Offshore markets where you can make money.
By Sandy Galland
It would be true, that for the majority of companies, to grow they need to sell more. The New Zealand market place is small and to achieve bottom line acceleration, the obvious place to look is offshore.
There are tremendous growth opportunities in many regions of the world and as our government and the various trade arms and agencies work to open up easier access with increasing numbers of international neighbours, both near and far, the export opportunities for our home grown companies expand.
Knowing how to get your foot in the door is often the hardest part of the process and over a series of features inAuckland Today, we will look at what is happening in the international trade sector, and how you can jump on the band wagon.
Prime Minister John Key has identified increased trade opportunities as a priority for 2010. In the trade mix, he has identified working towards free trade agreements (FTA) with the UnitedStates, India and Korea, the hope for conclusion of the WTO Doha Round and the continued push for the single economic market with Australia.
Other trade highlights of 2010 include the Association of Southeast Asian Nations (ASEAN) free trade agreement with Australia and New Zealand which entered into force on January 1. This opens up trade to and between Australia, New Zealand, Brunei, Malaysia, Myanmar, the Philippines, Singapore and Vietnam.
This is our third largest export market, growing by 110 percent since 2003, with two-way trade in goods worth $12.2 billion in 2008. Globally ASEAN represents a market of more than 566 million people and accounts for more than US$1,400 billion in trade, according the New Zealand Ministry of Foreign Affairs and Trade (MTFA).
Unfortunately the other key markets for New Zealand, Indonesia and Thailand, were unable to complete the pre-entry into force steps and during the early stages of the year, the MFTA will work closely with Australia to help both those countries to complete the required steps. The Malaysia-New Zealand Free Trade Agreement is expected to enter into force in May 2010, according to New Zealand Trade and Enterprise (NZTE).
On October 1, 2008 New Zealand became the first developed country to enter a free trade agreement with China. NZTE cite securing preferential access to China’s economy as having the potential to deliver significant gains to our exporters.
As our fourth largest trading partner, taking over $1.6 billion of New Zealand’s merchandise exports and over $1 billion of services , China is the planet’s fastest growing major economy, currently growing at 9.5 percent per annum.
Its middle class is now estimated to be more than 100 million people and growing – which will fuel the demand for New Zealand’s agricultural products. There should also be gains to New Zealand’s manufacturers and services operators.
India’s economic emmergence is undeniable and this is acknowledged by John Key saying our relationship with India is a priority for New Zealand. “Its leading position in the region and internationally, and its economic significance, makes it strategically important to New Zealand.”
New Zealand Trade Minister Tim Groser and Indian Commerce Minister Anand Sharma announced on January 31, that all approvals had been secured for FTA negotiations to commence. Meanwhile a recent visit by an Indian Member of Parliament helped to strengthen ties between the two nations.
India is one of New Zealand’s fastest growing markets, with New Zealand exports having tripled over the last decade. The start of negotiations offers significant opportunities for businesses in both countries. New Zealand’s exports to India were valued at NZ$630 million in 2009, a 280 percent increase on our 2001 exports and overall bilateral trade between India and New Zealand grew 180 percent between 2001 and 2009, from NZ$353 million to NZ$985 million.
It’s anticipated the long awaited FTA with the Gulf Cooperation Council (GCC) will be signed in April, with details of the agreement being made public upon signing, says the MTFA. This will ease trade between us and six Arab nations; United Arab Emirates, Kuwait, Bahrain, Saudi Arabia, Oman and Qatar.
The FTA is a significant achievement for New Zealand and secures new and improved access into some of our most important Middle East markets. Exports to GCC totaled NZ$1.3 billion in the year to June 2009, an increase of 218 percent since 2000. The group now ranks as our seventh largest trading partner with bilateral trade worth $3.85 billion. Christchurch based Innovative Travel managing director Robyn Galloway has been doing business in the Gulf since 1987 and believes this agreement gives us a huge advantage over Australia, who are nowhere near concluding negotiations.
New Zealand is only the third country in the world to sign a FTA with the GCC. “Politically, we also have a huge advantage over Australia. There is a lot of recognition in the Gulf of our more neutral political stance and, as a country, we are very well received over there.”
Galloway, a member of the NZ Middle Eastern Business Council, adds many Kiwi businesses think of the Gulf and look at the bad press and failed investments in Dubai recently, but the UAE are only a small blip on the map in the region, she explains. “There is so much growth and wealth across this area and people shouldn’t be influenced by Dubai alone.”
It is well recognised the Gulf is generally made up of conservative societies, and Galloway recognises there is a degree of nervousness among potential Kiwi exporters, but encourages anyone interested in expanding into this region to seek more information. The work, over the years, by New Zealand delegations our businesses already exporting goods and services to the region, have paved a smooth road to significantly increased potential in these Arab countries. “We are seen as a good place to do business with and this give more impetus to the agreement,” Galloway adds.
The objective of an FTA with the GCC would be to move towards deeper economic integration between New Zealand and the GCC countries. The aim of the FTA, at this stage, would be to cover substantially all trade, including goods, services and investment, and other issues including trade and labour, trade and environment, government procurement and intellectual property.
According to the MFAT there are currently three broad benefits accruing to New Zealand; the removal of tariff barriers to maintain our competitive edge, a platform to develop trade in services and investment and reducing non-tariff barriers to trade
New Zealand and Japan are establishing a joint Officials Group to examine ways to further develop our bilateral trade and investment relationship. The MFTA hopes to see advancement in the bilateral relationship and expects the process will provide both governments with information they need to decide whether to move to FTA negotiations in the future.
The first rounds of FTA negotiations between New Zealand and the Republic of Korea took place during 2009. It is our sixth largest market, taking goods worth nearly NZ$1.4 billion in 2008, while over the same period New Zealand imported NZ$1.3 billion worth of merchandise from Korea.
New Zealand’s exports are dominated by primary products, food and wood products in particular, while New Zealand’s main imports from Korea are automobiles and electrical goods. It is also our sixth largest source of overseas visitors, with almost 80,000 Koreans visiting New Zealand in 2008. Korea is also the second largest source of overseas students