As The Dust Settles

Rebuilding competitiveness after a major natural disaster

Gerard Quinn, TCI Conference, San Sebastian, October 2012

3

Contents

1. Christchurch as it was2. The Events3. The impact4. The Rebuild – conditions, issues and actions5. Future Christchurch

Christchurch

Palmerston North

Napier

TaurangaAuckland

Dunedin

Wellington

Christchurch

5

6

An attractive and vibrant city

7

Supported by and supporting a rural hinterland

8

Two of the major events

• Mag 7.1• 40 km west of Christchurch• Depth 10 km• 40 seconds• PGA 1.26g• 0 fatalities, 2 serious injuries, 100

injuries• Insurance Claims $3Bn

• Mag 6.3• 10 km southeast of Christchurch

• Depth 5 km• 12seconds• PGA 2.2g

• 185 fatalities, many injuries• Repair cost $30Bn

Feb

11

12

13

Why was this disaster unusual ?

18

19

The entire heart and central business district (CBD) of Christchurch was decimated, with 1 800 commercial buildings being demolished.

20

Red Zone Cordon

23 Feb 201104 Oct 2012

21

Issues – Insurance

• 80% economic losses covered, but ….– The Cordon - Definition of “untenantable” – for

asset replacement and B.I.– Insurance won’t progress claims until geotechnical

stability and rebuild decisions are made– Work in progress insurance for builders and

developers– Local government infrastructure reinsurance– Increased premiums and excesses

22

Activity Hot and Cold spots

Affected 7000 businesses, 60 000 employees

23

500 000t of liquefaction

24

Residential land zones – “uneconomic to rebuild”

25

Rebuild Issue - Land Stability

Category

Red Land is uneconomic to repair – no dwellings allowed

White Further work required to categorise

Green / Grey Future land damage from liquefaction is unlikely. You can usestandard foundations for concrete slabs or timber floors

Green / Yellow Minor to moderate land damage from liquefaction is possible infuture significant earthquakes.You can use standard timber piled foundations for houses withlightweight cladding and roofing and suspended timber floorsOr enhanced concrete foundations – i.e. more robust floor slabsthat better tie the structure together

Green / Blue Moderate to significant land damage from liquefaction ispossible in future significant earthquakes. Site-specificgeotechnical investigation and specific engineering foundationdesign is required.

These categories describe how the land is expected to perform in future earthquakes

26

Impact on people

• Psychological impact – Affects managers, staff, customers– Loss of confidence and identity– Uncertainty, lack of control

• Health impact – Anxiety, respiratory, PND, stress-related

• Economic impact– Loss of employment in some sectors– Loss of homes in red zone– Risk of flight of capital and talent

• Community spirit increased

27

Population - Migration of registered individual taxpayers into Canterbury

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

-1,500

-1,000

-500

0

500

1,000

Arrivals Departures Net Migration

Population decline 2.5%, to be more than replaced by rebuild workforce

28

Why reinvest in Christchurch

• Greater Christchurch provides • 12 %of NZ’s GDP• 70 % of the economic output in Canterbury• 250 000 jobs • 400 000 residents

• South Island hub• the main entry point for tourists coming to the South Island• Major import/export infrastructure• Canterbury still has economic strengths and vibrant

communities

29

Why rebuild the city CBD ?

• The centre of a city contains a higher density of people and businesses– more connected, can share ideas and communicate more

easily, and provide easier access to the labour market– lower transaction costs and access to common services– doubling in employment density = 2-4% increase in

productivity• Without a central city, greater Christchurch is losing up to $395

million a year in productivity.

• A vibrant centre helps attract people and finance• A city needs a heart, a memorable identity

30

The opportunity

• The new CBD will address issues such as :– Too much land in fragmented titles– Variable building quality– Inefficient spatial planning– Infrastructure to support key business sectors– Opportunity for a smart, sustainable, eco-friendly

heart– Move beyond lifestyle to attract talent in a

competitive global talent market

31

Favourable factors for a rebuild

EQC covers damage caused by earthquakes, landslips, volcanic eruptions, hydrothermal activity and tsunami.

