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Asia abounds with opportunities for New Zealand business. But our economic engagement in the region is not keeping pace with Asia’s growing wealth.
Several economies in the region (Hong Kong, Japan, Singapore, Taiwan, Brunei and Korea) have annual per capita incomes of over US$20,000. Even in the less wealthy economies, there are significant emerging middle classes with rising incomes. The region’s combined population of 3.5 billion gives it added economic significance to us.
China is set to become the world’s second biggest consumer market, and India will be rivalling the bigger European markets by 2020. Asia’s vast and increasingly wealthy customer base is shaping the region into a centre of innovation and influence upon consumer trends. Demand for services in Asia is already significant and is set to increase.
Asia is already a major market for New Zealand exporters. But after peaking at NZ$11.7 billion in 2001, our goods exports to the region have not been showing growth in New Zealand dollar terms, despite the rapid growth that the region is experiencing. In 2006, New Zealand goods exports to Asia amounted to NZ$11.4 billion. (The high rate of the New Zealand dollar has depressed our returns.)
Dairy products, meat, wool, logs and timber products dominate our goods exports to the region. We face a continuing challenge to expand the range and depth of our markets in the region and then to lift the value of both our goods and services exports.
Our imports from the region have grown steadily from NZ$6.8 billion in 1998 to
NZ$16.7 billion in 2006. Asia is an important source of oil, a range of consumer
goods including electrical and electronic goods, vehicles, and intermediate goods
for our manufacturing sector. This strong fl ow of goods imports has had benefi ts in
expanding consumer choice and keeping infl ation low, but has placed New Zealand
businesses under competitive pressures and will require them to work even harder
for comparative advantage and productivity gain. top of page
Tourism currently has the most visible New Zealand “brand” across Asia. Our tourismc profile also contributes to education, investment and migration. From relatively recent beginnings, Asia now generates 36 per cent of New Zealand’s visitor arrivals from all long-haul markets, and around NZ$1.5 billion in annual earnings. Asian markets make an even greater contribution during low-season months, accounting for 45 per cent of long-haul visitors.
Major challenges facing the sector include New Zealand’s high exchange rate and increasing competition from Asian markets, and air capacity. There has been a marked decline in the number of Japanese visitors, amongst our highest-spending tourists. Market research shows that the relatively high cost of travel to New Zealand, and an increased preference for travel closer to home or not travelling at all lie behind this trend. Tourism New Zealand’s efforts to re-invigorate the market include presenting a more sophisticated image of what New Zealand has to offer. It is also building New Zealand’s profi le in China and South Korea, while there remains considerable untapped potential in other Asian markets, particularly India.
Total arrival figures from China to New Zealand have more than doubled since 2001, with over 100,000 visitors in 2006. China’s visitor market is forecast to become our fourth largest market by 2010. With direct Auckland–Shanghai flights by Air New Zealand, and the possibility of an FTA with China, tourism will provide New Zealand with the greatest visibility. Using information gained from market research, government and industry are working together to develop greater consumer awareness of what New Zealand has to offer in terms of a good-quality tourism experience.
In education, our second largest sector of service exports, numbers of foreign feepaying students have declined from a peak in 2002-03. The high New Zealand dollar may have been one factor in the decline. Asian countries themselves have also boosted the places available within their own education systems.
New Zealand suffered damage to its reputation in the largest market, China, in 2002 following the collapse of some English language schools and negative Chinese media reporting of the treatment of students in New Zealand. Concerted efforts by the Government, supported by the education sector, have done much to recover our standing with off cials and education agents.
Longer term, greatly increased competition for Asian students from other English speaking countries will test New Zealand’s ability to attract the best and brightest. The Government supports a sustainable increase in student numbers. A concerted emphasis on quality and value and a we coming environment – backed by consistent marketing – should provide solid and enduring opportunities.
The internationalisation of the education sector means more than the presence of international students in New Zealand classrooms, though this in itself has the potential to have a positive impact on our engagement with the region. At the Government level, bilateral education relationships have grown substantially. Scholarships have been introduced to bring research students to New Zealand. Asia is a focus of these efforts. Our education institutions are building their own networks throughout the region.
