The Memorandum of Understanding of Economic Alliance between sister city triplets Auckland, Guangzhou and Los Angeles was signed in 2014 – and if a week is a long time in politics, three years certainly is.
Since then, New Zealand has had three prime ministers. Former Auckland mayor Len Brown “The Singing Mayor” hung up his chains – replaced by Phil Goff, known less for his singing abilities and instead for his prowess in forging New Zealand’s free trade agreement with China.
Guangzhou also changed its mayor in 2016, and although Democratic Party superdelegate Eric Garcetti is still mayor of LA, President Obama was replaced by the entirely different Trump Presidency.
Over that time, three summits were held to recognise the alliance. And just as with geopolitics, the alliance has come a long way.
The first summit, hosted by LA in 2015, was attended by a humble delegation of about 43 Auckland businesses.
In 2016, Auckland outdid the council’s own expectations with over 700 delegates and more than 330 formal business matching meetings.
Guangzhou’s turn to host took place last month, and saw 70 Auckland businesses take 97 delegates, with around 800 others from LA and Guangzhou.
“Auckland companies need to internationalise,” says Pam Ford, General Manager – Business, Innovation and Skills (Acting) at Ateed.
“They have to go global from day one – and it’s hard. “That’s why we ran workshops for attendees ahead of this latest summit. They helped to build the capability of businesses to maximise their time offshore, and gave them the confidence to take part.”
Alongside business matching, networking events and showcase functions, panel discussions and keynote presenters shared insights and ideas from speakers across the alliance.
Los Angeles 2015: New York is a river, Los Angeles is a lake
The first summit saw panellists discuss the cartoonish view of cities that people – including Americans – have about the US, and stressed that the City of Angels should be seen as more than just a gateway to the US, and certainly more than just Hollywood.
Hollywood makes up only a fraction of Los Angeles’ economy. As well as tourism, it is the US’ largest manufacturing centre, a hub for aerospace, logistics, clean technology and innovation, and home to the largest port in the Western hemisphere.
It is the country’s fastest growing tech start-up region – many arguing it has benefits over San Francisco or Silicon Valley for a tech launchpad.
Despite this, there is no denying LA remains the creative capital of the US. One in seven people are employed in a creative field, and it is the top American metro area for art, design and media employment, providing more than US$140b (NZ$203b) of annual economic impact to the city.
“One of the things the LA summit did was open people’s minds that it is more than just film,” says Ford.
“LA is the place for many of Auckland’s companies that create content. Content now fits across so many more mediums – from gaming and television to social media and particularly the influencer economy.”
“But LA is also about cleantech, food and beverage, design and manufacturing. “Because of this three-year relationship, we’ve developed solid partnerships with the organisations for our companies to access – whether that is through the World Trade Center Los Angeles or the Los Angeles Business Council – that we would not otherwise have had.”
One panellist – a resident of LA – described how the city unfolds as you spend more time there. “New York is a river, but Los Angeles is a lake. If you step outside in New York you will naturally go somewhere, the city itself will take you and it is simple to navigate.
“In Los Angeles, to get anywhere you have to actively swim there – or you risk never getting anywhere at all. But that’s what makes it so exciting.”
Auckland 2016: Partnerships, People, and Cross-pollination
The Auckland summit saw global heavyweights take to the stage at the Viaduct Events Centre, speaking about the importance of partnerships and collaboration, and the opportunities that arise when you bring people together and ‘cross-pollinate’ ideas.
Sunny Bates, a serial entrepreneur and a founding board member of Kickstarter who has served as an adviser to companies including GE, TED and P&G, insisted the economic driver of the future won’t come from factories, technology, or software – it will be down to the networks of people.
“Networks are the structural basis for globalisation and for modernisation,” says Bates.
“Networks know no boundaries, and cultural networks are extremely powerful.”
Former Nike innovation expert Erez Morag agreed that networks were critical, but said it wasn’t those networks on their own that lead to innovation, but instead the cross-pollination of ideas through those networks.
“Instead of chasing the competition, chase the insights, listen to everyone, and play bigger than your size,” he says.
