We are now very much in Export Year 2007. After a good break over the festive season it is time to start concentrating on just how we are going to improve our export performance.
Plenty has been written recently with very useful contributions from David Skilling at the NZ Institute who not only provided some clear analysis of our past preference, so providing a benchmark from where we can progress, but also made helpful suggestions on the way forward - the need to set targets.
With our current account deficit nearing the 10 per cent mark it is just as well government sees the necessity to pay more attention to the export sector.
There are some encouraging signs for business, and the increase of $33 million in the market development assistance scheme will certainly be useful and help another 400-500 exporters develop their export markets faster than otherwise would be the case. Applications are open from February 1, 2007, but you need to get in quickly as previously these schemes have been heavily over-subscribed.
In some ways this scheme is perhaps something of a stop-gap as government is clearly looking at introducing export market tax credits as part of the package under the Business Tax Review. This would be welcome as companies could then decide of their own volition to take advantage of tax credits, subject of course to possible audit, but it would save them the necessity of applying for a grant without any certainty of the outcome.
There are clearly good political reasons for a high concentration of activity in the wider Asia region, and for the long term New Zealand business will need to engage much more fully with Asia, and of course the giants of China and India. Whilst many businesses find that this region provides good products or components to import, we are struggling much more, with some notable exceptions, on the export front.
It is not that we can’t sell into these markets but it seems much harder to make the profit margins that are available in other markets. In comparison in the UK, Europe and of course the US, most New Zealand companies seem to be able to make good margins on their export business. Just why it should be so different in the Asia region is hard to get a grip on, but it is possible a combination of difficulty in understanding, distribution channels, the low margins they operate on and a real need to have feet on the ground in some form to provide the necessary market intelligence. For many of New Zealand’s SMEs, affording that in market presence is just not feasible given the size of their businesses.
That is where New Zealand Trade and Enterprise comes to the fore. Most exporters speak highly of the of market intelligence services they provide in offshore markets. David Skilling suggests in his latest report we should concentrate our offshore resources in three major regions of China, the US and Australia. Whilst there is undoubtedly a good case for strengthening our services in those markets it is really too narrow a view given the wide range of exported products and markets.
Export Year 2007 promises to provide a number of initiatives that will substantially increase the awareness and value of exporting. It will, however, only be the start of what needs to be a decade long push to change the attitude and aspirations of New Zealand companies in meeting the challenges of international business. It is essential we succeed over the long term to ensure we at least maintain and preferably increase our standard of living.
