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The Singapore-New Zealand relationship is very robust bilaterally. Singapore is one of New Zealand’s top-10 trading partners and investors.
Total two-way trade between the countries stands at $NZ2.5 billion with significant tourism and other services. Foreign direct investment is also strong: Singapore’s into New Zealand was $SGD2.36 billion in 2015 while New Zealand’s into Singapore stood at $SGD3.53 billion.
But consider: Singapore’s population is 5.8 million, New Zealand’s around 4.8 million. To see this relationship, healthy as it is, in isolation misses the greater value: New Zealand’s opportunity in ASEAN nations and the central role Singapore plays as a modern, open gateway for ASEAN - a region of more the 600 million people with GDP of USD2.5 Trillion.
"For both Singapore – where I now live – and New Zealand – where I was born – the regional opportunity dwarfs the bilateral one." David Green.
Billions
New Zealand marks 50 years of trade with ASEAN in 2017 and over the years the two-way trade relationships has grown from millions to billions.
When ASEAN was established in August 1967, it consisted of Indonesia, Malaysia, the Philippines, Singapore, and Thailand as original members. Countries to join the bloc later were Brunei, Cambodia, Laos, Myanmar, and Viet Nam.
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Statistics New Zealand’s International Statistics Senior Manager Daria Kwon recently said “Fifty years ago, we exported nearly NZ$16 million worth of goods to the five original ASEAN countries. That’s around NZ$160 million in today’s value.”
According to Statistics New Zealand, New Zealand’s two-way trade with the Association of Southeast Asian Nations (ASEAN) was $15.2 billion in the June 2017.
Goods and services exported to ASEAN countries totalled NZ$6.3 billion, and imports totalled NZ$8.9 billion. New Zealand’s trade deficit with the combined ASEAN countries was NZ$2.6 billion.
For both Singapore – where I now live – and New Zealand – where I was born – the regional opportunity dwarfs the bilateral one.
Singapore is a regional trade hub and a global financial centre, with the access and infrastructure to support businesses wanting a launch pad into the ASEAN region. Many global MNCs and regional corporates run their Asia Pacific activities from Singapore for this reason. And this opportunity will be amplified for New Zealand businesses by the New Zealand-Singapore Enhanced Partnership, currently being negotiated.
This is significant step forward since the bilateral trade agreement - New Zealand's second and Singapore’s first - was originally signed in 2000 between these two open economies.
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Enhanced
Our ASEAN economist here at ANZ, Ng Weiwen, says the enhanced partnership will see New Zealand leveraging Singapore as a gateway for its agricultural exports into Southeast Asia while there should also be an increase in our bilateral cooperation in research, technology and innovation, and other sectors where we have complementary strengths.
But I would make a broader point: the idea our relationship springs from a bilateral one to a regional one vastly greater in scale is not just about this particular new agreement. I think the broader value of Free Trade Agreements in general can be overlooked.
It is understandable and all too easy for business, particularly smaller businesses, to miss this opportunity.
It’s not just what’s in a FTA that creates value for businesses. These agreements also expand an awareness and prioritisation of the opportunities. The recently signed Singapore-Australia Comprehensive Strategic Partnership has demonstrated this, with the significant increase in engagement and proactive interest that has followed its announcement and the initiatives it seeded. Businesses tend to look too narrowly into what’s in the actual agreement.
What might these broader opportunities be? Consider ethical consumerism, a rapidly emerging markets segment. Proof of origin is part of the value customers attribute to the products they purchase and consume.
There is a high-value end of the consumer market in this region and businesses are missing out on the premium by not leveraging their brand as these consumers become more sensitive to food quality and safety standards.
Exports
New Zealand’s exports to ASEAN New Zealand’s exports to ASEAN have grown strongly over the past 25 years, at roughly 10 per cent a year on average.
Food and other agriculture products account for around 80 per cent of New Zealand’s goods exports to ASEAN – dairy alone represents 55 per cent.
New Zealand’s share of ASEAN’s overall agriculture imports is just 3 to 4 per cent but this share has been broadly stable over time and, as described earlier, is in contrast to Australia’s share which has been falling.
Looking forward, New Zealand appears well placed to benefit from increased demand for food and agriculture from ASEAN’s rising middle class.
ANZ’s baseline projections envisage New Zealand’s share of ASEAN’s soft commodity exports rising modestly by 2025.
Growth in soft commodity exports of nearly 5 per cent a year on average is projected over that period, taking New Zealand’s agricultural exports to ASEAN to around $US5.5 billion from a little more than $US3 billion in 2013.
This seems eminently achievable and the fact near-double digit growth has been recorded for some time, faster growth than our baseline may occur.
Assuming New Zealand records similar growth in non-agricultural exports to ASEAN (which it broadly has in the past) ANZ’s baseline projection is for total exports to the region to rise to around $US7 billion by 2025.
Values
The regional opportunity for Singapore and New Zealand builds on culture and values as much as supply and demand. The two nations are like-minded in their approach towards open trade and global connectivity.
Despite this, the global trading landscape and the way business is being done have changed significantly since the Singapore-New Zealand Closer Economic Partnership was originally signed.
With globalisation taking steps in the reverse direction it’s important for both countries to forge ahead in strengthening business linkages and promote increased two-way investment.
By upgrading the existing agreement through the New Zealand-Singapore Enhanced Partnership, the two countries will look to step up collaboration in the areas of trade and economics, security and defence, people-to-people links and research, technology and innovation.
The way in which they take these significant steps forward in their relationship will set an example of integration in the Asia-Pacific region.
David Green is CEO, Singapore and Head of South East Asia, India & Middle East at ANZ
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
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Singapore: New Zealand’s open gateway to ASEAN
2017-09-12
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