Helen Clark - Export Institute Annual Dinner
Friday 27 September 2002
Rt Hon Helen Clark
Export Institute Auckland
Ellerslie Convention Centre
Friday 27 September 2002
Thank you for inviting me once again to address this annual dinner.
Almost exactly one year ago I addressed the 2001 dinner. It took place two and a half weeks after the September 11 tragedy in the United States. That, meant that there was considerable uncertainty about the international economy and growth rates were being revised downwards.
While acknowledging the obvious, that what had happened would affect the New Zealand economy, I noted that New Zealand entered the period of uncertainty in a better position than many other countries. Our balance of payments and employment levels were improving, inflation and government debt were low, the government’s fiscal position was strong, and we were experiencing modest growth, backed by a competitive exchange rate.
One year down the track it is fair to report that all those factors did indeed contribute to New Zealand faring better than many in what was a difficult year internationally.
- Unemployment has hit a fourteen year low at 5.1 per cent.
- The current account deficit reached an historically low 2.2 per cent of GDP for the year to March 2002, and stood at a still credible 2.5 per cent for the year to June. Forecasts made at the time of the Budget in May were for the deficit to rise to around five per cent in the 2003/4 year and then reduce again.
- The GDP figures released today showed growth of 1.7 per cent in the June quarter, higher than market expectations. That gives an annual growth rate for the June year of 3.5 per cent, and puts New Zealand well into the top half of the OECD growth rates.
- The exchange rate has stayed within a relatively competitive range, but the extent to which it has appreciated has contributed to a sharp decline in the terms of trade, with the annual trade balance slipping into the red. Analysts suggest that this will contribute to capping further rises in our currency, although it is still forecast to rise a little further yet in the short term.
- Business confidence, however, is rising again as measured by the National Bank survey this month. After five months of decline, the mood is becoming more optimistic. Of note in the survey is the sharp fall in expectations of interest rate increases. This suggests to me that the new Policy Targets Agreement with the Reserve Bank Governor is seen as a stabilising force in the economy. It is also worth noting that the confidence figures relating to people’s own businesses are significantly positive.
- Consumer confidence, according to the latest surveys, is also remaining strong.
The positive performance of the economy owes a great deal in my view to the hard work of New Zealand exporters across the board. You have my respect and admiration for your contribution to our economy. In my time as Prime Minister I have visited many of your businesses, presented many awards, and travelled with you and your representatives on trade missions. I never fail to be impressed by your optimism and enthusiasm for your products and their potential and I am deeply appreciative of your efforts.
What we would all like to see is many more of our companies exporting and contributing to a positive trade balance.
A mere 157 companies account for 78.4 per cent of New Zealand’s export earnings. 380 account for another thirteen per cent. 6,200 companies contribute to the other 8.6 per cent.
Small to medium sized companies do find the concept of exporting appealing, but many of the practical aspects are daunting. Market research, customer selection, marketing programmes and other essential elements of a successful export strategy require a substantial commitment, and that creates barriers to companies developing international markets.
As a government, we are prepared to take practical initiatives to support company and export growth. Trade New Zealand has our full backing in offering a wide range of services to assist businesses from the early stages of considering exporting through to a sustained international market strategy. Some of these services, in particular the education of new exporters, will be carried out in future in close partnership with the Export Institute.
Industry New Zealand was set up in our first term in office to help stimulate faster regional, business, industry, and cluster growth. What has become apparent is the need for a single seamless organisation which can back the development of internationally competitive New Zealand businesses.
For that reason we have decided to merge Industry New Zealand and Trade New Zealand to get better integrated services and the best value for money, and to make it as easy as possible for businesses to access these services.
Meanwhile, a number of new initiatives are under way through Trade New Zealand. In the next few weeks, its new e-business initiative will be launched. It aims to deliver potential buyers from around the world directly to New Zealand exporters via the Internet. The new Internet site, “MarketNewZealand.com”, has been under development for the last two years, after government allocated $13 million for it and a range of other e-business initiatives.
As well as reaching out to tens of thousands of potential buyers who would otherwise not have direct contact with New Zealand, MarketNewZealand.com aims to provide a wide range of market intelligence services for New Zealand companies, allowing them to evaluate potential market opportunities. It will also inform overseas buyers of the wealth of products and services which New Zealand has to offer.
