional development is of interest to and the responsibility of all citizens and public organisations”. These goals are now incorporated in the latest version of the region’s Long Term Council Community Plan. This approach bears some risk but does reinforce the above assumption regarding joint responsibility. Tangibility is a particular issue with regard to monitoring. Whether this is a peculiarly New Zealand issue is unknown but there appears to be a great deal more comfort in producing visible, tangible outputs (such as buildings), than intangible outcomes. An example may help develop this point. The MRDT ascribes to the principles of attention economics. It has a strategy to position and promote the region as the “centre of opportunity”9. The MRDT’s principal strategy in this regard revolves around the application of network theory, building connections and nodes (See Section F) across broad sections of the commercial and political world both in New Zealand and abroad. This is achieved by leveraging one to one personal contacts, as well as the publication and presentation of papers such as this one. This is a strategy that the MRDT can claim to be particularly successful with and there is some anecdotal evidence amassing in support of the strategy. It will however, remain extremely complex to ever quantify the benefits derived. In other words, the potential benefits of one of the MRDT’s key strategies is highly intangible and non-quantifiable, at least without research requiring resources beyond those available to the organisation. F.

Network theory and the relationship clusters model

Systems, be they physical, chemical, biological, or social, natural or man made, have a tendency to organise themselves in a way that reduces the number of steps between any two points. While we might expect these connections to be organised in a random way (referred to as “egalatarian” in network theory), they in fact organise in a very different way. Certain key chemicals, people, computer 9

This is both literal and figurative, being a play on the fact that Marlborough is very centrally located within New Zealand, and the idea that it is a place that represents great opportunity.

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servers, etc, become nodes through which a disportionate number of connections are made. These are referred to as “aristocratic” networks. The internet has evolved in this manner, even though it was originally intended to be egalatarian. Aristocratic networks are more vulnerable to disruption, but hugely more efficient in making connections. This is why mathematical modelling has been able to prove the idea that on this planet we are all connected by no more than six degrees of separation is valid. If we were connected at random the degrees of separation would be a great deal larger, but because of a small number of very highly interconnected people, that number is only six. (Buchanan, M. 2002) How a partnership is defined has a major impact on how to think about this topic. For the purposes of this paper, partnerships and networks are used interchangeably. Strictly, partnerships are a subset of networks and it is networks that the MRDT has paid particular attention to. Early in its development the MRDT encountered research demonstrating that both commercial and social innovation are linked to the respective community’s “interconnectedness” and that a community’s ability to continually reinvent itself (to be sustainable in other words) was closely linked to it “prosperity”.10 Around the same time, the community consultation was revealing two disturbing trends: • The community had a very large number of “organisations”, many of which competed for resources, and often were resourced only sufficiently to survive rather than fulfil their objectives; and • Organisations and individuals were retreating into a protective “silo mentality” and communication linkages within the community were not as solid as they appeared on the surface.11 Without having any particular theoretical foundation, The MRDT concluded that it could improve the interconnectedness of the community by establishing itself as a communication hub. The original intention was to merely act as facilitator, stepping out of the role once a direct relationship was established. With an understanding of network theory, it now appears that such a move would be illadvised. The process began with the development of The Relationship Clusters model (refer next page) as an attempt to map or define the community and the relationships that do and should exist. The traditional way of doing this is to define communities by their organisations, typically divided into business, social, environment, etc. The MRDT believed this encouraged territorial behaviour (patch protection), competition for scarce resources instead of collaboration, and risked duplication and poor utilisation of resources. By contrast, defining communities by clusters of common interest and goals should help encourage better communication and collaboration, pooling of

10

This has an interesting parallel with Darwin’s assertion that those species that survive will not be the strongest or most intelligent, but the most adaptable. 11 An interesting analogy emerged from workshopping this topic. Of about six groups, five reported back that they thought that the community was not well interconnected. The sixth group strongly argued the opposite. It emerged that the sixth group was dominated by tradespeople who had a common linkage in the form of a hardware company that extensively used social events as a promotional tool – thus they were indeed well interconnected.

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resources, and breaking down of patch protection. As a result, an organisation can appear in multiple places within the network. As the MRDT and the use of the model developed, it became apparent that it could not only be used to map the local community, but by extension could map the community’s linkages with the world. The complete model is far too large to draw a complete diagram and its principal use is in assisting conceptualisation of where linkages might be beneficial and how they might be interconnected. The MRDT has now forged a portfolio of public and private partnerships that bring differing levels of complexity and formality. These include the following partnerships, categorised as described in Section D: • • • • • • • • • • • • • •

