New Zealand Is Not Dancing With The Int. Stars
New Zealand Is Not Dancing With The International Stars
A report released today shows that New Zealand’s level of international economic activity, in terms of exporting and international investment by New Zealand firms, is not increasing and does not compare well to most other developed countries.
This is the second report in the New Zealand Institute’s project, ‘Creating a global New Zealand economy’. This project is focused on identifying concrete actions to improve the level of New Zealand’s international economic activity. The first report, released in November, described why increased international engagement by New Zealand firms is vitally important in achieving a substantial, sustained lift in New Zealand’s labour productivity growth rate.
The New Zealand Institute report released today, called ‘Dancing with the stars?: The international performance of the New Zealand economy’, describes New Zealand’s exporting and international investment performance and compares this to the outcomes generated in other developed countries.
The key finding from this report is that New Zealand is not participating in a meaningful way in the opportunities provided by the substantial expansion of international trade and investment over the past decade. New Zealand is not dancing with the stars of international business.
New Zealand Institute chief executive Dr David Skilling notes that “Given the importance of meaningful international engagement for improved productivity growth in New Zealand, these outcomes are of real concern”.
New Zealand’s exports as a share of GDP are currently 29%, about the same level as two decades ago. Dr Skilling notes that “New Zealand’s exports have gone sideways over the past two decades. And between 2001 and 2005, exports have reduced sharply from 36% of GDP to 29% of GDP.”
For a small country, New Zealand does not export large amounts. The average exporting level from a small OECD country, with a population of 10 million or less, is 54% of GDP, almost twice the level of New Zealand.
New Zealand’s slow export growth is a long-standing issue. New Zealand’s export growth between 1971 and 2003 was 23rd out of the 24 OECD member countries in 1971. This slow growth is due in large measure to the composition of New Zealand’s exports; by value, 81% of New Zealand’s exports were in slow growth categories.
There is a similar story in terms of outward foreign direct investment (FDI) by New Zealand firms. New Zealand’s stock of outward FDI is one of the lowest in the developed world and has declined since 1990 as New Zealand firms have either pulled back or reduced their investing activity offshore.
This has occurred while FDI outflows across the world have been increasing dramatically. The level of outward FDI from developed countries has tripled as a share of GDP over the past 15 years, while New Zealand has been going backwards. New Zealand is unique among developed countries in having a declining FDI stock as a share of GDP.
New Zealand has a proud record of sporting success, most recently in terms of the Grand Slam by the All Blacks. But New Zealand’s business success on the international stage is less impressive, with few New Zealand multinational firms compared to other small developed countries.
The bulk of the New Zealand economy is domestically-focused, and very few New Zealand firms generate the majority of their earnings from overseas. Only 50 New Zealand firms exported more than $75 million in the past year and only 361 firms exported more than $25 million.
New Zealand is one of the least internationally integrated economies in the OECD, as measured by the sum of exporting and FDI activity, ranking 25th out of 30 OECD economies.
At a time when global economic integration has been proceeding rapidly, with substantial increases in international trade and investment, New Zealand’s exports have grown relatively slowly and FDI by New Zealand firms has reduced. New Zealand is the only developed country whose overall degree of international economic integration has reduced over the past 15 years.
The world is not hanging around for New Zealand and a change in New Zealand’s course and speed is urgently required. There are some wonderful New Zealand companies, competing successfully in international markets. But there are not enough of them. For New Zealand to succeed in a meaningful way, many more global New Zealand companies are needed.
The focus of the New Zealand Institute’s research project is to identify the actions that will help to create a global New Zealand economy. We will be releasing a series of further reports from early next year on these issues. As part of this process, we are talking with a wide range of people in both business and government about the best way forward.