Siah Hwee Ang: Learning the rules of the game

An inspector from the Animal, Plant and Fisheries Quarantine and Inspection Agency checks boxes of beef imported from the U.S. at a storage warehouse in Gwangju, South Korea.

Opinion

When doing business abroad, identify and plan for regulatory challenges. Part five of a six-part series.

In global operations, we tend to focus on the soft aspects of challenges, such as cross-cultural differences. In recent times, however, the more explicit regulatory frameworks are presenting a much greater challenge to New Zealand organisations doing business abroad.

Three major factors seem to be contributing to this. The first is the challenge of comparing regulations. To that end, some widely known indicators of regulation have been created. For example, the World Bank produces a large set of indicators on the ease of doing business in 189 economies. Similarly, the International Monetary Fund produces all sorts of documentation relating to regulations.

Yet, despite the abundance of indicators, it is hard for businesses to use the standalone figures, as the picture might change depending on their choice of indicators (although broadly, we expect developed economies to be more open than developing ones).

The second factor is the difference between the regulatory frameworks of two countries.

New Zealand's regulatory institutions set some expectations of our organisations as they trade but it is likely that such compliance applies only until the goods cross New Zealand borders. By the time the goods reach their destination, another set of regulatory frameworks comes into play.

Chances are high that the host country's regulatory framework is significantly different to the one in New Zealand. The onus is on businesses to do due diligence on the regulatory framework of the destination country. It is also likely that our New Zealand regulatory institutions can help facilitate this process, assuming the role of enhancer rather than compliance officer.

The third factor relates to the level of transparency in regulation in practice. For example, if you spend enough time on a foreign country's regulatory institution website, you will probably find that limited materials are provided, and they are frequently in local languages, with no English version available. This presents uncertainties that we do not normally associate with regulations.

Again, our New Zealand regulatory institutions could perform a role here. They are better placed than individual businesses to get more information -- and every bit counts.

It is imperative for businesses to find ways to gain more knowledge instead of ignoring the risks when information is not readily available. The caveat is that the practice in the host country itself may deviate from what has been documented.

What all this means is that there has to be better understanding of the different facets of regulations.

There are bound to be regulations that are generic to New Zealand organisations trying to do business internationally, and there are certainly some industry-specific ones such as the licence to operate, or a quota.

It is important for New Zealand organisations to identify these and incorporate regulatory challenges into the plan when considering doing business abroad.

Recent experiences concerning our meat and kiwifruit exports to China remind us that not paying enough attention to regulatory differences between countries can be painful.

While there is a call for regulatory institutions to facilitate this process, businesses also need to be more aware. Trying to comply with local institutional expectations is just the tip of the iceberg in trade. It is the host country's institutional expectations that can turn out to be the deal breaker.

?Professor Siah Hwee Ang is BNZ chair in business in Asia at Victoria University.