Exporter Issue 10

ISSUE 10 MARCH QUARTER 2009

EXPORT OPPORTUNITIES ON EVERY PAGE

In search of better loan rates > Govt gives exporters money, then take some back > Staked your home for the business? Ask for housing loan rates! > When demand shrinks, hedging exposes you to high risks > New Trade Minister Tim Groser’s game plan

When you are exporting cargo across the seas, it’s important to be insured by people who know the industry.

That’s why it makes sense to choose Vero Marine. We are New Zealand’s largest specialist commercial cargo insurer, providing tailored policies and exceptional claims service for businesses of every size.

BIG/VER472/EX

Vero Marine’s entire business is geared towards understanding the needs of exporters and importers. We maintain strong relationships within the global shipping community and a worldwide claims network ensures that – no matter where your cargo is – we can get you on an even keel again quickly and with the least possible disruption to your business.

Port

Our innovative products, such as E-certs (instant insurance certificates available online) are created especially to make life easier for exporters. Add to that best of breed marine policies written to fit your business and it’s easy to see why so many exporters enjoy smoother sailing with Vero Marine.

For more information, contact your insurance broker or adviser, or visit www.veromarine.co.nz

BIG/VER472/EX

Starboard

ISSUE 10 MARCH QUARTER 2009

COVER STORY BANKING/FINANCE In search of better loan rates: Some strategies to approach your banks

04

FEATURES BANKING/FINANCE Poles apart: Your house, your business loan rate

09

BANKING/FINANCE Throw out your customers’ old report cards, focus on their future

12

TRADE FINANCE NZ Export Credit Office reshapes product for exporters

16

INSURANCE Insuring for recessionary times: Keeping things water tight in the downturn

20

TECHNOLOGY Spam canned with software: Ring fence your company’s mailbox

24

INTERVIEW Fixing a not-so-great trading nation: An interview with Trade Minister Tim Groser

26

EYE ON GOVERNMENT Courting dragon & phoenix: Shanghai Expo 2010

MARKETING Wine lords link up to create new frontier for New Zealand wines

52

LOGISTICS Battle for Tauranga’s container business: The competition at Sulphur Point

57

REGULARS PUBLISHER’S VIEW / SAY IT LIKE IT IS Mike Taillie Letter to John Key

02

VIEWPOINT Daniel Silva Single border control agency anyone?

55 62

Alisdair Thompson Let’s get export aggressive

PRODUCTS Global Stage Innovative NZ products seeking a worldwide audience

30

31

60

PROFILE Kiwi marine safety product creates global attention

TRAVEL WISE Travel tips for the roving exporter

34

EYE ON GOVERNMENT Government dips into exporters’ promised purse to fund other needs

38

CURRENCY Hedging: Between Sylla and Charybdis

42

LOGISTICS Freight costs: Are you getting the best price for your freight?

46

UTILITIES Energy bill cutters: The need for tools to manage usage

49

Exporters’ Toolkit Products & services you should know about

19

DIRECTORY Useful Websites: Information for travellers and exporters

64

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EXPORTER 1

>PUBLISHER’S VIEW

Say it like it is mike taiLLie EXPORTER MAGAZINE / publisher@exportermagazine.co.nz

Photo: Dreamstime / Christopher Howey

Letter to John Key The cost of doing business in New Zealand needs to be the lowest among the OECD countries so that the return to business owners is as high as possible.

d

ear John It is times like this that the tough needs to get going.

Having spoken to thousands of tourists, exporters and international buyers over the last 15 years, here is my 6-point plan which you should give a chance.

Announce that: 1. We will have the lowest corporate and personal tax rates in the OECD by 2015 (or as close as possible to this date) 2. Your government’s goal is to make New Zealand the safest place in the world to live and travel.

3. We plan to have the world’s finest education system by

2 EXPORTER

2020 benchmarked according to international standards.

4. Our judicial process will be the most expeditious in handling crime as well as commerce.

5. We will have the best health system in the world by 2020.

6. Our immigration service welcomes skilled people seeking to live and work in New Zealand. All applications will be processed within 20 working days – no exceptions.

Every action should be measured against global benchmarks with finite timelines. At some stage someone needs to get sick of the expression “for the long- term benefit”. This is just an excuse for “I don’t or cannot measure it”.

The cost of doing business in New Zealand needs to be the lowest among the OECD countries so that the return to business owners is as high as possible. Once this is achieved, people will want to live and do business with New Zealand.

Your government will need to reduce its non-productive spending.

For every dollar you do not spend, please return it to the tax payers.

Tax payers know what best to do with their own money. As you are fully aware, all government departments or SOEs will attempt to justify their own empires. It will take a willful cabinet to cut the huge fat endemic in the public service sector. [end]

If China is your market, we are the solution.

Importing and exporting can be complicated. But with our help, it needn’t be. To succeed you’ll need to work with people who understand the market and culture. Through the ANZ network, you have your own select group of international bankers right there for you, with access to on the ground operations in Shanghai, Beijing, Guangzhau and Hong Kong. Build your export or importing network faster by utilising ours.

For more information, and for a conversation about how ANZ can help your business plans in China, phone Iain Leech 09 374 4934.

ANZ, part of ANZ National Bank Limited AZA0146

> BAnKIng/FInAnCE

In search of better loan rates

4 EXPORTER

The global credit crunch has forced banks to toughen their lending criteria.

Cost of business loans have yet to fall as much as housing loans and businesses have to work extra hard to sell the viability of their business as they try to gain new credit or extend credit lines.

BY V IRg InIA MCMILLAn

a

re banks helping firms survive the global trade downturn by lending at lower interest rates?

In an Exporter magazine online survey that attracted 109 responses, nine exporters said they had achieved little or no result after talking with their banks about lower interest rates. Eight reported success.

Security and cashflow loom large over any discussion between exporters and their banks. Trade credit is harder to come by (see story on NZ Export Credit Office, on page 16) and, to access the cheapest funds, equity in a home appears necessary (see “Poles apart – your house, your business loan”, on page 9).

In the Exporter poll, many businesspeople said they were in negotiations with their banks to access better rates.

Business interest rates haven’t fallen as quickly as residential rates, Kiwibank head of PR Bruce Thompson

acknowledges. As banks see it, there are extra risks in lending to business.

Nevertheless, ANZ National says it chopped a total of 3.25% from its base rate between July 2008 and February 2009. Says Thompson: “Our [business] rates are falling along with falls in the OCR, but they are not as closely related to the OCR as is residential lending.”

Kiwibank’s base business lending rate was 9.95% as the magazine went to press.

Banks will discuss the pros and cons of moving from a fixed rate that now seems too high, onto to a lower rate. If it’s not prohibitive, the “break” fee can be added, by negotiation, into the new loan. Banks explain the size of these fees by saying that they, too, get locked into their funders’ rates at particular times.

James Mitchell, head of relationship banking and financial services at ASB, says the bank seeks payment of “the cost to us of closing out at the time requested”. Particularly when the difference between the previous and new rate is considerable, paying the fee is often false economy and firms

KEY TAKEAWAYS > Keep the bank up to date with issues affecting cashflow, outgoings and forecasts. > Banks look at security, serviceability and business owner/manager expertise. > On loan expiry, seek a lower interest rate. illustration: istockphoto / Elena Lishanskaya

> Ask the bank exactly how it calculates any “break fee” required to change early to a lower rate. > In most cases the break fee is likely to be uneconomic. > If viable, break-fee repayment may hurt less if embedded into new loan. > Consider negotiating a period of interest-only repayments. > Consider seeking longer loan term to spread repayments. > Analyse the business’s credit-card usage – this is an expensive form of borrowing.

EXPORTER 5

our [business] rates are faLLing aLong with faLLs in the oCr, but they are not as CLoseLy reLated to the oCr as is residentiaL Lending.”

surviving difficult times • reduce your vulnerability

bRuC e T h ompson / Ki w i ba n K he a d of p R

• fix what you know you should instead wait for expiry. As Kiwibank’s Thompson emphasises, business interest rates depend on an individual firm’s circumstances. “A lot of businesses shop around, telling several banks ‘these are my circumstances, these are my lending arrangements’.

The bank competes strongly for good business.”

At Westpac, general manager for business banking Ian Blair says firms can now access some of the cheapest money ever seen.

There are factors pushing the other way, though. HSBC New Zealand’s head of corporate banking, Brent Malcolm, points out that the overall interest payable by a company is, more than ever, “being impacted by the increasing cost of funds that the banks themselves are faced with”. shrinking CapitaL Malcolm adds: “This is a worldwide industry phenomenon and is representative of the reduced availability of capital.”

Blair explains: “We haven’t changed our credit criteria; we do at the moment take account of constraining in the environment and the fact that the risks are greater than they were 12 months ago.”

Craig Haycock, head of BNZ Partners, says “access to funding” is the most common feedback BNZ is getting at the moment. “As part of the relationship, we want to talk about the business’s successes and its pressures. One of these topics is around interest rate and interest-rate risk management – that means not just price but how long to lock down for so that the business can have some security.”

Many businesses have moved to, or are seeking, floating loans as they anticipate rates haven’t yet hit bottom. taLk to the banks Like many bank leaders interviewed for this article, Haycock is encouraging businesspeople to approach the bank to discuss how they’re doing in the tougher market.

Westpac’s Ian Blair’s advice is always to reduce as many variables as possible,

6 EXPORTER

one of these being interest-rate costs.

He says financially distressed firms can move to interest-only for a short time, “or we can push out the term of amortisation to allow relief on cashflow”.

Exporter spoke to one company, with a turnover of $5 million-$6million, that recently obtained an additional $2.5 million short-term loan. This will fund the purchase of a rival and cover a temporary gulf between a large payout to suppliers and a seasonal wait for payments (to be banked at favourable exchange rates).

The company put up all the owners’ personal and business assets as security. They felt comfortable the business could support the repayments but, at an interest rate of 12%, this was a long way above average housing rates.

Auckland engineering company Jasan Warwick Bowring (JWB) has had a year of turnover at half the level previously enjoyed. Its bank has declined new lending and told it to live within existing facilities.

Director Grant Bowring says JWB has made some staff redundant and

• monitor and set targets • keep a close eye on operating costs • Lower your debt levels • preserve cash • free up cash • monitor your cashflows • tighten credit lines • tighten debt collection • Combat inertia Source: National Bank. For the full solution guide, visit: www.businessresourcecentre.co.nz

can lead to further cashflow constraints on exporters.”

Mitchell, of ASB, says when difficulties showed up in the December 2008 quarter, the bank began having more discussions with firms “as to what we could do, what they could do and how we could restructure debt to extend credit”. “The sooner we understand the issues, the sooner we can try to do something. Often, it’s too late and there is very little room to move.”

The two most common strategies to provide leeway, says Mitchell, are temporary excesses on overdraft and a

the two most Common strategies used by businesses to Cope with tighter CashfLow are temporary exCesses on overdraft and a period of interest-onLy Loan repayments. rationaLising Credit-Card usage is another foCus.” Ja me s miTC hell / asb’s head o f R elaTio nship banK ing and finanCial seRV iCes

shortened others’ hours, developed new products, and chased several large offshore orders that are now close to fruition. On interest rates between 11% and 14% – and with turnover not covering fixed outgoings – the company has been delaying payments to suppliers to survive and is looking to alternative lenders.

Trade credit would be an option if the offshore contracts were confirmed. struCtured produCts When export market liquidity becomes constrained, many clients move to more structured products, says HSBC’s Brent Malcolm. “We also see offshore buyers looking for extended supplier credit terms which, if not managed properly,

period of interest-only loan repayments.

Rationalising credit-card usage is another focus.

Banks emphasise they still have money to lend. ANZ National last month announced $4 billion in new lending SME and rural businesses this year, adding lending would be for sound and viable businesses. It included working capital to help with cashflow, and would assist export businesses, the bank said in a statement. [end] VIRGINIA McMILLAN / WRITER Virginia is a freelance journalist specialising in business and health stories. She has worked as a reporter, sub editor and editor and as assistant editor at The Independent.

International services to help your business soar around the world

Kiwibank has your business banking needs covered, both here and overseas. We’ve partnered with Citibank, N.A., the bank with the largest international branch network in the world. This means your business will get the international accounts and services you need, from foreign currency accounts to bank drafts and telegraphic transfers. So you can rest assured that just like your local business banking, your international business banking will be taken care of.

Kiwibank Business Banking. Call 0800 222 490 or visit www.kiwibank.co.nz/business-banking A fee applies for telegraphic transfers and bank drafts. Kiwibank’s Disclosure Statement is available from your local Kiwibank or at www.kiwibank.co.nz. Kiwibank Limited’s terms and conditions apply.

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EXPORTER 7

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Photo: istockphoto / Carsten Madsen

> BAnKIng FInAnCE

Poles apart – your house, your business loan Putting up your house up as a security for money to fund your business? Don’t be surprised banks are not all that eager to offer you cheaper loan rates as they consider business risks under a completely different light.

BY V I Rg I n I A MC MI L L A n

g

rant Bowring has watched in frustration as home-mortgage interest rates plummet to below 6% – while double-digit interest plagues the export company where he is an owner-director.

Auckland engineering firm Jasan [subs note: correct] Warwick Bowring has its lending secured by residential property, but has seen no benefit from recent falls in the official cash rate (OCR) or in home-loan interest rates.

Banks report that they have passed on some of the recent OCR reductions in cuts to business interest rates.

Reserve Bank data show that on average the base rate, which applies for new business loans, fell by just

0.6 percentage points between July 2008 and January 2009. This compares with a 3.71 percentage-point fall for the average floating first-home loan (see table on page 10).

Bowring says his bank hasn’t eased up on the company’s loans, one at 11%, the other at 12%. Its overdraft was costing 14% at the time of writing.

In an online survey, only 14 of 109 respondents told Exporter their business was secured by a home that allowed them to borrow at home-loan rates.

Aucklander John Seccombe, an international fishing and aquaculture consultant and equipment specialist, points out that having the home as security is the norm for small business.

Seccombe’s company Aquahort recently negotiated new lending with

KEY TAKEAWAYS > Business lending rates are significantly higher than home loan rates. > Banks regard business assets as riskier than property. > The more equity in the home, the greater its value as security for a business loan. > Strong equity in the home can achieve a lower interest rate on a business loan.

Kiwibank, with a home as security and at an interest rate within 0.5% of the housing rate.

