Brain drain 'must be plugged with opportunity'

The exodus of the best and brightest to Australia is an Achilles heel for New Zealand business, and personal and business tax breaks may be part of the answer, according to a visiting economist.

MasterCard Worldwide economic adviser Yuwa Hedrick-Wong said the persistent trend of migration to Australia of more than 20,000 people a year "seriously constrains entrepreneurial potential" here.

Speaking in Wellington, Singapore-based Dr Hedrick-Wong said those leaving for Australia tended to be "younger and better educated" people typically with a greater risk-taking attitude.

"They want to conquer the world," he said, but they should be able to do that from New Zealand, rather than having to leave.

"This is a damaging drain on the intellectual and entrepreneurial gene pool of the country," he said.

New Zealand could only reach its true economic potential if it stopped the "haemorrhaging of talent", he said.

Despite economic reforms in the past two decades and being an easy country in which to do business, New Zealand was still losing talent, Dr Hedrick-Wong said.

New Zealand should consider personal and business tax breaks as personal incentives for people to stay, support for business incubators and encouraging greater investment in areas such as the services sectors to create more job opportunities.

"If you are successful in getting those people back, the economic benefit is just huge," he said.

For example, Taiwan lost many students to the United States up to the 1970s, but that changed when the Taiwanese economy took off, creating exciting new opportunities for offshore residents.

The big successful Taiwanese firms were started by people who had studied and worked overseas, and also had international contacts. The same brain drain happened in China till the 1990s, but now more of those people returned to China because of the business opportunities.

"New Zealand must do the same, with a huge diaspora overseas. You need to mobilise that network and stop the talented people from leaving," he said. That needed to be combined with the right investment.

But the New Zealand economy was "very dynamic" with strong social mobility shown by the fact that 74 per cent of people worth more than $10 million were "self-made" multi-millionaires. That was well above Australia at 66 per cent, Britain and the United States.

There was also a high level of job destruction and creation each year of about 15 per cent, compared with 10 per cent in the US, he estimated.

It was easy to start a business in New Zealand, taking only three days, compared with 42 days in Germany and 53 days in France.

With a highly educated and technology savvy workforce, there was significant potential for New Zealand to boost investment in its service sector as the "new growth engine", he said. Health, education and technology all held potential for growth.

Investing in the service sector was possibly the best way to achieve greater success.

Exporting services like tourism and education were obvious areas for growth, with tourism providing jobs from cleaners, to retailers, right through to higher-paid architects and planners.

Less obvious areas of opportunity were activities such as manufacturing industry design, software design, long-distance medicine or pharmaceutical research.

"It is the cutting edge where you create the best jobs."

- © Fairfax NZ News