New Zealand: Your Preferred Destination for InvestmentInternational Trade
I'm here in a private and unofficial capacity to promote New Zealand - a dynamic and open economy - as your preferred destination for overseas investment.
It's quite clear that New Zealand needs significant new investment over the next few years if we are to continue to enjoy the strong economic and job growth we have experienced through most of this decade. For example, in forestry and wood processing alone, it has been estimated we need new investment of around US$2.5 billion if the industry is to live up to its potential of 30,000 new jobs It's estimated our tourism industry requires around US$1.5 billion. There's a need for investment in food processing, general manufacturing, electronics, engineering and construction and software - to name a few.
Across the economy as a whole, up to US$50 billion is needed over the next five years. Clearly that's beyond the scope of domestic savings from a population of three and a half million. So New Zealand welcomes foreign investment and I believe we are an attractive destination for it.
There are two key reasons for that. First, we operate one of the most free market economies in the world, with low tax, low inflation and a flexible labour market, combined with a stable political environment. Second, our free trade agreement with Australia - along with our membership of APEC - means New Zealand is a favoured destination for investors looking to enter other, larger markets.
Most of you will be familiar with the transformation of the New Zealand economy since 1984. In 1984, we were a country of:
extraordinarily high levels of direct taxation
Big Government: inefficient, consumer-unfriendly and pervading into activities far beyond the expertise of the state
costly and ultimately ineffective protectionism and subsidisation
crippling Government deficits and debt
overbearing and inflexible unions
falling living standards
Since then, our economy has been turned 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
economic growth and rising living standards
According to the World Economic Forum's most recent Global Competitiveness Report, New Zealand is the 13th most competitive economy in the world. We are the most open economy in the Asia Pacific region.
What's more, the reform process 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 partly so that our tax system becomes more competitive with our trading partners and alternative destinations for foreign investment. The size of Government as a percentage of GDP will be reduced. Despite a fairly extensive US$6 billion plus privatisation programme since 1987, we will continue to sell State Owned Enterprises which would be better owned by the private sector.
The Government is also examining carefully the costs we impose on business. We're concerned our key piece of environmental legislation is being implemented by some local councils at too great a cost on business and we intend to change that. Cost savings for business will be promoted through introducing competition into accident insurance. There will be greater competition in the electricity wholesale and retail markets. We are seeking efficiencies in the provision of roading. We intend to unilaterally abolish all tariffs well ahead of APEC's 2010 goal for free trade by developed countries - which will complete the removal of all domestic protectionism, a programme which began with the abolition of all agricultural subsidies.
All these developments mean that New Zealand will continue to offer an environment for foreign investment and business as free as you could find it anywhere. We have very few restrictions on overseas investment, and we are corruption free. Overseas investors can be guaranteed to be treated just the same as the locals.
But it is important that New Zealand is not seen by foreign investors as a small market of three and a half million people. In 1982, we signed our Closer Economic Relations agreement with Australia and for most intents and purposes we are one market. Further integration is underway, such as in the financial services and aviation sectors. Our market consists of 22 million people, with per capita GDP of around US$20,700 per annum. In terms of the total value of our market, we are nearing the size of Texas or Spain. 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 markets. The agricultural, horticultural, manufacturing, communications and software sectors are all examples. 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. For many New Zealand firms, those partners will be from Taiwan.
Essentially, I see New Zealand becoming the preferred destination for investors seeking to piggyback into Australia and the APEC region. Our competitiveness and productivity are 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 APEC region. New Zealand offers great potential to investors. Let's do business.