Regional Partnership Programme (Central Government, Macro, Informal, Money, Agency) The Growth and Innovation Advisory Board – a Prime Ministerial think tank. (Micro, Central Government: Informal, Knowledge, Collaborative) Ministry of Social Development/Work and Income NZ. (Micro, Central Government, Formal, Money and Knowledge, Agency and Collaborative) The adjoining Nelson Region for ICT development. (Micro, Formal, Collaborative) AJ Park – intellectual property consultants. (Private, Formal, Knowledge, Collaborative) Landcare Research – Crown Research Institute. (Micro, Central Government, Informal, Knowledge) Ministry for Environment (Micro, Central Government, Informal). Energy MAD – Energy management consultancy (Micro, Private, Formal, Knowledge) Nelson Marlborough Institute of Technology (Micro, Central Government, Formal) LECG – Consultancy (Private, Micro, Knowledge, Collaborative) Market Marlborough – Wine and Food Companies (Micro, Private, Formal, Collaborative) Marlborough Aviation sector (Micro, Informal, Knowledge, Collaborative) Isotrace (Micro, Private, Knowledge, Collaborative) Marketview Ltd (Micro, Private, Knowledge, Collaborative) 17



Aquaculture Sector (Micro, Private, Collaborative)

The most important and common lessons to be drawn from these quite diverse arrangements are: • • • •

• • •

G.

Establish very clear understanding of what the partnership is intended to achieve. Ensure that there is complete alignment between the partners. Understand the various parties motivations for joining the partnership. The dynamics caused by disparity are arguably “energising” providing they are properly managed. Wherever possible and appropriate, create a formal entity. If the partnership is commercially oriented, a limited liability company structure is the preferred option. Protect and recognise the intellectual property that the partners bring to the partnership. This generally takes the form of, “what belongs to the partners at the time of creating the partnership remains in their ownership. Whatever arises from that point on is the property of the partnership”. A broad view is taken of intellectual property. Often the IP provided by the MRDT is the context and network contacts that provides value for the other partners’ technical IP. Be prepared to take an active leadership role when this is required to make progress, but equally be prepared to encourage others to take leadership when that has potential. Be prepared to deal with the direct and political ramifications of different partners seeking to work at different rates – or even leave the partnership. Not every project is going to progress. Where the partnership’s efforts are dependent upon external funding, be prepared to manage the time delays in getting approvals in an effort to minimise loss of momentum. The problems of partnership proliferation “The government believes that wherever possible it should act in partnership with the private sector, local government, and/or community to assist the development of the economy” (Growing an Innovative New Zealand 2002)

As the Government’s stated importance of partnerships has gained momentum, problems of proliferation have begun to emerge. Increasing numbers of Government agencies are seeking to form social and economic development partnerships with communities. This is a laudable outcome. Unfortunately, the communities and the organisations that partnerships are sought with, often have extremely limited resources and while theoretically, the new partnerships will bring new resources, usually “in kind” such as new information flows, the reality is somewhat different. First, the building of a partnership takes time and effort – by both parties. In a community the size of Marlborough, the interface for the majority of these partnerships is either the EDA’s CEO or the Marlborough District Council’s Community Planning Manager. While these new partnerships, in the long term, may offer “economic payoffs in terms of lower transaction costs.” (North 1990; World Bank 1997), in the short term, they add extra pressures to already resource constrained organisations and individuals. A case can be mounted that if the government’s objective of partnership building is to be fully realised, then operational funding will need to be made available to the partner organisations, without associated prohibitive administrative burdens. The net effect of the proliferation of partnerships threatens to create the unintended consequence of further alienating the regions from the centre as too many channels emerge for the smaller regional organisations to manage and sustain. H. Conclusion The Regional Partnerships Programme provides a solid foundation for economic development partnership development in New Zealand. This partnerships based approach to economic development is a relatively new way of thinking for New Zealand and will take time to mature and develop. Time, 18

along with understanding the cultural differences between the organisationally large and small members of the partnership are likely to be key determinants in future success. Economic Development Agencies should not depend upon the RPP as their sole basis of partnership development and a broad portfolio of public:public and public private partnerships is recommended. Based on the experience of the Marlborough Regional Development Trust, the paper provides a framework for conceptualising partnerships and a number of suggestions that may enhance their development.

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REFERENCES Bartik, TJ and Bigham RD (1995) Can Economic Development Programs be Evaluated?. Staff working papers 95 – 29 WE Upjohn Institute for Employment Research. Buchanan, Mark (2002), Nexus. WW Norton & Co, New York, NY. Dalziel, Paul & Saunders, Caroline (2003). Regional Economic Development Planning in New Zealand: Who owns it? Agribusiness and Economics Research Unit, Lincoln University, NZ. Peter Drucker, Beyond the Information Revolution, Atlantic Monthly 284, 47-57 (October 1999) Economic Developers Association of Alberta website (January 2006) @ www.edaalberta.com Fizbien, AP and Lowden P (1999) Working Together for a Change: Government, Civic, and Business Partnerships for Poverty Reduction in Latin America and the Caribbean. World Bank, Washington DC. Gladwell, Malcolm (2000) Tipping Point. Little, Brown & Co. New York, NY. North, DC (1990) Institutions, Institutional Change and Economic Performance. Cambridge University Press, Cambridge, UK. OECD (1999) Best Practice in Local Development (OECD, Paris) Rowe, JE (2005). Economic Development in New Zealand. Ashgate Publishing Ltd, Hampshire, England. World Bank (1997) World Development Report 1997: The State in a Changing World. Oxford University Press, Oxford. ACKNOWLEDGEMENT Mike Burrell – Wellington. Thanks are expressed for input, references and inspiration.

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