ANZ National says 80% of small

EXPORTER 9

Home & business loans – poles apart interest rate trends July 2008 to february 2009 (Percent per annum) Variable first mortgage housing rates

Base lending rates (for new business loans)

July 2008

10.90

13.85

August 2008

10.89

13.90

September 2008

10.40

13.80

9.71

13.79

november 2008

8.75

13.59

December 2008

8.05

13.25

January 2009

7.19

13.25

February 2009

6.77

13.04

October 2008

Source: Reserve Bank of New Zealand. As of March 3 2009

business owners use residential mortgages to finance their businesses and are enjoying the significantly lower rates in the home loan market. But many exporters put up their homes as security and pay what they see as business rates. abiLity to serviCe Kiwibank frames its lending considerations around serviceability, says the bank’s head of PR, Bruce

Thompson. “If you have a large amount of equity in property, that gives some lending options,” he says.

Bear in mind residential values have fallen in most districts lately, however.

“The value of the property and the amount of equity is important, but the critical issue for us is serviceability.

Can the business afford to service the loan and, if one or more circumstances were to change, how would it affect the serviceability?”

At Westpac, general manager for business banking Ian Blair says: “For those with a large amount of equity in the house, it will lead to a lower rate than if they are using [as security] the general position of the business.” high risk, higher rates The head of BNZ Partners, Craig Haycock says: “Where the house is the major asset, sometimes the majority of the loan is aligned to a residential housing rate-type offering.

“If the business has a higher risk, or risk beyond the security of the house, we can offer to have a look at other [lending] products, reliant on the balance sheet. The rates will be higher.”

Security in the form of goods on the water or stock in the warehouse, for example, is riskier than property, says Haycock. “We look at the overall risk of the deal and the overall strength of the business. It drives how we set the lending up and how we price it.” [end] VIRGINIA McMILLAN / WRITER Virginia is a freelance journalist specialising in business and health stories. She has worked as a reporter, sub editor and editor and as assistant editor at The Independent.

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> BAnKIng/FInAnCE

Throw out your customers’ old report cards,

focus on their future Making sure you don’t end up with massive bad debts is a must in this economic environment. What services are out there to help provide credit checks on your customers? What are some of the fundamental questions you need to ask before you seal your trade with a foreign party you have never dealt with?

he global credit crunch is about to drain liquidity from many exporters’ customers around the world. Before the dirt hits the fence, it pays to be extra vigilant when extending credit terms to old or new customers.

Forking out some money to renew information about your customers can be worth the investment to avert bad debts. Timely and accurate credit decisions are critical to any business’ success, says John Scott, general manager of Dun and Bradstreet.

And exporters cannot rely on information that is three months old when evaluating a customer’s risk, says Tim Robertson of the New Zealand Export Credit Office. A past arrangement that’s worked very well can change as the firm you are doing

12 EXPORTER

KEY TAKEAWAYS > This is a time to be especially vigilant about who you extend credit to. > Credit risk assessment service providers can help exporters manage their credit risk. > Consider the Four Cs character, capacity, capital and conditions. > Letters of Credit ensure that payment is secured in advance of sending goods.

business with may be feeling the effects of the current economic situation.

So, what services are out there to help provide credit checks on your customers? What are some of the

fundamental questions you need to ask before you seal your trade with a foreign party you have never dealt with?

Credit risk assessors Cameron Gordon, international manager at the Auckland Chamber of Commerce points to the services of credit risk assessors. “Credit risk assessment service providers can help exporters manage their credit risks when making international transactions. “For a fee these services providers will provide a snapshot of the exporter’s customer’s financial situation.”

According to Gordon, credit risk assessors such as Veda Advantage (http://www.vedaadvantage.com) provide their clients with registration details about the requested company, previous enquiries about the company and adverse credit information about the organisation.

Photo: istockphoto / Judson Lane

T

BY VA L L E V E S O n

A typical company credit report you can expect • Confirm registered company name and previous names • Identify the registration number • Access director details • View incorporation date • Shareholding • Registered office • Details of all registered documents • Analyse adverse information on the company over the past 5 years: – Court judgements Photo: istockphoto / Judson Lane

– Payment defaults – Collection actions – Public notices • View previous enquiries • Known company affiliations (Source: www.vedaadvantage.com)

Level of information How much do credit assessors charge?

Scott says prices for credit assessment services range.

According to D&B’s customer services line, pricing for exporters depends on what country the company being checked is, not the country of the checker. For example, a credit check in the United States, Canada or Australia is $350 plus GST, for the European Community countries it’s $437.50 plus GST. The detail of the report depends on the laws of a given country – for example, in Canada and US, financials don’t have to be made publicly available, so it’s possible that when asked, a company could refuse to provide it. If that’s the case, financials won’t be in the report. The report includes things such as shareholder information, whether there have been court judgments in relation to the company, how they pay clients, do they export/import, among others.

The following services outlined in the D&B website only apply to New Zealand and Australia. You can get information on Australian companies on a one-off basis or as a subscriber, but some of the services are only for subscribers.

If you want a D&B report on a one-off basis for an Australian

14 EXPORTER

Exporters cannot rely on information that is three months old when evaluating a customer’s risk. A past arrangement that’s worked very well can change as the firm you are doing business with may be feeling the effects of the current economic situation”.

T im Robe rtso n o f the New Zealand Ex po rt Credit Office

company, you pay $612.50. What you pay as a subscriber depends on your subscriber plan, but it goes from $472.50 downwards (depending on your subscriber plan). The D&B website says the D&B Report is recommended for medium to high-risk decision. This report provides detailed information, from identification details through to financial stability and payment predictors. The report also provides analysis of a company’s long-term operations, credit history, profitability and stability.

The NZCO (New Zealand Companies Office) extract provides real-time access to information from the NZCO. The quickest tool for spotting credit risk before shipping to a new customer is the Commercial Bureau Enquiry. The Payment Predictor Report includes D&B’s Dynamic Delinquency Score (DDS) to give you an insight into payment patterns – will you be paid on time?

D&B’s Payment Analysis Report offers details on past payment behaviour and expected future performance. It also features industry comparisons. This costs $131.25 plus GST for Australia as a one off.

The Dynamic Risk Score Report is statistical modelling to “measure the probability of a business experiencing financial distress in the next 12 months.”

It also looks at the risks in the industry as a whole. eLimit Report gives direction for establishing the right credit limits or credit lines.

Four Cs In its Straight Talks Guide, D&B talks of the Four Cs you need to look at when making a credit decision – they are character, capacity, capital and conditions.

Get a sense of the character of the business and its principals – what is the experience of the management team,

how long have they had control, who is the owner, what is their background.

Look at a company’s capacity to operate productively on a day-to-day basis – in smaller businesses, principals often wear many hats and that could dilute effective management.

The capital – the financial ability of an organisation to meet its obligations in a timely fashion should always be analysed, looking at the conditions of the times can be vital.

Analyse the big picture – overall conditions in the industry and country could have an effect on a company’s financial ability and hence, ability to pay.

Gordon of the Auckland Chamber of Commerce says an option to mitigate the risk is export credit insurance. “This is provided by an insurance underwriter that will perform credit checks on buyers, and charge the exporter an appropriate premium to offer coverage against bad debts.

“When private insurers are unwilling to insure exporters’ goods, exporters can consider contacting the New Zealand Export Credit office http:// www.nzeco.govt.nz/about,” he says.

(For more on the NZ Export Credit Office, see article on page 16).

the d&b report is reCommended for medium to high-risk deCision. this report provides detaiLs inCLuding a Company’s finanCiaL stabiLity, payment prediCtors, anaLysis of a Company’s Long-term operations, Credit history, profitabiLity and stabiLity.

SOURCE: Com panY w ebsiTe hTTp://dnb.Co.nZ/

get the trade terms right Another option, says Gordon is ensuring secure terms of trade by using Letters of Credit.“A Letter of Credit is a document issued by the importer’s bank cementing its commitment to honour a draft, or otherwise pay, on presentation of specific documents by the exporter within an outlined period of time.

“The most common type of credit in international trade is the irrevocable credit, which cannot be modified or cancelled without the approval of both the importer and exporter. Letters of Credit ensure that payment is secured in advance of sending goods. Exporters should seek advice from a banking specialist about their customer’s nominated bank to ensure the LOC is legitimate and safe.”

Gordon points out that building rapport with a new customer is key to ensuring that issues of

non-payment are avoided. “One of the major challenges for New Zealand exporters, compared to exporters in Europe for example, is New Zealand’s geographical isolation.

“Instead of dealing with customers from afar exporters should make every effort to get to the market that they want to sell in to meet personally with potential customers both to initiate customer relationships and to maintain them.

“A healthy relationship will ensure that both New Zealand exporters and their customers feel secure with arrangements,” Gordon says. [end] VAL LEVESON / WRITER Val is an Auckland based sub editor and freelance writer who covers career issues, technology and business trends. She has worked at the Northern Advocate in Whangarei, the Manawatu Evening Standard in Palmerston North and The New Zealand Herald in Auckland.

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EXPORTER 15

> TRADE FInAnCE

NZ Export Credit OfďŹ ce

reshapes product for exporters The NZ Export Credit Office’s timely move of redressing its trade guarantee scheme will give exporters a much needed shot in the arm at a time when the cost of commercial trade credit insurance and bank trade guarantees are becoming costly and less forthcoming.

16 EXPORTER

BY V I Rg I n I A MC MI L L A n

a

small state agency is getting a bigger role in protecting exporters from risk of non-payment in the global downturn.

The Export Credit Office (NZECO) is entering small and medium-sized exporter territory now that its trade credit guarantees can include firms with normal terms of trade (for example, 30 or 60 days).

The issue got the government’s attention soon after the election and,

by February 4, Prime Minister John Key was making available $50 million more annually so that NZECO guarantees can include export orders and contracts on short-term terms of trade.

Previously, NZECO supported deals where the offshore client made payments over a period of more than a year. Now shorter time-frames also apply.

Transactions must be commercially sound, with creditworthy buyers in normally insurable countries.

NZECO assesses creditworthiness.

It will not support deals that the private sector is willing to insure or finance.

NZECO manager Carmen Moana says the message from OECD countries is one of falling global demand and delayed or cancelled orders. death of short-term trade Credit insuranCe Trade credit and trade credit insurance have been tightening globally in recent

credit insurers and banks to determine how we can offer them support directly.”

John Key acknowledges exporters are finding it difficult to get short-term trade credit. “This has made it very difficult for them to continue trading in some countries,” he said, announcing NZECO’s new product. “The result is that some Kiwi exporters, particularly small-to-medium exporters, have had to turn down export orders. That is unacceptable.”

This magazine’s online poll suggests few SME exporters have tried to obtain NZECO help; a handful of those who have, found it expensive or unsuitable.

There were others who intended researching the options.

Moana says because most exporters don’t offer terms of more than 360 days,

months, particularly in Europe. In some parts of the world, short-term trade credit insurance is “virtually non-existent”.

Late last year, as the financial crisis intensified, NZECO surveyed and talked with commercially sound Kiwi exporters, who confirmed restrictions were being felt here.

“The issues raised varied by sector, but the unifying thing was that they were starting to have concerns about trade credit insurance in particular and about their ability to go to the bank and get trade finance,” says Moana.

“With trade credit insurers extending less cover, banks are less willing to lend as there is no longer the security attached to it. This is why a key priority for NZECO is working with the trade

how it works nZeCo short-term export Credit guarantee direct to exporter (example)

er port

Ex NZ

Supply of goods/services

ign Fore

er Buy

Delayed repayment

Delaye Premium

Short Term Trade Credit Guarantee

u

CO

NZE

Source: New Zealand Export Credit Office (NZECO)

KEY TAKEAWAYS NZECO GUARANTEE Before applying, answer ‘yes’ to 4 questions: > Is the transaction commercially sound, with creditworthy buyers in normally insurable countries? > Is there evidence the private sector cannot provide support on commercially reasonable terms and conditions?

Photo: istockphoto / RichVintage

> Do the goods or services have at least 30% NZ value-added content? > Can the exporter show a proven trading history, and managerial, technical and financial capability?

nZeCo short-term export Credit guarantee confirms Letters of Credit (LC) to bank (example)

NZ

er port

Ex

Supply of goods/services

yer n Bu ank g i e For their b &/or

Letter of Credit

Acceptance of LC

Discounted Disbursements

K

BAN

Repayment over time

Short Term Financing Guarantee

CO

NZE

Premium

EXPORTER 17

this magaZine’s onLine poLL suggests few sme exporters have tried to obtain nZeCo heLp; a handfuL of those who have, found it expensive or unsuitabLe. there were others who intended researChing the options.”

there was no need for them to have dealt with NZECO. Since this year’s changes, she notes, enquiries are growing.

useful websites to find out about the new shortterm guarantees, go to: http:// www.nzeco.govt.nz/news/04feb09 more info: http://www.nzeco.govt. nz/news/products/tradecredit q&a: http://www.nzeco.govt.nz/ news/products/tradecredit/qanda List of trade credit brokers and insurers: http://www.nzeco.govt. nz/exporters/tradecreditinsurers

VIRGINIA McMILLAN / WRITER Virginia is a freelance journalist specialising in business and health stories. She has worked as a reporter, sub editor and editor and as assistant editor at The Independent.

Call us on 0800 276 7848 or visit www.nzpost.co.nz/export

R+R 20008

NZECO’s cover means it will pay 90-95% of the deal if the buyer defaults.

The short-term guarantee scheme is designed to last for two-and-a-half years while the present recession

It doesn’t matter what you export, where you export, how big or small it is, New Zealand Post can make it happen.

18 EXPORTER

Photo: istockphoto / Sascha Burkard

going direCt to nZeCo Exporters can apply to NZECO directly for a guarantee. Once approved, they can be assured of funds from the bank because NZECO is providing the security. Exporters pay a premium for the cover. They also must effectively “sell” the guarantee to the bank at a discount, in return for up-front payment of the working capital associated with the deal. The foreign buyer or its bank repays the bank over time.

Apart from going direct, an export firm can approach NZECO via its bank, with one option being getting NZECO (rather than the exporter’s own bank) to “confirm” the letter of credit provided by the offshore buyer’s bank. This is useful if a bank is unable to confirm because it has hit its limit in letters of credit with that country or that bank, says Moana.

unfolds. The new product comes after the previous government put up $100 million in new guarantee schemes for working capital extensions and contract bonds in a range of countries (NZECO’s original bond product is for US deals only).