Foreign investment – both ways – contributes to New Zealand’s economic transformation. Our open economy and commercial sensitivities account for the lack of publicly available data on investment fl ows between New Zealand and Asia. But it is clear that this is an area where New Zealand could be doing a lot better. Asian investment in New Zealand, which has largely been in resources and tourism, does not feature prominently in official statistics. The largest, Japan, is only New Zealand’s fifth largest investor (at three per cent of total FDI).
International surveys show we are one of the easiest countries in the world in which to set up and run a company. We have a stable and secure business environment, an educated and skilled workforce, and research and development and innovation capability. Other surveys point to our high standards of ethics and integrity in government and business.
In a keynote speech in Singapore in 2006, Deputy Prime Minister Dr Michael Cullen spoke about the New Zealand economy’s place in Asia. He noted that reforms of our economic and trade policies had left us with a responsive economy “perfectly positioned to pounce on opportunities” as they arose within our dynamic Asia Pacific neighbourhood. And New Zealand was “an essential place to invest” for our regulatory, business, fi scal, taxation, education and social climate.
The Government has committed funding to expand the network of NZTE’s investment arm, Investment NZ, into Asia. This will boost the work of investment specialists already based in the region, working with our diplomatic and trade staff to build relationships with key investment decision-makers, including Asia-based global multinational companies. Investment NZ will focus effort on Asian investment opportunities in New Zealand’s ICT, biotechnology and creative industries, and other high-growth sectors such as engineering, wood processing and food and beverages. Ministerial visits support this effort. The Prime Minister’s investment-based mission to India in 2004 opened doors to some of India’s major companies, including Biocon, Reliance, and Larsen and Toubro. There continue to be ongoing relations with these companies.
Global production changes rooted in Asia are key drivers behind our need to lift our international competitiveness. The business sector has long recognised the difficulties of competing at the low value-added end of the market, but we also face rapidly developing Asian economies which are competitive right through the production process, including high-end manufacturing and in service sectors such as distribution. (Some countries, like Japan and Korea, have been high-end producers for decades but are now being joined by other economies in the region.) Further engaging with Asia would enable New Zealand fi rms to gain experience in new business models. This should open up opportunities to boost productivity and to compete globally.
The Government’s economic strategy, the Economic Transformation Agenda,
focuses on lifting global competitiveness and productivity. This demands a shift in
how we think about the environment for growing globally competitive fi rms within
New Zealand, how we support them as innovative and productive workplaces,
and where our priorities for investment lie, such as infrastructure, education, and
research and innovation.top of page
New Zealand companies wishing to grow and internationalise require an offshore presence. Fonterra, for example, has several plants in China, and has recently undertaken a NZ$160 million dairy investment in northern China. Those investing in Asia are usually aiming to secure access to production bases or markets.
Icebreaker is a pioneering Wellington-based outdoor clothing brand whose pure New Zealand merino fabrics have been worn by some of the world’s greatest adventurers. The clothing range is designed in New Zealand while manufacturing is outsourced to Asia and elsewhere. Icebreaker’s global success across 24 countries has had a major impact on New Zealand’s merino wool industry. In 2006 Icebreaker paid a 30 per cent premium to New Zealand wool growers in purchasing almost one-sixth of the national merino clip.
Phil and Ted's most excellent buggy company designs and markets innovative and world-leading nursery products, including baby buggies. There is an inhouse design team based in Wellington, and products are manufactured in China before being shipped to 30 countries. The company, which employs Chinese-speaking staff and uses factories where phil&teds is the sole customer, emphasises the need to get beyond the “us and them” mentality in dealings with the Asian region, and sees the effort between its New Zealand operations and its production base in China as very much an integrated one. In the same way a company should listen to its consumers, phil&teds stress the need to listen to the supply chain’s views on capacity and capability. Leveraging the high-value intellectual property from New Zealand, phil&teds seeks to create a seamless operation from manufacture to market.
Skellerup is a well-known New Zealand brand best known for its gumboots, but is also a sophisticated international business selling technically superior rubber and polymer products for a variety of industries. Its Woolston operation recently established a stand-alone R&D department to drive innovation. A manufacturing facility in China keeps it competitive and is helping the company to develop significant new business where it has struggled to compete in the past.
