Leveraging local communities with strong overseas ties crucial.
New Zealand exporters are facing some difficult challenges – but looking beyond China as a trade partner and, ironically, accessing local expatriate communities could be the path to prosperity, according to BNZ.
Franky Wang, the bank’s Head of Asia Business Activation, says the increase in competition between the existing Chinese and the emerging Indian markets, plus ongoing geopolitical tension, means New Zealand businesses must think outside the box – including leveraging local diaspora community connections to thrive in a fast-changing global trade and investment environment.
India has overtaken China as the world’s most populous country and, with its growing middle class, is forecast to become an increasingly significant market. Wang says this means New Zealand businesses need to look beyond the existing, established trade partnership with China and look at exploring the Indian and other ASEAN markets.
“Although China continues to be a crucial trading partner, this country needs to diversify into other markets in Asia, not just from a trade point of view but also people-to-people services such as technology and education,” Wang says. “Our exports have always been more commodity-driven — the challenge we have now is our reliance on China and how much the Chinese economic slowdown has impacted us.
“We need to revisit our Asian road map and revisit our relationship with more Asian countries than China – which still remains important to us in terms of trade, investment, social and cultural connections.”
China is currently our number one trade partner, Australia second, with ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) third, Japan fourth and South Korea fifth.
Wang says some businesses are waiting for a formal free trade agreement (FTA) to be signed with India, similar to the one Australia has, “but my view has always been that we don’t need an FTA to secure a supply chain. We can build on people-to-people links that already exist within local diaspora communities.”
Local business owners who have maintained connections with their overseas origins have a powerful starting point to expand their enterprises into international markets. In May, BNZ sponsored the first ever EthnicBiz Forum, which brought together businesses in the local migrant diaspora, some interested in exporting their products to their home countries.
“These people become ambassadors for this country to markets elsewhere, and can drive trade growth,” Wang says.
A recent report by the Asia New Zealand Foundation showed how important the relationship with Asian countries has become. Eighty per cent of those surveyed said that developing political, social and economic ties with Asia was important for New Zealand’s future, and 65 per cent felt it was more important for New Zealand to invest energy and resources into building partnerships with Asia than it was five years ago.
The Ministry of Foreign Affairs and Trade has also refocused its strategy onto the countries in this region with the aim of creating a more in-depth relationships, for example, the IPEF – Indo-Pacific Economic Framework, Wang says.
In terms of challenges facing New Zealand businesses hoping to expand into Asian markets, Wang says geopolitical tensions remains an issue, as well as ongoing skilled labour shortages here.
“Many of our businesses here have been trying to get the right people for some time. We need to look at how do we attract skilled migrants, especially in the tech, IT and other spaces. How do we make it accessible for skilled migrants to come here, and bring their families who share the same values as us for a long-term play?
“It may take a while to train up a group of skilled labour to the industry standards required to support our business sector, so we need to source that expertise offshore in the immediate term,” he says.
On the positive side, Wang says New Zealand’s ‘brand’ internationally has huge value, which can help unlock doors for many businesses. New Zealand’s positive image, including our strategic focus on combatting climate change, will stand exporters in good stead as they compete internationally.
In terms of sustainability and climate change, he says we’ve shown genuine leadership in some areas, such as climate-related disclosures: “We have a great opportunity to leverage our market positioning and remain at the forefront with technology advancements in our farming and agriculture sector.
“We’re also doing well in the Gaming, AI engineering and Aerospace — right next to SpaceX is Rocket Lab. We have the resilience, too — the Kiwi give-it-a-go mentality, and the connections we have made globally through our networks as innovators.”
Wang says the BNZ is working with its business customers to help them navigate this complex, changing global landscape.
“Everyone is working towards the same goal — to grow opportunities for this country, but we’re not there yet. BNZ’s Growth Sectors team has the capability, connections and cultural knowledge to help, so for any businesses wanting to explore new export markets, let’s find a way together.”
For more information visit bnz.co.nz/asia-business