Morag used jogging as an example of cross pollination. In 1961, Kiwi runner and athletics coach Arthur Lydiard organised the world’s first jogging club in Auckland, promoting the cardiovascular health benefits of easy distance running.
Lydiard introduced Nike co-founder Bill Bowerman to the concept of jogging on a chance visit to New Zealand.
“[Jogging was] invented in New Zealand and commercialised in the United States,” says Morag – all through the cross-pollination of ideas.
Throughout the Auckland Summit, then-Maori Development Minister Te Ururoa Flavell reinforced the importance of trusted partnerships to the Maori economy. “Maori want to hear your heart, not just slick words.
“If there is no connection to your heart, then there can be no deal – because it will be doomed from the start” – a message that resonated strongly with Chinese delegates, who rely on guanxi – long-term, strong business relationships, based on trust and mutual reciprocity.
Guangzhou 2017: Leverage our Chinese diaspora
Auckland-based Kenneth Leong, co-founder and director at Healthy Breath – an anti-pollution mask using natural New Zealand wool filter media for international markets – spoke about leveraging the Chinese diaspora.
“We sometimes forget Auckland is home to a large, well-connected Chinese business community,” he says.
The summit and surrounding events enabled new connections between the business delegates, and deepened existing relationships.
“Cross-cultural partnerships enrich all parties, by bringing people with great ideas together with people who have connections, capital and channels to market,” says Leong.
“There is a need to accelerate integration between the migrant Chinese and mainstream business communities in Auckland. Everyone is keen to do business together, we just need to create more opportunities for interaction and relationship building.”
New Zealand’s connection to Guangzhou goes back a long way – many of the first Chinese immigrants to New Zealand came from the Pearl River Delta region, including Guangzhou.
Now, Guangzhou is China’s third largest city, contains seemingly endless skyscrapers, and is considered a manufacturing and commercial hub.
It has been consistently ranked by Forbes magazine as the best commercial city in mainland China for ease of doing business, talent, location, and international connectivity, and in many cases, could be a more accessible market for New Zealand businesses than the more recognised larger markets of Shanghai and Beijing.
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Tim McCready sat down with Vector chief executive Simon Mackenzie to discuss the future of Auckland’s energy sector, and beyond.
“It’s almost like we’re back to the future,” explains Vector chief executive Simon Mackenzie as he discusses the energy industry’s shift towards distributed energy systems.
It’s a future Mackenzie seems relatively at ease with, despite it completely disrupting the business models of the industry in which Vector operates as a distributor.
“The whole investment focus is now turning to: how do we utilise technology in the energy sector to still deliver energy in an affordable, yet renewable, sense?” explains Mackenzie.
“We’re seeing a huge tipping point in terms of customers driving what they require from energy.”
Where energy is currently generated at a centralised location — say, a dam — and then transmitted via the national grid to distributors such as Vector, increasingly customers are gaining the ability to generate the energy themselves, within — or on top of — their homes.
This shift has been driven and accelerated by global initiatives to reduce the use of fossil fuels from transport and energy sources in response to the threat of climate change.
And while the lack of international progress on emission reduction targets is often lamented, beneath the surface there has been significant subsidies provided for the development of renewable energy generation and a reduction in the price of technologies, such as solar panels.
“The customer has choice and may send energy back out to others, but even in urban environments they still probably need to move that energy around within the urban environments.”
In this context, says Mackenzie, “transmission and generation are becoming more and more commoditised. At some point in time it will be there more for a backup, or segmented needs.”
The position of Vector as a distribution company — downstream from those increasingly commoditised sectors — appears to be enabling the company to embrace the disruption.
“There’s a desire for more physical solutions — things like solar and batteries and the like — but I think one of the other sides is that we’re now seeing the convergence of transport coming into energy with electric vehicles, and that whole infrastructure to support that,” he says.
“Essentially, an electric vehicle could also be a mobile battery that you connect into your home, so we’ve got technology that enables that.”
