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Guy: NZ productivity for the Colombian agricultural sector

Hon Nathan Guy
Minister for Primary Industries

28 March 2014 Speech

New Zealand productivity for the Colombian agricultural sector

Address to seminar in Medellin, Colombia

Distinguished guests, ladies and gentlemen.

It is my great pleasure to be back in Colombia.

In March last year I accompanied our Prime Minister John Key to your country where we had a very successful visit. Our Prime Minister and your President Santos built on their very warm relationship and both committed to our two countries working closer together.

Our Prime Minister committed $4 million to Colombia to build dairy capability, and President Santos said that he "welcomed New Zealand investment in Colombia with open arms."

New Zealand places a great importance on our building our relationship with Colombia, and we are committed to full collaboration to help develop your economy.

That is why I'm back here a year later.

This time I have brought New Zealand's Trade Minister Tim Groser, who has decades of international trade experience, and a 14 strong business delegation that includes some of the best of New Zealand's agribusiness, agri technology, and agricultural training expertise.

Today I want to talk about productivity in the agricultural sector. I also want to talk about how New Zealand and Colombia can work more closely together.

New Zealand's productive agricultural sector

I would like to talk briefly about New Zealand's journey to becoming a world leading agricultural producer.

I believe that our success is underpinned by four essential components - structural reform, broad and deep export market connections, world class farm management and regulatory systems, and a focus on innovation.

New Zealand has been exporting our primary produce for over 120 years.
We spent the greater part of the 20th century essentially fulfilling the role of the United Kingdom's farm.

Our preferential access geared the focus of our economy towards primary production, and our living standards rose on the back of a buoyant primary sector. However, this arrangement meant that we were extremely dependent on one market.

New Zealand's fortunes changed dramatically when the United Kingdom joined the EEC in 1973, and New Zealand lost its access to its most important market.

This event, along with a range of other external economic factors, pushed New Zealand toward the brink of economic collapse. We were hopelessly in debt, and New Zealand had become a protectionist fortress that was strangling our productive sector. We needed to change dramatically or become a failed state.

Structural Reform

The 1984 Government responded to this crisis by introducing an ambitious plan of structural reform. Over the next decade tariffs became almost non-existent, subsidies all but disappeared, our highest income tax rate was halved, and government control of the economy was stripped back.

The adjustment was a hard time for New Zealand, but it was necessary.

New Zealand now consistently ranks at or near the top of ease of doing business world rankings. Our structure is applauded as being open, transparent and free of corruption.

Market connections

New Zealand has also heeded the lesson of relying too much on one market. Over a succession of different governments, New Zealand has pursued a strategic trade strategy, looking to broaden and deepen our trade connections.

In terms of free trade agreements we have signed high quality and comprehensive agreements with Australia, Chile, the ASEAN economies, China, and Hong Kong.

We are also in varying stages of negotiations with the Trans-Pacific Partnership countries, who collectively account for 45% of global trade, India, the Gulf Cooperation Council and Korea.

Our traditional markets of Europe and North America still remain important to us, especially for meat exports. But we have broadened our relationships to avoid the mistakes of the past.

We now export to around 200 countries and feed about 40 million people around the world. Our export growth has been phenomenal with a 45% increase in trade with China alone last year.

World Class farm and regulatory systems

New Zealand´s success depends upon the success or failure of its exports. And primary sector exports make up 72% of New Zealand´s merchandise exports.

What has become essential is that we have a strong brand as a safe, trusted exporter of high quality primary produce.

We need to be able to assure our customers that the brand matches the reality. This is why we place a huge importance on having world class food safety, biosecurity, animal welfare, and environmental management systems.

Our farm and regulatory systems are world class and we are continuing to improve them. When our food safety system was tested last year with the Whey Protein Concentrate incident we responded by initiating an independent review of our systems and are now implementing every single recommendation of that review. This will ensure we remain future-focused, and will further strengthen our systems.

Innovation

New Zealand's story is one of innovation. We are a small isolated island nation. We faced huge challenges and barriers on our journey to becoming a successful agricultural exporter. But it was these challenges that forced us to innovate and to do more with less.

The companies I have brought with me are great examples of that innovation. To choose but one example we have brought the Gallagher Group with us.