Moana reports that these products, too, have attracted interest from SME exporters. [end]

traveL wise CO M P I L E D BY E X P O R T E R M AG A Z I N E W I T H T H E H E L P O F T H E I N T E R N E T Photo: istockphoto / Holger Mette

Dengue outbreaks

Photo: dreamstime / Holger Mette

There are now confirmed outbreaks of dengue fever in North Queensland, Australia (Townsville, Cairns, Port Douglas). Significant dengue fever outbreaks are also currently occurring or have recently occurred in many parts of the Pacific (Fiji, Samoa, Tonga, New Caledonia, Kiribati, Palau and Vanuatu), as well as countries in Asia and South America.

Mexico alert

Valid passport

Multiple forms of exchange When overseas, do not rely on a single form of money. For example, take cash, travellers’ cheques and a credit card. Allow enough to cover emergencies. Don’t keep all your money in one place.

Paper trail Before you leave for a business trip, make copies of your passport, insurance policy, 24-hour emergency numbers and ticket details. Carry one set separate from the originals and leave another set with family or friends.

IF YOU HAVE ANY TRAVEL TIPS OR SUGGESTIONS EXPORTERS SHOULD KNOW ABOUT, PLEASE EMAIL: EDITOR@EXPORTER.CO.NZ

(Sourced from safetravel.govt.nz)

Well before travelling make sure you have a valid passport. Many countries require you to have a minimum of six months validity on your passport for the duration of your trip. Make sure you have at least one clear visa page in your passport for immigration stamps. You should also check to see whether you require a visa to enter or transit the countries you will be visiting. You should make enquiries about this well in advance of your trip with the relevant country’s High Commission or Embassy. Failure to comply with any of the above may see you turned away at the border and consular officials cannot intervene on your behalf.

Travelling to Mexico? Mexico is now deemed a risky place to travel to due to recent violent crimes including armed robbery, drug-related crimes, kidnapping and assault.

There has also been a significant rise in drug-related violence, the most affected areas being the northern states of Mexico bordering the US, including the cities of Nuevo Laredo, Tijuana, Mexicali, CD Juarez, Matamoros, as well as the cities further south of Culiacan, Acapulco and Lazaro Cardenas.

Foreigners have been warned to stay vigilant although they are not the targets for drug-related violence. On 15 September 2008, two grenades were thrown into crowds during the Independence Day celebrations in Morelia in the state of Michoacán. Eight people were killed and another 130 injured.

The city of Oaxaca experienced civil unrest during 2006 and more recently during the Guelaguelta Indian Folklore Festival in July 2007. There remains potential for further disturbances in Oaxaca city.

Demonstrations occur frequently in Mexico and are not usually violent.

New Zealanders are advised, however, to avoid all protests, marches and public demonstrations and follow the advice of the local authorities. The Mexican Constitution prohibits political activity by foreigners and such action may result in detention and/or deportation.

New Zealanders travelling or resident in Mexico should have comprehensive medical and travel insurance policies in place that include provision for medical evacuation by air. New Zealanders visiting or resident in Mexico are encouraged to register with the Ministry of Foreign Affairs and Trade at https://www.kiwisoverseas.govt.nz/kos/kos.aspx

> InSURAnCE

Insuring for recessionary times One of the side effects of the economic downturn is increased exposure to risks ranging from non-payment to products damaged while in transit.

It pays to find a water-tight insurance policy before your goods leave your warehouse.

BY M A RY M AC K I n V E n

a

ripple effect of the current global recession is increased risk to business and therefore changes to their insurance.

Exporters need to reassess their insurance cover in light of decreased shipping worldwide, recommends Vero Marine Insurance’s underwriting and risk manager, John McKelvie.

His reasoning is this: fewer goods are being sold/shipped so fewer ships are sailing the east-west route that

20 EXPORTER

New Zealanders link into; the vessels are carrying more, which increases the amount of an exporter’s product in transit at one time, which means greater exposure.

And in this economic climate, banks are tending to require exporters to have trade credit insurance even for open account transactions, which rely on a promise of payment, says QBE Insurance (international) Ltd trade credit manager for New Zealand, Mike Kayes.

QBE has not changed its credit terms although the government’s New Zealand Export Credit Office (NZECO)

has extended its term (usually for longterm repayments of more than a year) to less than 360 days; private insurers like QBE generally require exporters’ customers to pay in 180 days.

The changes in the NZ dollar’s exchange rate also mean that exporters may need to reassess the value of their cover. It might have been US$20 million per vessel but needs to be raised to US$25-$30 million. no singLe business poLiCy There’s no such thing as a comprehensive single ‘business policy’.

QBE manager of corporate property insurance Allan Beverwijk puts it this way: “Insurance is like building a fence: you can go as high and as wide as you like, but the higher and wider you go, the more it costs. “Add the cost of insurance to your sale price,” Beverwijk says.

Photo: istockphoto / Jonathan Maddock

KEY TAKEAWAYS > The question to ask yourself is: “If such and such happens, what cover can assist me?” > Check if you need to reassess the value of what you have provided insurance cover for? > Terms of trade are key to deciding what cover you need at every step in the transaction, where your responsibility begins and ends for goods. > Ask your broker to help customise or create policies within a standard policy should you have more specific needs. > Insurance company websites have considerable policy detail. See www.nzeco.govt.nz for trade credit options, as well as private insurers’ sites. > Insuring in New Zealand provides easiest access to help for claims and avoids currency fluctuations.

Vero Marine Insurance’s John Mckelvie.

Insurance can be technical and complicated for exporters. “It’s a mind trap for newbies. You shouldn’t get into exporting, especially for online sales, without understanding insurance,” says QBE marine and product development manager Graeme Orchard. “You might want to start with a business adviser or a course run by Export New Zealand or the local Chamber of Commerce.”

But you shouldn’t need a lawyer to work through your policy contract – a good broker ought to be sufficient.

To work out what cover you need, look at your terms of trade. Depending on your sale terms (CIF, FOB or CFR) you will need to share some responsibly for loss and damage with your buyer.

Insurers can create a package of policies to suit.

In deciding what cover you need, McKelvie says the question to ask yourself is this: “If such and such happens, what cover can assist me?

Work out the risk and manage it.”

If you don’t freight much, a freight forwarder or customs agent or broker can handle the insurance for each movement of goods. it’s not my fauLt! To minimize risk and increase the likelihood of a successful claim, exporters must ensure goods are packaged correctly, documentation is accurate and all correct steps are taken.

Beverwijk says it’s wise to have a post shipment survey where, someone checks your consignment every time it arrives at a new point in transit, so the

EXPORTER 21

Pictured from left to right: QBE’s Graeme Orchard, Allan Beverwijk and Mike Kayes.

cause of any damage can be known.

Photographs help.

If your cartons are wet but there is no leak in the warehouse roof, they must have got wet on the ship – or was it while they were on the tarmac in a hub?

The computers inside might be fine, but your customer does not want wrecked packaging. It’s your insurer’s job to figure out who the culprit is and get reimbursement.

If the warehouse burns down, the buyer of the computers probably has the risk for loss of goods (as their owner) but if he hasn’t paid the exporter, the latter could be out of pocket without trade credit insurance (which can be incorporated in some marine policies).

Even whole containers have been known to go missing, such as meat containers during the Balkan wars.

And as QBE marine and product development manager Graeme Orchard says, there are a multitude of law differences between New Zealand and other countries, making export insurance requirements incomparable with cover for domestic trading.

McKelvie says eight years after a shipment of high quality New Zealand skins and hides to Korea and China was wrecked when the boat was grounded in the Sea of Japan, the matter is still in the court system. And because a large chunk of the New Zealand industry output was on that ship, replacing that loss meant that hides and skins suppliers from other countries supplied these markets and regaining those markets proved to be an uphill battle.

He says to stick with your insurance company even if you gain a claims history. Building up relationships helps expedite the process. [end] MARY MacKINVEN / WRITER

eight years after a shipment of high quaLity new ZeaLand skins and hides to korea and China was wreCked when the boat was grounded in the sea of Japan, the matter is stiLL in the Court system. meanwhiLe nZ industry Lost its market share.”

Jo h n mC KelV i e / V eRo ma Ri n e ins u Ra nC e ’ s u nd e RwRiT ing a nd Ris K ma nag e R

Mary has reported news for 20 years including as sole writer and editor of Business to Business monthly newspaper in Auckland, NZ, for six years. Now she combines freelance journalism with part time writing at a business association in Auckland.

Helping your business to navigate the foreign exchange markets If you would rather spend more time on your own business than having to deal with managing your foreign exchange, give the specialists at HiFX a call.

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To speak to a member of our commercial team, please call:

09 306 3700 Alternatively, email info@hifx.co.nz or visit www.hifx.co.nz

HiFX holds an Australian Financial Services Licence (AFSL) in both NZ (AFSL No. 240914) and Australia (No. 240 917) and are regulated by the Australian Securities and Investments Commission.

22 EXPORTER

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Don’t waste precious time and effort on paperwork and bureaucratic processes.

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> T E C H n O LO gY

Spam canned with software Over 120 billion spam emails are sent out daily. Finding a way to ring fence your company’s mailbox from these insidious mails can be done using free software.

The problem is finding a user-friendly free software.

24 EXPORTER

BY ST E VE H ART

w

hile your internet service provider may pick up the vast majority of spam sent to your email address, having a second line of defence – such as your own anti spam software – can be worth having.

Figures from the Department of Internal Affairs show that more than 120 billion spam emails are sent every day – of which 0.1 % originate from New Zealand.

Sam Sargeant, chief technical officer

at ISP and web development company Modica Group, says more than 80 % of all emails are spam. And while internet service providers stop the vast majority of them getting to your inbox, around 10% can slip through the net.

“Running your own spam filter can give you a bit more control over seeing what has come through,” he says. “It is certainly good practice to check your quarantine folder on a regular basis to see if the filer has put something in there incorrectly – we call it a false positive.

“Spam filters are pretty good, but it

KEY TAKEAWAYS GOLDEN RULES TO STOP SPAM > Never reply to spam.

Replying to spam merely shows that your address is valid and that you read your mail - in other words, that you’re just the type of target the spammer is looking for. The only guaranteed outcome of your reply is that the spammers will send you even more spam. > Never use “remove” options in a spam.

Using the “remove” option in a spam is like replying, but is even worse because it shows that you have actually read it thoroughly - the “Holy grail” of spam. Using a remove option highlights you as a perfect spam target and will turn the relatively gentle shower of spam you’re currently getting into a deluge of truly biblical proportions. > Distrust everything.

Simple common sense should tell you that if something looks too good to be true, then it probably is. Don’t be gullible: if you receive mail that offers you something and you don’t personally know the sender, then you should assume the worst about it. Applying a little basic scepticism to everything you receive isn’t paranoia - it’s a healthy survival instinct.

that there is a risk their email will be sidelined into a spam folder and so – if they don’t get a reply – are learning to call and not assume their email has been purposely ignored.

People who want to report receiving spam can contact the Department of Internal Affairs for help under the Unsolicited Electronic Messages Act 2007.

On the other side of the coin, businesses can’t now email people to promote their products without risking falling foul of the Act – unless their email falls into one of three categories.

It is illegal to spam people with emails or text messages unless the recipient has expressly agreed to receive them, inferred that they want them or run a business that is likely to want to buy your products. Faxes and phone calls are not covered by the Act. [end]

Source: www.stopspam.net.nz

useful websites

llustration: istockphoto / Russell Tate

can happen. It’s also advisable to check the quarantine folder on your ISP’s account using the webmail option.”

He says business owners who are worried they are missing out on ‘good’ emails should see if they can receive a weekly email listing everything in their spam folder – until they are satisfied the filter is working to expectations.

For those who want to install anti spam software on their computers, there is a wide choice says Sargeant, including some free options.

“It can be a bit hit and miss with off the shelf software,” he says. “They each use different methodologies for detecting spam.”

Among the types of anti spam software are simple programmes that look for key words in emails, such as ‘Viagra’, and place these in a special folder on your computer. Other programmes are more sophisticated and learn to distinguish spam from other emails by the computer user ‘teaching’ the programme what to look for. free options Two free options are email programs Thunderbird and Macmail.

“They have built in anti spam support that can learn what a spam message is – when one comes in you click on a button and say ‘this is junk mail’,” he says. “Over time these programmes learn the trends and dump those types of emails the next time they arrive.”

Sargeant says there is plenty of open

source anti spam software available.

“But it’s not all user friendly,” he says.

“If you are not running Thunderbird or Macmail – and you want a nice easy turn-key solution – then you’ll have to pay for commercial software.

“Generally though Thunderbird, when you’ve trained it a bit, will do a fairly good job of cutting out the spam.”

Sargeant says the problem with spam, like computer viruses, is that it is a moving target. As soon as anti spam software is updated to identify a new type of spam, so the spammers alter what they send to get around them.

“When you buy anti spam software you want to ensure you can update it with a free subscription or free updates – forever,” says Sargeant. “Spammers – most of whom work abroad and so are not bound by this country’s anti spam laws – change their messages to beat the filters.” phishing emaiLs Sargeant also recommends people install software that picks up phishing emails. Phishing emails look like they come from an authentic source, such as your bank, and ask you type in your passwords. Or they include secret programs that install themselves on your computer when you open the email.

“These emails are like spam but their purpose is to help someone get access to your money,” says Sargeant.

He also says senders understand

www.mozilla.com/en-US/ thunderbird/ www.dia.govt.nz or www.dia.govt.nz/diawebsite.nsf/ wpg URL/Services-Anti-SpamIndex?OpenDocument

Choice of pC protection software mcafee internet security $100 (see: http://au.mcafee.com) norton internet security 2009: $100 (see: http://symantec-norton. com/– select new Zealand) trend micro internet security pro: $130.00 (see: www.trendmicro. com.au) kaspersky internet security 2009: $97(see: www.kaspersky.co.nz) Other products are also available.

Most programs are sold with a free one year subscription and then users pay to keep them updated.

Writer’s note: A search of the internet reveals dozens of free anti spam and phishing programmes to download.

But readers are advised that they download, install and use any software at their own risk.

see: www.netsafe.org.nz

STEVE HART / WRITER Steve has been working as a news reporter and journalist for more than 20 years. He left APN in 2007 to work as a freelance reporter covering employment, careers, business, technology and digital photography.

EXPORTER 25

> InTERVIEW

26

Fixing a not-so-great trading nation New Zealand’s new trade minister Tim Groser debunks the myth about New Zealand being a small but great trading nation. He says our export as a percentage of GDP is below our peers and we desperately need to grow the sector.

BY V irg i n ia Mc Millan

T

he new trade minister is accustomed to walking the halls of power in world capitals and talking up the importance of global trade unfettered by subsidies.

A former New Zealand chief negotiator in WTO debating chambers, National’s new appointee, Tim Groser, also knows intimately the state of international trade talks affecting this country.