And to complement the physical technologies being developed and deployed, Vector is heavily invested in software and digital innovation too. Data analytics is increasingly playing a role in how the company makes decisions, for example.
“We do a huge amount of work on data analytics, and we’ve worked really well and collaboratively with Auckland Council,” says Mackenzie. “We’ve got a huge amount of data and information with them.”
That includes layering data relating to housing construction and demographic trends with behavioural economics insights to generate predictions about future energy and transport usage.
Mackenzie says this unlocks “latent capacity” in the market currently; getting more usage hours for less, without necessarily needing to construct new hardware assets.
Similarly, giving customers the ability to optimise their energy usage by controlling devices from their mobile phones is another way Vector are hoping to use technology to access efficiencies.
“That’s all centred around de-complicating,” says Mackenzie. “Because we don’t believe customers want to be computer programmers to run their energy lives.”
“That sophistication now of being able to co-ordinate and optimise everything, we can provide through technology that we’re utilising.”
“That means there will be a lot more customers with those types of solutions either in their homes or on their roofs. Or they could be connected through other community initiatives such as peer-to-peer trading, or a school might have solar and battery in it that’s not used in the weekends or holidays — so then how does that get shared with communities?”
“The way we see the overall picture is Auckland becomes more and more self-sufficient, so the remote transmission and generation becomes more of a backup in the long-run, and more of a security layer, as opposed to the primary.”
Mackenzie says this vision is one in which Auckland is also a more resilient city, no longer dependent on remote transmission.
Interestingly, Vector’s modelling predicts the primary climate change impact in Auckland to be more high wind events, meaning building resilience and continuity of supply is of heightened importance.
The company also wants to raise the awareness on how climate change will differentially impact New Zealand’s various areas — with some areas more susceptible to sea level rises, for example, than Auckland.
“From the modelling we’ve done, from the global research, we worry about the fact that things are changing a lot quicker than people think, and I think we need to raise the debate and awareness around New Zealand on that.”
A company target of net zero emissions by 2030 reflects that awareness.
Another example of how the company is looking to lead the community and shift attitudes about how energy can be generated, traded, and used is the project with Auckland Council to light the Harbour Bridge using smart energy technology.
From this coming Auckland Anniversary Weekend, the bridge will be lit by some 90,000 LED lights, utilising solar-generated energy, new battery technology, and peer-to-peer energy trading.
“We saw that as a great fit for us, because it’s really iconic,” says Mackenzie of the project.
“For us, it’s a representation of giving back to Auckland but also displaying how we see the future of energy.”
The bridge will have static ambient lighting on most nights, but can be programmed with dramatic animated displays for special events, such as Waitangi or Diwali or the America’s Cup. The intention is to have between 12 and 15 of these events over the first year.
Partnerships, collaboration, and cross-industry learnings underpin much of how Mackenzie discusses Vector’s strategy in this fast-changing industry.
The company has worked with companies such as LG Chem and Tesla to bring their energy storage products to New Zealand consumers, for example.
Though there is not a great deal that is fundamentally unique about the Auckland energy market and infrastructure, or the city from an environmental perspective, these are features that has made the city amenable to innovation.
“Auckland is of a large enough scale to be globally recognised as an international city,” explains Mackenzie. “It’s got a political and regulatory environment which is seen as pretty conducive to actually adopting these technologies.
“For some of the technology companies we work with, they see that as a real positive because it becomes a proving ground for what they want to deploy into markets which are going to be a lot slower to adopt.”
Adopting new technologies early is seen as vital given Auckland’s pace of growth.
“What we’ve found, is that using technology has enabled us to build a whole new layer of networks internationally — and it’s not all from the energy sector — a lot is from outside of the sector, or from adjacencies,” says Mackenzie.
“Although we are small on a global scale, the reality is that doing these deployments or adopting these technologies early is advantageous.
“If you’re not an early adopter, by the time technologies gain a lot of interest from other parties, you’ll end up falling right down the pecking order.”
https://www.timmccready.nz/wp-content/uploads/2017/12/vector.jpg965973tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2017-12-15 20:07:042018-03-30 10:50:32Project Auckland: A positive vector for growth (NZ Herald)
Tim McCready talks Auckland, infrastructure, and Chinese investment with ICBC NZ chief executive Karen Hou.
