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Congratulations on holding this New Zealand Asia-Savvy conference. It’s good to see this type of student-led initiative.
Being Asia Savvy has never mattered more to New Zealand. Our relationships with Asia are increasingly the ones that will determine this country’s future.
With its increasing global significance, New Zealand needs to seize the opportunities for pushing ahead in the dynamic Asian region. And we need people with the requisite knowledge and skills to take full advantage of this.
David Walker speaks at the Asia-Savvy New Zealand Asia Conference 2011We are all aware of the shift in global power that is occurring as a result of the remarkable and continuing economic growth in Asia. Terms like the Asian Century and the New Asian Hemisphere have been coined to describe this change.
20 years ago Japan was the only Asian nation that ranked among the world’s major economies. Now China, Japan and India are all in the top ten.
After Japan, the “Asian Tiger” economies of Hong Kong, Singapore, South Korea and Taiwan were the first group of Asian economies to take off, with exceptionally high growth rates and rapid industrialization during the 1980s..
All four have developed into advanced and high-income economies, specializing in various areas of competitive advantage. Hong Kong and Singapore have become world-leading international financial centres. South Korea and Taiwan are world leaders in developing information technology.
Their economic success stories have served as role models for many developing countries, most notably the “Tiger Cub” economies of Southeast Asia – Indonesia, Malaysia, Thailand and the Philippines; to which one should now add Viet Nam.
Collectively, Asia now accounts for over 27% of total global GDP, and approximately 32% of global trade. The region accounts for 24% of total global FDI flows, with FDI into Asia increasing by 24% in 2010, significantly outperforming other developing regions.
According to the World Bank, in 2009 28% of the world’s middle class population were in Asia. By 2020, the figure is projected to more than double.
Individually, the biggest economic success story in Asia is China. The figures over the past 30 years tell the story so far:
Since 1980, China’s real GDP has grown at an average growth rate of 10%.
China’s per capita GDP has grown from just over US$200 in 1980, to US$4,382 in nominal terms today.
30 years ago, 84% of China’s population was living below the World Bank poverty line. Today that has fallen to 20%. That means about 500 million people have been lifted out of poverty – a remarkable achievement by world standards.
30 years ago China’s rate of urbanisation was 19% - today nearly half the population is urban. Eight Chinese cities now have a population of over 10 million and 94 cities have populations larger than New Zealand’s. The rise of China’s cities is a strong driving force for future growth.
As a result of this rapid economic growth, China’s economic global weight has increased, with China now the world’s second largest economy. 30 years ago, China’s GDP was just 7.3% the size of the US economy. This April the IMF forecast that, on a purchasing power parity basis, China’s economy would surpass the United States’ in 2016.
When exactly China will overtake the US in absolute terms is hotly debated, but most commentators agree that on current projections, this will happen by 2030 at the latest.
India is also on the rise and growing rapidly – on average three times as fast as the US. India too is now an important economic power. The World Bank ranks it as the world’s 9th largest economy this year, and according to Goldman Sachs it is on track to become a top-five global economy by 2030.
The economy of Indonesia, the 4th largest country in the world, is also booming with growth for 2011 predicted at 6.5%. The World Bank predicts that by 2014, the Indonesian economy will be as big as Mexico, Korea and Turkey are now. It also expects that – with the right policy developments – Indonesia will join the BRICs (Brazil, Russia, India and China) in providing up to half the world’s output by 2050.
Incomes in Indonesia are growing with 100m people expected to cross the US$3000/year income mark in the next four years fuelling further demand for New Zealand products (particularly food products/protein).
This shift in global economic weight closer to our own neighbourhood is a very good thing for New Zealand.
New Zealand is a trading nation. As a market of only 4 million people, we need to sell our goods and services to other countries to prosper and grow.
Overseas investors provide capital to develop our industries, and we use overseas knowledge and technology to help our own economy become more innovative. Global links help provide jobs, incomes and better living standards for New Zealanders.
In all of these areas – import and export, investment, knowledge and skills – Asia is crucial.
