A country risk factor: the Treaty

If you were listing the country risks for a foreign investor, what would you include? Small size and distance? Volcanoes and earthquakes? Major exports’ vulnerability to climate change and destructive pests and diseases? The Treaty of Waitangi?

Most could easily agree on the first four. The last is contentious because most don’t see it as an economic matter. But it is.

There are some direct costs. Compulsory consultation with Maori has become a widespread feature of legislation over the past 10 years, notably in the Resource Management, Local Government and Land Transport Management Acts. The foreshore/seabed legislation due in March adds another swathe.

Consultation has added to the cost of doing central and local government business, which is a charge on rates and business pays rates. It has directly added to the cost of business development because consulting local Maori now routinely incurs fees.

Smart businesses have long front-ended this in early stages of planning a development, so that by the time it gets to the formal consent process that aspect is squared off. Less-smart businesses have found themselves paying what they think is in effect a bribe.

Transparency International, the international non-profit watchdog on corruption, became concerned by anecdotes about the practice a couple of years ago but not enough to record it formally.

But those are in any case exceptions. Most business has no direct experience of financial cost resulting from legal rights flowing from the Treaty.

More important are the hidden costs of misjudging the bicultural aspect of our society.

One such cost we all bear is widespread underperformance of Maori in education and subsequently in the economy. This is a combination of low aspirations (which parents instil in their kids) and disproportionate Maori membership of least-well-off socioeconomic strata, which on average do less well educationally and economically.

Aspirations would improve if self-esteem did. The recovery of Maori culture is one step to that. Changing teaching methods, including Maori delivery of some education to Maori might be another, some evidence suggests. The revival of the Treaty has contributed to both.

Allied to poor average performance by Maori in the general economy is the underperformance of many assets in the Maori economy.

Poor or muddled governance of land and other corporations owned by Maori produces suboptimal returns on investment. If any country should recognise that when it sees it, it is this country, still trying to overcome the draining effect of three decades of suboptimal investment from the 1950s.

A summit on the Maori economy sometime this year will have governance on its agenda. Parekura Horomia and John Tamihere want younger, business-savvy, university-trained people setting the tone at that conference.

But such people are still a small minority. There is a growing anthology of Maori business, professional, artistic and sporting success. But it is swamped by failure.

And the demographics tell an investor that Maori will be a steadily growing proportion of the population. Without a quantum shift in educational and economic performance among today’s younger Maori, this economy as a whole will underperform its logical capacity by more and more as time goes by.

Will there be such a leap? Your call on that bet.

Stir in this factor: sorting out Treaty and other indigenous rights grievances is diverting the energy of many of Maoridom’s best and brightest from economic achievement.

Yet the grievance activity is necessary. Until accommodation is reached on the grievances, Maori leaders, both traditional and young, are likely to remain inward looking and preservationist, not outward-looking and developmental.

If there had been no colonisation, Maori leaders’ and thinkers’ preoccupation would not be preservation of ancient cultural practice and territorial possession because they would be a given. It would likely be to play a full part in the international economy. That, after all, was a driver in the embrace by Maori of the technologically advanced British 170 years ago.

The economic cost is that the need to recover before moving on squanders too much time and opportunity. There is a downstream risk: that it may compound if the best and brightest New Zealanders (including Maori) take their talents elsewhere while the Treaty and indigenous rights are being sorted.

The good news is that under-30s seem much more at ease with biculturalism and already live in the “post-Treaty” world. It is just conceivable that the downside economic risks the Treaty brought from the early 1980s may turn to upside later this decade.

OK, how do you call the Treaty as a country risk?