BRIC Concerns Reflected In New Zealand
News release
2 May 2013
BRIC Concerns Reflected
In New Zealand
As the glitter starts to
wear off the BRIC economies, New Zealand can learn salient
lessons from their slow down.
New research from
Grant Thornton’s International Business Report (IBR)
reveals that businesses in the fast-growing BRIC economies
increasingly view under-investment in national
infrastructure as a major constraint on their ability to
grow. Further, the data reveals that for the first time, the
top five most optimistic economies include no BRIC nations.
Forty five per cent of BRIC businesses cite
transport infrastructure as a major constraint on their
ability to grow, up from 21% this time last year and well
above the global average of just 12%. The figure is
particularly high in Russia (74%) and India (59%).
In addition, 47% of BRIC businesses cited ICT
infrastructure as a growth constraint. This compares to the
19% figure recorded 12 months ago and the global average of
just 14%. Again, India (64%) and Russia (63%) are most
concerned.
Growth in the BRIC economies over the
past decade has been incredible with the four economies
accounting for more than 30% of global economic growth since
2002. However, the IBR results reveal that they are now
facing capacity issues. Investment in infrastructure appears
to have lagged behind growth, leaving unsatisfied business
demand for better connectivity.
Peter Sherwin,
partner of Grant Thornton, said that New Zealand should
reflect on these figures and see if it is a case of “the
hat fitting” as far as our economy is
concerned.
“New Zealand has under-invested in
infrastructure for years and while we are trying to play
catch up, are we actually doing enough.
“This
research reinforces the strong parallel between investment
in infrastructure and a strong economy. Yes, we have made
progress in New Zealand with the gradual roll out of the
high speed broadband network. Wellington has invested up to
$500m on its rail public transport network with new rolling
stock and upgrades and extensions between Paraparumu and
Waikanae. In Christchurch the new Southern Motorway has
opened and the Western Corridor continues to be upgraded.
The Auckland transport network is being expanded and
strengthened, although the rail network doesn’t
necessarily get to where the people are living. Transpower
continues to spend hundreds of millions of dollars upgrading
and reinforcing the National Power Grid .
“This
is all a good start, but it is going to need a substantial
investment if we are to catch up on past under investment,
or at least hold our spot at worst.
“And the
worrying thing is that with the present social/political
scene in New Zealand we may not have the means to carry on
with the widespread infrastructure upgrades if the
Government’s asset sales programme fails to realise the
income projected, or there is a change of
Government.
“The Greens and Labour sabre rattling
over power structures and the Mighty RiverPower asset sale
certainly paints a gloomy picture for future investment in
our infrastructure, while a change of Government would halt
much of it in its tracks, literally,” he
said.
Sherwin said that such is the importance that
these countries put on their infrastructure investment that
at a summit last month the leaders of the four BRIC
economies announced that they would, together with South
Africa, be setting up a new development bank based on their
“considerable infrastructure needs”.
Opportunities for frontier
economies
The Grant Thornton’s
International Business Report (IBR) indicated that for the
first time in Q1-2013, no BRIC economy makes it into the top
five for business optimism. Top of the list is Peru,
followed by the Philippines, United Arab Emirates, Mexico
and Chile.
“Investment in infrastructure is a
sign that governments are serious about facilitating
business growth. This in turn breeds confidence. Last
month’s announcement in South Africa indicates that the
BRIC infrastructure concerns highlighted in the research are
not temporary blips. They represent long-term problems that
need to be addressed if growth is to be maintained in the
coming years.
“However, while the BRIC economies
overcome their growing pains, the next wave of emerging
markets – such as rapidly reforming Mexico and the other
rising Latin American stars, Peru and Chile – look ready
to take up the mantle. There is no doubt that holes in
output left by the BRICs offer opportunities for these
frontier
economies.”
ENDS