Groser says he sees his two main responsibilities as: to negotiate fresh opportunities for New Zealand; and “to support every positive deepening of productive effort and getting new companies involved in exporting”.

Chasing bilateral, regional pacts Despite recent failures in multilateral free-trade talks, he says a formula to allow a deal is close at hand. The deal will eventually come, but he can’t predict when.

Meanwhile, a long list of bilateral or regional trade agreement possibilities, some nearer fruition than others, are set to have the wheels oiled by his involvement – although he doesn’t play politics by criticising the former Labour government’s work or boasting that he’ll do it better.

He expects to be a hands-on minister, regularly having exporters with him on trips abroad.

“That is the most important thing for New Zealand I can do right now,” he

says. “I will be … developing targeted trade missions over the next two years to make sure New Zealand products and business are well represented overseas, as well as identifying new markets and opportunities.”

In India recently, he had early success in the “unbelievably difficult” task of persuading the Indian trade minster to open negotiations The Association of South East Asian Nations’ arrangement to align trade with Australia and New Zealand – eliminating tariffs on all key items of interest to New Zealand – is now a “done deal”.

The government also aims to advance the single economic market agenda with Australia, which focuses on harmonising statutory frameworks.

Groser is a huge fan of New Zealand’s first trade deal, the closer economic relationship with the Aussies.

He sees trade agreements as crucial to enhancing our exports. “This government is absolutely committed to this agenda.

EXPORTER 27

i wiLL be … deveLoping targeted trade missions over the next two years to make sure new ZeaLand produCts and business are weLL represented overseas, as weLL as identifying new markets and opportunities.”

Ti m gR os eR / mi n i sT eR of T Rad e

faCt fiLe: tim groser born: Perth, Scotland Migrated to new Zealand: 1958 education: Victoria University, Wellington Career: Policy adviser, Treasury, Ministry of Foreign Affairs and Trade, Prime Minister’s Advisory group; new Zealand’s chief negotiator, gATT Uruguay Round; new Zealand’s ambassador to the WTO; chair of agricultural negotiations, WTO entered parliament: 2005 as national list MP portfolios: Minister of Trade, Minister of Conservation, Associate Minister of Foreign Affairs, Associate Minister for Climate Change Issues (international negotiations)

“Our top priority is economic growth and trade is absolutely essential to it.”

He’s relieved New Zealand hasn’t yet had a dramatic fall-off in export sales.

“Our exports are holding their own surprisingly well – they only started [being eroded] in the December 2008 quarter. While I don’t expect that [strength] to continue, in some countries such as Taiwan ... it has been catastrophic. “Things are going to be tight and difficult but we are holding up OK. We cannot be quite as optimistic into the future, but there is no reason to panic.” kiwi woes He cites data, however, that paint up our problems: New Zealand is 13% poorer than lame-duck Tasmania and 87% poorer than rich-kid Western Australia.

80% of departing Kiwis are under 40 and 24% of our tertiary qualified people live overseas (“we are losing our best, brightest, youngest and most entrepreneurial”).

New Zealand’s exports are 30% of GDP, compared with the 54% average for 15 similar countries.

All this adds up to a big-picture imperative to lift our export drive:

28 EXPORTER

“It’s frighteningly important to New Zealand,” Groser says.

Solutions include boosting wages and productivity growth, where the government’s infrastructure and broadband release projects can help.

Amid recession, there are “a number of things the government can do to keep the show on the road”, he says.

One is the expanded export credit guarantee (see story on page 16).

“That gives quicker access to unorthodox, government-led trade finance, which is codified common sense. We’ll continue to monitor the situation and make judgements accordingly.”

Groser also says PM John Key has “made it clear we can’t throw money away to make political points”, because of the burden on future generations.

“We know government debt will go up … It’s important to provide strength [to the productive sector]… but you have to be careful.”

as groser sees it “our long term challenge is to get on a sustainable economic trajectory.” “new Zealand is the worstperforming small, developed country. So the idea of new Zealand as a small but great trading nation that I grew up with, is a myth.” “i don’t know how long we can carry on ‘bleeding’ people [deserting our shores]. we have to offer a vision that will inspire them to return.” “[A China trade deal] is fundamentally important because in the coming 10-year period we will have access to 24% of the world’s customers.”

right areas, and duplication of effort minimised and the compliance burden reduced.

“We need to work to ensure that the science and business communities co-ordinate to create business opportunities from scientific research.”

Asked what government might do for this country’s manufacturers sector, he points to offshore manufacturers

tim groser’s reLieved new ZeaLand hasn’t yet had a dramatiC faLL-off in export saLes. “our exports are hoLding their own surprisingLy weLL – they onLy started [being eroded] in the deCember 2008 quarter.”

private seCtor must Lead So he’s not committing to new spending. He wants “encouragement” for private effort to drive New Zealand through the recession so that it’s ready to thrive in the recovery, but he elaborates no further.

Many exporters were disappointed when tax credits on research and development spending were ditched.

Groser wants businesses to do more R&D to extend their competitive advantage; possible government assistance with this, he says, is a matter for his Cabinet colleague Bill English.

On the wider issue of R&D across both the state and private sectors, he wants more bang from bucks spent.

“It is important that we promote greater co-ordination between businesses, CRIs, tertiary institutions, research agencies and funders to ensure that R&D is targeted to the

and exporters declining, opening up opportunities for New Zealand businesses. “There is a need to rebuild our skills base along with our R&D capability… “(The government’s) focus is on developing our manufacturing base to take advantage of the opportunities presented by the decline of our competitors.

“We will ensure that the infrastructure, logistics and supply-chain capabilities are in place to capitalise on growth when it returns and fill the niches left by the departure of our global competitors.” [end] VIRGINIA McMILLAN / WRITER Virginia is a freelance journalist specialising in business and health stories. She has worked as a reporter, sub editor and editor and as assistant editor at The Independent.

This is not the disaster This is just the beginning. The disaster will continue for months to come. A burst pipe allowed chemicals from your business to escape into a nearby waterway. Now you have to deal with the clean up and cover your legal fees defending a Resource Management Act prosecution, not to mention the costs for testing and expert witnesses, as well as any resulting fines should you be convicted.

QBE0070_EXP

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> E Y E O n g OV E R n M E n T

Photo: istockphoto / Robert Churchill

Courting dragon & phoenix:

Shanghai Expo 2010 Fed up with the Chinese scamming your products or still intrigued by the prospects of an ancient kingdom with over a billion people? Will Shanghai Expo 2010 deliver new markets for Kiwi products?

KEY TAKEAWAYS > Shanghai Expo 2010 will be held in Shanghai from May 1 to October 31. > New Zealand exporters can host their Chinese contacts at the New Zealand pavilion hospitality and meeting facilities by prior arrangement with NZTE. > The New Zealand presence is likely to cost more than $30 million. > A total of 70 million visitors are expected to visit the 5.2km Shanghai riverside site from May to November. > For more information and contacts check out: www.shanghaiexpo2010. nzte.govt.nz or contact mike.pattison@nzte.govt.nz. > NZTE are looking for private sector sponsors for the pavilion although the cost will be mainly government funded. > Overall theme: “Better City, Better Life”. New Zealand pavilion theme: “Cities of Nature, Living Between Land and Sky”.

BY LO UIS E B LO CKLEY

w

orld Expos began in style at London’s Crystal Palace in 1851. Historically New Zealand’s presence at the five-yearly extravaganzas has been intermittent but we are fully committed to our new-best-tradingfriend’s show – Shanghai Expo 2010.

Commissioner General for New Zealand at Shanghai, Phillip Gibson, refers to Kiwis as “expo pragmatists” – involved only when there is a compelling reason. According to Gibson our compelling reason to build a pavilion at Aichi 2005 was that our third-bestexport-friend, Japan, told us to.

Although expos are not trade shows there are compelling reasons for New Zealand exporter’s to attend. Those who attended Aichi were so successful they couldn’t believe more exporters weren’t there.

EXPORTER 31

We were a bit blown away that more companies weren’t using the facility but it gave us a presence in Japan that we’ve never had before.”

K e i t h Cowa n / man ag i n g di r ector of C hristc hu rc h ba s e d H Dawson Sons & Co Wo o l New Zealand Ltd

Keith Cowan, managing director of Christchurch-based H Dawson Sons & Co Wool New Zealand Ltd sent two staff to woo customers in a way he believes is impossible as an individual exporter away from home.

“We were a bit blown away that more companies weren’t using the facility but it gave us a presence in Japan that we’ve never had before.”

Lamb, wine and presentation room The New Zealand pavilion gave them a home base where lamb cutlets and fine New Zealand wines were on the menu with bilingual hospitality staff and a presentation room provided.

H Dawson has done approximately $20 million of wool business with two of those visitors since. Although Cowan couldn’t say Expo was directly responsible for sealing the deal he believes it significantly elevated the company’s position.

Cowan, like many exporters, is undecided about attending Shanghai 2010 citing the recession as a possible barrier.

32 EXPORTER

Expo theme The 2010 Expo theme is “Better City, Better Life with New Zealand’s effort concentrated on “Cities of Nature, Living Between Land and Sky”.

The pavilion will have four spaces – a welcoming veranda under a forest canopy of pillars, a walk along a gradually rising, winding ramp through sea, suburbs, a city centre, mountains and a garden of native plants with sculptures. A mezzanine hospitality area hosts 40 guests for formal dining or 80 for cocktails with a separate meeting/ dining room.

Gibson touts our presence at the Japanese Expo as a huge success – 4 million visitors to the NZ pavilion – but says the site in Nagoya was a “little bit off the radar screen of most NZ exporters who would go first to Tokyo or Osaka”.

He reckons there will be a lot more “natural promotion” this time with a more central Shanghai riverside location and China’s trading status with New Zealand. The Chinese have allocated New Zealand the honeymoon-suite site next door to theirs “Last time we did a lot of (Aichi expo) promotion but people just weren’t all that interested,” Gibson says.

Echoing the Beijing Olympics, China is doing it big – predicting 70 million visitors from May to November with 230 countries and organisations exhibiting on the impressive 5.2km site.

These numbers have made New Zealand weak at the knees now more than doubling Aichi’s Japanese dowry for our 2,000sqm Shanghai pavilion.

The mostly government-funded tab will top $30 million according to the expo website.

Big bucks Gibson won’t be specific about the money saying it will be a “significant commitment”. He is also negotiating with private sector sponsors who are

New Zealand businesses not sponsoring the pavilion can host their Chinese contacts for business meetings, lunches, dinners and functions by arrangement with NZTE. It is open to all New Zealand companies, not only existing NZTE clients.

New Zealand’s pavilion at Shanghai Expo 2010 will have four spaces – a welcoming veranda under a forest canopy of pillars, a walk along a gradually rising, winding ramp through sea, suburbs, a city centre, mountains and a garden of native plants with sculptures.

offered “discreet product exposure”, acknowledgement of their support, the right to advertise their support and access to the VIP hospitality and meeting rooms.

New Zealand businesses not sponsoring the pavilion can host their Chinese contacts for business meetings, lunches, dinners and functions by arrangement with NZTE. It is open to all New Zealand companies, not only existing NZTE clients.

As for the economic downturn,

Gibson is adamant it won’t affect China’s commitment but concedes other participants may reassess budgets. Chinese authorities recently announced they will not be downgrading anything.

“China is just so big and so important and this is just such a massive undertaking, that for all of us who are doing business with China we have got to be there and we have got to be there in style,” says Gibson.

This sentiment is not echoed

wholeheartedly by everyone in the export industry. Tradex director, Norm Morgan says, “As a tradeshow company we have no inclination to do a show in China anymore and we don’t think it is in any New Zealand exporter’s interest to go there because, quite frankly, you are never going to win in China.”

Some businessmen surveyed by exporter magazine are fed up with their products being copied and sold cheaper by Chinese companies and are deterred by “scammers” at trade fairs.

Others argue this thinking is shortsighted and see risk management as just a part of the overall equation.

New Zealand Trade and Enterprise has responsibility for New Zealand’s presence in Shanghai with input from the Ministry of Foreign Affairs and Trade, the Ministry of Economic Development, the Ministry of for Cultural Heritage and Tourism New Zealand.

The Shanghai Expo runs from May 1 to October 31, 2010. NZTE is predicting seven million people will visit the New Zealand pavilion. [end] LOUISE BLOCKLEY / WRITER Louise is an Auckland based freelance writer who has recently completed an AUT Bachelor of Communication Studies in journalism. She has worked in the travel industry and for publications such as The New Zealand Herald and New Zealand News UK, London, in advertising sales.

EXPORTER 33

> PROFILE

Vesper Marine has developed a safety product for sailors that has grabbed global attention.

A kick-start in research funding from the Foundation for Research Science and Technology will accelerate growth for this company seeking a niche in safety products for marine use.

34 EXPORTER

Photo: istockphoto / Jim Larson

Kiwi marine safety product creates global attention

BY YO KE H AR L E E

n

ecessity is the mother of invention, so the saying goes.

For intrepid seafarers Jeff Robbins and Deirdre Schleigh, an overnight business success has been born out of the need to build their own warning system that can prevent them from being run over by huge vessels plying the ocean.

For a product that has only been launched in April 2008, the AISWatchMate has gotten onto the world radar screen pretty quickly.

Its strongest endorsement so far is from the influential US SAIL magazine which awarded AISWatchMate “Gear of the Year” innovation award in its February 2009 edition. Yachties reading sailing blogs have also been enamoured, leading to enquiries from the internet.

this gigantic freighter,” Schleigh tells exporter.

Schleigh and Robbins set sail from the US across the Pacific in their 40-ft yacht in 2001, arriving in NZ shores in 2003, for what would eventually turn out to be a new adventure – a new business – that would take them away from their carefree seafaring days.

A fortuitous development in world maritime law paved the way for AISWatchMate’s development. In 2001, the International Maritime Organisation in 2001 made it mandatory for all sea vessels of over 300 gross tonnes to carry an AIS (Automatic Identification System). An AIS is a VHF transponder system which sends data about its identity, position, speed, bearing and course. The law was put in place partly

as a result of the need to respond to possible terrorist attacks on the US. Although there were already products in the marketplace that incorporate AIS, they were not ideal. Schleigh says: “We bought a receiver but found the AIS data needed interpretation. There were also other options in the market which incorporate AIS into chart plotters, and softwares, but these were limited. You needed the data to be in your computer programme all the time which is not efficient,” Schleigh says.

