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Swanning into new markets a myth
Monday, 02 April 2007

Well, New Zealand seems to have found a simple way to cure its balance of payments problem.

In fact it’s so simple it’s hard to understand why we didn’t think of it before. All we need to do is establish half a dozen new sister city or strategic alliances in good commercial hubs globally. If you can get $500 million from each of the six you net around $3 billion, which is not far short of the 10 per cent needed to cover our present current account deficit.

And at minimal cost too: just a few business class tickets and a couple of nights in a hotel, and there you have it.

If only life were that simple and business could be so easily transacted internationally. The reality is that whilst sister city and strategic alliances may have some value, they produce nothing like the sort of returns that were glibly talked about recently after Auckland City councillors visited Hamburg. Indeed it is unlikely the entire New Zealand sister city relationships we have, produce anything like the dollar sums being bandied around.

What such talk does do, is belittle the efforts of the real exporters who are finding it very tough out there in the real world of gaining international business.

With a high dollar and intense competition from some low-cost countries, New Zealand exporters need real determination, good planning and exceptional marketing to focus on the real opportunities and bring them through from pie in the sky to hard dollars truly earned in foreign exchange.

In that regard the Reserve Bank’s obsession with stifling housing inflation and consequently telegraphing regular interest rate rises is holding the Kiwi dollar up beyond a reasonable tradable level. The latest interest rate rise (last March 8) will merely ensure the dollar continues to be high and put severe pressure on the export sector.

Right now we’re lucky that commodity prices are also high and might stay so for some time. But for many exporters the high dollar dramatically reduces profit margins and as a consequence, their ability to invest in new markets and develop an internationally competitive business. For that reason there needs to be urgent work on finding more than the single lever of the OCR (Official Cash Rate) to get the dollar back to more realistic levels.

The people really gaining from New Zealand’s present monetary policy are the proverbial Japanese housewives and Belgian dentist speculators who are literally laughing all the way to the bank.

New Zealand’s Export Year 07 is well underway with a mass of competing events and activities over the next few months which will give any aspiring exporter good opportunities to gain sound knowledge, network with peers and plan their business and marketing strategies for new markets.

You should look seriously at the market development grants offered by New Zealand Trade and Enterprise, and money is still available to assist you. The support they provide enables you to get into markets faster and deeper and so build yourself a more sustainable position quicker than would otherwise be the case.

Political grandstanding that implies it is ‘oh so simple’ to swan into a an international market and pick up multi million dollar business is not only a myth but does a complete disservice to the efforts of hard-working New Zealand exporters.

• Bob Walters is chief executive of Export New Zealand.