by Professor Alexandra Andhov, Director of ALTeR, University of Auckland

With New Zealand’s Strategy for Artificial Intelligence: Investing with Confidence, New Zealand has joined the global conversation on artificial intelligence with the publication of its long-awaited AI strategy. As the last OECD country to release such a framework, the Government’s Strategy unfortunately brings more uncertainty than clarity.

The long-awaited Governmental Strategy reveals three fallacies that need to be addressed immediately, as they threaten New Zealand’s technological sovereignty and economic future. New Zealand has chosen to follow rather than lead, creating uncertainty rather than clarity, and positioning us for wealth extraction rather than wealth creation.

The First Fallacy: New Zealand as a Follower

New Zealand’s Strategy explicitly positions the country as a consumer of foreign AI systems. It states that “This strategy deliberately emphasises AI adoption and application rather than foundational AI development, reflecting both economic reality and strategic opportunity for New Zealand’s context.

This stipulation is not merely about missing economic opportunities, it represents a fundamental surrender of technological sovereignty.

Aotearoa can develop its own models and be a leader –  an ethical and accountable leader. New large language models are being created at an unprecedented pace, with hundreds of new models released every month. Far from making development expensive or exclusive, this explosion in AI innovation means that creating domestic capabilities is becoming cheaper and more accessible.

Take the example of Switzerland – Universities in Switzerland joined forces and, with the support of the Government, developed their own large language model (LLM). It reflects Swiss values, culture and is multilingual.

Countries across the globe are recognising that sovereign AI development is not just possible but essential – essential for their own sovereignty and economy.

Countries like France, Canada, Denmark, Finland, Singapore or Israel – countries of diverse shapes, sizes and economic powers – they are all launching significant AI initiatives. Virtually all developed nations except New Zealand are creating their own AI systems. And undoubtedly, there are numerous initiatives already underway in Aotearoa that, with help and support, can become successful.

Every day the government waits, it makes catching up harder.

The announcement of establishing the New Zealand Institute for Advanced Technology represents a critical opportunity to demonstrate how technological development and regulatory frameworks must work in tandem.

The Second Fallacy: Business Does Not Need Rules

The strategy promises to help businesses “invest with confidence” while refusing to provide clear regulatory frameworks that create confidence. This creates a challenging paradox: the reluctance to regulate creates the uncertainty that deters it.

Consider a New Zealand healthcare company aiming to introduce AI systems for diagnostic tools. The Strategy references existing privacy, consumer protection, and human rights frameworks but provides no specific guidance on how these apply to AI systems. What constitutes adequate human oversight? How should algorithmic decisions be documented? When do AI recommendations require additional validation? The Strategy’s fear of being too prescriptive leaves businesses to navigate these critical questions alone.

Modern businesses operate in global markets where compliance with multiple regulatory regimes is the norm, not the exception. Companies routinely navigate GDPR requirements in Europe, CCPA in California, and sector-specific regulations worldwide. They have compliance departments, legal teams, and risk management systems precisely because they understand that clear regulatory frameworks provide the certainty needed for strategic planning and investment.

What businesses cannot navigate is regulatory ambiguity. When requirements are vague, compliance becomes impossible to demonstrate, insurance becomes difficult to obtain, and investors become hesitant to commit capital. The Strategy’s concern of imposing “burdens” on business ironically creates the greatest burden of all: the inability to plan with confidence.

The evidence from other jurisdictions is straightforward: clear AI governance frameworks accelerate business adoption, not hinder it. Singapore’s AI Verify has been embraced by over 100 companies precisely because it provides measurable standards that businesses can meet and demonstrate to stakeholders. The EU’s AI Act, despite its complexity, has prompted massive investment in AI governance solutions and compliance technologies—creating new markets and opportunities rather than stifling them.

New Zealand’s approach forces businesses to operate in regulatory limbo, unsure whether their AI implementations will later be deemed problematic and uncertain how to demonstrate responsible practice.

