If New Zealand wants to diversify its trade with China, then the ten ASEAN countries will become an important market. However, commercial realities, especially for value-added products, will be challenging | Instant News

In recent years, New Zealand has become increasingly dependent on China as its most important market. Main reason, I wrote about last month, has become a natural alignment of trade interests. New Zealand has what China wants and vice versa. However, the level of dependency now causes anxiety.

The irony is that the alignment of New Zealand’s trade with China is influenced by the perceived need to diversify away from traditional markets. Some people predict that the solution might become a new problem.

Now, once again looking for more diversity, where is the new road going?

The idea that a new road, like the old one, must still lead to Asia should not be controversial. Europe and America do not need most New Zealand products. Most Africans cannot afford it. So yes, the main focus is Asia.

I’ve written before about Southeast Asia as a logical place to start the search. Japan, South Korea and Taiwan together comprise around 200 million people. They have higher incomes than most of the Asian region. Apart from China, they have become the economic power of Asia for the last forty years. New Zealand also has long-standing relations with these countries.

The big problem with Japan, South Korea, and Taiwan is that even before COVID-19, they experienced a decline in low growth modes. Also, they have already experienced a decline in population (Japan) or will do so (South Korea and Taiwan). Therefore, finding a new market in an already urban society will be a challenge.

Closer to New Zealand, there are 10 countries in ASEAN. Traveling roughly from north to south, these countries are the Philippines, Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia and Brunei. Their combined population is more than 750 million, about half of which is China.

ASEAN countries have their own internal free trade agreements. More importantly, since 2010, New Zealand has had a collective trade agreement even though it is not perfect with ASEAN.

According to the Statistics Department of New ZealandNew Zealand’s exports to ASEAN countries were $ NZ7.6 billion in 2019, up from $ NZ6 billion in 2014. The dominant item was dairy products of $ NZ3 billion followed by ‘travel services’ of 1.2 billion. Other main physical products are fruit and nuts for $ NZ322 million and meat for $ NZ220 million.

At various times, I have been assigned to work in these seven ASEAN countries. They are indeed very different countries with different histories and cultures. But they are all in the tropics. As a result, these are countries that will always struggle to produce dairy products, beef and lamb. Also, they are not a good place to grow kiwifruit, apples, pears and grapes.

Here I focus on the four largest countries in terms of population. They are Indonesia (273 million people), the Philippines (109 million), Vietnam (97 million) and Thailand (70 million).

All of these countries experienced rapid increases in GDP before COVID-19, usually between four percent and seven percent each year, with Thailand the lowest and Vietnam the highest. However, all four remain relatively low-income countries with a combined GDP with an official exchange rate of around US $ 2 trillion, with about half being produced by Indonesia. On the basis of the same exchange rate, New Zealand has a GDP of around US $ 200 billion while China has a GDP of around US $ 12 trillion.

The first main message in these figures is that the four ASEAN countries have a combined economy 10 times greater than the economy of New Zealand. The second comparison is that their combined economy is roughly one sixth of China’s economy.

The initial stages of economic development in these countries become clearer when GDP is expressed on a per capita basis. The Philippines and Vietnam each have a GDP per capita of less than US $ 3,000, with Indonesia around US $ 3,600, and Thailand around US $ 6,500. In comparison, New Zealand has around US $ 40,000 and China around US $ 8500 of GDP per capita.

These figures illustrate that the spending power of ASEAN citizens to buy New Zealand products, especially those with added value components, is very limited. Also, with the exception of Thailand, these countries are the generation behind China in terms of citizen spending power.

In making this comparison, I deliberately used the official exchange rate rather than purchasing power parity. This is because exports must be paid in US dollars at the official exchange rate. If I try to compare living standards as a whole, I will use purchasing power parity, which will make these developing countries look somewhat more prosperous.

Another consideration is population growth. The story is a spectacular change, with Vietnam perhaps the most striking.

Back in 1950 when Vietnam struggled to expel France, Vietnam’s population was around 25 million. By the end of what the Vietnamese called the American war in 1975, the war had risen to 49 million, with 15% of the population aged less than five years. In 1990 it increased to 68 million but soon after that restrictions were put in place, with the right behavior socially to have a maximum of two children. One of my Vietnamese colleagues in a project was demoted from his position as a responsibility for having a third child, but he considered it valuable, and did it intentionally.

For the time being, Vietnam’s birth rate has fallen below two children per woman and hence the population pyramid is now reversed. However, the birth rate now returns to levels close to 2.1. According to UN projections, Vietnam’s population will reach around 110 million by 2050, about 13% higher than now.

Conversely, the Philippines has been slower to reduce birth rates, with this being associated with a predominantly Catholic Christian population. I remember working on a project there in the late 1990s when the population was 70 million. However, the women still have around four children. I think it is inevitable that even if this figure is quickly reduced to around 2.1 children, that it has been ‘roasted’ that the population will increase to around 140 million. At present, the number is 109 million. With births per woman still around 2.6, the population will surely surpass 140 million by 2050.

Indonesia has reduced its birth rate faster than the Philippines, but their population is still destined to increase by another 20 percent by 2050. In contrast, Thailand has had a low birth rate for more than 30 years and will have a stable but aging population. for the next 20 years.

Bringing together all these attributes, it is clear that the main ASEAN countries are open to New Zealand for business. Some people, like Vietnam, specifically want to strengthen their alliance with the West as a countermeasure against China’s long shadow. However, the stages of economic development in all major ASEAN countries are not compared to China. Therefore opportunities to sell value-added products to wealthy consumers are far more limited.

The result of that conclusion is that the past decade has been extraordinary in terms of opportunities opened up in China. The search for comparable opportunities in the next decade outside China must still continue. We have not found that opportunity.

* Keith Woodford is Professor of Agricultural and Agribusiness Management at Lincoln University for 15 years to 2015. He is now a Principal Consultant at AgriFood Systems Ltd. He can be contacted at [email protected]. Keith’s previous COVID-19 article was available here.

image source

to request modification Contact us at Here or [email protected]