The total cost to insurers of rebuilding has been estimated at NZ$30 billion, making it by far New Zealand's costliest natural disaster, and the third-costliest earthquake worldwide. EQC Reserves $11Bn.

Evidence-based Economic Development strategy was in development

Important relationships already existed

33

Local organisations – first responders

Canterbury Business

Recovery Trust

Custodian of the long-term economic development strategy

Immediate business Survival

Received and allocated private sector and public donations to businesses

• Post rebuild growth path• Water• Long term • Redistribution of economic

hotspots• Long term outcomes not

constraints

• Access to premises and information, relocation

• Loss of customers• Forced suspension of

trading due damage and DEE

• Loss of key staff

• Assessment• Equity

34

Recover Canterbury

WHAT – Single point of contact.– Christchurch Earthquake Support Package $260M

• Employer subsidy• Employee grant

– Recovery planning , Referrals, Mentoring, Training, Funding

WHO– CDC, CECC, 6 Govt Ministries, sharing information and resources !!!

HOW – Surveyed businesses– Call centre– www.recovercanterbury.co.nz– Business Recovery Coordinators

35

Love Christchurch campaign

36

Putting the City on Your Side

• Cluster Managers know businesses and sectors and are trusted by them

• Nature of businesses affects their recovery – compare the mobility of professional services firms = dislocation, vs engineering with 50t machines = relocation.– Business choices to relocate are off-shore– Fighting for Council information and decisions,

quick consents, development contribution waivers

Re:START

38

Central city Plans – aspirational, inspirational, citizen-driven

Kia Kaha(Be Strong)

39

Recovery Strategy required Focused Organisations

• CERA• Scale of disaster and need for public money requires

integrated and timely decision making across a range of organisations• Own Minister with special powers – e.g. land

acquisition

• SCIRT• Horizontal infrastructure ($2.2Bn)

• CCDU• The central city rebuild

40

Recovery Strategy

Factors ObjectivesLeadership • Recovery

• Integration• Partnership

People • Workforce Dynamics• Quality of Life• Renewing regional brand

Business Environment • Capital availability (confidence)• Business friendly • Worst affected sector support

(tourism, hospitality, education)• Encouraging and investing in

innovation• Leveraged infrastructure investment

41

Local Industry Participation Project

• Primary actions– Get local and NZ companies into supply chain– Change Government procurement policies to include Value

for Money (overall economic impact) and Whole of life (not just cheapest purchase price) principles

– Collaborate Canterbury to encourage JVs to achieve scale– Work with clusters in other regions to mitigate impact and

maximise economic advantage• Secondary consequences

– Local sector capability profile and capability increased– Inbound procurement visits from Australia (ICN)– Export sales to Australian transport industry

42

Demand for labour – scenario planning

Level of Damage

TimeLevel of Damage

TimeLevel of Damage

TimeLevel of Damage

TimeLevel of Damage

TimeLevel of Damage

Time

Infrastructure $3 billion 6 years $3 billion 3 years $3 billion 7 years $3 billion 10 years $3 billion 6 years $3 billion 6 years10,000 houses

10,000 houses

10,000 houses

10,000 houses

10,000 houses

10,000 houses

$4.3 billion $4.3 billion $4.3 billion $4.3 billion $4.3 billion $4.3 billion105,606 houses

105,606 houses

105,606 houses

105,606 houses

105,606 houses

105,606 houses

$3.7 billion $3.7 billion $3.7 billion $3.7 billion $3.7 billion $3.7 billionCommercial $4 billion 15 years $4 billion 10 years $4 billion 20 years $4 billion 25 years $6 billion 15 years $10 billion 15 years

7 years

10 years

10 years

4 years

4 years

4 years

4 years

Scenario 2 Scenario 3 Scenario 4 Scenario 5

2 years 7 yearsResidential New 4 years

Residential Repair

4 years

Base Scenario Scenario 1

2 years

•Scenario driven•Not just at Trades level•An additional 23,871 construction workers will be required with a peak demand for labour being somewhere around quarter 4 2013.

