Where in the world is my oyster?

If your enterprise is up and running and you haven’t yet cast your eyes offshore, it’s time to get with the programme..

Your country needs you. And now. Business owner, entrepreneur, idea generator, scientist ... if your enterprise is up and running and you haven’t yet cast your eyes offshore, it’s time to get with the programme..

It may be that you’ve given the matter some thought but fear you’re too late to the world marketplace. Maybe you’ve entertained the notion and put it into the too-hard basket. After all, who would want something from a country they’ve probably never heard of?

Should you give up? Absolutely not. New Zealand has an enviable history of exporting—and the rules of the game have changed in favour of the novitiate as the information age opens up some rich markets and the recent economic downturn allows a whole new set of possibilities.

There’s a mine of resources at your disposal, yet if you suddenly get gung-ho and decide you can conquer the world without any help, preparation, discipline or planning, you may as well join the lemmings and leap over the cliff.

The importance of exporting is obvious. Statistics New Zealand figures show that two out of three New Zealand jobs are dependent on trade and the New Zealand Ministry of Foreign Affairs and Trade estimates that $4 of every $10 our economy produces is generated by exports—so nearly half our income is generated by what we sell offshore.

Moreover, exporting can be really good for your business. Some of the benefits include:

  • Increasing your revenue and profitability by expanding your business—often the most obvious reason to export your goods and services.
  • Protection from local market fluctuations. The wider the base you take business from, the better.
  • Stabilising your annual workflow. Many businesses experience seasonality if they concentrate on only one market, but this effect can be lessened by broadening your horizons—for example selling your summerfriendly products in hotter climates throughout winter.
  • Finding a market. A failed product in one market may be a hit in another.

But you need to be realistic and keep an eye on your home base as you move out of a familiar market into the unknown. Here’s what you need to prepare for:

  • Increased costs that, without proper factoring, could play havoc with the balance sheet.
  • Complex regulations and bureaucracies that turn red tape into an art form.
  • Legal or compliance risks, which may arise from operating under laws that differ from ours.
  • The risks of trading in a politically unstable region.
  • Belief that your planning is bulletproof to the point you are impervious to advice, warning signs and impending disaster.

AJ Park partner Allan Bowie says, in exporting terms, keep your eyes and mind wide open and always look a gift horse in the mouth. What you’re seeing, or believe you’re seeing, may not always be what you were looking to achieve.

“Don’t rush into a deal in the first instance. Find out who and what you’re dealing with. Your IP strategy may well predetermine what sort of licensing or distribution agreement you enter into and you want to ensure it’s really the best option for you. Make sure you do research and engage an expert, especially if you’re basing your whole venture on some presupposed notion of what you think might be your own intellectual property.

“New Zealand is very good at commodity exporting but when there is IP involved and there isn’t a strategy, that is when things can come unstuck. Not everyone can patent their IP, but if you can and you don’t, your venture could be doomed to failure if you’re looking for future recourse. Why should or would anyone pay you for your IP when they don’t have to? China is changing dramatically ... But the whole tradition of copying was ingrained into their culture and essentially viewed as a form of compliment. The Japanese also had a similar cultural more of ‘adopt, adapt, adept’ and would have no hesitation using someone else’s idea or innovation as the starting point of that process.”

How is the world?

Even if you thought you had prepared for each and every contingency, there are always unexpected world changing events—things like 9/11, Icelandic volcanoes and the GEC that totally change the rules of the exporting game.

NZTE regional director for Europe/Middle East & Africa Anne Chappaz says these moments of crisis usually affect all business equally. If New Zealand exporters have invested in building strong and strategic relationships with their customer base, then Kiwi agility and innovative thinking can turn these moments of crisis into a demonstration of our ability to deliver niche solutions. In the current environment Europeans are open to quality consumer and lifestyle products that don’t cost the Earth, and services that improve productivity and efficiency, especially in the public sector.

From her office in Hamburg she says: “Problems such as the sovereign debt crisis are serious and have global implications but ...

For many business sectors life will not change noticeably. Having said that, countries like Greece, Spain and Portugal will suffer a slower recovery.”

In Germany, Scandinavia and the Netherlands the economies remain strong and consumers wary but confident of future growth. New Zealand companies can engage in these countries with an equal degree of confidence.

“The interconnectedness of the world’s economies means that a slowdown in one area will affect others,” says Chappaz. “but equally growth in the Asia Pacific region will help Europe find its feet again. It is not a time to turn your back on one of the most globally connected business sectors: if the Euro stays low, along with interest rates, European exporters will be in a position to be good business partners for growth into non- European markets.”