Robbins was formerly a software programmer from Seattle. Convinced that there is a need for a better solution, he used his software prowess to design a standalone electronic-based solution which resulted in AISWatchMate – a device that receives signals from AIS,

growth Robbins reckons revenue growth for their company Vesper Marine – which has exceeded initial expectations – will continue to be strong. “If we continue along this, we expect to see revenue double or even quadruple from current levels next year.”

At least 80% of the AISWatchMate is sold to overseas clients, mainly to people in recreational sailing who need an early warning system. “When you are out there, you run the risk of being run down by freighters. You may have been looking and scanning the horizon, the next thing you are looking at is at Least 80% of the aisWATCHMATE is soLd to overseas CLients, mainLy to peopLe in reCreationaL saiLing who need

KEY TAKEAWAYS

an earLy warning system.

> Vesper saw an opportunity to create an early warning system for ocean sailors. > Careful selection of distributors is critical to helping foreign markets in a localized way. > Be prepared for cultural differences when reaching new markets. > Funding from the Foundation for Research Science and Technology will help accelerate new product development. > Assembly of product is done in NZ to maintain quality control.

EXPORTER 35

company. Robbins says: “People were really surprised we didn’t have this (circuit boards) done in China. We have a good manufacturer here and it allows us to maintain our quality and standard.”

Deidre Schleigh and Jeff Robbins.

interprets the data sent, and sends alarm signals to avoid clashes. It is able to show graphically if a ship will pass ahead or behind. testing the prototype A second prototype built was truly tested when the couple took it with them on a trip, sailing from the Panama to Tahiti. “At one point, there were 124 ships that we were monitoring on our device, and we found only five that would be of concern.” This was made possible by the device’s ability to prioritise targets and filter out false alarms. That gave the couple assurance the product had a real future.

Vesper contracts out the manufacture of the circuit boards, while the units are assembled and then tested at the

path to markets Initial inroads into the US market developed when a yachtie Robbins had met in 2003 expressed interest in selling the product in the US. This contact managed to open doors for AISWatchMate into West Marine, a large US wholesaler of marine products with a chain of stores and an online presence. Vesper Marine’s foray across the ditch to Australia was achieved through a sales representative who had inroads into the boating community there. The company has also appointed distributors in the UK and France. Its distributors have the task of opening new channels for Vesper’s products in a localised way. grant New products are in the offing after Vesper received a grant from the Foundation for Research Science and Technology for research that would speed up the company’s capability

to bring on new products. Robbins says the company would focus on creating safety products used in marine applications.

For now, the company is focused on expanding its reaches into Europe which puts it on a new learning trajectory. “The challenges of going into Europe come from the cultural differences, different expectations on payment terms, and decisions on exclusivity versus non-exclusivity,” Robbins says.

Schleigh says the couple was once asked by a writer of a sailing magazine why they gave up their carefree life of sailing around the world to run a demanding business. “We wanted a challenge. And we have always talked about being in business together. We didn’t set out intending to do this, it kind of just landed. We often joke, this is not our retirement, but our pre-tirement.” [end] YOKE HAR LEE / WRITER Yoke Har was formerly a senior Reuters correspondent, a Business Herald writer, and personal finance editor for a regional media company. Most recently she managed internet and intranet content for a global US consultancy.

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38 EXPORTER

Government dips into exporters’ promised purse to fund other needs The Enterprise Development Grant-Market Development programme has undergone a recent revamp but exporters still have their bugbear over the pedantic application process. There has been an “underspend” in one year, and the government has also reached into the promised fund to fund its other projects.

BY LOUI SE B LO C K L E Y

n

ZTE’s Enterprise Development Grant-Market Development programme (EDG-MD) has expanded from $6 million to more than $40 million in less than five years. The growing pains are evident – exporters have been frustrated by delays and pedantic processes, funds have been under spent and, this year, the government dipped back into exporters’ promised purse.

An evaluation into the funds’ administration was requested by the Ministry of Economic Development in 2008, as part of a three-yearly evaluation process. Exporter has requested a copy under the Official Information Act. The government has taken back $9.4 million of the 2008/2009 budgeted funding of $54.3 million “to fund other government priorities”. soft CLose The 08/09 fund allocation has been “soft closed” to new applicants. NZTE predicts 100% allocation with just over

KEY TAKEAWAYS > Exporters can apply for funding to help enter a new market or undertake new activity in an existing market (not Australia). > The fund has grown from nearly $6 million to over $40 million in less than five years. > Budgeted funding for the 2008/2009 financial year was initially $54.3 million. This has been reduced by $9.4 million to fund other government priorities. > There was an underspend of $8.8 million in the claim period ended September 2008 (for the 2006/2007 financial year).

The underspend was almost 25% of that year’s $36.3 million fund.

three months until year end – actual spend is not known until claims close in September 2010. The 07/08 fund was

also “soft closed” for a time but that appropriation looks set to be heavily under spent. Existing client claims will be processed but any new applications go into a “standby pool”, says Carole Wright, director of the Market Development Fund.

Criticisms exporters have voiced about the fund’s administration include an unnecessarily-complex, timeconsuming application process, lengthy processing delays and commerciallyunrealistic, pedantic questions and uncertainty over acceptance of claims – most not wanting to be named for fear of jeopardising relationships with NZTE. baCkLog In May 2008, KPMG consultants were brought in for two months – at an undisclosed cost to taxpayers – to clear a four-month processing backlog.

The EDG-MD annual spending period begins when NZTE acknowledges the application’s receipt. The four month backlog (exporter was told of applications that took eight months) meant exporters sometimes had to start spending without knowing if they

EXPORTER 39

were eligible for their dollar-for-dollar reimbursement.

Exporters in the programme are quick to compliment the intention of the fund and the invaluable support it provides but many have experienced administration frustrations.

Consultants who apply for the grant on behalf of exporters report smaller exporters often give up after the first year because the application and claims process has been so arduous they won’t do it for $40,000 dollars of funding.

Norm Morgan, director of trade fair management company, Tradex agrees, “It is tough to get the grant because of the pin pricking little comments that they [NZTE] keep coming back with. We have many clients who now refuse to go through the grant application process because it is just a waste of their time. ”He says the NZTE case managers sometimes tell clients certain costs are ok yet when they put in their claim for reimbursement it’s declined.

Andrew Cunningham from Hunza Lighting says the fund has been instrumental in getting his product to important trade fairs. He is too busy running his business to spend time on the application – it goes directly to a consultant. NZTE have recently reiterated that clients do not need consultants to complete claims.

Predicting the fund’s appropriation versus actual spend is a complex balancing act. Some firms may not spend all allocated funds or have large claims turned down if not within the criteria. The fund’s comparatively short history and rapid expansion add further complication.

When claims closed for the 06/07 year in September 2008, $8.8 million – almost 25% of that year’s fund — was unspent and returned to government.

The MED’s official reason for the 06/07 under spend was “lower than expected grant application rates and lower grant sizes” (refer opposite for full answer). The decline rate for 06/07 applications was 30% – now reduced to around 10%.

As at February 23, 2009 the 07/08 claims received a total $40.5 million against the budgeted appropriation of $51.4 million. Claims close for 07/08 on September 30, 2009. While more claims are traditionally lodged in the second half of the claims period it will probably be under spent again – for the same reasons as the previous year.

40 EXPORTER

Q&A

We put together a few questions to the Ministry of Economic Development (MED) on the funding for EDG-MD programme.

Here is what the official response is.

Q1

July 06/June 07 financial year: Why was there an $8.8 million difference between appropriation ($36.3 million) versus the spend of $27.5 million? We can understand a difference due to exporters not using all the money allocated to them due to changed plans but almost 25% of the fund seems an excessive amount for this reason.

MED’s response The underspend was due to lower-than-expected grant application rates and lower grant sizes. Anecdotal evidence from some exporters at the time suggested that EDG-MD applications for the 2006/07 were low because the $13.5 million EDG-MD funding boost for Export Year was a one-off and firms did not expect to have access to funding in future years. The Budget 2007 increase to ongoing EDG-MD funding levels and the decision to allow firms benefiting from the Export Year funding boost to be eligible for support for up to five years under existing criteria, addressed this disincentive.

Q2

July 07/June 08 financial year: Why was only $45.3 million appropriated to the fund in 07/08 when in the year end 07 NZ Trade and Enterprise annual report, the quoted figure is $51.4 million?

What happened to the $6.1 million that was announced but not included in the appropriation?

MED’s response We’ve discussed this with NZTE and agree that you should use the opening appropriation figure of $51.4 million that you quote.

This appropriation was underspent for essentially the same reasons as in 2006/07. Please note that it is difficult to accurately forecast expenditure for this grant scheme because of its relatively short history (making it difficult to extract reliable trends), the fact that successful applicants can apply for further draw-downs of the grant for up to five years and the uncertain pick-up rate.

Q3

July 08/June 09 financial year: Why was only $44.9 million appropriated to the fund when the budgeted figure is $54.3

million?

MED’s response It is correct that in the 2008 Budget, EDG-MD received an appropriation of $54.3 million for the 2008/09 financial year. This appropriation was subsequently reduced to fund other government priorities.

It is important to remember that the “soft closure”, is a precautionary approach only, to ensure there is enough funding to meet the demand of current grant recipients who reapply in 2008–09. Applications from firms already in the EDG-MD programme will continue to be processed and NZTE will continue to offer EDG-MD support to these companies. All existing EDG-MD contracts will be honoured.

All this means is that it is still too early to say how much will be spent on the EDG- MD this financial year, and it is too early to talk about “underspends” or “overspends” for this year. We won’t know the final figure for expenditure this year until after the financial year ends

what the edg–market development programme covers The EDg–Market Development programme can help your business enter a new market or undertake new activity in an existing market. But note that activities in the Australian market are not eligible for the funding.

The funding covers up to half the costs of: • market visits • in-market representation • advertising and promotion • marketing materials • trade fairs and events • market research.

Industry experts say it is normal practice to over-allocate funds in similar schemes as it is commonly accepted that there will be a level of non-uptake.

Funding is allocated during the July1 to June 30 tax year. Exporters have one year from their application anniversary date to use it. They can

claim reimbursement for up to half their costs throughout the year and up to three months after it finishes. Exporters can re-apply for further grant draw downs for up to five years. fund for 08/09 fuLLy taken?

Under subscription of 08/09 funding has been vehemently denied by Tim Gibson, CEO, New Zealand Trade and Enterprise, “I want to be quite clear that the EDG-MD fund is very close to being fully committed.” This year’s budgeted funding was slashed by government by $9.4 million.

Wright says administration changes were made around December 2008 “because we knew we could improve it” but denies it has anything to do with the MED evaluation.

Gibson agrees, “In response to client feedback, we have made it easier for clients to make a successful application and to claim reimbursements from the fund. At the same time as we have made the processes easier, we have sped up our turn-around times too, because we know how important it is for clients to have certainty about their cash flows so they can get on and do the market development activity they plan to do.”

Bryce Hawkins, managing director and founder of Canterbury Scientific – an EDG-MD recipient for four years – says: “They seem to have smartened up their processing, it is coming through a lot quicker.” Hawkins was “bemused” at some application questions and wondered if NZTE would understand the answers but he says the funds have been invaluable to get to international markets, particularly trade fairs, in tough times.

“We have built up a relationship where they realize we’re not doing anything we shouldn’t do and I think once that relationship built we have found they have been very helpful.”

Marc Michel, general manager at International Airport Systems (group marketing) for BCS Group says while he “didn’t enjoy the reporting requirements” of the fund, BCS accepted it was taxpayers money so “that’s the price you pay”. [end] LOUISE BLOCKLEY / WRITER Louise is an Auckland based freelance writer who has recently completed an AUT Bachelor of Communication Studies in journalism. She has worked in the travel industry and for publications such as The New Zealand Herald and New Zealand News UK, London, in advertising sales.

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EXPORTER 41

> CURREnCY

Hedging

Between Sylla and Charybdis Shrinking demand from your key customers can quickly throw your currency strategies out of whack.

In a volatile currency market, hedging can also rapidly increase your risks, experts say.

T

BY BO B E DL I n

he experience of F&P Manufacturing has been mirrored – to some extent – by many exporters as the global recession deepens.

Demand for its products had collapsed, it announced in mid-February, and whiteware sales had significantly fallen.

More vexing, F&P’s foreign currencydenominated debt burgeoned when the NZ dollar depreciated.

It had borrowed for offshore expansion in foreign currencies. The drop in demand for its products substantially reduced the revenues the company expected would serve as a natural hedge.

42 EXPORTER

The currency depreciation was rapid against the US dollar, in which a substantial volume of New Zealand exports is traded, from above US75c in July last year to around US50c at time of writing (19 February).

Australia is New Zealand’s biggest export market and the NZ dollar tends to move in the A75- 95c range. But it had slipped towards the lower end of that range from above A87c in January last year to around A79c, punctuated by a spike to the A90c levels in mid-October. it aLL about demand But as F&P’s experience shows, a lower NZ dollar is good for exporters only if there is a demand for their goods and services in overseas markets.

A shrinking demand throws currency strategies out of whack, and by increasing your hedging – BNZ chief economist Tony Alexander advises - you could increase your overall risk. Reason: the expensive foreign currency receipts

KEY TAKEAWAYS > Make sure you can meet your sales expectations. > A further easing of the NZ dollar against the US and Australian dollars is likely. > Consider hedging further out. > Be prepared for a sudden turnaround.

Photo: istockphoto / Shawn Riley

you count on hedging back into NZ dollars won’t be available if you don’t make the sales you expect.

HiFX forex specialist Mike Hollows agrees, cautioning that once you are hedged, you are hedged.

With the NZ dollar significantly down against the Aussie from a few months ago, he says, it’s great for a firm to have been uncovered, but not so great if it is covered much higher than A79c. The same, generally, applies to the US. While the NZ dollar is around US50c, there’s no harm in hedging in that general zone, but most money market people expect a further easing.

“So keep some powder dry, because I wouldn’t be surprised to see the Kiwi slide a little bit more, certainly into the mid-40s at some point in the not too distant future,” says Hollows.

The best thing to do depends on a company’s risk profile.

Risk aversion is the over-riding influence on world currencies: global investors have plenty of money but are unwilling to take risks.

They are avoiding assets that tend to be highly price-volatile, where turnovers sometimes can be relatively low, or where some of the underpinning fundamentals are suspect.

with the nZ doLLar signifiCantLy down against the aussie from a few months ago, it’s great for a firm to have been unCovered, but not so great if it is Covered muCh higher than a79C.” miKe hollows / hifx fo R ex speCialisT

under the Cosh The NZ and Australian currencies are suffering from that sentiment, but “I think we are probably a little bit more under the cosh,” says Hollows.