What does New Zealand need to improve if we are to boost our trade and economic linkages with Asia? Enhancing access to markets through free trade and other agreements would help. Such agreements help to open doors for New Zealand and send important political messages about the warmth of our relationships. Government efforts at present are channelled into the implementation of fi nalised FTAs (with Singapore, Thailand, Brunei) and into the negotiation of new ones (Malaysia, China, ASEAN). A joint exploratory study has begun with Korea, and there is agreement in principle with India to proceed with a study. New Zealand and Japan have a joint working group looking at ways of improving our trade and economic relationship.
Apart from FTAs, the Government undertakes a broad programme of work with individual countries in Asia for trade access, regulatory reform, investment promotion and business facilitation. Co-operation on standards, for example, can help New Zealand exporters reduce compliance costs. Building co-operation at this level involves long-term, sustained commitment and contact.
Through its offices in Asia, NZTE provides in-market support, and leads export strategies focused on specific sectors and growth opportunities. Two growing aspects of its work involve helping companies to maximise the value from their engagement in international markets, and facilitating their access to global value chains. Recent initiatives include the New Zealand Focus retail centre established in 2005 in Hong Kong, the business beach-head facility in Tokyo, and the New Zealand Wood Innovation Centre which opened in Shanghai in 2006. These are assisting New Zealand companies gain knowledge of how to operate in highly competitive markets.
Other Government initiatives to support our Asia effort have included the Seriously
Asia Fund, which aims to build linkages with rising Asian leaders and those well
placed to infl uence public opinion, and Leveraging Aichi, which capitalised on the
World Expo in Aichi, Japan, in 2005 to stimulate co-operation between New Zealand
and Japan. Projects included science and technology, biotechnology, ICT, advanced
manufacturing techniques and encouraging a new generation of exporters to focus
on Japan.top of page
Ngai Tahu Holdings, the commercial arm of Te Ru- nanga o Nga- i Tahu, has a diversified portfolio but some of its companies have a particular interest in Asian markets. Asia is the most significant market for Nga- i Tahu Seafood, especially in terms of premiums for its live product and abalone (paua). Areas of focus include Japan, Singapore, Hong Kong and China. The company’s international marketing team has a constant presence in the region as it regards building relationships as crucial to doing business. The Asian market is also important for Nga- i Tahu Tourism, which is the parent company for a selection of tourism businesses including Shotover Jet, Rainbow Springs and Whale Watch Kaikoura.
Aotearoa Fisheries Ltd. is the largest Maori-owned fisheries company in New Zealand. Trading brands include Sealord (which AFL part-owns with a Japanese company, Nissui), Moana Pacifi c, Prepared Foods and Chatham Processing. Asia features highly on AFL’s radar screen; with the possible exception of Australia, no other region is as important. Japan, Korea, Hong Kong and other parts of Asia are high-yield markets for the company, particularly in rock lobster, abalone and some finfish. Asia is also a valuable market for mussels and eels.
Wai Ora Spa, based in Rotorua as part of the Hell’s Gate geothermal reserve
complex, offers a traditional Ma- ori massage (mirimiri) and spa experience based on the
health properties of local muds and other traditional products. The company has taken
its concept abroad, notably to Thailand (an extremely knowledgeable and competitive
market) where there is a Wai Ora spa in downtown Bangkok providing a New Zealand
experience – complete with hot mineral pools – for its clients. Wai Ora also plans
openings in China, Korea, Japan, Malaysia, Singapore and Laos over the next few
years. The company had to make a huge effort to learn about how to do business in
each market, all of which differ markedly from one another.
Te Awanui Huka Pak, a Tauranga company, has developed a strong indigenous
brand that has given it a clear point of differentiation in emerging kiwifruit markets
such as Malaysia, Indonesia and India. Branding includes use of kapa haka groups and
the gifting of carvings – all part of investing in relationships which are so important
in the region. The company works with a mix of Maori and non-Maori growers who
contract the packing, cool-storing and logistics of delivery to Huka Pak. Huka Pak
is a good example of a company collaborating with others to maximise returns to
New Zealand growers.
