Auckland, March 26, 2019
Strong institutions underscore the growing of the global economy and are of special relevance to small countries like New Zealand, a top bureaucrat has said.
Treasury Secretary and Chief Executive Gabriel Makhlouf said that stability, certainty, rule of law, well-functioning markets and peaceful political processes help to create supportive conditions for investment and employment and ultimately an improvement in wellbeing.
“It is in everyone’s interest for nations to pursue strategies and policies that uphold stability, not undermine it,” he said, addressing a meeting of the New Zealand India Trade Alliance held at the office of PricewaterhouseCoopers on Tuesday, March 26, 2019.
An expert on national and international finance, Mr Makhlouf sketched the international trade sector, stating that the International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD) have lowered their growth forecast for the global economy, following a decease of high volatility and uncertainty.
“Recent events have served to focus that trend – the trade dispute between the world’s two largest economies, the US and China, potential tariff hikes in the US, China experiencing its lowest growth in nearly three decades in 2018 and Brexit uncertainty,” he said.
Mr Makhlouf said that New Zealand is taking a more productive and effective path, recognising the importance of building a resilient workforce with flexible skills, and that we should expect and enable the economy to adapt to change as it happens.
Trade with India surges
According to him, one area of the most positive changes for New Zealand has been digitalisation, with opportunities to sell services and deliver them to other countries in a fraction of a second, in addition to selling goods delivered in days or weeks.
He said this shift in trade from physical goods to services is very evident in the trade between New Zealand and India.
“Two-way trade was close to $3 billion in 2018, almost double what it was 5 years earlier. The value of goods and services we import from India are both around three-quarters higher than they were in 2013, now sitting at $709 million and $248 million respectively,” he said.
He said that during the same five-year period, the combined value of New Zealand’s goods and services exports to India doubled from $1 billion to $2 billion.
“Back in 2013, the majority of those exports were goods worth $669 million compared with $408 million worth of services,” he said.
Services Sector improves
But as of 2018 services have bolted well ahead, he said.
The value of goods rose slightly to $712 million, while the value of services more than tripled to $1.3 billion.
“Services account for almost the entire growth in the value of our exports to India in the last 5 years. The lion’s share of this has come from education and tourism. For many other areas such as ICT, logistics and financial services, there remains huge scope to raise the value of our services exports,” he said.
Mr Makhlouf said the potential opportunities in India are huge.
“New Zealand and India are both ambitious to grow their economies and enjoy the accruing benefits. India’s economic growth has been booming. It is currently the world’s sixth largest economy and Prime Minister Narendra Modi has expressed a hope that it will be within the top three in the next 15 years,” he said.
“It is a growing market of 1.3 billion people, and has an expanding middle class with a rising demand for quality goods and services that New Zealand can offer. Trade liberalisation between India and New Zealand would be in the interests of both countries.”
Progress of talks on a Free Trade Agreement is slow, he said, but was optimistic about the chances for progress in the multilateral negotiations on the Regional Comprehensive Economic Partnership (RCEP).
The 16-nation agreement will establish consistent rules and boost market access in southern and eastern Asia, a region containing 45% of the world’s population and covering 40% of world trade. Earlier this month all 16 countries, including India and New Zealand, agreed to intensify negotiations, resolve remaining issues and conclude talks by the end of this year.
Potential for growth
Mr Makhlouf identified Agriculture, Tourism, Education, High-quality Foods, Software, Engineering and Consultancy and Professional Services as areas with high growth potential for New Zealand in India and Aviation, Information Technology, Property, Biotechnology, Infrastructure, and Health and Eellness products as areas of involvement for Indian investors.
PwC hosted the event, with the support of the New Zealand Treasury, New Zealand Trade & Enterprise, New Zealand-Sri Lanka Business Council, Africa New Zealand-Business Council and British New Zealand Business Association.
Sunil Kaushal is Secretary General of New Zealand India Trade Alliance.