New Zealand: Your Partner in the Asia Pacific Region

New Zealand: Your Partner in the Asia Pacific Region
Business Development Seminar
Austrian Chamber of Commerce
Vienna
Austria

New Zealand and Austria are good friends, but the links between our two countries are not as great as I would like. I would like to see our relationship grow, building on the mutual strengths and complementary advantages between us.

Right now, trade between Austria and New Zealand is relatively insignificant. Your exports to New Zealand were worth around 540 million Schilling in 1997. That's up nearly a quarter from 1996 but it still represents only 0.08% of your total exports. New Zealand?s direct exports to Austria were even less - around NZ$8 million or just over 50 million Schilling in 1997, although the real figure is of course bolstered by Austria?s share of our exports to the EU.

Realistically, of course, we are never going to be big markets for one another. Both our countries need larger export markets than we can offer each other. Where I see potential is for us to work together in those larger export markets, through joint ventures, establishing subsidiaries, and sharing information and expertise to mutual benefit.

New Zealand business, like Austrian business, recognises that survival depends on such links - on being internationally oriented, flexible, and dynamic. We have both experienced some degree of isolation. In your case, that isolation was political, imposed by the Cold War. Our isolation is geographic. But we both know that we are too small to go it alone. We both recognise that we are both part of bigger regions. In your case, it is Europe and you are now a member of the EU. In New Zealand's case, we negotiated a comprehensive free trade agreement with Australia 15 years ago. Today, we are an active member of APEC, and keen to promote further trade liberalisation in the Asia-Pacific region.

The world beyond our neighbourhood is equally important. New Zealand, together with Australia, is in a fortunate and unique position. The cultural origin of our 19th century settlers was European; our neighbourhood is Asian. We continue to value the close links we have with most European countries, and are always looking for ways we can develop them further.

Two recent examples include bilateral agreements about to be signed with the EU on mutual recognition of certification and testing procedures, and veterinary issues. That means that Austrian products for export to New Zealand can be tested for conformity with our standards here in Austria instead of in New Zealand. That facilitates trade. A veterinary agreement with the EU also recognises equivalence of standards.

New Zealand?s links within the Asian region grow day by day. The extent and depth of our involvement means that New Zealand cannot avoid the impact of the financial difficulties in Asia. This morning many of you have been listening to analyses of the situation in Asia, given by your trade representatives in that region.

Although the situation is serious, I think the title of your seminar this morning; ?Crisis as Opportunity?, is exactly right. Asia is down, but not for the long-term. Those who take recent events as an excuse to avoid engaging with the region will not be equipped for the 21st century.

If one looks beyond the short-term, opportunities in Asia have increased as a result of the current difficulties. Weaknesses in financial sectors are now being addressed to varying degrees across Asia; and most governments have accepted that further liberalisation is a necessary part of the recovery process. This will undoubtedly create new opportunities, and have a positive influence on the way business is done in Asia.

The full impact of the situation in Asia on the New Zealand economy cannot be assessed with any certainty until the flow-on effects from third countries such as Australia become apparent. The New Zealand Treasury expects that the Asian crisis will slow New Zealand?s GDP growth by 0.5% in 1997/98, lowering the forecast for this year from 2.7% to 2.2%. For the following year, 1998/99, growth will be similarly affected with the forecasted rate of 4% now being reduced to 3.5%. In 1999/2000, however, the New Zealand Treasury has now increased its growth forecast from 3.3% to 3.8%. These estimates lie roughly in the middle of the range being offered by other sources.

Obviously, it is the tourism and export sectors which have been the first to feel the effects. Exports to many Asian countries declined in the year to December 1997. Exports to Hong Kong fell by 13%, to Japan by 5%, and to Korea by 4%. But total New Zealand exports in 1997 rose by 1.5%. And in the long term, several balancing factors will maintain momentum in the New Zealand economy.

The global economy is still expected to grow by 3.5%. Recent decreases in the New Zealand dollar - which had risen too sharply in the past two years, by 30% against the DM - will improve our competitiveness across all our markets. The decreases bring us back into line with the more acceptable level of two years ago.

And our markets are spread right across the globe. In 1997 around 20% of New Zealand?s exports by value went to Australia, 18% to Europe, 16% to the Americas, 28% to North Asia, and 9% to South East Asia. Our fastest growing export markets include the EU, the Philippines and Argentina.

New Zealand?s export profile to Asia is also very diverse, limiting the impact in any one sector. A large proportion of our exports are inputs to Asian exports, which will become more competitive following devaluations in many Asian currencies. For example, aluminium exports are an input into products exported from Asia such as cans, tin foil and semi-conductors. The latest statistics indicate that New Zealand?s exports of unwrought aluminium products in the three months to January 1998 were NZ$95 million higher than in the same period last year.

While the sharp downturn in the number of tourists from Asia is hurting our tourism sector, the recent decision by the Chinese Government to list New Zealand as an approved tourist destination - the first non-Asian country to be granted this status - is expected to result in a significant increase in the number of Chinese tourists, who numbered 17,000 in 1997. The drop in tourism returns from Asia have been compensated for by increased numbers from elsewhere, and a lower New Zealand dollar, making New Zealand a more attractive destination for Europeans.

Another positive development is the decision taken at the APEC Leader?s Meeting in November 1997 to endorse a programme of accelerated liberalisation in nine agreed sectors, which include fish and forest products. These are two of New Zealand?s most significant export sectors. Our forestry sector contributes around 12% of total exports, and 5.3% of New Zealand?s GDP. It is expected to become our biggest export earner in the future.