You have been living in Auckland for a while now. How do you see its future?
Auckland is a beautiful, attractive city. I have been living here now for three years, and every year it becomes even better. There are signs of growth everywhere.
I have lived and worked in a lot of cities around the world, but Auckland stands out because although the city is relatively expansive and feels big, the actual population is very low.
This, combined with Auckland’s beautiful weather, climate, scenery and multi-cultural population makes it a wonderful place to live.
However, increasingly Auckland’s infrastructure is lacking. As Auckland has grown in population the infrastructure hasn’t kept up.
Auckland Council has tried very hard to meet people’s requirements. They have big plans to make the city more usable.
More apartments, hotels, transportation links and other infrastructure projects are underway.
As one example, the New Zealand International Convention Centre (NZICC) will greatly improve Auckland’s capacity to host world class conferences and exhibitions, which will provide yet another reason to attract people from all over the world.
But the key challenge is making sure the required infrastructure developments happen to ensure the city continues to remain as great as it is now into the future.
The new Finance Minister Grant Robertson is looking to the private sector to finance major transport and housing projects in Auckland.
Do you see an opportunity for Chinese investment?
For Auckland, the government or local government can’t possibly fund everything that is needed. For New Zealand to quickly see results from infrastructure projects, it will be important to use public-private partnerships (PPPs) to bring in significant investment alongside the funds of the government.
ICBC NZ has been shortlisted several times for recent infrastructure syndication loan tenders, and although we are yet to secure a successful deal, our team has become increasingly experienced in the local market.
It takes a lot of time and effort to prepare a bid, but our commitment to this shows our dedication to being involved in successful infrastructure project finance here.
Chinese investment presents a lot of opportunity for Auckland. Over the past few years, China has very quickly developed its infrastructure – in areas like energy, telecommunications and water, but also massive transportation projects that link the country together.
Where local enterprises in New Zealand are struggling to meet the infrastructure shortage, Chinese companies can help them to increase capital, access high quality materials, and reduce cost.
Are Public Private Partnerships popular in China?
Yes, one of the most popular PPP models used in China for delivering major infrastructure projects is called a BOT (build, operate, transfer). With this model, the government uses the private sector to design, build and run an infrastructure project. After a period of time the asset is transferred back to the government.
This structure relies on the private sector, but the government supports the private sector to help with regulatory hurdles and ensuring the repayment of the investment makes the project worthwhile.
As an example, when establishing a subway: the cost is designed from the outset, including how to repay the investment.
If there is not enough money to repay the investment through the subway alone, the government can help by using other developments associated with the subway – such as the related commercial areas – to go towards the repayment of the project.
That way, getting resources for infrastructure projects is easier because the risk of repayment is lowered.
Is ICBC’s client base actively looking to do deals here?
Yes. We have already helped Chinese companies come to New Zealand and understand the bidding process for projects. Although there have not been many successful bids, our Chinese customers are increasingly seeking out opportunities here.
ICBC is the largest bank in the world, and works with the best companies. This means we are able to ensure the highest standard of Chinese companies enter the market to help with infrastructure projects.
We have now been operating in New Zealand for four years. Over this time, we have progressed significantly – we have more than NZ$1.5b of assets in this market – mostly to local customers.
We’ve introduced new technologies and products such as an e-commerce platform to make it easier for New Zealand export companies to do business in China, and we help local companies connect with companies in China.
We also introduced a dual currency credit card, which can be used locally for New Zealand dollar transactions as well as in renminbi while in China, making visiting China more convenient. ICBC hopes that we can continue to increase the links between the two countries.
What can Auckland learn from China in terms of our mounting infrastructure projects?
China’s Government plays an important role in the country’s infrastructure. The government considers the future of the country, makes plans, and ensures projects are delivered quickly.
What people may not realise is that China has become very strong in construction, operating at an interna tional standard. As an example, Chinese companies have played a role in construction projects for the Singapore and Hong Kong subway.
