It's time for New Zealand Inc to face up to some home truths and seize the biggest opportunity in the global economy this century.
Today's announcement that New Zealand's biggest rural services group PGG Wrightson is for NZ$36 million is a perfect example.
Here are the home truths. New Zealand has too much debt. It needs to sell assets to bring in new equity. The pointy end of this uncomfortable position is being felt by our larger listed corporates first because they struggle the most to bring in new equity. That's because regular New Zealand investors have lost faith in their share market and are 100 per cent committed to investing in housing.
That's why PGG Wrightson has gone overseas for fresh equity and into the arms of Chinese investors. It's the same reason why Fisher and Paykel Appliances did the same thing earlier this year when it sold a 20 per cent stake to Chinese appliance manufacturer Haier. Both were forced to do this by looming debt deadlines and reluctant New Zealand savers.
But both are trying to make the best of their bad situations by forming active partnerships with Haier and Agria to find ways to leapfrog into the vast and fast-growing Chinese markets. Their 'deals with the devil' mean they will also be handing over their not inconsiderable intellectual property to the Chinese to copy, exploit and possibly improve on.
PGG Wrightson and Fisher and Paykel Appliances have done their best SWOT (Strength, Weaknesses, Opportunities and Threats) analyses and worked out how they might be able to turn their own weaknesses (distance from market and lack of scale) and threats (debt and weak capital markets) into an opportunity.
The Chinese, for their own reasons, are very keen to get their hands on the two things they don't have - intellectual capital and commodities.
New Zealand should expect and welcome this influx of new capital and access to markets. This is the biggest chance we'll get in decades to be desired by the country that will be the biggest economy in the world by 2050.
This will mean many sales of dairy and other farms, sales of rural and other technology, and the development of other linkages with China.
We can either choose to fear and avoid it or choose to embrace and exploit it.
We don't have much choice, but we should try to make the best out of a difficult situation.
To that end, New Zealand should open up the immigration taps from China and encourage Chinese investors to come here. Meanwhile, business people should do their best to make these arrangements partnerships rather than fire sales.
Bernard Hickey
Pictured: Prime Minister John Key speaking at the recent 60th anniversary celebrations. Photo / Martin Sykes.
Prime Minister John Key speaking at the recent 60th anniversary celebrations. Photo Martin Sykes.
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