The Business Growth Agenda Progress Reports BUILDING: EXPORT MARKETS INNOVATION SKILLED AND SAFE WORKPLACES INFRASTRUCTURE NATURAL RESOURCES CAPITAL MARKETS Building Export Markets August 2012 2 Ministers’ Foreword We are pleased to present this progress report on the Government’s work to help grow New Zealand’s export opportunities and build sustained economic growth. Building Export Markets is the first of six progress reports on the Government’s Business Growth Agenda. It lays out the export challenge for New Zealand, the great opportunities we have, and the Government initiatives underway to help companies boost our export performance. The Government has an ambitious goal for New Zealand – to increase the ratio of exports to GDP from the current 30% to 40% by 2025. This will require a concerted effort to encourage investors to develop more internationally competitive businesses, in both the commodity and high-value technology-based sectors. Setting this goal ensures the Government remains focused on supporting the confidence and growth of our high productivity export firms. It is also clear that to lift the international profile of Kiwi exporters in international markets we need to better tell the ‘New Zealand Story’. Work is under way with key stakeholders on developing a compelling and consistent narrative about our country’s special qualities that work for a range of exporters and sectors. We want to see the ‘New Zealand Story’ used by the Government, its agencies and New Zealand businesses to build greater brand recognition and demand for our goods and services overseas. For exporters to be successful they need to be competitive. And to be competitive, companies need access to innovation, capital, skilled workers, resources, the supporting public infrastructure, and markets to sell their products. Making it easier for firms to access all six is the focus of the Government’s Business Growth Agenda. The Government has established six informal portfolio groups of Ministers, specifically grouped around the work streams, to drive the Business Growth Agenda forward and focus on what matters to businesses and companies. This progress report tells you where we are at in the Building Export Markets stream. We want your feedback to assist us in focussing our efforts. We encourage you to engage with the relevant Ministers and officials to give us your views on the programme. Nothing creates jobs and boosts incomes better than business growth. For New Zealand to build a more productive and competitive economy, we need more companies out there selling their products on the world stage. Export Markets Group of Ministers Rt Hon John Key Hon Steven Joyce Hon David Carter Hon Murray McCully Hon Tim Groser Hon Craig Foss Hon Bill English Hon Steven Joyce MINISTER OF FINANCE MINISTER FOR ECONOMIC DEVELOPMENT Hon Chris Tremain Hon Maurice Williamson Hon Dr Pita Sharples Business Growth Agenda Progress Reports | BUILDING EXPORT MARKETS 3 The Business Growth Agenda It is businesses that Growing competitive businesses creates jobs and increases exports to the world. Nothing creates sustainable high-paying jobs and boosts our standard drive economic growth of living better than business confidence and growth. and build a more Building a more competitive and productive economy for New Zealand is one of the key priorities the Prime Minister has laid out for this Government successful economy. to achieve. The Business Growth Agenda will drive this by ensuring the Government stays focused on what matters to business, to encourage confidence and further investment. There are six key ingredients that businesses need to succeed and grow. By focussing on these ingredients we will ensure businesses have the opportunity to lead economic growth. The six key areas in the Business Growth Agenda are: Export Markets Infrastructure Innovation Natural Skilled and Safe Resources Workplaces Capital Markets This is one of a series of progress reports each focussing on one of the six elements needed for business growth. These reports give a clear picture of the advances in each area of work and the projects the Government is focused on, both to provide transparency to businesses and to obtain feedback. The Government is holding itself accountable to the business community and to the public to achieve tangible progress. The new Ministry of Business, Innovation and Employment is working alongside other agencies to coordinate the agenda and ensure businesses can more easily access the advice and support from Government agencies they need to be successful. 4 Introduction New Zealand’s economic future hinges on growing our exports in a fast-changing and increasingly competitive global economy. Our success relies on competitive businesses successfully taking advantage of international opportunities. To help give businesses an edge internationally and grow our economy the Government is working with business to lift the volume and value of our exports. We will ensure the rules, regulations and policies – both here in New Zealand and in key markets offshore – promote exports; and we will assist New Zealand firms to better leverage the value of the ‘New Zealand brand’ for export success. Business Growth Agenda Progress Reports | BUILDING EXPORT MARKETS 5 Building export markets is central to building a more productive and competitive economy and is clearly linked to the Government’s other strategic priorities: Building a more productive and competitive economy Responsibly managing Rebuilding the Government’s Christchurch finances Delivering better public services within tight financial constraints In a challenging global environment it The Government sector represents about It is essential a vibrant and dynamic is incumbent on us to deliver ongoing one third of our economy. Continual Christchurch continues to play its part in macroeconomic stability and provide a solid improvement in the delivery of public our nation and economy. This includes its and predictable foundation for businesses. services will lift the productivity of the contribution to New Zealand’s exports, both The level and volatility of the exchange whole economy. The Better Public Services from the region’s commodity base and its rate is clearly a critical factor for exporters. programme will also improve the services high-tech and manufacturing businesses. Getting the Government’s accounts back the Government directly provides to into surplus is the most direct contribution exporters – such as border services, the Government can make to lifting national regulation and assurances, and market savings and reducing upward pressure on intelligence. interest and exchange rates. 6 Business Growth Agenda Progress Reports | BUILDING EXPORT MARKETS Export Markets matter New Zealand is not going to get rich by selling to itself. The small size of our domestic market constrains New Zealand businesses’ growth. The ability of businesses to sell their goods and services to customers in overseas markets is critical. It enables New Zealand businesses to access a larger market. Businesses are then able to benefit from economies of scale, and to specialise in areas they have an advantage in. Connections to international markets also allow us to access resources, knowledge and ideas that can boost our productivity and stimulate innovation. These global connections are even more important for a geographically small and remote country. Increased exports and international linkages are therefore critical to lifting New Zealand’s productivity and economic growth. OECD research suggests that a 10 percentage point increase in trade openness – the share of exports and imports to GDP – lifts GDP per capita by 4%. The evidence also suggests that firms that are more efficient and productive are more likely to export. This highlights the importance of “building a more productive and competitive economy”. To succeed in a dynamic global economy we have to improve New Zealand’s productivity and competitiveness so that our businesses have a great platform from which they can compete successfully in the global market. More successful businesses based in New Zealand means more and higher-paying jobs for New Zealanders. Export markets and an export-focused economy are the path to a more prosperous future for all New Zealanders. Business Growth Agenda Progress Reports | BUILDING EXPORT MARKETS 7 State of the Play The volume of global trade and the range of goods and services traded have increased enormously over the last 40 years. New Zealand has successfully diversified our export markets and products: 12.1% NORTH14.3% ASIA EUROPE 10.6% 1970 10.7% 49.1% 2011 20.9% CHINA12.3% NORTH AMERICA 8.2% 1.2% In 1970 Europe took 49.1% 3.5% …in 2011 Europe took of our total exports and 2.2% MIDDLE EAST only 12.1% and North 1.9% SOUTH 9.4% North America 20.9%… America 10.7%, as we have EAST ASIA2.4% expanded our markets SOUTHERN & 3.1% CENTRAL ASIA 22.7% into Australia, Asia, the 3.3% Middle East, and Africa PACIFIC 8.7% AUSTRALIA SOUTHTHE AMERICA CARIBBEAN & We have extended our export profile from our traditional is complemented by a strong niche manufacturing sector in agricultural base of wool, meat and dairy to include resource-based and high-tech areas; and services exports – horticulture, wine, forestry, fisheries and aquaculture. This tourism, education and, more recently, commercial services. New Zealand has been an early and successful mover in negotiating of our exports go to Exports to since our FTA countries with which we China have