High performance exportsWhere is the growth coming from in the export sector? Catherine Beard has been tracking the numbers.Exports have been growing across all manufacturing subsectors, except wood and paper. High tech manufacturing grew by 17 percent compound annual growth rate to 2006, but slowed to two percent CAGR from 2007-11. This is because the […]
High performance exports
Where is the growth coming from in the export sector? Catherine Beard has been tracking the numbers.
Exports have been growing across all manufacturing subsectors, except wood and paper. High tech manufacturing grew by 17 percent compound annual growth rate to 2006, but slowed to two percent CAGR from 2007-11. This is because the sector took a hit from the global slowdown in demand following the GFC; both international and domestic demand has been much flatter.
2011 saw a surge in growth in exports of processed foods (driven by infant formula, nutraceuticals and innovative foods) and high tech manufacturing.
In the food and beverage sector, the Ministry of Business Innovation and Employment (MBIE) undertook a programme of research to predict which sectors had the potential to be the next equivalent of the wine industry.
Twenty categories were identified, (see table above right). Together, New Zealand exports of these 20 categories in 2010 were greater than the wine industry (US$845 million vs US$774 million); and most of these categories are growing faster than all other food and beverage exports. Seventeen out of 20 of the identified growth segments have already attracted foreign and/or private equity investment, indicating that the market itself has identified that these present strong opportunities for growth.
If all 20 categories achieved their potential we would be looking at exports worth between US$3.5 and US$5 billion – that is, up to approximately US$4 billion in additional exports.
Commercial services exports
In addition to manufactured food and beverage exports, the export of commercial services (a category excluding education services and tourism) has been creating a ripple of excitement in policy circles in Wellington.
This is partly because they now have a better statistical breakdown on what is happening commercial services exports.
Commercial services exporters (computer services, engineering, royalties and licence fees, accounting and legal services, management fees between related parties and merchanting) has grown at an annual average rate of 8.3 percent over the 2005-2011 year period, from $2.5 billion to $4 billion to June 2011.
Merchanting, for those who don’t know, is where a New Zealand enterprise buys goods overseas and then on-sells to another overseas party without the goods ever coming to New Zealand. This is increasingly common in global supply chains.
The top three commercial service exports include computer services; architectural, engineering and other technical services; and advertising, market research and public opinion polling. These service types accounted for a third of all service exporters.
The dominant way that commercial services are being provided to overseas customers is via the Internet, email or phone (85.8 percent). This underlines the importance of fast broadband and the competitive provision of providers from New Zealand to the rest of the world.
Services exports are mainly destined for Australia, North America and the UK.
Manufacturing is increasingly inclusive of a service offering, and those firms that do have both streams of income tend to grow faster and be more productive.
While we may be able to overcome some of the tyranny of distance from our markets with an increase in our services exports; we could still do with a larger domestic population to grow larger companies with scale and the ability to tackle export markets with a bigger balance sheet. .
Catherine Beard is executive director of ExportNZ.