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Dalziel: "Business Opportunities in Malaysia"

20 November 2007
Speech Notes for delivery by Commerce Minister Lianne Dalziel

Trade and investment opportunities between Malaysia and New Zealand

Address to a seminar on "Business Opportunities in Malaysia" sponsored by the Malaysian Industrial Development Authority (MIDA)
Langham Hotel
83 Symonds St, Auckland

Distinguished guests, ladies and gentlemen - Selamat Datang and thank you for your warm welcome.

I am delighted to be here today in my role as Minister of Commerce to talk to about trade and investment opportunities between New Zealand and Malaysia.

As you will all be aware, New Zealand's small domestic market means internationalisation is the way ahead for many New Zealand firms and as a result relationships with, and investment in, countries such as Malaysia, whose economic growth has benefited the region as a whole, are very important to us.

New Zealand and Malaysia already have a 50-year long history of close friendship and diplomatic ties. Malaysia is New Zealand's eighth largest trading partner and is a significant market for New Zealand services.

Malaysia is our largest trading partner in the ASEAN region and, as such, is already the destination of choice for a number of New Zealand companies aiming to grow their businesses in the Southeast Asian market and further afield.

These connections were strongly reaffirmed by the visit of our Prime Minister, the Rt Hon Helen Clark, to Malaysia in July, accompanied by a delegation of businesspeople from knowledge-based sectors.

During that visit, our Prime Minister spoke about the New Zealand/Malaysian economic relationship and today I hope to reaffirm some of the themes she covered then.

New trends in business are emerging as our economies evolve and change. Trade in primary products is still vital to New Zealand, but our economic relationship with Malaysia is increasingly becoming focused on knowledge-intensive products; particularly in the fields of services and investment. In areas such as education, Information, Communication and Technology (ICT), health sciences, biotechnology and agricultural technology, it is partnerships between New Zealand and Malaysian companies that I believe will characterise much of our future economic dealings.

To achieve our government's economic transformation agenda, the New Zealand economy needs our businesses to become more internationally competitive. An important component of this development, which addresses issues around proximity to market and provides for benefits from increased scale, is growing New Zealand businesses offshore through partnerships and investment.

The government's thinking around how we can support this is at an exploratory stage. We already assist firms through programmes that develop business capability, export markets and sector-wide initiatives. As a government we recognise that growing New Zealand firms through international partnerships has the potential to deliver wider benefits to our whole economy.

Internationalisation includes representation through local agents, the establishment of sales subsidiaries, forming alliances in market, and production or manufacturing in key markets outside a country's home region.

Internationalisation might also involve outward investment (that is direct investment made abroad) and expanding into overseas markets by establishing joint ventures and outsourcing parts of a firm's activities that are can benefit from being in-market. These may include licensing or franchising arrangements taking New Zealand brands to global prominence in a range of ventures.

Internationalisation strategies may be driven by customer, resource or regulatory requirements, cost, or access to technology and management expertise. Individual businesses between and within sectors may progress quite differently, depending on their requirements. For example, a company providing software services may want to establish a 'help centre' in a key market and another might want local sales representation.

In July the Minister of Economic Development asked New Zealand Trade and Enterprise and the Ministry of Economic Development to develop options around how government could provide appropriate support for outward investment by New Zealand firms. We expect to see the results of this work next year.

Current examples
New Zealand companies are already investing in relationships with Malaysian firms in a number of areas including education, agricultural technology, food and beverage, and ICT.

The education sector has been an important feature of our relationship for many years, with an extensive alumni network originating from the Colombo Plan initiative that brought many Malaysians to study here in New Zealand. Currently around 2,000 Malaysian students are studying in New Zealand universities, 90 of them at PhD level. Our education ties with Malaysia's national petroleum company, Petronas, are especially strong. After Australia and the UK, New Zealand is the third-largest destination for holders of Petronas scholarships to obtain engineering and business studies degrees.

This relationship has entered a new phase with the e-learning sector. A group of New Zealand e-learning companies is helping Malaysia transform its teaching and learning methods using ICT within its schools with the goal of developing students for the knowledge economy workforce of tomorrow.

Innovation New Zealand Education Malaysia Ltd (or iNZed as it is called) recently completed a pilot project in the State of Perak, which I understand received high praise from Malaysia's Education Minister Hishammuddin Tun Hussein.

This iNZed project involved five primary and secondary schools in Perak, and focused on building teachers' confidence and capability in using ICT in the classroom. The project provided links between Malaysian and New Zealand schools through online learning tools such as virtual field trips.

