A priority focus of the new Government needs to be on setting a clear, credible strategy to drive growth in the export economy
The new Government came to office promising to focus on six areas to achieve its goal to get New Zealand back into surplus by 2014 and deliver a more prosperous New Zealand: debt and the economy, welfare, law and order, education, health, and rebuilding Canterbury.
It needs to add a seventh – building up a tier of new exporting enterprises able to grow the size of the economy.
With a domestic market of just 4.4 million, building a bigger economic pie by making exporting the priority game in town is critical if we are to grow the wealth and jobs needed for our long-term economic survival and success; find a niche, be great at it, and sell it to the world.
That’s exactly what Fonterra has done with dairy; a single company which accounts for 25 percent of our total exports and is the world’s biggest dairy exporter. But until we break through and establish new and innovative global market relationships of matching scale in other sectors, we’ll be stuck with another 50 years of export stagnation.
Including Fonterra, just 450 companies, most resource-based, account for 80 percent of all exports. The balance is shared between about 12,000 companies, most of which export less than $70,000 a year. Less than 2 percent of businesses are regular exporters.
By any yard stick, for a nation claiming to live by the motto of “Export or Die,” our export performance is pitiful. Or putting our performance into a positive context, the opportunity for improvement is huge.
Three points stand out.
First, our export competitiveness has been gradually slipping since the 1960s, and despite numerous efforts and talk by successive governments of adding value to exports, moving up the value chain, knowledge wave conferences and ‘export year’ campaigns (e.g. 2007), it turns out that the composition of our exports today are largely unchanged from the past. We are still heavily reliant on the land for our well-being.
Second, the export challenges facing New Zealand are in many ways the challenges facing the economy as a whole – around 95 percent of businesses are small-medium; many face demand issues around skills and finance, have problematic relationships with government agencies perceived as less than business-friendly, and lack the ability and/or attitudes to realise economies of scale and scope needed to grow their business.
Third, as testified in many research reports dating back to the 1980s, our economy is too small to generate rapid growth without strong export performance. Low export growth is the main factor explaining low growth in the New Zealand economy as a whole.
Against this background, where is the opportunity for some game changers?
The trick, I suggest, is not to re-fight policy wars that are already over. Instead, we need to look to the future and ask ourselves what is the outcome we want to achieve from creating a truly export-led economy?
In the past 10 years, the government has opened new market opportunities by concluding free trade agreements (FTAs) in some 15 countries, including: China (2008), Thailand (2005), Singapore (2001), Malaysia (2009) and the ASEAN regional block of 10 countries (2009). More FTAs are under negotiation – with India, Japan, Russia and a trans-Pacific group including the United States.
There is a huge opportunity awaiting action to back-fill these agreements with targeted export initiatives, including in core market access areas of goods, services, investment and government procurement. For example, trade minister Tim Groser has been a passionate and successful advocate to achieve FTAs, but there is a lot of work needed on the home front to attract businesses to take advantage of the opportunities his work on FTAs has created.
To turn around our fortunes, government agencies like the Ministry of Foreign Affairs and Trade and Enterprise New Zealand need to be better organised and more proactive, nimble and focused to attract businesses that want to grow, and then make the export opportunities work in their favour. A strong, demanding leadership from the Beehive to set a policy agenda and targets and urge officials and business partners to work proactively together would also help.
Business organisations could be recruited to partner with government to deliberately target companies with perceived high potential. I note for example that in the recent FTA between Canada and the European Union, Canada has established an SME Advisory Board which not only helped with the negotiation but has been set
One of those includes a networking agreement between the governments of Canada and Italy and respective Chambers of Commerce which deliberately focuses on linking SMEs new to exporting in both countries with the aim to help them grow to mid-sized companies.
We have 14 regional economies in New Zealand, each of which could be a platform for developing a Regional Project Export Action Plan. This could involve recruiting business organisations to talent scout for potential exporters and link them to New Zealand export agents in target markets, as Australia does well.
My point: To reclaim our destiny as a nation with a rising standard of living and offering exciting, rewarding employment in areas in demand by the world, we need a game changing strategy and a paradigm shift in our attitudes. We need to grow our economy, and exporting is the only viable strategy available to become more productive and generate the jobs needed to raise the living standards of all New Zealanders to the scale required.
The starting point is the opportunity to systematically strategise and convert the benefits of the many FTAs we have won. We have been successful at being first to negotiate an FTA with a number of countries.
We owe it to ourselves as a forward-looking progressive nation to organise ourselves to be just as successful at converting the opportunities FTAs have created. And do so with passion and urgency. We are in a global race.
We have a long way to go and not much time to do it in but I would not be urging the new government to show leadership and collaborate with business to focus on lifting exports unless I believed there was a good chance of success.