Scenario 3 – Reduced BAU and slower pace, 10,000 additional workers

2010 Q2

2010 Q4

2011 Q2

2011 Q4

2012 Q2

2012 Q4

2013 Q2

2013 Q4

2014 Q2

2014 Q4

2015 Q2

2015 Q4

2016 Q2

2016 Q4

2017 Q2

2017 Q4

2018 Q2

2018 Q4

2019 Q2

2019 Q4

2020 Q2

2020 Q4

0

5000

10000

15000

20000

25000

30000

35000

BAU with Reduction Infrastructure Residential New BuildsResidential Repair Commercial

2010 Q2

2010 Q4

2011 Q2

2011 Q4

2012 Q2

2012 Q4

2013 Q2

2013 Q4

2014 Q2

2014 Q4

2015 Q2

2015 Q4

2016 Q2

2016 Q4

2017 Q2

2017 Q4

2018 Q2

2018 Q4

2019 Q2

2019 Q4

2020 Q2

2020 Q4

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

BAU with Reduction Infrastructure Residential New BuildsResidential Repair Commercial

Scenario 1 – No BAU Adjustment30,000 additional workers

required

44

Building Resilience

Resilience

Survive in a Crisis

Thrive in an uncertain world

Resilient firms have to exist in a resilient community or else staff and customers leave

45

Building Resilience – www.resorgs.org.nz

Resilience = Self-reliance + Interdependence

Leadership & Culture

Networks Change Ready

Not static - Can be eroded and rebuilt

46

Embrace Innovative thinking – smaller scale

• Openness and collaboration between firms increased.– HP , IBM donated IT equipment to SMEs

• Late shopping in CBD Re:Start to combat malls• Cloud computing• A cardboard cathedral ?• A combined cathedral ?• Vibration reduced piling system

47

Innovative thinking – large scale, longer term

• UC Futures– Student Employability Hub– Student Innovation Centre

• Innovation precinct– 40+ ICT companies collaborative campus

• City and environmental redesign to reduce crime

• Schools rationalisation

48

Case study Tourism

Jan-

10

Feb-

10

Mar

-10

Apr-

10

May

-10

Jun-

10

Jul-1

0

Aug-

10

Sep-

10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb-

11

Mar

-11

Apr-

11

May

-11

Jun-

11

Jul-1

1

Aug-

11

Sep-

11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb-

12

Mar

-12

Apr-

12

May

-12

Jun-

12

Jul-1

2

-50%-45%-40%-35%-30%-25%-20%-15%-10%

-5%0%5%

10%15%20%25%30%35%40%

8%6%

3%

0%1%

3%

3%

3%

0%-4% -3%-5%

-1%1%

-5%

-2% 0%

2%

-2%

6%

34%

16%

6%

3%-2%

-8%-10%

-4%-3%

3%

-5%

9%

5%1%

4%

-6%

-1%-1%

-8% -8%

-15%

-2%

-9%-7%

-24%

-46%

-42%-38%

-38%-39%

-30%

-32%

-28%

-34%-29%

-32%

-43%-42%-40%-42%-43%-45%

International Guest Nights All NZ vs Canterbury

International Guest Nights ... Note: this data compares growth perform-ance vs same month of previous year up to June 2012, from February 2012 onwards compares growth to prequake results of 2010

• Tourism sector in Canterbury is worth $2.3 billion pa• South Island tourism is dependent on Christchurch working• Major “physical” problems with Christchurch visitor infrastructure

especially accommodation

Stage 1 – Survive2012 - 2016

Existing business retention

Planning for “New” Christchurch

Development and implementation of transition plan

High priority project rebuild commences

Stage 2 – Recover

2017 - 2025 Major rebuild

construction (75%) completed

Marketing of “New” Christchurch

Communicate milestones achieved

Stage3 – Grow 2026 - 2032

Complete remaining rebuild projects

Market Christchurch as Australasia’s best visitor destination

Tourism phases of recovery

Gateway to South Island

High Priority Projects – Phase 1 & 2

1. Accommodation re-instatement and new builds

2. New convention centre

3. Ensuring “transitional city” works for visitors

4. Air Services : Re-instatement of Tasman capacity and development of new long-haul direct routes

5. Creation of new visitor attractions

6. Developing a new metro sports facility & improved marketing of sports events

51

Enrolment of international fee paying students

2007 2008 2009 2010 2011

55,000

60,000

65,000

70,000

75,000

80,000

85,000

90,000

95,000

100,000

105,000

110,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

Rest of New Zealand (LHS) Canterbury (RHS)

