The truth about NZ business regulation

I have a mate who theorises that one reason NZ businesses do so poorly in Oz is that they don’t know how to handle regulation when they have to work in a properly regulated business environment. He lives across the ditch and studies these sorts of things, so what would he know?

Clearly not as much as the National and ACT parties, who are always banging on about how NZ business is over-regulated and over-burdened with compliance costs. It would be funny if the business press didn’t reinforce this dopey nonsense at every opportunity.

But wait. Once again, NZ has been ranked second in the world for ease of doing business by the World Bank/International Finance Corporation survey of 181 economies. (Full report — pdf: 7.2 MB — here.) It’s rated 1st or 2nd in each of the six years the surveys been done.

It’s not shonky this exercise. It’s comprehensive and objective. It covers regulations affecting 10 stages of the life of a business are measured:  starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Most of the indicators are the laws, regulations and official cost schedules that apply to business.

Business New Zealand says this is all very well, but the survey doesn’t cover “some of the more complicated issues that are the subject of discussion between business and government, like for example, ease of getting resource consents, energy and roading infrastructure and investment in skills and education.”

There’s some truth in that. But take NZ’s rankings in the ultra-conservative Heritage Foundation’s Index of Global Economic Freedom (6th in 2008 Index) and the conservative Fraser Institute’s Economic Freedom of the World (3rd in 2005), which cover a wider range of business freedoms than the World Bank’s survey. You have to ask why Business New Zealand isn’t celebrating the clear success of the business community in having business so lightly regulated.

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5 Responses to “The truth about NZ business regulation”

  1. Bryce Edwards Says:

    Pete – you seem to be celebrating and heralding that the NZ economy is so ultra-business friendly. Isn’t this indicator one that reflects the degree that the neoliberal economic framework is still deeply embedded under this Labour Government?

    Bryce
    http://www.liberation.org.nz

  2. jafapete Says:

    Bryce, I didn’t mean to give that impression. I thought the references to the conservative nature of the Heritage Foundation and Fraser Institute might have signalled that.

    Note that the Fraser Institute Economic Freedom of the World rates “labor market regulations” more highly the greater the degree of “freedom” there is for employers. E.g. Minimum wage: “Countries received higher ratings if the survey respondents indicated the minimum
    wage had a small impact (on hiring) and/or was not strongly enforced.” Hiring and firing regulations: “The hiring and firing of workers
    is impeded by regulations (= 1) or flexibly determined by employers (= 7).”

    I think that’s perverse.

  3. Truthseeker Says:

    Bryce: It has more to do with the relative simplicity of New Zealand’s internal structures and institutions. Unlike the US, Canada, Australia, India, China and most developed nations, New Zealand has no states or provinces. It’s hard for Kiwis to understand how much SIMPLER it is to run a business in New Zealand than in a country with overlapping and divided federal / state / local levels of government and all the regulation that goes with that.

    Its essentially a naked lie that NZ is over-regulated……but then it’s a lie that some love to believe….like “She done me wrong..” and “You shoulda seen the one that got away!”

  4. adamsmith1922 Says:

    I am not sure it as simple as Truthseeker suggests. In some respects compared to other countries New Zealand is not regulated as other countries are. This may or may not be a good thing. I tend to the view that in some aspects of corporate regulation that may be a bad thing, though indubitably in some countries the pendulum swings too far the other way.

    Yet in some other areas we are over regulated, eg the dead hand of the RMA, which needs reform – not to make it easier to despoil the environment, but to avoid project delays caused by an unwieldy process.

  5. Paul Litterick Says:

    “some of the more complicated issues that are the subject of discussion between business and government, like for example, ease of getting resource consents, energy and roading infrastructure and investment in skills and education.”

    Business New Zealand needs to lobby for higher taxes to pay for this investment. Clearly free market solutions are not solving anything.

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