Increased trade between India and New Zealand a real possibility

Bilateral trade between India and New Zealand could rise from its current US$1 billion to US$3 billion by 2014, according to the Indian Government’s Minister of Commerce and Industry Anand Sharma.

Minister Sharma was speaking at a recent India-New Zealand Business Council (INZBC) and Federation of Indian Chambers of Commerce and Industry (FICCI) joint business forum in Auckland.

He described current trade levels as well below their potential and the projected increase in bilateral trade as “not only optimism but realism”.

Minister Sharma said the increase is “do-able”, citing opportunities for New Zealand businesses in India’s food, generic pharmaceuticals, biotech, education, services, research and development , tourism, film and wine sectors.

New Zealand Trade Minister Tim Groser highlighted New Zealand’s interest in broadening its export portfolio to India from its current emphasis on coking coal and wood.

In 2010 total trade between the two countries increased by 65 percent on the year earlier, mainly due to sharp increases in exports of coal, dairy products, wood and machinery. However, even though India became New Zealand’s eighth most important export market in 2010, New Zealand exports to India of US$652 million still only accounted for two percent of New Zealand’s total worldwide exports of US$31.4 billion.

Ministers Sharma and Groser have indicated they hope to conclude a Free Trade Agreement (FTA) between the two countries early next year. Officials completed the fourth round of negotiations in New Delhi in March this year.

In an indication of the significance he attaches to the deal with India, at the forum Minister Groser said that most New Zealanders think the TPP (Trans-Pacific Partnership) involving the United States “is the only game in town”.

“But I’m not sure, to be frank, which one I’d chose: such is the importance that I personally place to New Zealand’s economic future on this negotiation [with India].”

An FTA with New Zealand would be a logical extension to India’s much wider ‘Look East’ policy. Initiated in 1991 by then Indian Prime Minister P V Narasimha Rao and pursued by subsequent governments, including that of current Prime Minister Monmohan Singh, the policy is seen as the cornerstone of India’s engagement with the Asian region.

India signed a Comprehensive Economic Co-operation Agreement (CECA) with South Korea and an FTA with the Association of Southeast Asian Nations (ASEAN) in 2009. This year it has picked up the pace, signing separate agreements with Japan, Malaysia and Singapore. It has also launched negotiations with Indonesia.

New Zealand National Member of Parliament Kanwaljit Singh Bakshi pointed to interest in long-term Indian investment in New Zealand’s coal, minerals and forestry sectors. He also noted recent Indian investment in Australia in coal mining and, subsequently, a port venture.

“These are very good signs that India is not just looking within Asia but around Asia also … and we are looking forward to Indian investment coming to New Zealand.”

He also said that many people raise with him the need for direct flights between the two countries: a move which would lift visitor numbers in both directions.

Minister Sharma noted that around 25,000 Indian tourists and 10,000 students already come to New Zealand every year.

Minister Groser said there are about 100,000 Kiwi Indians in New Zealand which, “given our tiny population”, is a significant number.

“We are hopeful that we can use this community of Kiwi Indians as one of the tools to build a much more powerful economic relationship between the two countries.”

Robin Bannerjee, chief financial officer of India’s wind power company Suzian Energy, told forum delegates that “from India’s point of view, about 0.1 percent of both imports and exports are with New Zealand” and questioned why New Zealand has “such a small share of such a large market”.

The New Zealand Inc India Strategy, our first such country strategy to be developed, acknowledges New Zealand business perceptions that India is “hard and difficult”. The strategy also notes that this is “the same perception as of China a few years ago” and states that “you’ve got to be there”.

Glidepath chair Sir Ken Stevens told forum attendees his company had a “rough start” when it first entered the Indian market four years ago.

The company found its prices were 28 percent too high. Glidepath responded by outsourcing elements of its manufacturing, electrical and design work.

Sir Ken says costs and margins are now in line so the company can compete in the market. Glidepath has already completed nine airport baggage and cargo handling projects in India and has another five under way.

Sir Ken noted that his company has lifted its involvement in tendering rather than relying on local agents. It has also learnt to use a three-tier approach to penetrating, and creating relationships in, the market. While he works at the highest level with the chairs and CEOs of Airports India and other large organisations and individual airports; Glidepath salespeople and engineers, and operations and maintenance staff, work with their counterparts in client companies.

When New Zealand Trade and Enterprise (NZTE) commissioned research in India in 2008 to gain a better understanding of perceptions there of New Zealand, among other issues Indian respondents reported disappointment that New Zealand business people did not appear to share their enjoyment in the interpersonal side of business.

“… although New Zealanders are honest and trustworthy, they take a seemingly cold, transactional approach to business with an emphasis on profit not relationship,” the report concluded.

India New Zealand Business Council chair Wenceslaus Anthony concedes that may have been the case a few years ago but says he has seen a “perceptible shift” in recent times in New Zealanders’ ability to fit in with Indian business practices and behaviours.

Read more:

NZ Inc India Strategy
“Perceptions of New Zealand Overseas” research in India

Photo: L-R Indian Minister of Commerce and Industry, Anand Sharma;
India New Zealand Business Council Chair, Wenceslaus Anthony;
ANZ New Zealand Head of Trade and Supply Chain, Gavin Haworth;
ANZ New Zealand Indian Segment Hear, Sunil Kaushal. Credit: ANZ