In terms of scoping opportunities for the future she says keep an eye out for what used to be collectively called the transition economies of Eastern Europe.

“Today there is no one-modelfits- all approach, however Poland seems to offer opportunities for growth across all sectors, and unless tourism numbers drop significantly, the transition economies on or near the Mediterranean should show continued growth in hospitality and food service sectors. Eastern European government sectors are likely to be in the market for processes and systems that will modernise their bureaucracies as well as their health and education systems. Russia is a huge market with boundless opportunity, but you need time, a generous bank manager, an appetite for risk and a good local lawyer. Turkey is an interesting bridge between Europe and Middle East and has growing influence in the marine and energy sectors.”

Chappaz believes the Middle East demands investigation at the moment too. “They have not really suffered from the global financial crisis and except for Dubai (quickly bailed out by Abu Dhabi) they’re not facing sovereign debt issues. As China and India restart the global growth engine, the need for Middle East oil and the returns on the global investments of their sovereign wealth funds will ensure that customers in the Gulf States will have plenty of money to pay for clever solutions from New Zealand.

“We’re fortunate that New Zealand is viewed very favourably, which makes it easy to find great local partners. The Middle East is seeking solutions that will help it to educate, employ, house and provide health care for their rapidly growing and youthful population. They can afford the best, but they need more than that. They need solutions that recognise their particular cultural, social, political and environmental context.”

Conversely, the US is actively seeking to reduce imports in order to reduce debt levels. New Zealand exports to the US declined by ten percent in 2009 compared with 2008. High US debt levels, continuing difficulty with accessing credit, concern about rising unemployment and low confidence all seem set to constrain consumer spending and imports in 2010. Yet the sheer enormity of the market means writing off the Americas on this basis is akin to saying you’re now bald because you lost a few hairs.

Those that don’t have a piece of the American pie should now think about adding the region to their exporting recipe. Marta Mager, NZTE regional director, Americas, says the global economic downturn is opening up new opportunities with New Zealand’s wealthiest trading partner. The reason, in a word? Stimulus.

“The $787 billion recovery package is the first of many measures taken by the US government to reinvigorate consumers and business. Funds are being allocated for projects in infrastructure, communications, education and renewable energy. New Zealand companies with new and creative solutions have enormous opportunities to compete in this market.”

The US multitrillion-dollar healthcare market, she says, is about to expand after passage of major healthcare reform legislation. More than 30 million more Americans will be added to a system that’s getting an injection of capital to reduce medical errors, cut waste, improve treatment outcomes and safeguard medical records.

North America continues to offer unparalleled opportunities for the right New Zealand companies— in particular the food and beverage, renewable energy, marine and ICT sectors.

South of the border there are also some rich opportunities.

“The poster child for growth and opportunity right now is Brazil, which reported record economic growth of nine percent in the first quarter this year,” says Mager. “The Brazilian government has made a monumental commitment to improve the country’s infrastructure and communications to prepare for hosting the Summer Olympics in 2016 and the FIFA World Cup in 2014. This commitment creates a fertile ground for New Zealand companies willing to navigate what can be complex regulatory and distribution systems. The potential rewards are vast.”

Across South America, New Zealand agritech companies are continuing to identify profitable ways to leverage their expertise and cutting-edge technologies.

Chile is an especially appealing country combining a well organised market with a stable, transparent government and economic system. Particular opportunities include the agritech sector, renewable energy, waste management and earthquakeresistant construction.

“Remember,” says Mager, “more than 900 million consumers make the Americas a powerhouse of wealth and opportunity. There is a business climate and investment opportunity for every globally minded New Zealand company.”

Closer to home

New Zealand’s fastest growing major export markets in the year ending December 2009 were China (43 percent, to NZ$3.62 billion), Singapore (28 percent), Egypt (25 percent), United Arab Emirates (18 percent) and India (16 percent). South East Asia and India represent a combined economy size of more than US$2,469 billion dollars (World Bank, 2008). Currently, three of New Zealand’s fastest growing trade markets are in this region (Singapore #2, India #4 and Vietnam #10).

Perhaps nothing shows how market conditions can change more than the ousting of Japan as one of New Zealand’s top three trading partners, a position it has held since the early 1960s. Exports to Japan declined 22 percent to NZ$3.6 billion in 2009. It’s an abrupt decline since the high-water mark of NZ$4.1 billion in 2001, reflecting Japan’s prolonged recession and fluctuations in the value of the New Zealand dollar in the interceding years. The good news is that the Japanese government is looking to find a way out of the recession by boosting exports.

