Clarky's Comment - November 2014

This comment comes to you from China where I joined the official NZ business delegation to the APEC CEO Summit in Beijing 8 – 10 November. China hosted the event and its organisation was with the grandeur, efficiency and associated security arrangements that we have grown to expect from this great nation.

APEC comprises 21 countries of the Asia Pacific region. Cooperation talks amongst these economies have been on-going for 25 years so one of the first questions discussed was: is APEC still relevant? Although addressing that question occupied 45 minutes of some 1500 business and political leaders from the region, the one line answer that summed up the consensus view of its relevance was: "Consider where we might be now had we not had APEC." A plethora of mutually beneficial trade agreements as well as cross-border cooperation and understandings of each other's issues and positions have emerged from the quarter century of this forum.

Some key messages and implications for New Zealand businesses from the Summit are:

  • We are fortunate to be part of the Asia Pacific region. It is the most vibrant and resilient of all the regions of the world following the Global Financial Crisis.
  • There is strong support for reducing barriers to trade. President Obama came out strongly in support of concluding TPP, while China proposed a feasibility study into a Free Trade Area of Asia Pacific (FTAAP) that would effectively encompass a range of existing FTAs into an overarching regional FTA. There has been some NZ domestic opposition to TPP and free trade generally. This is misplaced. We will never sustain or improve our lifestyles and social support structures selling products to just 4.5 million Kiwis. Trade is the lifeblood of NZ. We have in our APEC neighbours 40% of the world population, 57% of global GDP and 44% of world trade. TPP may not suit all NZ businesses but it is hard to disagree with the statement from Michelle Bachelet, President of Chile that "A diamond with flaws is better than a perfectly formed pebble."
  • China will focus on stable economic performance and internal reform of its government to better service business needs. It will seek more resilience to global shocks by expanding its services sectors. China is planning to grow its trade and people-to-people relations with neighbours. Expect slower growth in China as the new normal, but still at 6% - 7% and from a higher base. Also expect China to move rapidly up the curve in terms of quality of products and services its domestic consumers demand. Our tourism sector will need to consider the quality of the NZ experience for Chinese visitors but should be able to get its fair share of the expected 500 million outbound Chinese tourists within the next decade.
  • Although three decades of double-digit growth has lifted millions from poverty in China, this has come at the expense of the environment. The global population is expected to expand by 2.5 billion by 2050. Fresh, safe food must be produced and transported to markets in a sustainable way. Business opportunities linked to safe food production, efficient supply chains and environmental protection are likely to emerge.
  • China will continue to invest in its own internal infrastructure and is developing considerable expertise in large scale infrastructure projects. President Xi Jinping announced US$40 billion contribution to help set a new Asia Infrastructure Investment Bank (AIIB). A major infrastructure project planned is the so-called Silk Road land and sea routes to connect across Asia to Europe.
  • A strong clampdown on corruption as an economic enabler was raised by Philippines President Bengio Simeon Aquino III. The significance of anti-corruption for business and investment decisions was endorsed by the CEO of Rio Tinto. The Philippines is an english-speaking nation that has been performing at 6.3% average growth between 2010 and 2013. NZ exporters would do well to pay attention.
  • The Secretary General of the OECD has some sage advice of key drivers of economic growth over the medium and longer terms:
    • education and skills development of the workforce
    • competition but appropriate regulation where needed
    • investment in infrastructure.
  • Advances in ICT and international data standards are key enablers of more efficient supply chains and smoother commerce across borders. How can we use this to advantage in the forestry sector?

My overarching impression from the Summit was a great deal of consensus that globalisation is here to stay and is a good thing. Although the Asia Pacific comprises nations that are at different stages of development we should still strive to cooperate regionally. The more we can gain understandings and cooperation in trade in goods and services and people –to-people contacts across borders, the better for us all.

Bird nest
In the afterglow of the 2008 Olympic games, the main stadium known as the "Birdsnest" is an impressive example of contemporary architecture and engineering and a popular tourist attraction. Six years on, Beijing hosted the 2014 APEC Summit where nations discuss what can be gained from economic, political and social cooperation.