Capital's big plans
Council targets long-haul flights to Asia and a talent, business and investment attraction strategy.
Monday, January 23 2012 || News || BY Claire Rogers, Businessday.co.nz
It is the coolest little capital in the world, a thriving tourist destination, a foodie paradise and home to a whole host of creative and innovative businesses.
But underneath all the plaudits, the picture is more sobering.
A National Bank survey in November said economic activity in Wellington grew only 0.2 per cent in the September quarter after shrinking 0.7 per cent in the June quarter. The result was well behind Auckland and Canterbury, and indicated flat growth for the year.
The public sector, which provides nearly 20 per cent of jobs in the city, continues to be squeezed as the Government seeks to save nearly $1 billion over the next three years. There are fears Wellington will be overlooked as the Government focuses energy and resources on the Christchurch rebuild and the Auckland supercity.
Enter Wellington City Council's economic development strategy – an ambitious document that through a range of initiatives aims to create a net 10,000 jobs across the economy by 2015, increase exports by $500 million, and grow gross domestic product (currently $12.8 billion) by 10 per cent by 2021.
The council has singled out long-haul flights to Asia and a talent, business and investment attraction strategy as two initiatives that will be key in reaching the targets – calculated by consultancy Market Economics.
Council economic portfolio leader Jo Coughlan says a direct long-haul route will strengthen the city's links with overseas business, tourist and education markets.
New generation aircraft mean a runway extension is not necessarily required to bring long-haul flights to Wellington, but a fighting fund is, she says."You can't go to the table without some sort of incentive."
The fund, expected to be $10 million to $15 million, could come from a combination of rates, businesses through the downtown levy – imposed by the council to fund the costs of bringing big events and tourists to the city – the council, and contributions in kind such as reduced fares from the airport, she says.
Councillors have been told they must find $180m in savings over the next decade, or raise rates an eye-watering 7.5 per cent, but Coughlan says the opportunity cost of not attracting long-haul flights should make the fund a priority.
"It could be a reprioritisation of funding ... or it could be new money, that's what we've got to work out."
The vast majority of the 45 public submissions on the strategy support the long-haul route, but some doubts remain over whether it will be possible to run an economically viable service out of Wellington.
Paul Spence, chairman of technology society Unlimited Potential and a former commercial pilot, says he is in favour of "low-cost" lobbying of airlines to come to Wellington, but questions the wisdom of spending millions to subsidise uneconomic operations.
There is a risk that airlines could pull out when the money runs out, he says.
"Even with the small additions that they've made to the runway length, there's a huge constraint on payloads that you can put on aircraft. That's the fuel they carry and passenger and freight loads. With [Boeing] 787s that could change, but they're still quite a few years away."
Departing Wellington Employers' Chamber of Commerce chief executive Ken Harris says the service will attract businesses to establish themselves and stay in Wellington, boost tourism and also help attract international students, but says the $10m to $15m seems "way too high".
"The sorts of numbers I have heard are $3m. That seems more realistic to me, unless you're going to extend the runway."
Funding should come from a range of sources, not just businesses.
"This requires a reallocation of funding priorities and that's not going to be easy."
Positively Wellington Tourism chief David Perks says the $10m to $15m figure came from consultants, commissioned by it and Wellington International Airport, who "do this stuff all over the world".
The fund could be used for a variety of purposes, including marketing the route and subsidising the airline's costs for the first few years, he says.
"It would come down to individual negotiation with the airline. One thing we're very clear about is that it will only be given to an airline that's actually flying airplanes into Wellington. "
The airport's chief commercial officer Matt Clarke says more than 250,000 passengers travel long haul to and from Wellington a year, and an airline with a comprehensive presence in Asia would be able to capture a significant proportion of that traffic.
"The Wellington market could easily justify an initial five direct services per week, moving to a daily service soon after with the right mix of airline, Asia destination and aircraft."
Cities compete fiercely to win international flights, and financial incentives and risk-sharing arrangements can be a point of difference between one city and another, he says.
A 2009 study by researcher Berl estimated the economic impact of a long haul direct service in tourism alone at $50m a year, and 383 full-time jobs, Clarke says.
Coughlan says costs are yet to be finalised for the second key initiative, to attract talent, business and investment to Wellington. An attraction strategy could include attending business trade fairs to promote Wellington as a destination, aligning marketing with tertiary education providers to lure international students, and helping businesses settle in the city.
Carl Penwarden, managing director at Wellington software firm Able Technology, says finding talent is the biggest obstacle to his company's growth, but warns that bringing in overseas talent might only be a short-term fix.
The strategy identifies linking education to industry needs as an initiative, but Penwarden says there needs to be more done to develop skills locally, including more funding for internship schemes.
The company currently takes on interns at its own cost to ensure it gets people with the right skills.
"With our particular technology, it's just impossible to go out and get people off the street."
Key to attracting talent and investment will be improving the city's infrastructure, Coughlan says, and to that end the council's Wellington Venues organisation has begun a three-year investigation into whether the city needs a multi-million dollar concert venue or conference centre to attract big events.
Other infrastructure actions identified in the strategy include facilitating broadband rollout and continued advocacy for high quality transport.
Coughlan concedes economic development strategies, with their grand visions and often scarce detail, are hardly an exact science but says the challenges facing Wellington are too serious to stand by and do nothing. "If we don't do it, who's going to?"
BOOSTING BUSINESS
Wellington City Council's economic development strategy suggests a number of initiatives, including:
Strengthen ties with existing local businesses and make the council more business-friendly, to keep businesses in Wellington and help them grow
Encourage export of professional services, such as in IT, architecture and design, and firms with expertise in servicing the public sector
Explore the potential for business improvement districts in suburban centres to stimulate local businesses
Investigate establishing an innovation hub for innovative companies, research and education interests to collaborate