Asian economies have already become a permanent and vital part of New Zealand’s economic future. 39% of New Zealand’s total goods exports now go to Asia - up from 29% in 1986, and 6% in 1964.
11 of our top 20 export markets are now in Asia: China 2nd; Japan 4th; Korea 5th; India 7th; Taiwan 8th; Indonesia 9th; Malaysia 10th; Hong Kong 11th; Singapore 12th; Thailand 14th and the Philippines at no. 16.
China is now our second largest trading partner on both the export and import side. 20 years ago China ranked as our 16th largest export market.
Our exports to China have tripled over the last five years. In the year to June 2011, exports to China grew 37%. Nominally that was an increase of $1.5 billion - broadly equivalent to New Zealand’s total annual exports to South Korea, our 5th largest export market.
New Zealand now trades with China in eight hours the equivalent value of what we traded in an entire year when diplomatic relations were established in 1972.
Indirectly, China’s influence on our economic success is even greater when you take account of the importance of its dominant role as a trading partner for our large and growing markets in Australia and ASEAN.
New Zealand’s economic ties with India are seeing very strong growth with merchandise exports more than doubling over the last three years.
20 years ago, India ranked as our 25th largest export market – now it is No 7. In the year ended March 2011 exports to India were worth NZ$917m.
Asian markets are vital for many of our key industries. Higher incomes in Asia have led to higher meat and dairy consumption and this has positive spin-offs for New Zealand’s primary sector.
The dairy industry is NZ’s biggest export earner, last year accounting for $10.4 billion or nearly 24% of our total goods exports. Eight of our top ten markets for dairy are in Asia.
The dairy market in China is our largest, and it has presented significant opportunities for New Zealand. Dairy products to China increased by 64% in the year to May 2011 – it is our biggest export to China, accounting for a massive 38% of total exports to that market.
Forestry products are New Zealand’s second largest export category by value - with sawn timber, pulp and paper together accounting for around 10% of our total exports. 8 of our top ten markets for forest products are in Asia, with China no 1, Japan 3rd and Korea 4th. China’s infrastructure development has meant continuing strong growth of our timber exports to that market, jumping nearly 40% in the year to May 2011.
In addition to the goods trade, our services trade with Asia is growing in value.
Tourism is one of New Zealand’s top export earners. Growth in this sector is driven strongly by Asia where rising incomes are leading to more overseas travel.
Japan is our 5th largest source of tourists with almost 90,000 visitor arrivals in the year to December 2010. South Korea is ranked 6th largest with 67,000 visitors arrivals last year.
China has been the fastest growing major in-bound tourism market for New Zealand over the last 10 years and is now our 4th largest source of tourists. Improved direct air links have been a major factor in the rapid growth of Chinese tourism. Air New Zealand has instituted direct flights to Shanghai and Beijing, and most recently China Southern Airlines has begun direct flights from Guangzhou to Auckland.
Korea is our second largest source of international students with over 15,000 young Koreans registered at NZ schools and tertiary institutions in 2010. India and Japan are ranked 3rd and 4th respectively.
In recent years science has become recognised as an important part of New Zealand’s economic growth strategy, and this is also being reflected in our relationships in Asia.
Science and Technology agreements with a growing number of Asian countries underpin collaboration, with a focus on areas with promising commercial applications.
New Zealand’s expertise in the area of agribusiness and agritech has the potential to feature strongly in a number of our relationships with Asian countries.
Take India for example. At present it is reported that something like 30% of agricultural production in India is lost post-harvest. Built on a strong science base, New Zealand expertise in the storage, transport, marketing, R&D and retailing of foodstuffs has the potential to build greater resilience into India’s food security profile.
Alongside our relations with individual countries, regional groupings are becoming increasingly significant in our engagement with Asia.
In the trade and economic space this reflects the increasing integration of national economies.
This evolution of cross-border/integrated supply chains represents a fundamental change in the structure of international trade.
Nowhere has this trend been more evident than in Asia, where intermediate goods make up more than 60 per cent of imports and China is the top importer of intermediate goods in the world.
This integration of supply chains makes for compelling logic in favour of having a coherent set of regionally agreed regulatory rules for trade and investment.
