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Address To NZ Business Community In Shanghai

Hon Dr Michael Cullen
Address To The New Zealand Business Community In Shanghai

Venue: Residence, 27A, Kingsville, 198 An Fu Lu, Shanghai

New Zealand is a small island trading nation. The government is committed to policies that will result in long term, sustainable growth.

We have excellent, long-standing trading links with economies and organisations the world over. Our citizens are great travellers and New Zealanders are well known for their ability to think laterally and broadly.

The Labour Alliance Government is a government of balance. We are not returning to an overly regulated market but neither do we accept that a completely free market will deliver the living standards we demand for our citizens. We believe that in the 21st century the state must be a leader, a facilitator, a co-ordinator, a broker and a partner.

At the macroeconomic level, the government is continuing with a programme of fiscal conservatism and monetary policy orthodoxy.

The government is running an operating surplus, projected at over one percent of GDP this financial year, rising by roughly half a percent of GDP a year for the years after that.

We have an economy geared for long term international competitiveness: a cleanly floated exchange rate; free movement of capital; no subsidies; deregulation and a modernised infrastructure.

Indeed New Zealand's improving economy is out of step with many of our key trading partner - although not China - whose economies are slowing down. We are seeing a range of economic indicators moving in the right direction for the first time in years. In the past our performance was more often driven by the global economic cycle.

The economy grew by 2.5 percent in the 2001 March year, and is forecast to average three percent growth over the three years after that. Initially, this was driven by a healthy export sector on the back of strong commodity prices, a competitive dollar and a good growing season for farmers. Now, the basis of growth is broadening as tourism grows, and life returns to retailing and construction.

We have just recorded our first trade surplus since 1995. Provisional figures show that in the twelve months to the end of July the trade surplus was $65 million. That is a big turnaround from a year ago when the trade deficit was $3.1 billion.

The current account deficit has fallen from seven percent of GDP to less than five, and is still falling, inflation remains subdued and unemployment is at a thirteen year low.

New Zealand is now back on a stable AA+ credit rating and consumer and business confidence are firmly in positive territory.

Over the years, international investment has contributed significantly to the development of New Zealand's economy. Since the 1960's Australian companies have invested nearly NZ$25 billion, the US over NZ$11.5 billion, and the UK over NZ$9 billion directly in New Zealand. We are keen to continue to encourage further direct foreign investment, especially in long haul 'greenfields' developments.

The government has developed a specialised agency, Investment New Zealand to service the interests of investors. We have increased its funding which has enabled it to substantially boost its staffing levels and to shift from a totally passive to an increasingly pro-active strategy that targets and encourages international direct investment.

Over the last year Investment New Zealand has brought over 30 senior investment decision-makers to our country as part of our "red carpet" programme.

Its work is paying off. Over the past year overseas investment has created 400 new jobs and $278 million worth of exports for New Zealand.

Investment New Zealand has played a leadership role in facilitating a number of fruitful investment decisions. But it could not do its job in isolation – the success of the agency is that it works in partnership with other central and local government and non-government agencies to get the best and quickest results for overseas investors.

These successes include:
American Herbals call centre
A UK export focussed agricultural development]
Ericcson-Synergy joint venture
Two North American superyacht construction companies
Vertical Limits – film location investment

The agency has many other cases under active management including:
Information technology and telecommunications
call centre/back office processing
biotechnology research and development
added value wood processing
marine construction
aviation engineering
film production
venture capital and others

There are many compelling reasons why companies should seriously consider New Zealand as an environment to invest in or locate to – or both.

Firstly, New Zealand is a stable investment location with a strong record going back many years. The Labour and Alliance centre left coalition is delivering smooth and steady government for New Zealand.

New Zealand has a competitive time zone. We are the first OECD country to wake up every day and we can offer distinct time-driven advantages for service industry investments such as back office operations and call centres.

Next, New Zealand is well known as an ideal test market. Our willingness to embrace the new along with our compact size mirror those of much larger markets and make the country a perfect site to test new technologies before they are released to the global market. Ericcson, Vodafone, BMW and IBM can all attest to the fact that we are a sophisticated and highly technologically aware nation.