New Zealand Trade Commissioner for Singapore Ziena Jalil points to the island nation state as being a great place to trade or set up an initial beachhead.

“Singapore is an obvious hub for New Zealand companies looking to grow into Asia. There is a wealth of opportunity to make the most of Singapore’s business-friendly climate, supported by several government-driven incentives. New Zealand companies can also partner with Singaporean businesses to leverage their extensive networks, experience and knowledge of doing business in the region.”

It makes sense, says NZTE regional director south/South-East Asia Alan Koziarski, to match a particular sector opportunity with a particular country. “Across South- East Asia and India, for example, there is a growing demand for innovative products and services in the aviation industry, an area where New Zealand is already very active. We’re also seeing regional demands for clean technology, food supply chain modernisation and ICT.”

In one sector alone the impact can be dramatic. China overtook the United States to become our leading partner in the dairy trade. Our dairy exports to China increased by as much as 72 percent to NZ$978 million from NZ$521 million in 2008.

China’s appetite for Kiwi exports is being driven by the country’s strong secular growth combined with massive stimulus packages. China’s economy expanded by 8.5 percent in 2009 as a massive NZ$852 billion stimulus package announced in November 2008 cushioned the impact of the global economic downturn.

China’s robust economy not only provided a shot in the arm for New Zealand but also helped our trading partners in emerging Asia. Several of these economies, which also have China as a major trading partner, bought more New Zealand exports in 2009. Exports to Singapore rose 27 percent from 2008 to NZ$1.1 billion, Hong Kong saw a 17 percent rise to $794 million and Taiwan saw a 13 percent rise to $79 million.

BNZ’s Brett Walters has no doubts that South-East Asia, particularly China, is where New Zealand exporters should focus their efforts. Just returned from Shanghai, he says that infrastructure and retail spending are phenomenal. There is a huge demand for good quality products and Brand New Zealand is something many Chinese recognise.

“New Zealand is seen as country capable of producing quality products. Consumers know us and react well to some of our quintessential values—of being down to earth, clean, fresh and forward thinking. There is no question that the engine room of global growth is in this region.”

Then there is India. Even though it has made an art form of British-style bureaucracy, it is an alluring export proposition. With a population of more than 1.2 billion, India is one of the world’s largest economies and is undergoing a period of significant change and rapid growth. Even during the recession, growth has been over five percent and is projected to soon return to the nine to ten percent it has been over most of the past decade. The GDP forecast for 2011 is 7.8 percent and the New Zealand Government is in the early stages of crafting a free-trade agreement.

More than most countries, New Zealand exporters looking at the Indian continent should come prepared with a five-year plan says New Zealand’s Consul General and Trade Commissioner in Mumbai, Gavin Young.

“They’re not going to become rich on their first trip, but they need to build relationships and in a number of cases invest in building the market. For example we see a real opportunity for New Zealand in aviation services. Working with other New Zealand companies, such as is happening through Aviation New Zealand, is a way of creating credibility while developing your own business. Indian companies can also become great partners to help take products or services to a wider market.”

Across the ditch

With good reason, Australia is New Zealand’s number one trading partner. Proximity is a factor, as is the fact New Zealand goods are given preferential treatment and generally can enter Australia duty free. There are also no currency restrictions or visa requirements.

Many Australian regulations are the same or similar to New Zealand’s and the perception of New Zealand products and services in Australia is generally very positive, especially in the wine, biotech, information and communications technology, fashion, screen production and marine sectors.

Australian consumers are increasingly influenced by value, brand awareness and innovation. Many New Zealand exporters have moved away from trying to compete on price to providing innovative products.

But remember, even though the Aussies may seem like us, they’re not. And you’ll need to approach the region in manageable chunks rather than trying to bite off the whole continent.

Turning adversity to advantage

Our export story is built on turning adversity to advantage. In the 1870s, New Zealand faced a quandary. The country had built wealth literally off the sheep’s back but in the mother country, demand was low. With an expanding population, what they really needed was food—particularly meat.

New Zealand was capable of producing canned meat but not many places salivated over salty mutton.

Enter the age of refrigerated meat. The Australians were the first to try: the Northam sailed from Australia to the UK in 1876, but the refrigeration machinery failed en route and the cargo was lost.

Later that year chilled beef was sent from the United States to Britain and although spoilage was high, this voyage provided some encouragement to the antipodean promoters of refrigeration.

The Dunedin (1876–82) was the first ship to complete a truly successful transport of refrigerated meat. Fitted with a Bell Coleman refrigeration machine, its success helped set the stage for New Zealand’s success as a major provider of agricultural exports.

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