To strengthen the local construction capability here, we need more labour and a lower cost of materials.
The use of Chinese companies can make the cost relatively lower than others due to labour, scale, and the cost of materials. At the same time, Chinese technology, management and safety are world-leading.
Should New Zealand take greater advantage of the skilled labour that China can provide?
Nearly everyone in the world wants to immigrate to New Zealand – for the reasons I outlined earlier.
This provides New Zealand with the rare opportunity to identify the particular skills that are most needed here, and get the right people to match.
For this reason, access to labour should not be a problem in this country. Rather than constricting the volume of people that can come and live here, New Zealand should look towards implementing a policy that will select the people that are needed.
The use of short-term and special visas can bring skilled workers in that can help with construction.
This type of visa is really helpful to fill the labour shortages and rapidly advance infrastructure projects.
China has some great inter-city transportation links, such as the line between Beijing and Tianjin that has cut travel time from three hours to around 30 minutes. Do you think Auckland can learn anything from this?
I think that in the long term, it will be good for New Zealand to be more evenly developed, and not just focused on one or two major cities.
Imagine if there was a high-speed train connecting Auckland and Hamilton – or other satellite cities. A short commute between the two cities would encourage people to spread out further, and reduce the housing, transport, and other infrastructure pressures that Auckland currently faces.
Many cities in China have – or are introducing – high speed rail networks to link them to neighbouring cities. Working with China can give access to not only capital and cost advantages, but also to innovation and experience in projects like these.
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It’s just over one year since Phil Goff became Mayor of Auckland after a stellar three decades long career in national politics. Tim McCready asked business leaders to rate how Goff is handling the job.
Heather Ash, Partner, Simpson Grierson: Overall the council is making good progress under Phil Goff’s leadership. My sense is he is working well with council officers and has a good structure around him.
In particular, the proposal for a regional fuel tax is a significant step forward, given the restrictions that local authorities face around alternative funding mechanisms.
Funding, or lack of, is the biggest constraint for the council. Mayor Goff understands the importance of investing in infrastructure – transport, water, etc – for unlocking issues like the housing shortage. New solutions will be needed to help pay for this investment.
A stronger relationship with Wellington will help create solutions for these strategic challenges. The dynamic on this front seems, as expected, to be in good shape. The new Government has a positive attitude to working with local government.
A big issue for the mayor, and council generally, is winning hearts and minds in the community. Progressing the big issues for the city, delivering a great service and keeping control of costs and rates is a major challenge.
For local government, managing the entire Auckland region post-amalgamation is challenging because people’s expectations on what councils do are very different.
Keeping the focus on the big picture and what’s best for the region will mean that local government (the wider Auckland Council group, including the CCOs) does deliver for the city – in particular making the strategic decisions needed to address challenges around growth, transport, infrastructure and housing.
Auckland is a stunning city geographically and has such great potential. It’s an exciting time to rise to these challenges as well as plan for the America’s Cup and Apec.
Kim Campbell, CEO, EMA: Auckland city is facing major challenges.
By 2036 its population is predicted to rise by almost 750,000. We’re already lagging behind in infrastructure investment by billions and that will only be exacerbated with the intensification allowed for under the Unitary Plan.
Furthermore, there continues to be a disconnect between where people live and work, both now and in the future, that will only add to current congestion woes.
Therefore, the mayor’s relationship with Wellington has been constructive and he has a functioning council. After all, he has been successful in convincing the new Coalition Government of the need for a regional petrol tax.
While we don’t necessarily see the petrol tax as a solution, we do know that transport is a major issue for businesses and residents of Auckland.
Our own research shows that the city loses at least $1.3 billion dollars a year in productivity.
The mayor and council in conjunction with Auckland Transport, the New Zealand Transport Agency and central Government must work in alignment on the how the roading and public transport networks will operate.
We need to address both short-term bottlenecks and long-term congestion issues that the city’s growing population will put increasing pressure on.
The funding mix is crucial, and Auckland business and residential ratepayers cannot be expected to pay more, unless they know what the network looks like and are confident it will reduce or manage congestion.
