NZ an exporting economy? Yeah, nah, says new report on how to lift food and fibre sector productivity

Food and fibre exporters should be supported to be "mini-multinationals", says a new discussion paper.

Kiwis like to think New Zealand is an exporting economy - a new report shakes up that idea, saying the facts show we just “aspire” to be one.

Even then, it seems we have a long way to go.

In fact, New Zealand has the lowest export intensity of 24 OECD small countries (with populations smaller than 20 million), says the New Zealand Institute of Economic Research (NZIER) in a discussion paper called “Pathways to Prosperity: Capturing more of the value of our food and fibre sector exports for New Zealand”.

The paper, commissioned by the Helen Clark Foundation, said New Zealand’s goods and services export intensity - exports as a proportion of GDP - in 2021 was 27 per cent, compared to the OCED small-country average of more than 60 per cent.

After a decade of major adverse domestic events, including earthquakes, the pandemic and severe weather issues, the public and private sectors had, out of necessity, focused their attention and resources domestically on recovery and building resilience, the paper outlined.

Now is the time to prepare and chart a course for increased exports as domestic demand begins to pick up in 2024, the paper suggests, recommending actions both sectors should take to lift export productivity in the food and fibre industries, which account for 80 per cent of New Zealand goods’ exports.

Improving the productivity of the food and fibre sectors was “crucial to New Zealand’s prosperity and standard of living”.

The paper noted research showing the portion of GDP from exports today is essentially at the same level and composition as in the 1980s.

It acknowledged in comparisons between New Zealand and other OECD small economies, there was a fundamental difference: most of those were in Europe and well-integrated in the EU’s single market. New Zealand was distant from key markets which posed significant barriers.

“We can participate in global value chains (GVC) by importing foreign inputs to add value to goods and services we then export (backward GVC participation), and also by exporting local goods and services to countries that use our exports as inputs to their goods and services exports (forward GVC participation).

“However, we rank at the bottom of the OECD small economies on participation in GVCs.

“Finding ways to improve participation in GVCs is critical to reaping the benefits from them,” the paper said.

Exporting is "difficult and complex" and not many NZ firms have the skills and scale necessary to compete effectively, says a new NZIER report. Photo / Michael Craig

The paper’s recommendations for the food and fibre sectors and the Government include:

• Food and fibre exporters should be supported to be “mini-multinationals”. Extracting more value from competitive export markets means companies, even small ones, have to do everything that bigger multinationals do: market research, product development, supply chain management, export clearance, and financial arrangements. Most food and fibre companies do not yet have all these capabilities and will need support in developing them.
• The Government could identify businesses with the right set of capabilities and potential, and work with them proactively to build their exporting capabilities. Building on insights developed by the Ministry of Business, Innovation and Employment and other agencies to focus Government resources on those firms most likely to lift export intensity would mean working with firms that meet identified predictive characteristics of success rather than simply seeking to pick winners.
• The Government could work with industry to understand what kind of investments would best support export growth and devise a long-term investment strategy.
• Industry and the Government could collaborate to develop mechanisms that reduce investment risks in the food and fibre sectors, given its economic importance and higher risk profile. For example, a Government fund with an equity stake that invests at below-market rates could provide funding but capture the upside from ventures that succeed.
• More investment should be made into research the practice of management, given the importance of managerial capability in building export-capable firms. Consideration should also be given to subsidies or tax credits for managerial training for qualifying management and governance roles in the food and fibre sectors.
• Industry and the Government should collaborate to explore options for more strategic collaboration among key players in the food and fibre sectors ... while being mindful of limits set by competition and trade law. Funding could be directed to academic and applied research to determine the most promising forms of collaboration for the food and fibre sector.

The report said exporting was “difficult and complex”.

“Not many New Zealand firms have the skills and scale necessary to compete effectively in unforgiving global markets, so we need to ensure we’re doing everything we can as a country to support the food and fibre sector to grow its productivity and earn more from its exports, without putting more pressure on our people or our environment.”

The paper is based on interviews with more than a dozen sector leaders and academic research.

Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.