New Zealand: Your Preferred Destination for Foreign InvestmentInternational Trade
I'm here today unashamedly to promote New Zealand as a destination for foreign direct investment, as a dynamic and open economy. I'd like to thank the New Zealand Government's official trade development board - Tradenz - for doing the same.
It's quite clear that New Zealand needs significant new foreign investment over the next five years if we are to continue the strong economic growth we have experienced through most of this decade. In forestry and wood processing alone, for example, it has been estimated that we need new investment of between $4.5 billion and $6.5 billion if the industry is to live up to its potential of 30,000 new jobs and $5 billion per annum of extra foreign exchange receipts by 2010. It's estimated our tourism industry requires around $3 billion if it is to take advantage of potential growth, particularly from Asia. There's a need for investment in food processing, general manufacturing, electronics, and engineering and construction - to name just a few. Across the economy as a whole, between $75 billion and $100 billion is needed over the next five years. Clearly, that's beyond the scope of the domestic savings of a population of fewer than 4 million. So we welcome foreign investment and I believe we are an attractive destination for it.
But it wasn't always the case. As some of you may know, back in 1984 New Zealand was 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 counterproductive subsidisation and protectionism
crippling Government deficits and debt
overbearing and inflexible unions
high unemployment, and
falling living standards
Like I said, we were a basket case. We were forced to make a change. And since then, like President Ramos here in the Philippines, we've turned our country around. 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, and
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 in terms of 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. That turnaround and those economic fundamentals are what New Zealand has to offer. What's more, our reform process will continue.
If the final treaty is acceptably comprehensive, and safeguards our ability to settle genuine historical claims by our Maori people, we will sign the Multilateral Agreement on Investment next year. It is likely there will be further privatisations of state owned enterprises, like our television network, airports and property companies, if it is clearly identified that the Government is not the best owner. We intend to abolish our last remaining tariffs well ahead of APEC's 2010 goal for free trade by developed countries. We intend to encourage further immigration by skilled people, particularly from Asia. 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 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 ensure that our economy becomes ever-more efficient; and ever-more attractive destination for foreign direct investment.
New Zealand offers no short-term incentives to potential foreign investors. What we do offer is better: 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. I believe we offer great potential, particularly to those interested in producing high tech, middle- to top-end-of-the-market goods and services
What's important, though, is that potential investors do not see New Zealand only as a small market of fewer than 4 million people. We offer a gateway into Australia and into the growing markets of the APEC region. In 1982, as our first tentative step towards opening up our economy, we signed a free trade agreement with Australia. We called it Closer Economic Relations, or CER for short. It has been overwhelmingly beneficial to both sides, with two-way trade increasing five fold since 1982.
CER means that, for most intents and purposes, New Zealand and Australia are one market. Closer economic integration continues, with work currently going on in the aviation and financial services sectors. Our combined market consists of 22 million people, with per capita GDP of NZ$26,800 per annum. In terms of the total value of our market, we are comparable with Korea, Spain or Russia. And both Australia and New Zealand, but particularly New Zealand, are interested in pursuing the free trade agenda through international forums, most notably APEC and the WTO, as well as at the bilateral level.
What New Zealand offers is a very wide range of small and medium sized investment opportunities which are already performing well above par in the reasonably large and highly competitive Australia/New Zealand market. From the base of that highly competitive and open market, they want to expand, increasing their operations and sales in East Asia. Examples are in food processing, and forestry and forest products, to name just two. For that, they are looking for partners who can provide knowledge and capital, and who can benefit from being involved in strongly established industries, toughened by Trans-Tasman competition, and ready for further expansion from our open market into Asia.
Essentially, I see New Zealand becoming the preferred destination for investors looking to piggyback into Australia and the APEC region. Our competitiveness and productivity are well ahead of alternative destinations; our economic fundamentals are strong; our reform process is continuing; our commitment to free trade is unmatched. And we need and welcome investment, in the most open economy in the region. We offer great potential to investors. Let's do business.