52

Intl Education – recovery strategy

STRATEGIC OBJECTIVES IMPACTINTERVENTIONS

Expanding capacity and capability

Aligning and Engaging industry

Retaining student value

Promoting the Value Proposition

Raise capacity

Utilise Alumni

Develop products

Market Development

Market Penetration

Remove impediments

Efficient Sector Support

Articulate to study or work

Active advocacy on national issues

Change relnship with Study CHC

Leverage IERNZ and CCC relationships

Nett Income

Number of

students

Increase value add segment numbersMaximise return per student

Return per

Student

Investment in Infra.

Soft Infra . & Sector Support

Sector Contbn

Boost Safe Student Programme

Tertiary Expos

Industry Internship programme

Encourage stays

Korea, India market campaigns

Destination Mktg campaign

Contestable mktg Fund

Inbound agent programme

Develop offshore delivery products

Attract new providers

Alumni Kit & Events

Alumni database

Support Student Village project

Motivate secondary segment providers

53

Politics of the rebuild

• Business Leaders’ Group want influence on G and LG actions– Significant investors in people and assets– Committee for Christchurch– Publicly opposed CCC actions and decisions

• Central Government calling the shots and expecting local Government to foot much of the cost – sell CCC assets ?

• Competing rebuild sectors – issues of economics vs equity– Housing (EQC, Insurers, PS) – Amenities (LG)– Infrastructure (G, LG) – Commercial (PS)

• Suspension of elections for regional council• Changes to individual property and appeal rights

54

Indelendent

Finding : A set of forced marriages caused a degree of confusion, inefficiency and duplication of controlRecommendation : clear authority and closer links with businesses and community organisations

56

A new heart

57

A new essence

• Changed skyline• Innovation centres• A modern, safe,

smart city which attracts global talent

• Increased productivity

• A new breed of leaders and entrepreneurs

58

LEARNINGS

1. Uncertainty is a major problem. Communication is key.2. Have networks already established which provides resilience

generally3. Direction and pace is important.

• There is a window of opportunity within which to set the direction of recovery and growth to retain people and capital.

• Rebuilding as fast as you can may not be the optimum pace in economic terms.

4. The presence and effectiveness of development agencies and strong clusters is vital to coming out of the disaster better than when you went in.

5. Opportunities to increase competitiveness have come not from a single asset or an investment, but from the combinations of people, place, investment and attitude. • Bring in new people who aren't scarred, scared and tired.

Christchurch

Palmerston North

Napier

TaurangaAuckland

Dunedin

Wellington

Thanks to Fairfax Media

60

Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Hotels Motels Backpackers Holiday Parks

Capacity of accommodation establishments in Christchurch City(stay unit nights)

61

Immediate Response

• 2010 - Responsibility shared between Civil Defence and Christchurch City Council

• 2011 Scale of event required reallocation of responsibilities

Magnitude vs Time

63

Everything takes on a different perspective

64

Estimate of real gross regional domestic product - levels($ millions, seasonally adjusted in 1995/96 prices, measured quarterly)

Jun-

07

Sep-

07

Dec-0

7

Mar

-08

Jun-

08

Sep-

08

Dec-0

8

Mar

-09

Jun-

09

Sep-

09

Dec-0

9

Mar

-10

Jun-

10

Sep-

10

Dec-1

0

Mar

-11

Jun-

11

Sep-

11

Dec-1

1

Mar

-12

$30,000

$30,200

$30,400

$30,600

$30,800

$31,000

$31,200

$31,400

$3,500

$3,550

$3,600

$3,650

$3,700

$3,750

$3,800

$3,850

$3,900

$3,950

$4,000

Rest of New Zealand (LHS) Canterbury (RHS)

65

International Education – Change of Marketing to “New”

66

Being real about it …… involve cluster members