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Slow steam ahead

2010 has been another tough year for Kiwi exporters – so how is 2011 shaping up? Ruth Le Pla asks leading export commentators for their predictions, and profiles four Kiwi export businesses who didn’t let the GFC slow them down.
First up, apologies if some of this sounds a bit woolly. Tough markets and mixed conditions don’t make for great headlines. Truth is, though, 2010 has so far served up an unappetising blend of market conditions for many exporters. They’ve had to contend with sloppy target market economies, unexpectedly hazardous conditions on the home front and some lumpy exchange rates.
This time last year there was tentative talk of an export-led recovery. Now, when NZTE chief economist Gareth Chaplin mulls over this year’s export backdrop he’s talking ‘tough’, ‘slow’ and ‘faring reasonably well’.
“It’s a really mixed story,” he says. Our key consumption markets are recovering more slowly than they – and we – had hoped, Chaplin points out. And issues like trade finance and working capital are still front of mind for many exporters.
On the plus side, international commodity markets are helping keep our export stats afloat. Prices for both dairy products and logs are holding up: we’ve been getting lucky as Russia restricts its log exports. And we’re exporting a fair bit of coal and oil at the moment.
“In summary,” he says, “in a very tough trading environment we’re doing alright – but we need our markets to recover.”
Catherine Beard echoes many of his comments. As executive director of Export NZ, she gets a bird’s eye view of the ups and downs of export life. Sitting in her central Wellington office she hands over a chart tracking the export stats for basic manufacturing and elaborately transformed goods. The wavy lines paint a mixed picture: a nice upwards curve until round about the first quarter of last year, then a swift swoop downwards as the global financial crisis struck home. Only around February or March this year has that downturn bottomed out.
“We’ve been recovering ever since,” she says.
Like Chaplin, Beard sees some positive signs on the horizon. The monthly BNZ - BusinessNZ PMI (performance of manufacturing index) serves as an early warning system around activity levels in the New Zealand manufacturing sector.
“A couple of key indicators are good,” says Beard. “Manufacturing has been quite flat but employment and new orders are improving.”
These indications dovetail with comments at a series of ExportNZ CEO Forums held in Auckland, Christchurch, Dunedin, Tauranga and Wellington in the last two weeks of August.
“A key comment made – and I think it’s quite a good commonsense one – about employment was that businesses that are concerned about the future are taking on new staff,” says Beard. “Getting skilled labour is always a potential barrier to growth, so people are starting to recognise that once the economy picks up there will be labour shortages again.”

The global viewpoint

At the big picture level, Trade Minister Tim Groser continues to plug New Zealand into the Asia-Pacific’s increasingly important – and complicated – network of free trade agreements.
It’s tempting for small exporters to let such niceties pass them by. But, in the absence of progress at the World Trade Organisation’s Doha Round, these are the deals that will lock us in, or out, of the growing spider’s web of partnerships in the region.
This year there’s been nothing to match the gob-smackingly big free trade deal with China but there’s still been plenty of action.
From January 1, 2010, when the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) swung into force, trading eased between Kiwis and business people in Australia, Brunei, Malaysia, Myanmar, the Philippines, Singapore and Vietnam.

Prime Minister John Key recently jetted off to Hanoi, Vietnam, to tell other East Asia Summit delegates he’d like them to join up to AANZFTA and make it a 16-country deal.
We’ve now got separate two-way agreements with Malaysia and Hong Kong. We’re talking with the South Koreans and have just concluded the third round of negotiations on a deal with India.
Looking further afield, we’ve locked in a deal with the six Gulf Co-Operation Countries and we’ve kicked off talks with Russia.
Significantly, the US recently announced it will participate fully in the Trans-Pacific Strategic Economic Partnership Agreement. If, and when, this goes ahead it will be the first agreement between countries that span from Asia, through Oceania, to the Americas.
As the working year grinds to a close and the summer sun starts shining through, some commentators are putting a more positive spin on the mixed economic signals that exporters have faced in the past 12 months.
As BNZ chief economist Tony Alexander writes in a recent report: “General business confidence has lifted along with employment and investment intentions. Perhaps signalling that many are putting the winter behind them, looking at their balance sheets, and thinking maybe the time is coming to get more actively positioned for better growth beyond simply trimming expenses.”

 

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