Tohu Wines was the first indigenous branded wine to be produced for export. Boasting numerous award-winning wines originating from its Marlborough and Gisborne vineyards, this Marlborough wine company – like other New Zealand wineries – exports mainly to the US and Europe but is keen to make greater inroads into Asian markets. Asian markets are more diffi cult to penetrate than markets in some other regions. Current markets in Asia include Singapore, Japan, Thailand and Hong Kong, and Tohu recently launched its product in China, where wine-drinking is still relatively new.
We have to narrow the gap between opportunities in Asia and the New Zealand business response. New Zealand is short of businesses with offshore capabilities: only 165 companies account for 75 per cent of New Zealand’s export earnings. Few New Zealand exporters have a business presence in Asia compared with their representation in Australia and the US.
It may be that a business model mixing new forms of collaboration with Asian institutions (e.g. chambers of commerce and other industry associations) will help overcome New Zealand’s barriers of capacity and distance. Working more closely with Asia in this way would also provide additional access to expertise and support networks throughout the region.
During the visit by Korean President Roh Mo-Hyun in 2006, the two agencies agreed to share market information and work together to assist New Zealand and Korean companies to develop information and business partnerships. KOTRA will help introduce New Zealand companies to potential Korean partners as well as provide local market information and other support services. NZTE and KOTRA will also work together to organise business missions, seminars and workshops to explore opportunities for New Zealand companies in Korea, and for Korean businesses in New Zealand.
...For many years, common perceptions of New Zealand have centred on our landscapes and clean, green image. These are important, but they do not promote the value New Zealand businesses offer through creativity, innovation and technology...
In Export Year 2007, the Government is making special efforts to improve long-term
export performance by raising business awareness about the importance of
exporting, and helping to build export capacity. Recognising that work needs to be
undertaken at home as well as offshore, Export Year provides an opportunity for
business-to-business and business-to-government collaboration. Asia naturally
features in this effort.top of page
Continued participation and leadership by business and industry in our Asia effort is critical, and there is enormous potential for business leaders to harness their own substantial networks. The newly established International Business Forum has already signalled that it intends to treat Japanese and Korean markets as a high priority.
There is a particular challenge to improve Asia-related skills among businesses to take advantage of opportunities in the region. The Asia New Zealand Foundation’s 2007 survey of Asian businesses revealed that New Zealanders were well regarded and seen as trustworthy, but their skills base was perceived to be low and they needed to lift their game in Asian markets. The study concluded that action was needed at an individual level for business people, and at an educational level within business schools and professional business development. More work was considered necessary in market research, strategic planning and in-market connections.
Optimising the knowledge, skills and contacts of Asian business people based in New Zealand is a strategy that could be developed further. New Zealanders based in Asia who may not be working for New Zealand companies but who are nevertheless willing to share their local market knowledge and business connections can also make an important contribution. The KEA network of New Zealand expatriates has already done some useful work in this area.
For many years, common perceptions of New Zealand have centred on our landscapes and clean, green image. These are important, but they do not promote the value New Zealand businesses offer through creativity, innovation and technology. NZTE has spearheaded a Government effort to promote a greater understanding of New Zealand’s capabilities in the global marketplace, using the “New Zealand, New Thinking” concept. A well-co-ordinated and coherent programme will improve understanding of our smart economy, and benefi t trade, investment and migration links.
...Linking New Zealand’s economic growth to the economic growth of the Asian region is a challenge with many dimensions...
Following on from the Aichi World Expo in 2005, participation in the Shanghai Expo in 2010 will be a huge undertaking by NZTE, other government agencies, businesses and volunteers. Expos are valuable opportunities to expose New Zealand to large numbers of locals and can be used to lift our profile in the region.
To leverage our capabilities in innovation we need to forge closer ties with the key drivers of science and technology in Asia. This calls for deeper and stronger Asian linkages for universities, Crown Research Institutes and the private sector. The Government has established formal science collaboration agreements with partners in China, Japan and Korea. These agreements provide a framework for the exchange of knowledge, skills and infrastructure as well as facilitating trade in research services.
Linking New Zealand’s economic growth to the economic growth of the Asian region
is a challenge with many dimensions. The wealth we can grow together will mean an
increase in incomes and assets. But it is much more that that: it can also bring about
an expansion of our innovation, creativity and knowledge horizons, stronger people
connections and better options for New Zealanders.
Next > Challenge 4: Becoming more 'Asia Literate'