One reason: the Standard & Poors rating agency has revised its outlook on New Zealand’s foreign currency rating from ‘stable’ to ‘negative’, although it affirmed the country’s ratings for now.

The Australian dollar has some technical support to hold it above A77c but if that was breached, Hollows foresees “we could easily find ourselves pushing towards A73c with A77c being a critical level. “Meantime, the Kiwi looks unlikely to get much above A82-83c,” he adds. Hollows advises exporters to take some cover and continue to hedge further out around the A77.5-78c mark, but – again – to leave room for manoeuvre because if it does break, “it could be quite aggressive – it’s like Victorian bush fires. Suddenly things can happen quite quickly.”

Alexander essentially advises: “Never fall into the trap of believing the currency has settled down, and we are now going to stay at these nice competitive levels.

His basic tips are • Don’t fall into the trap of thinking everything is sweet.

• Volatility will continue – exporters will come in one morning to find the currency a few cents different from where it was 12 hours earlier.

• The strategy to adopt depends on where you are sending your goods.

With the NZ dollar at the lower end of the usual trading range against the Australian dollar, Alexander says exporters willing to take a punt should “hang out, because I think we could go down towards the A75c area”.

Even so, it would be worth building up medium-term hedging, out to 15 months or so.

Against the US currency, Alexander is not so sure. The NZ dollar could fall

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EXPORTER 43

wiLL those saLes happen?

Alexander says this is an environment where options come into their own, both for exporting to the US and Australia.

“But above all, when you are working out your hedging and the level, ask: are you really certain those sales are going to happen. We have seen on this occasion and previously, when the Kiwi fell sharply, some large companies reporting hundreds of millions of dollars of forex losses because expected sales did not occur.”

Jane Hunter, managing director of Hunters Wines, says taking forward exchange is difficult for her company “because we are not really sending out volumes at regular intervals.”

In some bigger markets the company deals in NZ dollars but the US (“a very small market for us”) wants to deal in US dollars and Australian in Australian dollars.

“We have to take a punt on what we think the exchange rate will do, which isn’t the best philosophy to have,” Hunter said.

never faLL into the trap of beLieving the CurrenCy has settLed down, and we are now going to stay at these niCe Competitive LeveLs.” TonY a le xa ndeR / bnZ Chief eCo no m isT

“But the longer you export into these countries, the more you find it’s swings and roundabouts – you are never going to win completely, but the longer you are exporting the more the wins and losses kind of even out.”

Christchurch-based Wyma Engineering exports 90% of its bulk vegetable washing, handling, grading, sizing and packing equipment. smaLL Chunks Managing director Peter Suckling says the US market “is infinitely more difficult to get right” because of its volatility, compared with the Euro or Australian dollar. Wyma sticks rigidly to its treasury policy on currency dealing: it uses a combination of a natural hedge of foreign receivables and payables (“so we are purchasing in the currency we are selling”), but will take some spot rates and will put some buy orders in as well as predetermined exchange rates.

The treasury policy allows management to manoeuvre within fixed parameters. The company gets

forex guidance from its bank “but it’s guidance only – the ultimate decision is ours,” says Suckling. Wyma tends to buy smaller chunks of currency and reviews current exposure and purchases daily. Rather than (for example) lock in funds for a milliondollar contract, it will examine its overall position and the trends, and might lock in $200,000 today, $200,000 next week, then sit for three weeks and take more after that.

Says Suckling: “We’ve found that taking smaller chunks in the dips has been better for us than locking up larger amounts at whatever the rate is.

We do a little and often policy.” [end] (Editor’s note: During the first week of April, just as this magazine was going to print, the Kiwi was trading between 55 and 56c per US dollar.)

BOB EDLIN / WRITER Bob, a journalist for more than 40 years, writes about trade, agri business and the economy. He has been editor of NZ Truth, and managing editor of the National Business Review.

And we have a $0 fuel surcharge on our International Express and International Economy Courier services.

Call us on 0800 276 7848 or visit www.nzpost.co.nz/export

44 EXPORTER

R+R 20008

between US45-50c, but he doubts it would stay there for long, unless something unexpected happened (such as a lowering of the country’s sovereign credit rating).

EXPORTER 45

> LO g I ST I C S

Shippers have little room for manoeuvring to trim freight cost Shippers may not have much room to negotiate freight rates but they can certainly shop around to get the best quotes. There is also room for folks in similar industries sending similar products to team up for bargaining power.

46 EXPORTER

BY K.Y. CH An

a

t one end of the spectrum, exporters may benefit from lower rates as carriers may be competing on price to fill up excess capacity. At the other end of the spectrum, the recent rise in fuel costs and a weaker New Zealand currency may have the impact of bumping up freight and rising raw material cost.

Whichever way an exporter or importer looks at the situation, the tough market conditions call for some tough action. Cost-conscious business people are getting tough on their service suppliers, often shopping

KEY TAKEAWAYS > Shop around and compare quotes from different freight forwarders. > Consider cooperative consolidation of cargo with other compatible exporters but this would require a lot of organization and liaison. > Join or form a consortium of like-minded/similar cargo interests to negotiate for lower rates with shipping lines in return for larger, secure volume to ship.

Photo: istockphoto / Eric gevaert

Photo: mychillybin / Pippa de Court

around to get the best rates before deciding.

Importers like Alex Ng, whose Knightbright Corporation sources spas, showers, bathroom fixtures and vanities from China, are particularly hard hit by the unfavourable exchange rates.

“All my imports are priced in US dollar and therefore, are more expensive.

It’s the same with freight charges and forwarding services.” shop around Ng says he has no choice but to scale down imports, particularly the higherend items like spas and jacuzzis. And as for freight forwarding services, Ng says he now shops around and compares costs before deciding. “In the past, I used to rely on one particular company.

Now I call at least two (companies) for quotes. I should be calling more.”

Riding on the back of the weakened Kiwi dollar, exporters are enjoying a surge in sales but their gains are somewhat diminished by freight rates being quoted in US currency.

True, freight rates are weakening in most major trade lanes but it’s less so

rates from ocean lines will normally be passed straight on otherwise they could become less competitive and thereby targets for other providers.” “We are always looking to devise new and innovative ways of solving problems for clients,’’ says Thompson who declines to reveal “commercially sensitive” details.

ConsoLidation Thompson acknowledges that there could be some potential for co-operative consolidation in goods that are compatible but this would

in the past, i used to reLy on one partiCuLar Company (for freight rates). now i CaLL at Least two (Companies) for quotes. i shouLd be CaLLing more.” i m p o RT eR al ex n g / f Rom Kn i g hT bRig hT CoRp oRaT ion

for cargo to and from New Zealand, says Noel Thompson, managing director of Cargo Coordinators International NZ Ltd. “The reason some rates are reducing (in US$ terms) is due to lighter vessel loading and carriers competing to maximize their load space. It should be noted that lower fuel costs today does not signal that will continue long term into the future,” he cautions.

There’s very little exporters can do to realize savings in shipping costs when demand is hot. “When there is high demand for shipping space, it is difficult for exporters to argue for reduced rates,” Thompson says.

“Equally, from a shipping line perspective, they are experiencing low demand in some other trade sectors. So they are unlikely to reduce their rates where there is real demand and space shortage. This may change if export volumes drop off,” he adds.

As freight forwarding companies have limited margin, there is not a lot of wriggle room for them in the current market, Thompson says. “Reduced

require a lot of organisation and liaison.

“Are there exporters in the same area, does the cost of putting the goods together with domestic freight cost outweigh the gains? Does shipper A have his cargo ready to move at the same time as shippers B and C? Are they going to the same location in the destination country or does it have to be unloaded and then moved domestically? Who is going to pack the goods in the container? If they are not commercial packers, are they insured?

Do they have adequate experience… and so on.

“You can see it is no easy task. If you then introduce refrigerated cargoes, it gets even more complex.”

There is perhaps the possibility for like-minded/similar cargo interests to join a consortium, says Thompson.

“In effect, this is what you have in some sectors today such as kiwifruit, other fruit and produce where a number of shippers have entered into joint negotiations on the basis of their shared volume. They offer a larger, secure

volume to ship in total and the shipping lines deal with one body for the agreed arrangement,” he adds.

On developments in the international trade scene, Thompson says most exporters are aware of a possible protectionist stance being taken by some countries. This situation is yet to be resolved but he is confident that in markets where New Zealand is not disadvantaged by local subsidies, “our products will generally be in demand due to our inherent combined value and quality components.”

Still, amidst the gloom and doom that has gripped New Zealand businesses, comes a burst of sunshine – in the form of a free trade agreement (FTA) that NZ and Australia have signed with the 10-member Association of South East Asian Nations (ASEAN).

More than 90,000 different tariffs will disappear under the new agreement, covering trade in goods, investment and services, financial services, telecommunications, electronic commerce and intellectual property.

With a combined GDP of over $2 trillion, the ASEAN market offers tremendous opportunities for NZ exporters.

He says new exporters and importers frequently need as much if not more help in mentoring or consultancy support for general business setup, organisation, GST/tax and registration, and just general business advice. A one-stop shop to help businesses would meet this need, he adds. [end] K.Y. CHAN / WRITER Malaysian born K.Y. Chan is a veteran journalist who has held various senior posts including news editor at The Business Times and The Star in Malaysia; and as senior sub editor at (the former) Sun and National Business Review in Auckland.

EXPORTER 47

Auckland: 23rd & 24th May 2009. Call: 0800 626 5463 or visit www.mkp.org.nz 48 EXPORTER

> UTILITIES

Energy bill cutters The complexity of the energy environment has given rise to the need for tools to help businesses manage their energy usage and bills.

Photo: dreamstime / Kevin geijer

e

BY VA L L E V E S O n

nergy management service providers have sprung up in the New Zealand marketplace amidst the green revolution. Kiwi companies seeking to cut power bills can look forward to between 5 and 10% energy savings for about 1% outlay in cost of implementing the system, according to one estimate.

The increasingly complexity of the energy market – with more energy retailers in the market than before coupled with the uncertainties brought about by the government’s Emission Trading Scheme – has forced businesses to be more aware of what they can do to save on their energy bills while using this to build a “green” angle into their products.

Collating your own power bills or energy bills – to see where savings can be made – can be time consuming. “It’s all very well to tell staff to cut energy usage – but to make a real difference, you need to measure what’s going on so you can put a proper plan in place,” says Gary Walker, general manager of Energy Pro Solutions. It can take a

KEY TAKEAWAYS > Having an energy management system in place can save money and aid marketing your product as “green”. > You need to know the full picture of your power expenditure before you can do anything about it. > Employing a service provider to assess your energy usage can help you choose the best options, helping your bottom line. > There are more retailers in the energy market today than ever before – it’s important to know which is best for your needs.

staff member about four or five days to collate all this information. However, by using a service provider like Energy Pro Solutions, it can take just half a day, Walker says. “This means that a person can spend those four or five days looking at and implementing plans to cut power consumption rather than just collating data.”

An added advantage to being part of a scheme like this is you can sell yourself as being green, he adds. “Our mission statement is that we’re helping the planet one kilowatt at a time.” knowing peak usage Walker works mainly with large organisations with energy bills of more than $100,000 a year. Companies that subscribe are provided with a software tool – Energy Pro – that checks that billing is correct and works with a company’s accounting system. There is also access to consultants.

He says using the system can reduce energy use by between 5 and 15%, the cost of the system comes up to about 1% of your energy bill. The system helps companies make better purchase decisions. Companies can chose which scheme is most appropriate by identifying their peak usage time based on profiles created.

Paul Chapman, Manager - Energy Management Services, says: “Internationally, energy prices have been trending upwards but are also increasingly volatile. In New Zealand the effects of volatile overseas commodity prices and

EXPORTER 49

CoLLating your own power biLLs or energy biLLs – to see where savings Can be made – Can be time Consuming. “it’s aLL very weLL to teLL staff to Cut energy usage – but to make a reaL differenCe, you need to measure what’s going on so you Can put a proper pLan in pLaCe.” ga RY wal KeR / g en eRa l ma n age R of e ne RgY p Ro solu T ions

“At the same time traditional, larger retailers are improving their billing systems and becoming more clientfocused. They are simplifying their tariff structures and their commercial contracts, while simultaneously offering more flexible deals which may include additional value added services such as energy audits and improved energy management information through web sites and other data feeds.”

Chapman says that for the energy purchaser, these changes are a mixed blessing. Increased choice brings the promise of energy supply arrangements with a better fit to a company’s specific needs, but also brings the increased requirement to analyse and interpret a bewildering

foreign exchange rates have added more uncertainty among exporters at a time of escalating local energy prices due to concerns of supply security. more retaiLers than before “Add to this the advent of new technologies such as smart metering and the inevitable, yet still frustratingly uncertain impact of the Government’s Emissions Trading Scheme for reducing greenhouse gas emissions, and you have a highly complex and rapidly changing energy outlook.” He says there are more retailers in the energy market today than ever before. Some of the new entrants are concentrating on niche markets and offering more than just energy related services.

                   

Simply Better Business                                                   

50 EXPORTER

range of financial implications and to better understand their own energy needs and options.

That’s where service providers come in. Chapman says Energy Link helps consumers to obtain the best possible supply arrangements and then supports them with a number of ongoing cost management measures such as invoice checking, performance reporting, site benchmarking and periodic assessment of viable retailer offers.

Energy Link’s energy cost management services are collected under the Ellserve brand. The company produces the de facto industry standard electricity and gas price forecasts and has market modelling software in all of New Zealand’s major generators.

Costs vs savings Ellserve’s cost structure is related to the complexity and size of the client’s specific requirements. The bulk of customer needs can be met with the standard Ellserve service which is paid for by monthly subscription fee and typically falls below 1% of total annual energy spend. These costs always compare favourably with the direct energy and indirect administration costs saved by using the service.

As far as the service provider market is concerned, Chapman says there are a wide range of services available in some of the areas covered by Ellserve.

“Other services on offer cover energy management areas not specifically addressed by Ellserve, typically these relate to energy audits and technology-based energy management initiatives such as those designed to make energy savings from technological adjustments to industrial processes and machinery.”

Andrew Wilson, general manager of properties at IHC, says his organisation has recently got an energy structure in place. “Now we have good energy reports in place, we can examine patterns of use in our various sites and categorise them. That way we can collate invoice information and see if anything is out of kilter as far as usage is concerned.” [end] VAL LEVESON / WRITER Val is an Auckland land based sub editor and freelance writer who covers career issues, technology and business trends.

