Southeast Asia NZ's 'insurance policy'

NZ exports to Asean increased by 17pc over the five years to March - those to China more than doubled. Pictured, the Kuala Lumpur skyline. Photo / Getty

Govt creating options so nation doesn’t fall back into dependency on one market.

With China's economic outlook becoming increasingly uncertain, Trade Minister Tim Groser says Southeast Asia is New Zealand's "number one insurance policy" should the Chinese market deteriorate further.

Speaking to the Business Herald at an event in Kuala Lumpur on Saturday to celebrate 40 years of relations between New Zealand and the Association of Southeast Asian Nations (Asean), Groser said export diversification was crucial.

"What we're trying to do is create options for New Zealand over the next 20 years so we never recreate the same dependency that we used to have 40 years ago, which was [on] Britain," he said. "Southeast Asia, for us, is frankly our number one insurance policy if things go the wrong way in China."

New Zealand's trade links with Southeast Asia have been growing since the early 1970s, when New Zealand lost its guaranteed access to the British market.

Kiwi exports to the 10-nation Asean region - which includes Thailand, Indonesia and Malaysia - reached $6.1 billion in the year ended March 2015. Five years earlier it was $5.2 billion.

A free trade agreement between New Zealand, Australia and Asean came into force in January 2010. New Zealand also has separate FTAs with Singapore, Malaysia and Thailand.

Asean, with a population of more than 600 million, is this country's fourth-biggest export market.

But despite the opportunities available in Southeast Asia, when it comes to New Zealand trade the region has been overshadowed by China in recent years.

While New Zealand exports to Asean increased by 17 per cent over the five years to March 2015, those to China more than doubled over the same period to $10.7 billion, Statistics NZ figures show.

Now, with China's growth story hitting a bumpy patch, questions are being asked about whether our heavy focus on the world's second- biggest economy has been the right call.

A disappointing Chinese manufacturing survey sent jitters through financial markets on Friday, adding to concerns about Beijing's recent moves to devalue the yuan to bolster the country's exporters.

Groser, however, dismissed the suggestion that New Zealand's focus on China had been a mistake.

"What the previous Labour Government did in getting this FTA [with China] ... has been enormously beneficial to New Zealand," he said. "So the answer is not to stop trying to exploit those advantages we've got in China, but to create other opportunities to de-risk."

A report by market research firm Coriolis, released last week, identified scope for New Zealand to increase dairy exports to Asean, particularly those of butter and infant formula.

Another report, published by ANZ in April, said there was potential for two-way trade with Asean to more than double to US$27 billion by 2025.

At the time of the report's release, ANZ's Graham Turley said New Zealand exporters were conscious of the risks that came with relying on a small number of large export markets.

"With its accelerating urbanisation, rising incomes and consumption, Asean will be a market of considerable scale and will provide New Zealand exporters with an alternative to their two main export markets of China and Australia," Turley said.

However, New Zealand still faces barriers in growing exports to the Asean region, despite the FTA.

Indonesia, for example, introduced import quota restrictions on beef in 2011, which led to a slump in Kiwi beef exports to the world's most populous Muslim nation.

New Zealand and the United States have requested that a World Trade Organisation dispute panel assess the restrictions, which could lead to sanctions against Indonesia, Reuters reported in March.

Meanwhile, five Malaysians credited with deepening links between that country and New Zealand received awards as part of Saturday's celebrations.

One of them, Amar Leo Moggie, was one of the early Colombo Plan students and graduated with a Master of Arts in history from the University of Otago in 1965.

He went on to become a Malaysian Cabinet Minister and is today chairman of Malaysia's national electricity firm, Tenaga Nasional Berhad.

New Zealand's High Commissioner to Malaysia, John Subritsky, said NZ relations with Asean had matured from an initial focus on regional security and development to a range of areas including trade, investment, tourism and disaster management.

Christopher Adams is being hosted in Malaysia by the Asia New Zealand Foundation.