Gallagher delivers innovative technology solutions for customers in more than 160 countries. The company's success started with electric fencing, an essential tool in farm management. They have broadened their focus and are global leaders in live animal weighing and electronic animal identification, and security solutions.

Our companies are producing some of the most innovative products and services in the world, as evidenced by the offerings of our companies in this room.

The New Zealand Government is also investing in innovation. We a partnering with industry and have so far jointly committed $700 million towards 17 new and exciting innovations in a programme called the Primary Growth Partnership. If these 17 projects are successful the New Zealand economy stands to benefit by up to $7 billion per annum by 2025.

Getting these fundamentals right has meant that New Zealand is a world leader in agricultural productivity.

To give one example, in 1984 New Zealand had over 70 million sheep. We now have a little over 30 million. But although we have halved our sheep flock, we still produce the same amount of sheep meat. To me this proves our farmers are adopting innovative techniques inside the farm gate.

Colombia's agricultural sector

I have taken a great interest in Colombia's agricultural sector. Today I will focus on the dairy sector, which although not as advanced as the New Zealand dairy sector has great potential.

The total number of dairy cows in our two countries are actually quite similar. The estimates vary but the figures show that New Zealand has around 5 million, and Colombia is estimated to have over 5 million dairy cows.

However even with a similar number of cows, New Zealand produces around 20 billion litres of milk per year while Colombia produces 6.5 billion litres.

In terms of the yield or production per animal, New Zealand produces around four times as much milk per cow as Colombia does.

The structure of the two countries is also vastly different. New Zealand has an average dairy herd size of around 400 cows, in Colombia this number is just 12.

To me there is a very powerful story in these figures around the productivity of the respective sectors.

But as I've just outlined, by undertaking a range of measures it is possible to vastly improve the productivity of the sector, which leads to improved profitability and lifting of living standards.

Colombia is on a growth trajectory, with analysts predicting it is now South America's second biggest economy.

Colombia has great resource potential, a young and educated population, an improving security situation, and is becoming more open to trade and investment.

I note that Colombia has trade agreements with the EU and the USA, and I'm also aware that there has been significant protests from farmers regarding these agreements.

I am firmly of the opinion that free trade is a good thing for agricultural development. But lowering your barriers must also come with additional investment in your productive sectors.

Colombia has around 25 million hectares in production with another 10 million hectares ripe for development. New Zealand has world leading technology and expertise. If we combine those we will both end up stronger.

Let me offer you two examples of how New Zealand's expertise could benefit Colombia.

To produce a litre of milk in Colombia at the moment, it will cost 45 cents.

To produce a litre of milk in New Zealand at the moment, it will cost 25 cents.
So why is there such discrepancy between our two nations? There are obviously a range of factors, but abundance of quality pasture land is not one.

In my view there are three major factors: the structure and scale of the industry, skills and expertise, and technology.

In all three regards New Zealand can help.

In the business delegation here today we have great examples of New Zealand businesses willing to invest in Colombia to address these issues.

Fonterra has invested significant amounts of new capital here in South America, and has firsthand experience of successful industry collaboration and growth.

We have two seed companies who specialise in increasing the productivity of pasture. We have experts in animal husbandry, milk production technology, and livestock equipment. We also have experts in agricultural training.

Since our Prime Minister John Key visited Colombia last year we are already seeing closer collaboration.

In July last year seven of our agribusiness companies were represented at the Agroexpo trade show in Bogota for the first time.

In October I was very pleased to receive a 170 strong delegation from Fedegan, who took up the opportunity of seeing New Zealand agri-technology in action on our farms. I believe that this Fedegan trip – and a return visit in February this year - shows that Colombian farmers are starting to realise the value proposition offered by New Zealand.

Conclusion

Last year I came to Colombia saying that New Zealand wants to collaborate with Colombia, not compete. I genuinely believe that if we work together we will both come out stronger.

I am here again with my colleague Tim Groser and 14 businesses to show that we are committed to investing in Colombia and working together to develop the Colombian agricultural sector.

President Santos and our Prime Minister John Key announced last year that they want to begin work on a free trade agreement between New Zealand and Colombia. I believe this will be hugely beneficial to both countries and we look forward to commencing negotiations when Colombia is ready.

Thank you for your attention and I look forward to visiting your beautiful country again in the near future.

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