Education NZ’s Rob Stevens wrote a piece in their E-News today about the relative investment in tourism and education generic promotion (not online yet). I’ve quoted a key part below.

In other words, the Government invests $1 in tourism promotion for every $87 dollars generated by the tourism industry. This compares most unfavorably with education, where the Government invests $1 in education promotion for every $735 generated by the education export industry. Given that the two industries share similar economic dynamics (major market failure issues, free riders and the need for cost sharing), this stark comparison can lead to three conclusions:

- the education export sector has done incredibly well in building such a large and successful export service industry, when compared to tourism;

- education represents a far better value for money return on generic promotion investment for the Government than tourism; and

- lastly, the Government’s investment in promotion of education is seriously lagging, when compared with tourism. Education brings in 25% of the foreign exchange returns of tourism, yet receives only 3.6% of the Crown funding that tourism receives. If education was funded on a pro-rata par with tourism, government investment for education generic promotion would be within the vicinity of $23.5 million per annum.

Some variant of this argument comes up every year or so from ENZ and I find myself disagreeing with it every time. For a start, we could compare the government’s investment in export education with its investment in dairy promotion. I can’t imagine that the government spends any money directly on dairy promotion, yet dairy had $8.5b in annual earnings in the April 2010 Overseas Merchandise Trade stats. (That is, of course, hard money paid over the counter, not a figure calculated by friendly (ie paid) economists, like the ENZ figure.) If you think dairy isn’t the best example, where’s the government subsidy for promoting logs and wood ($2b export earnings), crude oil ($2b ) or wine ($1b)? Those industries just pick up their costs themselves and probably have an infinite return on (zero) government generic promotion investment.

It’s not as though there isn’t a mechanism to collect industry contributions – the export education levy serves the purpose. Now I don’t support the export education levy, but if the option is between the government paying a subsidy on behalf of all taxpayers or the benefitting institutions paying a levy, I’m on the side of the levy.

Finally, I would expect an industry to exhaust all internal sources of funding before seeking government funding for anything, let alone marketing funds. ENZ has an unhealthy reliance on government because the MOE manages the export education levy funds (and the Minister sets the levy). That was a bad call for the last Government, and has meant that ENZ spends more time on government relations than on building up industry support. As a result, ENZ has neither asked for extra direct contributions from the industry, nor has it sought support for the export education levy to be increased. That should be done first before any claim is put up for government funds