The Strategy’s hesitation to regulate becomes particularly counterproductive for New Zealand businesses seeking to operate internationally. A company that can demonstrate compliance with recognised AI standards gains credibility in global markets. A company operating under vague voluntary guidelines has no comparable credentials. In an AI-powered global economy, regulatory compliance becomes a competitive advantage, not a burden.

The SME situation illustrates this perfectly. The Strategy identifies that 68% of New Zealand SMEs have no plans to evaluate AI technology, compared to only 38% in Australia. This gap exists precisely because smaller businesses lack the resources to interpret vague principles or navigate regulatory uncertainty. They choose to avoid AI entirely rather than risk unknown compliance problems—exactly the opposite of what the Strategy intends to achieve.

The Third Fallacy: Path Towards Dependency and Loss of Sovereignty

New Zealand’s Strategy does not address the most fundamental question of AI: who will control it? As those entities that can control AI, will control information, production, the economy, and our decision-making, it is crucial to understand the implications of this.

We can see already now the power of Big Tech companies. AI in fully private hands will make this only worse, not better.

By focusing solely on AI adoption while not prioritising AI development, the Strategy consigns New Zealand to permanent technological dependency.

When New Zealand businesses rely exclusively on foreign AI systems, they are not just adopting neutral tools—they are embedding foreign values, priorities, and biases into their operations. OpenAI’s systems reflect Silicon Valley’s particular worldview and business model. Chinese AI systems like DeepSeek embed the priorities and constraints of the Chinese regulatory environment. European AI systems increasingly reflect EU values and compliance requirements.

None of these necessarily align with New Zealand’s values, priorities, or interests. Yet the Strategy treats this as an acceptable trade-off for convenience and “cost savings”.

The development of domestic AI capabilities is not just an economic opportunity—it is a sovereignty imperative. Countries that cannot develop their own AI systems will find themselves subject to the priorities and decisions of those who can. This is not abstract future speculation—it is already happening.

Consider the implications: when New Zealand’s healthcare system depends on foreign AI for diagnostics, those foreign systems determine what conditions are prioritised, what populations are considered, and what outcomes are optimised. When New Zealand’s financial system depends on foreign AI for risk assessment, those systems determine who gets credit, who gets investment, and who gains economic opportunities.

The Strategy’s silence on domestic AI development capabilities effectively surrenders New Zealand’s ability to shape its own technological future. Other small nations recognise this challenge. Singapore invests heavily in domestic AI research and development. Israel has become a global AI powerhouse despite its small size. Estonia leads the world in digital government services built on domestic capabilities.

New Zealand has unique advantages that could support domestic AI development: world-class universities, strong research institutions, a skilled workforce, and distinctive datasets that could power uniquely New Zealand AI systems. The Strategy ignores these advantages entirely.

More critically, domestic AI development creates the foundation for effective AI governance. Nations that understand how AI systems work because they build them can regulate them effectively. Nations that only consume foreign AI systems lack the technical understanding needed for meaningful oversight.

And, as Abraham Lincoln famously said, “laws without enforcement are just good advice”.

Conclusion: The Choice for Us

The next five years will determine whether New Zealand becomes a confident participant in the AI age or a digital colony subject to decisions made by AI-powered entities beyond its borders.

The New Zealand Institute for Advanced Technology represents our best opportunity to prove that this is not a choice between regulation and innovation, or between domestic development and international cooperation.

Designing the Institute with an understanding that we must aim for New Zealand’s technological sovereignty with commercial success instead of technological colonialism with economic dependency.

The Institute must demonstrate that clear regulatory tools and commercial focus are not opposing forces but essential partners in building New Zealand’s technological future. Countries that master this integration will lead the next economic era. Countries that maintain the false choice between governance and growth will be left behind.

New Zealand must evolve beyond its fear of regulation, embrace sovereign technology development, and prove that the most innovative companies and the clearest regulatory frameworks can coexist and thrive together.

In times when the line between corporate power and sovereign authority is rapidly disappearing, this integration is not just a policy choice—it is a matter of national survival.