Over the past fortnight the border issue troubling politicians and the media has been whether Kiwis returning from overseas should contribute to the costs of their managed isolation.

But even with its half-billion-dollar price-tag, the cost of quarantining returning Kiwis is the least of the country's border concerns.

Lack of quarantining capacity at the border to cope with demand is the big problem. The human toll of families kept apart is staggering enough. The border choke hold also risks strangling the life out of the economy. The $5 billion export education sector alone dwarfs the costs of isolating returning Kiwis. Yet, with the border closed to international students, the 50,000 jobs the sector supports remain on ice.

But the border problem is not limited to students. Across the country businesses are struggling to bring in critical overseas workers with niche skills not available locally.

Foreign fruit pickers and dairy farmhands may be the workers who spring to mind when talking of "offshore workers." But it is the highly paid overseas experts with specialist skills that are most critical to the New Zealand economy. Workers like the German sewerage specialists brought to the country during lockdown to fix Wellington's water woes.

To drive New Zealand's economic recovery, it has never been more important for businesses to have access to the specialist international skills and expertise they need.

Border exemption lottery

Unfortunately, Employer Border Exceptions from the Ministry of Business Innovation and Employment for businesses to bring in critical workers based offshore are as rare as a winning Lotto ticket. And, by all accounts, gaining an exemption is its own lottery.

A recent survey of members of The New Zealand Initiative – among them a majority of New Zealand's largest companies – revealed a litany of shortcomings with the critical worker exemption processes run by MBIE and the Ministry of Immigration.

Compounding the lack of quarantine capacity is MBIE's list-based approach to granting exemptions for overseas workers. If a project is on the priority list, workers are waved through. For businesses not on the list, there is a time-consuming and bureaucratic approach that lacks flexibility, transparency and any mechanism for appeals.

Survey responses reveal:

• Large projects stalling as employers await specialist overseas workers;
• Major plant commissioning deferred while firms struggle to get approval to bring in commissioning personnel;
• Senior executives (or their families) in limbo overseas after they have resigned from highly paid jobs to relocate to key leadership roles in New Zealand;
• Critical overseas staff in New Zealand for major projects unable to take breaks to return to their homes to visit their families, leading to resignations threatening project delivery;
• Excessively bureaucratic processes requiring firms to apply, and then reapply in the event of changes in circumstances, setting the "clock" back at zero regardless of the application's urgency. As one respondent said, the process "appears to be a bit of a mess ... with a huge amount of paperwork and process and zero visibility on status and timing of any outcome".

Or, as another said, "The issue is that the process is not seamless and transparent, and so you really have no idea if you are going to be successful which makes planning difficult."

Government must allow capacity to increase

In June, Housing Minister Megan Woods was charged with fixing New Zealand's porous borders. With the gaps mostly plugged, it is time she came up with a plan to scale up the country's border capabilities to meet the needs of the economy.

The New Zealand Initiative outlined how scale could be achieved in its July research note, Safe Arrivals. Using a combination of:

• user-pays for business migrants (critical workers and New Zealand citizens who need to travel overseas for work);
• a booking system to manage both demand and the quality of managed isolation facilities; and
• strict auditing, policing, and enforcement,

There is no reason why New Zealand's managed isolation and quarantine facilities could not be significantly upscaled.

With business willing to meet the costs, the existing budget constraints for the costs of managed isolation facilities can be significantly relaxed, increasing the range of facilities for user pays managed isolation.

This would avoid capacity being diverted away from dealing with Kiwis returning from overseas. And with business meeting the costs, upscaling quarantining capacity would not come at the taxpayers' expense.

Without urgent action to increase quarantining capacity, the feedback from New Zealand's largest businesses is sobering. Major projects will stall, costs will overrun and critical overseas staff will be lost. As a result, both the economy and employment levels will suffer.

List-based approach must change

In the meantime, MBIE must change its list-based approach to deciding which firms and projects get priority for border closure exemptions.

To qualify, applications for border exemption must involve "regionally or nationally significant" projects. But even with these criteria, MBIE has no way of knowing which critical workers are most critical to the economy. Is it the tunnelling engineer needed for a major infrastructure project or the digital security specialist needed for a national network company? The new chief executive or the new chief risk officer?

Compounding the problem, MBIE's priority list comprises mainly politically sensitive projects: the so-called "shovel-ready" infrastructure projects announced by the Government in June. Yet among these is the $360 million cycle and walking path over Auckland's Harbour Bridge (previously known as the SkyPath). But why this nice-to-have but clearly not must-have project is a priority for critical worker border exemptions is confounding.

Surely the priority should be supporting projects that are critical to the economy. And the priority should be projects that are already under way. After all, ongoing projects where the shovels are already in use are more likely to keep Kiwis in jobs than ministers' think big aspirations.

Overlooked in MBIE's priority list approach is a coherent framework for allocating border exemptions.

Fortunately, economics can provide the missing link. In situations of imperfect information, markets and the price mechanism can help officials discover how to allocate scarce resources efficiently. All that is needed is an auction. MBIE should take the same approach with border closure exemptions for critical workers as officials take for other scarce but valuable resource – like radio spectrum, to take just one example.

After allocating managed isolation capacity for returning Kiwis and the Government's other social priorities, the capacity left for exemptions for business's critical workers should be auctioned off to the highest bidder. That way, the Government will ensure scarce border exemptions flow to the greatest economic value.

The end user of the exemption may be a business needing an aircraft engineer, a data scientist or a specialist project manager. Regardless, the Government would know the highest bidder has the highest value use. And the Government could apply the auction proceeds to up-scaling quarantine capacity.

The good news is that fixing the border chokehold is not rocket science. But it does require the Government to focus on the real problem. This is not charging a handful or so of Kiwis for the costs of their managed isolation. It is scaling up our quarantining capacity at the border to get the economy working – and, in the meantime, making sure that scarce border exemptions are used where they are of most value.