She has worked at the Northern Advocate in Whangarei, the Manawatu Evening Standard in Palmerston North and The New Zealand Herald in Auckland.

2008 Edition

For the first time this decade

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The Directory will also be promoted to international visitors via ‘arrival’ magazine.

International trade offices located offshore such as New Zealand Trade and Enterprise office, KEA offices and offshore trade associations with links to New Zealand.

Email requested from visitors to the New Zealand Trade Centre website: www.newzealandtradecentre.com

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EXPORTER 51

> MARKETIng

Wine lords link up to push new frontier for NZ wines A dozen wine making companies have linked up to collectively promote New Zealand wine abroad in a move that puts to test the power of collective branding.

i

BY VA L L E V E S O n

n 2005, 12 independent New Zealand wineries decided to come together and share resources in order to build their export markets – creating Family of Twelve.

The name was meant to reflect both the co-operative spirit and private ownership of each winery behind the initiative.

As founding chairman of Family of Twelve Richard Riddiford, managing director of Palliser Estate Wines of Martinborough, says: “The collective power of our brands will always be stronger than any one brand.

“We have found that people like the concept. If I had a single brand in a New York wine tasting, not many people would turn up – but if we market it

52 EXPORTER

as a New Zealand family of wines the concept is very appealing.”

He says the initiative is primarily export based. “The thing is, we don’t all have to travel to the same places and the same times. This is both cost and time saving. For example, we had a show in Chicago where four individuals represented the 12, at the same time the rest were in Dublin.

“This means we have the ability to spread resources.” showCase aLL The aim, he says, is to have wine tastings of a generic nature – highlighting New Zealand wines. “New Zealand has about 400 wines, there’s not enough time to showcase them all. In the Family of Twelve we have 48 wines – this is more manageable.”

KEY TAKEAWAYS > The wineries involved have found that the collective power of their brands will always be stronger than one brand. > The initiative helps save time and cost as resources are shared. > Each winery maintains its own distributor deals. > The initiative’s website is an important tool for international branding. > Our wine industry may be small but strong branding and marketing can help build new frontiers.

He says all 12 members are very good brands and they represent a spread down both the North and South Islands.

Wineries in the group are: Kumeu River, Villa Maria Winery, The Millton Vineyard, Craggy Range, Ata Rangi, Palliser Estate, Neudorf Vineyards, Nautilus Estate, Lawson’s Dry Hills, Fromm Winery, Pegasus Bay and Felton Road.

“The essential thing,” Riddiford says, “Is that we have found 12 people who can work together. It was through that that the branding initiative fell into place.

“This exercise is purely about

the thing is, we don’t aLL have to traveL to the same pLaCes and the same times. this is both Cost and time saving. for exampLe, we had a show in ChiCago where four individuaLs represented the 12, at the same time the rest were in dubLin.” RiC ha Rd Rid difo R d / fo unding ChaiR m an o f fam ilY o f Tw elV e

consumer awareness of the country as a wine producer.

Asked whether there was concern that those attending a trade show would give more emphasis to their wines rather than other members’ products, he says all 12 members have

we have found that peopLe Like the ConCept. if i had a singLe brand in a new york wine tasting, not many peopLe wouLd turn up – but if we market it as a new ZeaLand famiLy of wines the ConCept is very appeaLing.”

R i C h a R d Ri ddi foRd / fou n di ng C ha iRma n of fa milY of Twe lVe

branding. We are all individual businesses with our own distributors who were in place before this initiative started. It’s just that we’ve found a way to share our resources in a manner that helps us all.”

He says that just as with something like the New Zealand Cricket Team, there are people who criticise one or other selection – but that is normal.

“As the New Zealand industry evolves there’s going to be more and more need for co-operation.” smaLL industry He points out that New Zealand has a very small wine industry “not like Australia, Europe or the US” – good branding and marketing is vital to gain

confidence in each other. “Remember – ultimately it’s what is in the glass that counts. It’s about the quality of wine.

People aren’t dumb and what is in the glass has to be good. If it’s not in the glass, it’s not on the family table.”

The Family of Twelve expands their branding to their website: www.familyoftwelve.co.nz. The site is easy to navigate, tells of the concept “The Family of Twelve – New Zealand’s Wine Family” and the events they will be attending.

To keep with the family theme, the website both features links to the websites of the individual wineries involved and a pdf for each, telling of that winery’s history and produce.

“Each of us is committed to fine

wine and it’s refreshing to work with generous-spirited, fun, intelligent and creative people. We’re dedicated to continually pushing the boundaries of excellence, and we hope ultimately to stimulate demand for all New Zealand wine.”

Paul Brajkovich, marketing manager at Kumeu River, says the scheme is working well. “It’s an ongoing collaboration and it’s good to have a group of people with whom we can try to find new ideas. We represent a good range that provides a snapshot of the winemaking areas of the country – giving extra interest to our wine tastings.” He said the scheme is cost affective and for him provides a “good network of friends”.

Riddiford says on the group’s website: “We’re a group of producers who enjoy one another’s company, who like and respect on another’s wines and philosophies, and who can make quick decisions.” [end] VAL LEVESON / WRITER Val is an Auckland land based sub editor and freelance writer who covers career issues, technology and business trends.

She has worked at the Northern Advocate in Whangarei, the Manawatu Evening Standard in Palmerston North and The New Zealand Herald in Auckland.

EXPORTER 53

• Export inquiry from international visitors coming to New Zealand • Your products on display at the New Zealand Trade Centre in CBD Auckland • Your products viewed by more than 10,000 visitors every year • Qualified visitor details emailed as they register at the centre • Priority listing on the Trade Centre website visited by more than 100,000 visitors each month • Invitations to export functions • Free use of CBD meeting rooms and office facilities to meet clients

TO SECURE SPACE FOR YOUR COMPANY CONTACT: Mike Taillie mike@nztc.co.nz

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Companies who call an book space before 1 November receive the first month free and a bottle of Pinot Noir and 6 pack of Monteiths crafted beer .

> gUTSY PEOPLE

Viewpoint danieL siLva

Photo: dreamstime / Milosluz

seCretary / importers institute

Single border control agency anyone?

Importers want some sensible solutions from the National government to help reduce bureaucracy.

For a start, stop the excessive encroachment of MAF into Custom’s territory.

The following is the Importers Institute’s briefing to new Ministers Maurice Williamson (Customs) and David Carter (Bisosecurity).

m

inisters, the good news is that you have inherited a top-notch Customs department. That is not just flannel produced by the department’s PR, it is a fact established by reputable international surveys and it is also our observation.

Customs protects the border and collects duties efficiently and with minimum disruption to trade.

The bad news is that the Ministry of Agriculture and Forestry (MAF) continues to encroach on the border protection work of Customs. Other agencies, like Immigration, are quite

happy to delegate front-line duties to border protection professionals. But not MAF. Have you noticed that, these days, after going through the Customs queue and waiting for your baggage to come out of the belt, you have to go through another lengthy queue? You hand out a form to a MAF official who then decides, based largely on intuition, whether or not to screen you. The people from Customs upstairs, whose job is to detect drug smugglers and illegal immigrants are apparently not to be trusted with figuring out whether you are likely to be trying to smuggle apples.

When MAF officials find bugs in containers, they promise to stop every shipment for the importer in question (or for other companies importing from the same supplier) for the next five shipments or the next twelve months, whichever occurs first. These stops are to be accompanied by charges of $100 an hour and the intention appears to be clearly punitive. Notice that they are not punishing an accredited operator for failing to detect risks and to alert MAF, they are punishing importers whose suppliers may not have done the right thing.

EXPORTER 55

Bureaucratic excess In reality, this is not going to work.

They just don’t have the manpower to inspect so many low-risk containers a typical case of bureaucratic overreach. Some importers will be put through a lot of inconvenience and expense and MAF will, no doubt, be asking you for more ‘resources’ (a.k.a. money). This tactic seemed to work a treat with the last government: just have a look at MAF staffing levels in 1999 and in 2009. We suspect that you and your colleagues aren’t quite so gullible.

Now, this has been going on for a very long time. About twenty years ago, Sir Geoffrey Palmer asked Gerald Hensley to look at border protection agencies and he recommended setting up a single agency. Ten years later, a National government asked Sir Ron Carter to do a similar review and his recommendation was essentially the same: form a single border protection agency.

The government changed before a decision was made and the new Labour-led government ministers,

Phillida Bunkle and Marian Hobbs, dismissed the recommendation on the grounds that Labour had promised the Greens that it would maintain a border agency dedicated to ‘biosecurity’.

The Ministers said that they would get Customs and MAF to work better together. Ten years on, the departments have come up with a proposal for something called a “Trade Single Window”. All they need is $120 million, more or less. We consider this proposal to be an answer in search of a question.

Unfinished business You really should dust up the old reports. A single organisation will, of necessity, provide a single window.

Customs use a modern relational database and we see no need to spend huge amounts of money on another big computer project.

There is also some unfinished business that you may want to turn your attention to: (1) a Law Commission report to do away with excessive departmental powers of seizure was dismissed by the previous

government on spurious grounds; (2) Customs gave a monopoly to an outfit called ECN to clip the ticket on every import and export and, despite Ministerial promises to the contrary, this profitable contract was never put up for public tender; and (3) New Zealand importers still have to go through the absurdity of paying GST to Customs only to claim it back from the Inland Revenue a month or two later, while in Australia they are treated as a simple balancing debit and credit on the same statement.

The current recession means that you need to raise the bar on the quality of government’s spending.

Importers expect our border protection agencies to continue to improve services and reduce red tape. The only significant change in this area that the last government managed to make during the nine years that it was in power was the creation of an import transaction tax. We expect much better from you. Let us know if we can help.

[END]

Editor’s note: The views expressed above may not necessarily reflect the view of this magazine but we are happy to provide the space for gutsy opinion.

maerskline.com

CREATING OPPORTUNITIES IN GLOBAL COMMERCE We aim to be your preferred container transport partner.

To do this, it is critical that we truly understand your business. As partners in international trade, we look to actively engage in discussions of your needs both now and for the future.

Maersk New Zealand Ltd The CPO. Level 3, 12 Queen Street Auckland, New Zealand T 0800 MAERSK (623775) F +64 9 359 3488 E NEZSALONL@maersk.com

56 EXPORTER

> LO g I ST I C S

Battle for Tauranga’s container business Port of Tauranga is poised to defend its turf as NZL tries to reincarnate its former container handling aspirations.

The competition at Sulphur Point should provide shipping lines more choice, and hopefully savings for exporters.

T

BY YO KE H AR L E E

he key question for shipping lines wanting to use Port of Tauranga’s (POT) Sulphur Point container terminal operated by NZL Group will be: ‘What is the level of cost savings? How efficient will NZL be? And how will my logistics be improved if I should switch operators?”

These are hard questions any exporter or businessman would ponder before deciding on a supplier. These are also matters for hard negotiations done in private under the toughest, most calculative way between container operators and their customers.

It is interesting therefore that Ports of Auckland has stuck its neck out to support NZL, which in effect makes Ports of Auckland the “first” big

customer that has gone on record for putting its weight behind NZL for a “container terminal operator” that has yet to materialise because NZL’s “right” to operate as a full container operator at Sulphur Point is a matter of contention.

Mike Pohio, significant stakeholder in NZL Group, who is also a former manager at Port of Tauranga, is sanguine about the whole thing: “For the shipping companies, it boils down to whether, if we become the “port” of choice, what benefits will come from that choice.”

According to Pohio, “we have had a level of enquiries from shipping lines interested to make that choice.”

Ports of Auckland chief executive Jens Madsen sees NZL’s offer at POT as an opportunity not to be refused. “NZL is a very professional logistics provider.

KEY TAKEAWAYS > Shipping lines would want to know if NZL can offer a better deal than Port of Tauranga. > Exporters would want to know if they benefit at all from any passing down of cost savings shipping lines may have for using a different container operator. > Port of Tauranga has the advantage of being a tough negotiator as it owns the cranes and straddles which NZL will rely on. > Ports of Auckland is keen to offer the Tauranga link to its shipping clients.

EXPORTER 57

From left to right: Jens Madsen, Mark Cairns and Ken Harris

From what Ken’s (chief executive of NZL) sketched out, from a customer perspective, it gives us the opportunity to offer customers the choice of two ports.”

Madsen adds there is ample opportunity to reduce “fat” from the supply chain, with better positioning of the movement of empty containers between Auckland and Bay of Plenty region and vice versa. annoyed Mark Cairns, chief executive officer at POT is no doubt a bit annoyed by all this. His main contention is that it is a bit “misleading” for NZL to say it has the right to set up container operations because all this is a bit “too premature”.

“It is still a matter of contractual interpretation, a matter yet to be decided by the legal teams.”

As far as he is concerned, the old deal limits NZL to stevedoring and marshalling services in the port’s common user area.

Without the benefit of scrutinizing the contract, it is anybody’s guess whether it will be NZL or POT who would walk away from the negotiating table with their tail behind their leg.

But if NZL gets to have a crack at operating as a container operator, customers would want to know whether it has the requisite capital, requisite experience and ability to pull it all off – and be better than POT – as well as more cost efficient.

Businesses surveyed by exporter magazine who have used both ports were mixed in their views on their preferred port. One said Tauranga has had an inland port in Auckland for years, so it was a matter of time before Auckland copied the move. Another commented: “Fix your own backyard first, Auckland.”

Others see the added competition as a welcomed move and good opportunity to gain better rates from their shipping companies.

Mike Pohio is convinced that NZL has the requisite and residual services

58 EXPORTER

to provide its future customers a competitive choice as a terminal operator against POT. Port owners in New Zealand are all keen to get a slice of the container terminal business. The question is will NZL slice a bit of POT’s margins as it offers competition on POT’s own turf. operation Costs One estimate puts crane and wharf/ berth cost at close to 60% of a shipping line’s costs at ports. Pillage, towage, stevedoring and marshalling and other services make up the rest. If this structure is reflective current market, POT will certainly be a hard negotiator with NZL for use of its crane/straddles.

NZL advantage is its extensive road link, warehousing, its stevedoring, and marshalling strength. One source cites stevedoring cost at 25% at the container terminal, which would give NZL some upside on pricing.

Links Ken Harris, chief executive of NZL Group, who formerly ran Wellington Port, says NZL will be a strong rival service provider. “I have no doubt in my mind that we will be more oriented towards exporters’ needs.”

NZL, he says, will be a strong player as it already has links to interisland transport, planning service, yard placement, ship placement and marshalling of cargo. “We are a brand that has been around for 60 years.”