We are one of the most "connected" countries in the world. 65 percent of New Zealanders have access to the Web from their homes. Every other New Zealander now has a mobile phone. Of firms employing 20 people or more all of them use computers and over 90 percent of them are connected to the Internet and around 70 percent of these firms have their own domain name and Website. And even New Zealand's smaller firms have a high ICT take up, with 65 percent connect to the Internet.

The $2 billion Southern Cross Cable, links New Zealand, Australia, Hawaii and the United States and allows for the huge volume of Internet traffic that New Zealand is expected to generate.

New Zealand's widespread and enthusiastic adoption of ICT has put us way ahead of many other more tentative countries. It has generated a thriving software industry. We spend 8.54 percent of GDP on ICT – the highest in the world.

New Zealanders create leading-edge technology. Now positioned as a global supplier of niche solutions, New Zealand software and IT services are in demand internationally.

New Zealand is now developing successful world-class clusters of companies and supporting infrastructures around strong niche industries such as IT and our growing biotechnology sector.

We have a specialised cluster of skills and competencies in innovative and advanced manufacturing. Our manufacturers can retool quickly and handle small, specialist and difficult production runs.

We have one of the most open economies in the world. New Zealand is a straightforward and cost efficient place to do business. We have a stable and educated workforce, internationally comparable labour laws and we are one of the least corrupt nations in the world.

There is no payroll tax, no social services tax and no superannuation tax. A small levy for accident compensation provides 24 hour, no fault protection.

The corporate tax rate is just 33 percent and there is minimal and in many cases no capital gains tax and the overall level of tax paid by an international company is limited by double taxation agreements. We were the first country in the world to recognise the value of intellectual property for depreciation purposes. New Zealand offers 100 percent deductibility for research and development.

New Zealand is an easy place to do business. There is no complex or formal business etiquette to learn, protocols to worry about nor rigid networks to negotiate. We are relaxed and accessible - from industry leaders to senior government officials and ministers.

We have an inclusive, multi-cultural society that includes Maori and Pacific peoples among those of Asian and European origin – a result of over 150 years of migration.

Our business community reflects and reinforces this diversity and we continue to welcome talent, skill and achievement in people from other countries.

New Zealand's Business Migration Policy is designed to attract high quality migrants with a clear and open set of rules so that prospective migrants can have some surety of success in their endeavours to migrate to New Zealand. This Government seeks to contribute to the skill base by selecting migrants who are able to match their skills with opportunities in New Zealand.

Our people to people links with China are booming. China is now our third largest source of migrants after the UK and India. China has become the leading source country for foreign students at the secondary and tertiary levels, and the number two source for language schools.

And the Chinese are getting a real taste for the New Zealand experience. Growth in visitor numbers is running at roughly 50 percent year-on-year.

These are the sort of figures have helped make tourism a $13.2 billion dollar industry.

These growing people-to-people links are reflected in other parts of our relationship. China has now become New Zealand's fourth largest trading partner, with two-way trade up 38 percent in the year to June 2001.

We are determined to forge wider trading partnerships, especially in the East Asian and South American theatres. I believe that as long as bilateral partnerships are comprehensive, outward looking and WTO compatible they can enhance progress in the multi-lateral system.

We have completed a closer economic partnership with Singapore – which was New Zealand's first since signing CER with Australia in 1983. Now Hong Kong and New Zealand are negotiating a similar trading partnership. We are expanding our relationship with Australia and last year we opened a new embassy in Chile.

Investors need the certainty of level playing fields and robust stock markets. Recently we introduced a long overdue Takeovers Code and we have strengthened the Commerce Act to get a better deal for consumers and small businesses. We will deal firmly with anti-competitive behaviour from dominant firms in the market.

New Zealand offers many advantages for investors. But on a personal level, I think of the some very compelling reasons that I haven't mentioned.

New Zealand is exceptionally beautiful and varied and we are lucky enough to enjoy a lifestyle that is the prerogative of the only the very rich in most other countries.

And secondly, our most important and our most precious resource is our people. New Zealanders are friendly, hard working and fair. We believe in opportunities for everyone. We will give anything a go with a can-do attitude. Kiwi ingenuity is a catch phrase known the world over. We come up with some pretty good ideas – including three Nobel Prize winning ideas.

In closing, let me just say that New Zealanders call our country "god's own land", come over and find out why. You won't regret it.


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