But the reality of trade rules in the Asia-Pacific region is very different. It has been famously described as a “noodle-bowl” of overlapping and sometimes contradictory regimes. In 2000, only three FTAs were in effect in East Asia. Today this number is closer to 50, with many more at various stages of negotiation.
Ultimately, trying to move forward using a patchwork of bilateral FTAs does not make sense economically, strategically or geo-politically. Businesses want to see clear and coherent trading rules. Integrated supply chains demand global, or at least regional, solutions. Now is the time to modernise and enhance trade rules to reflect the transformation that has taken place in production/distribution patterns and business models.
For this reason New Zealand is an enthusiastic supporter of the various regional economic integration initiatives under way. And, importantly, we see these as complementary - as potential pathways towards the same ultimate strategic objective.
The Trans-Pacific Partnership (TPP) is one pathway that New Zealand is pursuing toward a high quality, free trade agreement in the Asia-Pacific.
It is, of course, not the only one. APEC is doing some valuable work in this space, towards the objective of an FTAAP (FTA of the Asia-Pacific).
And New Zealand is closely involved in the economic integration initiatives in the East Asia Summit.
There are two ideas for integrating trade and investment flows in the East Asia region. The first is the concept of an FTA between the 10 members of the Association of South East Asian Nations (ASEAN) and the north Asian economies of China, Korea and Japan. This is sometimes referred to as ASEAN + 3. The second initiative is know as ASEAN +6 as it includes all of those nations as well as Australia, New Zealand and India.
The common denominator of both ideas is ASEAN. New Zealand has a longstanding relationship with ASEAN; a relationship which is becoming increasingly significant as ASEAN becomes more cohesive – both in its own right, and because of the centrality of ASEAN in East Asia integration initiatives. The Australia, New Zealand, ASEAN FTA (AANZFTA) represents a strategic advance in this context.
It is not just about the economic numbers though. There is an important and growing people dimension to our links with Asia.
At home, New Zealanders are coming into increasing contact with Asia and its people, through short-term visitors (students, tourists and business people) and also through immigration from the region.
New Zealand is home to many Asian communities, including for example people of Chinese, Indian, Filipino, Sri Lankan, Japanese, Korean, Cambodian and Vietnamese descent. Some individuals in these communities are recent migrants; others are from families that have lived in New Zealand for generations.
Over the past two decades, the number of people of Asian descent in New Zealand has grown rapidly. Over 9% of New Zealanders now identify themselves as Asian; the figure is 19 per cent for Auckland.
Statistics NZ estimates that by 2026 there will be 790,000 people of Asian descent in New Zealand, or approximately 16% of the national total. The face of New Zealand is changing.
For all that New Zealand is doing in Asia and with Asians in New Zealand, we could be doing better.
New Zealand businesses could be participating more fully in the growth of Asia’s economies. Tourism and education face intense competition from other countries.
Investment flows are much smaller than they could be given the prominence of Asia in our trade profile.
A 2007 survey of Asian businesses reported that New Zealand business people were well regarded and seen as trustworthy by Asian counterparts, but their Asia-related skills in language and culture were perceived to be low.
The government recognises the need for New Zealand to lift its game in Asia. To this end the Ministry of Foreign Affairs and Trade has been working to enhance access to markets through trade agreements and, with New Zealand Trade and Enterprise (NZTE), to improve support for business connections between Asian countries and New Zealand.
But the role of officials is just one part of the equation.
We need more New Zealanders who are confident in their dealings with Asia and Asian societies, and that will only come through greater familiarity and knowledge of the region and its peoples.
New Zealanders need to become more Asia Savvy so we can better engage with the region in which we are increasingly making our living.
As an Asia-Pacific nation, New Zealand is well placed to take advantage of the new dynamics of Asia and harness the growing importance of the region for our future prosperity, security and cultural vigour.
The challenge will be to take up the opportunities the region offers, to remain competitive and prosperous in the global economy.
The skill you have as Asia-savvy graduates will be important to New Zealand in meeting this challenge. I would say you are in the right place at the right time – it’s a great time to be an Asia-savvy graduate.
Thank you.