Pohio also notes that NZL which employs about 300 people in New Zealand is already the supplier for Fonterra’s road transport and Carter Holt’s solutions through its joint ventures. Fonterra last year awarded DTL (which is owned by NZL) the contract to manage its domestic road transport networks.

He was emphatic that NZL was active as a container terminal operator prior

port of auCkLand’s Chief exeCutive Jens madsen is of the view there is ampLe opportunity to reduCe “fat” from the suppLy Chain, with better positioning of the movement of empty Containers between auCkLand and bay of pLenty region and viCe versa.

The question for exporters/shipping lines would be: Does NZL still have advantage in providing a leaner, cheaper supply chain, to shipping companies, compared to POT after having paid port charges, berthing costs, and use of the port’s cranes/straddles?

Cairns of POT is of the view that his port is a competitive provider of service and he is not worried about NZL’s competition. “We have always said we encourage inter port competition.

The container terminal is a strong operating part of our business and we’re comfortable with where we sit.

We are happy to compete.” He is also confident of POT’s productivity rates echoing this: “We rank top 10 in the world in terms of productivity.”

to 2003, when it received containers by rail and road, hold containers at the terminal and marshalled containers with contracts from shipping lines. He cited JIL Cosco and JKCS as client examples.

“It all boils down to our ability to provide a competitive service. Shipping lines are ready to make that choice. We will have to perform in a way that is competitive or customers will change from the choice they made,” Pohio adds. [end] YOKE HAR LEE / WRITER Yoke Har was formerly a senior Reuters correspondent, a Business Herald writer, and personal finance editor for a regional media company. Most recently she managed internet and intranet content for a global US consultancy.

export opportunities Below are a number of opportunities from recent visitors to the New Zealand Trade Centre. All of the opportunities are available for $200 + GST each. If you are a paying client and display your products at the New Zealand Trade Centre, ALL opportunities are available at no charge.

www.nztc.co.nz

All $200+GST each or free to Trade Centre Exhibitors

MALAYSIA

SRI LANKA

Goats milk wanted for export

Hotel supplies needed

Our visitor is Managing Director of a company in Malaysia. He is genuinely interested in Goats milk for export to Malaysia. His company currently exports milk powder from Sutton Group and also Manuka honey.

The visitor claims that if your price is competitive you will have an excellent business contact with his company.

These two business partners visited the Trade Centre and head a hotel chain and order extensively through agents. They have an online directory for hotel suppliers in Sri Lanka. They are genuine visitors who are worth contacting.

Reference 9386

Reference 9240

SCOTLAND

AUSTRALIA

Wood products wanted for export

Plumbing, beauty and coffee products wanted

This visitor is currently importing and is keen to see what wood products we have here in New Zealand.

He is currently travelling around but is contactable by mobile. He has two retail shops, mainly specialising in hardware but sells other product also and currently imports from China and Brazil.

Our visitor is interested in a variety of products.

He is the manager of a plumbing and construction company. His wife is the owner of a beauty spa and his brother manages a coffee store in Australia hence the variety of enquiries.

Reference 9717

Reference 9217

BRAZIL

NETHERLANDS

Distributor looking for products

Organic produce needed

This visitor is currently an agent and distributor, who deals with retailers and distributors. He is currently importing from China. He currently exports to Brazil, Chile and Argentina.

Reference 9918

Our visitor is the Director of a large international organic company with offices in Germany, Holland, Italy, and France. He is currently in NZ looking for organic produce.

Reference 9890

SINGAPORE

UnITED STATES

Beef, lamb, dairy products and water

Health products wanted for spa in Orlando

This man is a distributor to retailers in Singapore seeking to extend his range of products. He frequently visits NZ. In addition he owns his own freight forwarding business.

Also imports rice and pulses from India.

This visitor has been travelling in New Zealand. She has been in business for a number of years and operates a successful sports and health spa in Orlando. She imports some supplementary health products from China but is not satisfied with the product and service. She is looking for new suppliers.

Reference 8990

Reference 9054

EXPORTER 59

TOOLKIT

E X P O R T E R ’S

SEF UL TOOL S EX POR Lou ise bLo CkL ey LOO KS AT U

TER S CA n U SE

new Zealand Export Credit Offi ce: Short-Term Export Credit guarantee

60 EXPORTER

Exp r Credit Gu ran ee i

g

f

C

For more information refer to: www.nzeco.govt.nz/news/products/tradecredit

Photo: mychillybin / Blair Walker

N EW Z EALAND E XPORT C REDIT O FFICE

THE NEW ZEALAND GOVERNMENT recently announced the New Zealand Export Credit Office’s (NZECO) sho t term credit guarantee for exporters and their banks for s or er e m repaymen (les th 3 0 days . Introduced in response to the global financial crisis, it is a temporary measure to ensure exporters can continue to accept orders that may not happen in the current environment. Exporters will need to prov the tr nsac ion s comme cially sound with credit-worthy buyers, confirm the private sector cannot provide the cover, have a proven history and sell goods and services with a NZ value-added component of at least 30%. Read more about this in the article on page 9.

THE NEW ZEALAND INTERNATIONAL BUSINESS AWARDS is the new title for the revamped New Zealand Export Awards, last held in 2007. The winner of the Supreme Award will receive a prize of NZ$100,000, to be used to further its growth internationally. NZTE decided to review the New Zealand Export Awards, after 40 years, on the recommendation of the 2007 judges.

The new categories include: • Best business (small, medium and large) operating internationally • Most innovative international business model • Best use of design in international business • Best commercialisation of intellectual property in international business • Best use of research and development in international business.

Entries in the inaugural awards close on 14 April and the winners will be announced at an awards ceremony dinner on 30 September 2009. New Zealand businesses operating successfully internationally, exporting products and services and investing in growth in international markets, are invited to enter the awards now go to www.nzte.govt.nz/awards.

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TODAY’S challenging international trade conditions make it critical that you protect your business from fi nancial risks. Kiwibank export letters of credit and document collections services can help you to reduce the risk of non payment.

Kiwibank provides a full range of international services to help you manage foreign exchange exposure and trade risk. These include foreign currency accounts, forward exchange contracts, international payments and trade services.

Call their specialist team on 0800 222 490 (during normal business hours) or email business. banking@kiwibank.co.nz

Photo: dreamstime / norman Chan

Revised NZTE Export Awards

Expressions of Interest for Hong Kong Wine and Spirits Fair AN EXPRESSION OF INTEREST is being called for a formation of a New Zealand Pavilion at the Hong Kong International Wine and Spirits Fair 4-6 November 2009 being organised by the Hong Kong Trade Development Council (HKTDC).

The 2008 fair attracted more than 8,000 trade buyers and more than 10,000 public visitors.

In 2007, Hong Kong imported 20 million litres of wine from around the world – a 28% increase on the previous year. New Zealand’s wine exports to Hong Kong increased by 48% in 2007. for further info contact the hkdtC office on +612 9261 8911 or sydney.office@hktdc or check out www.hkwinefair.hktdc.com

kiwibank’s disclosure statement is available from your local kiwibank or at www.kiwibank.co.nz.

Export Business Mentors BUSINESS MENTORS NEW ZEALAND is a non-profit charitable trust that provides a mentoring service when your business needs it. They also have specialised export mentors available. All their export mentors have proven exporting experience and often have current international contacts to help establish your export markets. If your business has been trading for more than six months with evidence of accounts, employs less than 25 full-time employees and provides you with your primary source of income, you are eligible to apply for a business mentor. The only cost to the applicant is a $100 administration fee. Mentoring is provided free of charge for two years. The organisation is 70% funded by private sector companies and 30% funded

by New Zealand Trade and Enterprise. for more information: www.businessmentor.org.nz

EXPORTER 61

> gUTSY PEOPLE

Viewpoint aLasdair thompson CHIEF EXECUTIVE, EMPLOYERS MANUFACTURERS ASSOCIATION (NORTHERN) & EXPORT NZ DIVISION

Photo: istockphoto / Hsing-Wen Hsu

Let’s get export aggressive!

The government needs to demonstrate strong leadership in lifting New Zealand’s export performance. Now is not the time to back off from cementing important business relationships with our key trading partners.

i

f ever there was a time when we should expect government and the wider community to get in behind exporters it has to be now.

While the global recession has every business struggling to maintain its sales and market presence offshore, and hunting for opportunities where others have pulled out, what has government said about exporting so far?

Apart from seizing on a small opportunity to liberalise the grossly underused trade credit insurance offered by the Export Credit Office, exporters have been ignored.

Creating jobs by bringing forward more spending on infrastructure,

62 EXPORTER

which is unquestionably needed, is all well and good, but the longer-term imperative for New Zealand is to earn more foreign exchange so we can reduce our level of consumer debt and rebalance the economy. need to earn more Exporting and otherwise earning more offshore is the only way to do this. It’s also vital if we are to meet the government goal for Kiwis personal incomes which is to return to par with Australia’s by 2025. Our domestic market certainly doesn’t have the scale required.

Besides, exporting is where our products and services are tested

against the world’s best. This is where the recovery will start, and where sustained growth for the economy overall is developed.

To help we have some great free trade agreements (FTAs) to leverage from, especially with China. Now is not the time to take a tea break from building relationships in the People’s Republic. The opposite will pay dividends, particularly if, as many expect, China is amongst the first nations to emerge from the recession.

Cementing markets, friendships So why aren’t we aggressively cementing our relationship with China, the Middle

East and other emerging markets?

Sure, we have the New Zealand pavilion at Shanghai Expo coming up in 2010, the budget for which is some $30 million. This is an excellent initiative of the previous government and no doubt developed with the blessing of most, if not all our political parties.

However a useful way to underwrite the success of the expo would be to run some trade missions there beforehand. So, is the government planning any trade missions to China, or anywhere else? If so I haven’t heard about them.

Going with a trade mission to countries like China is by far the best approach but to be fully successful trade missions require the presence of a cabinet minister or other high ranking official. When cabinet ministers go along, trade doors can be flung open far wider than any business person or group of businesses can hope to achieve. After all in China, the politicians “own” much of the country’s business on behalf of the people. So to accelerate

business matching we need to take our politicians along. Is the government aware it can help exporters like this?

Whether or not the government picks up this challenge, I urge exporters to keep trekking to China, and if no sales eventuate from the visits, the investment won’t be lost because, when the upturn comes, your trade contacts, colleagues and friends there will remember who it was that met and talked over their challenges in the down time.

The FTA with China has given Kiwis a great head start, and now it is even less likely our competitors will catch up any time soon. But rather than taking this lead for granted we should be capitalizing on it.

The same principle is true for other countries and our other FTAs – the evidence of their desire for more trade with us is reflected in the clamour to join our P4 agreement 1 and sign up to new deals with us (Korea, Malaysia, and India).

One of our strengths just now is our floating exchange rate. Though its volatility is punitive as ever, the fall in the exchange rate is allowing higher margins for exporters, which is

something of a breathing space even though market demand is down. But the dollar will likely fall further.

This is also a time when Government should underwrite a boost in investment in export-oriented products and services. The best and most equitable way to do this would be to slash the company tax rate. In this way our exporters would retain more of their earnings for re-investing in export market development, skills training, and new plant and equipment. Of course their earnings would be taxed in the normal way if and when they paid out dividends to shareholders and other individuals.

A crisis as of now is also a great time of opportunity. Let’s hope our government and businesses seize the opportunities on offer, and reject any thought they might sit out the downturn. [END]

1. The Trans Pacific Strategic Economic Partnership Agreement (the Trans Pacific Agreement, formerly known as P4) was signed

by New Zealand, Chile and Singapore on 18 July 2005. Brunei signed up on 2 August 2005. US, Peru and Australia also want to participate.

Editor’s note: The views expressed above may not necessarily reflect the view of this magazine but we are happy to provide the space for gutsy opinion.

EXPORTER 63

Useful Websites for Exporters GOVERNMENT-RELATED SITES

HELPFUL TRAVEL SITES

www.mfat.govt.nz Ministry of Foreign Affairs and Trade website. Trade and economic relations information. www.nzte.govt.nz new Zealand Trade and Enterprise. Agency for new Zealand economic development.

www.asiarooms.com Reliable way to book hotel rooms. www.lastminute.com Cheap last minute travel bookings. www.wotif.com Travel bookings.

www.maf.govt.nz Ministry of Agriculture and Forestry.

www.itchyfeet.co.nz Full of interesting travel tips and deals.

www.customs.govt.nz/exporters Customs regulations for exporters. www.nzeco.govt.nz new Zealand Export Credit Offi ce.

Provides export credit guarantees to support the export activity of new Zealand businesses.

www.timeanddate.com A world clock which can be personalised, international dialling codes, day and night map, daylight savings dates and more... www.traveldoctor.co.nz Health and vaccination information for safe travel. www.safetravel.govt.nz general and specifi c travel advisories for overseas destinations.

NEW ZEALAND / INTERNATIONAL ASSOCIATIONS www.germantrade.co.nz new Zealand german Business Association.

www.houseoftravel.co.nz Very user friendly for fl ights and hotels. Compares most airlines.

www.uktradeinvest.co.nz Help for nZ companies interested in investing in UK to grow their business in the European Union.

www.seatguru.com Shows seating plans of all major airlines and profi les good and bad seats.

www.flanderstrade.com

www.airsafe.com Safety statistics for all airlines.

Flanders Trade Commission. Email for Trade Commissioner of Flanders in new Zealand is auckland@fi tagency.com.

www.travelex.com/nz/personal/converter.asp?content=cnv Foreign exchange converter from nZD

www.inzta.com InZTA (Ireland new Zealand Trade Association) www.hknzba.co.nz Hong Kong new Zealand Business Association

OTHER CATEGORIES www.exportnewzealand.org.nz ngO, not for profi t association of nZ Exporters.

www.canada-nz.org.nz Canada new Zealand Business Association

exporter is not responsible for the contents or reliability of the websites listed above and does not necessarily endorse the views expressed within them. For more information regarding these listings please contact the listings directly.

www.asianz.org.nz Asia new Zealand Foundation

feedbaCk

www.amcham.co.nz America new Zealand Chamber of Commerce

the publishers of exporter magazine welcome all feedback and ideas on the content of this magazine. more specifically, we encourage you to let us know if there are:

www.jetro.go.jp/newzealand/ Japan External Trade Organisation new Zealand

• Stories/companies/personalities you would like to read about • Innovative export products that should be profi led • new products or services that you feel would be of value to other exporters

www.transtasmanbusiness.co.nz Trans Tasman business circle.

send your contributions to: publisher@exportermagazine.co.nz

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