Forestry and forest products is also a strong sector in Austria, with timber and wood products second only to tourism as your largest earner of foreign currency. While most of your forestry receipts come from EU countries, Austrian paper products are exported to New Zealand as well. This is one of the areas where I see unexplored potential for joint venture style cooperation.

One of the key reasons why the financial difficulties in Asia have not had a more serious effect on New Zealand, has been our comprehensive economic reforms of the last 14 years. Many of you may have heard of the "New Zealand model".

Back in 1984, the New Zealand economy was in crisis. We were a country of:

extraordinarily high levels of direct taxation, with a top rate of 66%
Big Government: inefficient, consumer-unfriendly, and interfering in areas far beyond the expertise of the state
costly and ultimately counterproductive subsidisation and protectionism
crippling Government deficits and debt
high inflation
aggressive and inflexible unions
high unemployment, and
falling living standards.
Tough measures were required to turn that around. We're now a country of:

controlled Government spending, funded by a low-rate, broadbase tax system
smaller, more efficient Government
open markets and zero subsidisation
Government surpluses and zero net foreign debt
low inflation
a flexible labour market
relatively low unemployment, and
economic growth and rising living standards.
The reform process will continue, under our new Prime Minister Jenny Shipley. We are determined to ensure that the New Zealand economy is able to operate to its full potential, by reducing the costs imposed on business and promoting competition. We plan to:

implement further tax cuts this year
privatise those state enterprises where it is clearly established that the Government is not the best owner
pursue further efficiencies in the central bureaucracy
abolish our last remaining tariffs well ahead of APEC's 2010 goal for free trade by the developed economies
promote more efficient pricing and investment in our roads, to reduce transportation costs.
reform our state-run workplace insurance scheme to reduce costs to business.
review the implementation of our key piece of environmental legislation to ensure it is not imposing unacceptable costs and delays on business.
review rules and regulations across the spectrum
further reform our electricity system, to promote greater competition in the generation, distribution and retail markets.
On that last point, you may have heard of the power failure in a limited part of central Auckland. Some may have suggested it had something to do with our restructuring programme. In fact, it was caused by a lack of maintenance over a number of years and the El Nino weather pattern. It had nothing whatsoever to do with our restructuring programme.

The key aim from our comprehensive programme of further reform is to ensure that the Government is in no way an impediment to further, sustainable, economic growth. We believe that the combined effects of our macroeconomic reform over the past decade and a half, and our ongoing microeconomic reform programme, will ensure that New Zealand will be the preferred business partner for those wanting to operate in the Asia Pacific region.

The New Zealand Government offers no short-term incentives to business. What we offer you is better: sound, long-term fundamentals and a commitment to ensure our economy remains on track. Governments can offer incentives but they can also take them away unexpectedly.

New Zealand business and society is open, straightforward and honest. A recent international assessment has ranked New Zealand the least corrupt country in the world, in both the government and business sectors. Our government regulations are transparent and "user friendly" and will become more so. We have a flexible and high quality labour force, with very few non-wage costs imposed by the Government. Any remaining language barriers are becoming less important with English already a working language for many Austrian companies. New Zealand business has a positive perception of European goods and technology. We enjoy excellent international transport and communication systems. We offer advantages even over our neighbour Australia, with lower labour costs. Costs for services such as telecommunications, electricity, postage, shipping and freight are substantially lower than for most of our competitors. Doing business with and in New Zealand is very much like doing business in Europe - but with more flexibility and lower costs. You will feel at home. And with modern communications, distance is no longer an obstacle.

It is important, however, that you don't see New Zealand as just a small market of fewer than 4 million people. Through our free trade agreement with Australia we are part of a larger single market, and offer a gateway into the growing markets of Asia. Closer economic integration continues. Recent advances include the signing of a mutual recognition agreement on standards, the establishment of joint food standards, and a single aviation market.

Our combined Australia/New Zealand market consists of 22 million people, with per capita GNP of around US$14,500 a year. The combined GDP of Australia and New Zealand is similar to that of the Netherlands, Korea, Texas or Russia. What's more, we are making progress on further trade facilitation throughout the South East Asia/South Pacific area. Discussions are underway on linking the Australia/New Zealand agreement with the Association of South East Asian Nations' Free Trade Area. All the countries in the region are committed to APEC and the WTO, and New Zealand will take the chair of APEC in 1999.

In a global context, Austrian and New Zealand firms are mostly small or medium-sized. Both need global partners. We can benefit from working together. We both offer one another advantages. Geographically, New Zealand businesses have extensive experience in our hinterland of Australia and Asia. Austrian firms could provide our businesses with the benefit of your experience in your hinterland of central and eastern Europe. Businesses in both Austria and New Zealand have been honed into highly competitive enterprises as a result of competition from within our free trade regions. Both are looking to expand their operations and sales internationally. Both are looking for partners who can provide knowledge, capital and networks - partners who are looking to benefit from involvement in strongly established industries.

I believe we are logical partners. While agriculture is New Zealand's most important export industry, our manufacturing sector in fact provides a greater share of GDP. Industries in the New Zealand manufacturing sector which have strong potential and might be of interest to you include food and beverages, home appliances, industrial freezing and heating equipment, professional electronics and communications equipment, specialist computer software, environmental technology, outdoor apparel and equipment, and, of course, forestry.

My message to you is this: take a look at New Zealand as a place to base your business interests in the Asia-Pacific region, and check out New Zealand companies as partners for joint activity. I believe we both offer one another great potential, particularly at the top end of the market. I look forward to seeing cooperation between our two countries grow and grow. Let's do business.