New Zealand in the Asia Pacific

  • Dr Lockwood Smith
International Trade

Launch of Sarawak Chapter
New Zealand Malaysia Business Council

Deputy Chief Minister, Tan Sri-Tan Sri, Dato-Dato, Friends.

Links between New Zealand and Malaysia - and between New Zealand and Sawarak - are already very strong. New Zealand troops helped to liberate Sawarak in the Second World War. Today, both Malaysia and New Zealand are members of the Commonwealth and APEC. The launch of this new chapter of the Malaysia New Zealand Business Council is another example of how our ties continue to grow.

In the five years since they were formed, the Malaysia New Zealand Business Council and its sister organisation back home have made a very positive contribution to building economic links between our two countries. Already, the business council here in Malaysia is involved in the annual policy dialogue arranged by your Trade Minister. It has helped bring people together and it helps continually build the bilateral relationship. We in New Zealand have appreciated its support for scientific cooperation in Antarctica and its assistance with our preparations for this year's Commonwealth Games - to mention just two examples.

Given its success, it makes sense for the council to establish chapters in other parts of Malaysia. I'm confident this will only be the first. And it's fitting that Sarawak is the first new chapter, given the especially close ties between Sarawak and New Zealand.

I understand that Deputy Chief Minister Tan Sri Alfred Jabu, State Secretary Tan Sri Datuk Amar Hamid Bugo and Honorary Consul Datuk Amin Satem and many others of you here today have studied in New Zealand. Today, well over 300 young Sarawak people are following in your footsteps and studying in New Zealand universities. Links between New Zealand universities and UNIMAS are growing. A Chair of Malay Studies has been established at Victoria University in our capital city.

Economic links between New Zealand and Sawarak are just as strong, going well beyond our growing trade in goods. New Zealand assisted with the tourism master plan for Sawarak. We have longstanding links in the surveying area. Your Chief Veterinary Officer recently visited New Zealand.

We in New Zealand were also honoured that your Chief Minister has been able to visit us twice in recent years. In late 1997, he joined us for Sawarak Week which involved cultural and trade promotions as well as meetings with ministers.

This new chapter can only help strengthen relations further. My thanks to all involved. I wish you every success.

New Zealand's particular interest in Malaysia stems most obviously from our shared geography. We are both Asia Pacific countries. But New Zealand is also of the firm view that the next century will be the Asia Pacific century, the current difficulties notwithstanding.

Those difficulties have not dampened our enthusiasm for Asia, and your country. Reciprocal prime ministerial and ministerial visits in recent years have helped to update our relationship. Last year, we signed a new Trade and Economic Cooperation Agreement. New Zealand is a keen participant in the annual consultations between the AFTA economies and Australia and New Zealand. We regard ourselves as a leading member of APEC, fully behind the liberalisation agenda.

Our trade with Asia remains critically important. That's why our Deputy Prime Minister led a delegation to Kuala Lumpur and Penang last week. It included many of our most senior businesspeople, our former Prime Minister, Rt Hon Mike Moore, and the chair of our Asia 2000 Foundation. The delegation was pleased to send a representative to Sawarak.

The extent of our integration with Asia means that what happens here impacts directly on us. That applies to the current downturn.

It is clear that different economies are addressing the downturn in different ways. Some, like Malaysia, have taken on board the need for reform. Others are still grappling with what they see as the enormity of that they need to do. Because of the close links between all the economies in the APEC region, we need to encourage them to make those reforms. Failure to act will impact negatively on us all. New Zealand's recent history may offer a guide to those governments in the region having to make the necessary reforms.

For most of our history, New Zealand acted as a farm for the United Kingdom. Producing food for what many still called the "mother country" was the source of our prosperity. But in 1973, the United Kingdom joined the EU, and our market access was restricted. The '70s also saw the oil shocks. It was clear we would have to take a different economic approach than we had for most of our history.

For a variety of reasons, we took the wrong path. We subsidised our major industry of agriculture. We implemented a system of protectionism as vast as you would have been able to find outside the communist world. Our government grew in size and ran budget deficits.

By 1984, that approach had clearly failed. We had slipped from near the top of the OECD in terms of living standards to near the bottom. Unemployment was rising. Inflation was controlled only through a wage and price freeze. Our debt was becoming unsustainable. Our farm subsidies had reached 30% of the value of agricultural production. The top rate of tax was 66%.

Since 1984, both the main political parties in New Zealand have contributed in different ways to turning that around.

Government spending has been controlled so that deficits have been turned into surpluses. We now have zero net foreign public debt. Taxes have been cut - the top rate halved. Our central bank has the sole responsibility of keeping inflation at between 0% and 3%. Our labour market has been deregulated. The size of the central bureaucracy has been slashed. We have privatised over US$6 billion of assets, including our telephone network, our railways and our airline. That enabled us to cut our debt, freeing up debt servicing payments for tax cuts and for greater investment in social services.

And we have opened up our economy to fair competition with the world. Our farm subsidies were abolished in one year. We abolished import licensing. We have no tariff quotas and we will abolish all remaining tariffs ahead of APEC's 2010 deadline. Our economy is now more open than Hong Kong's.

That reform process was not easy. There was some initial pain, but not to the extent many expected. The abolition of farm subsidies, for example, meant that fewer than 1% of farmers needed to stop farming.

And the returns have been clear to see. We have experienced economic growth this decade far higher than in the previous decade. Two hundred thousand new jobs have been created this decade, in a country with a population of fewer than 4 million.

What's more, our reform process will continue. I mentioned the abolition of all tariffs. We're also reforming our electricity industry, the provision of roading and our accident insurance regime. We are carefully planning for the removal of the special powers of our agricultural producer boards. Further privatisations will occur when the government is clearly identified as not the best owner.

New Zealand's experience shows that reform can be achieved with less pain that many believe. And our experience shows that it is the country which makes the reforms fastest that will get the biggest returns the earliest.

There is no reason at all why Asia cannot come through its current difficulties, with sufficient dedication to reform. It is critical that economies do not follow the example of New Zealand in the 1970s. It is critical that the path they follow more closely resembles New Zealand's path since 1984. If they do, there is no reason why next century should not be the Asia Pacific century.

As long as the region deals appropriately with the current difficulties, I believe New Zealand and Malaysia can both look forward to being part of the most dynamic and fastest growing region of the 21st Century. That can only be good for our countries, and good for the Sawarak Chapter of the Malaysia New Zealand Business Council.

I wish every one of you all the best for the future.