The cross-city tunnel has yet to have a major contract let and the Auckland Transport Alignment Plan (Atap) is still only a laundry list of projects being considered with no clear governance or pathway to completion.
Local body funding is an issue facing every council. In Auckland city’s case this is about growth.
The population growth and the growing pressure this puts on the infrastructure, housing, moving around the city and so forth, is a matter the mayor and council are only too aware of, I’m sure. Rates alone will never fund the investment required, and the council is limited in how much money it can borrow.
However, public private partnerships, infrastructure bonds or targeted rates (such as a congestion charge) all have a role to play to overcome investing in some of the significant big-ticket items the city faces. We would like to see these options being given more serious consideration.
I know the mayor has recognised the delays and other planning system issues residing within council but we have yet to see real evidence that lead times have reduced.
It has been a solid start but there is a tidal wave of issues including the America’s Cup and Apec which the city needs to be prepared for.
Tony Falkenstein, CEO, Just Water: The first year has been an opportunity to judge Phil Goff as a leader, and he has failed to lead. He is managing, but not leading this city.
If he was a business leader, taking on a company that was spending more than it was receiving, this would have been the first port of call to get those costs under control.
Something is wrong with the budget process when the mayor “was surprised” and did not realise that the number of executives earning over $200,000 had increased by 25 per cent in the past year.
Either the mayor isn’t getting meaningful information or the CEO is incompetent. Both of them, plus all councillors, should have been all over the staff salaries to see what could have been cut to get the foundation of the council in order.
This is the council’s largest expense, with a new mayor the staff would have been expecting change, and it didn’t happen.
People want to see “leaders” and the inaction over the first year has been disappointing, and a wasted opportunity. I do not see it happening under Phil Goff, as much as I like him as a person.
All we have seen are meaningless cuts, which have done so much to harm our city. If he had been able to reduce only five of the overpaid executives, it would mean our prestigious Art Gallery would not have to consider closing on one or more days a week.
There have been many of these pitiful cuts, which have been overall so small as a percentage of council spending, but so large in terms of those affected.
The mayor can talk about visions of the future, but a vision without a plan is just a dream.
Get the foundation right first, get rid of the shareholdings in the port and the airport, establish private/public partnerships for long term funding opportunities, and most of all get the organisation structure right to match the costs with income.
Graeme Stephens, CEO, SkyCity: I have had a number of positive interactions with Phil Goff and have found him to be highly energised, interested and engaged.
When it comes to translating some aspects of our discussions into action I think his team hits up against the somewhat cumbersome bureaucracy and the silos which dictate decision making in Auckland. The long process to get things done must be as frustrating for him as it can be for us.
Investment in infrastructure, transport and tourism are critical to ensure Auckland keeps pace with regional competitors.
Equally as important, however, is addressing the pressing issue of those with genuine social and financial needs that are not being met under the current system, particularly the homeless.
As a large ratepayer with a big footprint in the Auckland CBD, the decisions council makes strongly impact our business.
The disruption we’re seeing to the roading network is hurting us, as it is hurting many inner-city businesses, but we accept it is critical if we want a vibrant, competitive city in the future.
The council’s vision for a network of laneways, shared spaces and green corridors is also positive, and will ensure the city evolves and responds to community and business priorities.
Homelessness is an issue which requires partnerships from central government, local government, businesses and communities if any meaningful progress is to be made.
Following conversations with the mayor, SkyCity is considering how we can contribute.
Though it does feel as if the city is gaining momentum, with the CRL construction going ahead and the announcement of a regional fuel tax to fund projects like light rail connection between the CBD and the airport, there is still much more that needs to be done, and SkyCity is keen to play a part wherever possible.
Auckland needs major events to stimulate the local economy and promote the city. The New Zealand International Convention Centre will play a role, and SkyCity can and will do more, but the America’s Cup provides the mayor and council an enviable platform to cement Auckland’s place as a global city, for major events, leisure and business tourism, and investment.
Making sure this event is a huge success is critical.
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