Expanding and Deepening the Philippines/New Zealand Trade and Investment RelationshipInternational Trade
It's great to be back in the Philippines, this time as Minister for International Trade. One of my earliest experiences in the international market place was here in the early 1980s, launching Anchor milk powder for the New Zealand Dairy Board. Filipinos used to hear my voice everyday on the radio and TV advertisements.
Since then, and especially through the 1990s, trade between our two countries has grown significantly. I'm particularly pleased to see that our exports of milk powder grew to just under NZ$100 million last year! The Philippines is now our 15th biggest destination for exports while we take around NZ$50 million of your exports per year. In investment, New Zealand companies are involved in energy, infrastructure development and housing in particular. And we welcome Philippine investment in New Zealand in the future.
It's a two-way relationship I'm keen to see grow. And there are good reasons why it should. The New Zealand economy has been turned round over the last 13 years. Back in 1984, we were a basket-case. We were a country of:
extraordinarily high levels of direct taxation, with a top rate of 66%
an inefficient and consumer-unfriendly state sector, which pervaded into activities far beyond the expertise of the state
costly and ultimately counter-productive subsidisation and protectionism
crippling Government deficits and debt
overbearing and inflexible unions
high unemployment, and
falling living standards
Since then, all that's changed. We're now a country of:
controlled Government spending, funded through a low-rate, broad-base tax system
a smaller and more efficient state sector
open markets and zero subsidisation
Government surpluses and zero net foreign debt
a flexible labour market
relatively low unemployment
economic growth and rising living standards
According to the World Competitiveness Yearbook, New Zealand is now number one in the world in terms of our economy being well adapted for long-term competitiveness. We're number one for having public sector contracts open to foreign bidders. We're number one for the management of our public finances, number one for labour market flexibility, and number one for the administration of justice. According to the same report, our economy is the most open in the East Asia/Pacific Region.
And reform in New Zealand will continue. The Government is committed to maintaining a tight line on fiscal policy, continued low inflation, and a flexible labour market. We will continue to run surpluses and eliminate net public debt. Greater immigration by skilled people from Asia will be encouraged. As the economy grows, tax will be cut again, partly to ensure our tax system is competitive with those of our trading partners and alternative destinations for foreign investment. The size of Government as a percentage of GDP will be reduced. On top of our $12 billion plus privatisation programme so far, we will sell those state owned enterprises where the Government is clearly not the best owner. If the final treaty is acceptably comprehensive, and does not restrict our ability to settle historical claims by our Maori people, we will sign the Multilateral Agreement on Investment next year. We intend to abolish our last remaining tariffs well ahead of APEC's 2010 goal for free trade by developed countries. That means there will be no remaining reasons why the Philippines should not be able to increase your exports to New Zealand substantially, and address our trade imbalance. Our economy will be totally open to Philippine and all foreign exporters. There will be further reform of our electricity industry, with the Government planning to introduce greater competition in both the wholesale and retail markets to reduce costs for businesses and families. We will reform our Government-run accident insurance scheme to reduce costs for business. We are reviewing the implementation of our key piece of environmental legislation to ensure it is not imposing unacceptable costs on business. Across the spectrum, rules and regulations are being reviewed to ensure that the Government is not an impediment to further, sustainable, economic growth.
Essentially, we are going to continue to ensure that our economy becomes ever-more efficient; an ever-more attractive partner for trade and investment. New Zealand offers no short-term incentives to potential foreign investors. What we offer is better: an open economy, sound long-term fundamentals and a commitment to ensure our economy remains on track. Our message to investors is this: come and set up business in New Zealand and we guarantee you will be able to work under the same simple rules and in the same environment as the locals.
What's more, through our free trade agreement with Australia, or CER, we offer investors a chance to take advantage not only of our strong fundamentals but the opportunity to access that larger market across the Tasman. Our combined Australia/New Zealand market consists of 22 million people and its value is roughly the same as Korea, Spain or Russia. New Zealand's goal is to be the preferred investment destination in the Asia/Pacific region, particularly for those wanting to produce high-tech, medium-to top-end-of-the-market goods and services, and piggyback into Australia and East Asia.
It's interesting that the Philippines, under President Ramos, is following a similar programme of economic reform. Your country is now seen clearly as one of the tiger economies of Asia, the current region-wide currency storm notwithstanding. It's clear that policies of liberalisation, privatisation, deregulation and financial sector reform will pay dividends. There is always short-term pain as the demands of the international marketplace hit previously inefficient industries. We know that from our experience. But we also know that the returns can come through relatively quickly. Your GDP growth since 1992 - and particularly the impressive 6.8% reached last year - prove it.
If the Philippines remains on track - remains fundamentally sound - I believe the country will weather the currency storm successfully. New Zealand investors and exporters are keen to be part of the future success we believe is yours to have. We bring our investment here without any strings attached or hidden agenda. We're a small country. We must be competitive and trustworthy to succeed. New Zealand's interest in the Philippines is based on our shared geography here around the Pacific Rim, and our belief that you continue to be an exciting market prospect. We believe your economic reforms will enrich your people and economy into the future. We want to be part of that.
Our two countries have a special relationship. The Philippines and New Zealand are similar in the sense that, for historical reasons, we both have one foot firmly in Asia and the other in the West. Both our countries are pursuing common-sense economic policies. Through APEC, we are partners in promoting free trade by the early part of next century throughout the Asia/Pacific region. You are a fellow member of the Cairns Group. We consult annually through the AFTA/CER dialogue, looking at ways to promote trade between those two free trade areas. And, later today, I expect to agree with Secretary Bautista for the Philippines and New Zealand to undertake regular bilateral consultations on trade and economic issues.
New Zealand wants to see our relationship grow closer still. We're keen to sell more to the Philippines and invest more in the Philippines. And we welcome with open arms your products and your investment. We're happy to have more of both. The 21st Century is undoubtedly going to be the APEC century. New Zealand and the Philippines are already close partners. Let's ensure we're even closer partners into the future.