In this year’s budget, an extra $2 million per annum was allocated to boost the promotion of MarketNewZealand.com.
Earlier this year I announced Trade New Zealand’s beachhead initiative. It is a programme which establishes offshore export platforms aimed especially at new economy and technology companies. These companies are born global and need to get to market quickly. Yet the costs can be prohibitive.
Trade New Zealand’s research suggests that the cost of a foreign technology company establishing itself in the United States with, say, four business development managers, can be as much as $1m million in the first year. Clearly that is beyond many of our innovative start-up companies.
To address this and to allow New Zealand companies to establish themselves in the USA, Trade New Zealand is exploring options for marine and technology beachheads on both the East and West Coasts. It is also looking at facilities for ICT exporters in the UK.
Jim Sutton formally opened the first beachhead-facility in Singapore’s technology park (an area known as PhaseZ.ro) for New Zealand companies earlier this month.
I believe it is important that government agencies working on programmes to support exporting liaise closely with those who represent exporters’ interests. In recent months there has been a series of meetings between government officials and members of the Export Institute’s executive, and that is leading to closer co-operation in a number of areas. For example, a heads of agreement has just been concluded between the Institute and Trade New Zealand. It will see the two work closely together in developing support services for exporters and education programmes. There will also be closer co-operation in areas such as the annual Export Awards and in organising inbound and outbound trade missions.
The Institute has also been discussing the nature of the government’s export credit arrangements with officials, and the government itself has been reviewing the scheme which was launched a year ago, as was proposed when it was launched. Export credit is complex, and it was recognised that the original design would need to be examined in the light of practical experience.
A report on the review is now with Ministers. It recommends a number of changes to make the scheme more accessible and consistent with international best practice. For example, there needs to be more information available to exporters about trade finance, particularly medium and long term financing, and improved information in general on what the scheme offers. The review found that many exporters are not used to offering their buyer an option of repaying over periods longer than two years. The Export Credit Office’s MLT products could help change that.
While the MLT scheme has not yet written any business, it has had a substantial number of enquires for business totalling $600 million. Changes are being proposed to the scheme’s term of cover; to the risk sharing ratios between exporters, financiers and the Crown; to the denomination of contracts; and to other aspects of the scheme, to help make it a more attractive and useful option for exporters.
Based on international evidence, however, the MLT cover on offer through the current scheme, will only ever support a relatively small number of projects and even then it will take time to build a broad portfolio. By way of comparison, the Australian equivalent had about eleven comparable transactions last year supporting exports of $367 million. Nonetheless, this form of support is important for exporters of capital goods.
For most exporters, however, especially those who in world terms are small to medium sized enterprises, I understand that the important issues are working capital, securitisation of lending, and short term trade credit insurance and reinsurance.
On these and related issues, officials are working with Export New Zealand and EXGO to refine a proposal which has been made to them, and on other issues of importance to exporters. Our experience with the medium to long term facility shows that the devil is in the detail, so it is important that we get it right. Continued close involvement with the Export Institute is important for this.
The key issue here is to ensure that any intervention by the government will help deliver more productive and more profitable exporting than would have happened without it.
Trade missions have been an important part of this government’s support for exporters and they will continue. Since I addressed your dinner last year, substantial business delegations have been with me in Latin America and Australia.
Jim Sutton, Minister for Trade Negotiations, is planning further trade missions to Southern China, the South Pacific, South East Asia, Eastern Europe, and possibly Australia in the next nine to twelve months.
Government announced earlier this year an increase in Trade New Zealand’s funding for Export Networks, to enable greater numbers of companies to work co-operatively together on activities such as trade missions and trade fairs.
The three agencies involved in the Brand New Zealand initiative, Tourism New Zealand, Trade New Zealand, and Industry New Zealand, are also working on a refinement of the Brand’s international positioning and its use by exporting companies. This co-operation is reinforcing the need for an integrated governmental approach to business development and internationalisation.
In summary, there are many government initiatives underway to provide assistance to the nation’s exporting effort. Building innovative, high value, internationally competitive businesses is at the very heart of our government’s growth and innovation strategy. We look forward to working closely with the Export Institute to meet our common goals of building a strong economy and strong businesses.