The Minister reported that many of the key initiatives from Malaysia's national education blueprint were embodied in the pilot project. Like Malaysia, New Zealand's economy is dominated by small to medium sized companies, with relatively few large-scale corporates. The iNZed model shows the value of a group of small, but capable providers joining forces to create an entity large enough to get the attention of important institutions, such as the Malaysian Ministry of Education.

This group's goal is to roll-out a programme of professional development to a large number of Malaysian schools, in line with priorities identified in the 9th Malaysian Plan. The vision is to create an international hub within Malaysia in partnership with local providers, as a springboard for education sector opportunities across Southeast Asia and the Middle East.

Collaboration is allowing these companies to develop the scale needed to take on the global market. This kind of engagement is a long-term investment and the government has in this case facilitated engagement locally and in Malaysia. It's a good example where local skills and access through an in-market partnership is creating a win-win situation for New Zealand and Malaysia.
Early adoption of IT and the internet has generated a thriving software industry in New Zealand. Local companies produce software for many kinds of industries, with particular strengths in niche business applications, healthcare and utilities, security control, supply chain management and pointofsale systems. New Zealand's competitive ICT strength lies in its technical innovation and ability to adapt rapidly within a relatively low cost structure.

Datacom Group Ltd, our largest locally-owned information technology company, is another New Zealand business working in Malaysia. The company offers a range of ICT services and products, ranging from software development to system integration and business process outsourcing.

As Datacom Southeast Asia, this company runs one of New Zealand's largest operations in Malaysia; a contact centre that has contracts with Microsoft, Logitech, D-Link, and Colgate. Datacom's operation in Kuala Lumpur employs over 400 staff and is growing quickly thanks in particular to their increased involvement in the roll-out of Microsoft's Vista operating system. Locating business operations in KL has been an excellent growth strategy for the company and highlights potential across the sector.

While I have talked today about distance from large markets driving the need to grow companies internationally, there are very positive aspects to this isolation. New Zealanders are known for their ability to find innovative solutions to problems and for their hands-on ability to make things work. Our rugged and diverse physical environment has demanded much from communications and as a result, companies like 4RF Communications now provide wireless communications solutions a New Zealand strength into parts of Southeast Asia.

A Malaysian government focus on the development of electronic commerce has also offered opportunities for New Zealand companies. Innovative point-of-sale systems are now found in petrol stations throughout Malaysia, thanks to New Zealand electronic payment experts, Provenco.
New Zealand has one of the world's most efficient agricultural economies and is an acknowledged leader in agricultural management, equipment and technology. The Malaysian government's plans to revitalise the Malaysian agricultural sector and its drive to increased self sufficiency in beef and dairy production offers much potential for our two countries to work together.

On the construction front, one of New Zealand's biggest companies, Fletcher Building, has also invested in Malaysia. AHI Roofing, the Fletcher-owned global leader in the manufacture of steel roof tiles, has three roofing plants around the world Auckland, California and Malaysia. Current Malaysian production capacity is 2 million tiles per annum and there are plans to expand this in the near future, to 3.5 million, most of which are destined for export.

Free Trade Agreement
A bilateral free trade agreement between our two countries is currently being negotiated, although I understand that the outcomes in a number of areas of the agreement, including investment, need to be improved if the FTA is to have a meaningful impact on commercial activity.

We hope that Malaysia can look again at how it can raise its level of commitments in investment and in the related area of services trade so that both sides can engage afresh and conclude these negotiations quickly. Parallel negotiations are also ongoing for an FTA between ASEAN, and New Zealand and Australia. However, I believe we can do more together bilaterally. The successful conclusion of the New Zealand-Malaysia FTA would send a positive message to business people in both of our countries to make even greater efforts to explore the potential that is so clearly there.

I am convinced that there are also huge possibilities in partnering together to target third markets such as China, India and the Middle East. There are a growing number of New Zealand companies, for example, who are designing products at home, manufacturing part of it in China, and finishing it in Malaysia for export to the United States.

Growing business relationships between our two countries is a win-win situation for both New Zealand and Malaysia and as the Prime Minister said in July we are looking forward to seeing Malaysia and New Zealand as globally competitive economies working together for our mutual benefit. The opportunities are there and we must claim them.

Thank you once more for the privilege of addressing you today. I trust that today's seminar has opened everyone's eyes to the opportunities that Malaysia and New Zealand can develop together and given impetus to making it happen.


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