Agribusiness: Greener Pastures Under Trump? (NZ Herald)

Tim McCready

Donald Trump says his Administration is “pro-agriculture,” but the rising protectionist sentiment in the United States brings with it a significant amount of uncertainty. This is particularly true for agribusiness – an industry highly dependent on global trade and one which has benefited in the past from freer trade.

Two-way trade between our two countries reached $16.1 billion in 2016, making the United States New Zealand’s third-largest individual trading partner. The US is a major market for agricultural products, and is our largest market for beef and edible offal – worth over $1 billion.

However, with the possibility of border taxes in play, a US-backed Trans-Pacific Partnership (TPP) off the table, and ongoing North American Free Trade Agreement (Nafta) negotiations, the future potential of New Zealand’s trade with the United States is uncertain.

Charles Finny, former official and trade negotiator agrees. “At this stage US policy beyond withdrawal from TPP and a strong preference for bilateral agreements is still unclear, and following the recent visit of Todd McClay to Washington DC a bilateral FTA seems a possibility,” he says.

“But would that be as good a deal as was proposed for TPP? It is too early to tell whether the Trump era trade policy will be good or bad for New Zealand.”

TPP: a leadership vacuum and new opportunities

One thing that was evident throughout the Trump campaign was that America would pull out of TPP. Trump frequently criticised the deal labelling it as “horrible,” a “bad deal,” and a “death blow for American workers.”

While a TPP that includes the US is at this stage off the cards, eleven Asia-Pacific nations – including New Zealand – remain dedicated to ensuring the regional free trade deal goes ahead. The absence of the US has created a vacuum in global trade leadership which China has been more than happy to fill by supporting the Asean-led 16-nation Regional Comprehensive Economic Partnership (RCEP).

For American agriculture, the TPP represented an opportunity for agricultural exporters to trade with what is now a very lucrative Asian economy. The American Farm Bureau Federation estimates that the deal would have boosted annual net farm income by US$4.4 billion.

There is concern in the US that other economies are in a prime position to take advantage of America’s lost opportunity. While in some cases the US is paying significant tariffs in Asia, New Zealand, for instance, is working towards the elimination of tariffs on 99 per cent of exports to key Asean markets by 2020.

The US Meat Export Federation believes its members will see a reduced market share in Japan – their largest export market if the US fails to strike some kind of Pacific trade deal soon. “What we’re worried about is 18 to 24 months from now when [Australia] can offer competitive prices and volumes on cuts that we now are supplying, but at duty rates that are double-digit lower, that really represents a handicap [to US exports],” says the Federation’s Senior Vice President for the Asia-Pacific, Joel Haggard.

The longer this disparity goes on, the bigger the disadvantage could be to the United States, and the greater the advantage to its competitors – including New Zealand.

Recognising this, Darci Vetter – who served as America’s chief agricultural trade negotiator under President Obama said:
“You want to have the best level of access at the time they start forming relationships with buyers and so the timing on this is critical and we’re going to be way behind New Zealand,” he says.

Tim Groser, New Zealand’s ambassador to the US and a former NZ trade minister who worked relentlessly to get the TPP across the line agrees.

“This is a competitive game and of course we aren’t going to sit in a hole and do nothing on these non-TPP fronts because everyone is in this game and if you fall behind you are in a competitive disadvantage.

“At the end of the day we’re all economic nationalists. Our responsibility is to look after our own country’s economic interests.”

Border taxes: sparking a trade war?

Also in play is a border tax on imports into the United States.

In a bid to support Trump’s commitment to increase American competitiveness and prevent jobs moving overseas, some congressional Republicans have put forward a proposal to apply a border adjustment tax (BAT).

The border adjustment tax is considered by some to be a critical part of tax reform, as it will mean that companies can no longer deduct the cost of imports, creating strong incentives to bring supply chains and research back to the United States.

While the introduction of a BAT would impact all sectors, agriculture is expected to be one of the hardest hit due to the amount of materials and inputs farmers rely on that come from outside the US – including fertiliser, fuel and chemicals. Moves to retain the entire value chain within the US could also spark a trade war, with countries like China and Mexico moving away from the US and instead buying their agricultural commodities from other countries.

The levy has divided Congressional Republicans. It is said that Trump is also against its introduction. And there is a question of the legality of the proposed BAT, with critics arguing it would violate United States commitments under World Trade Organisation rules which the US has signed up to.

“Any border tax adjustment runs the risk of breaching commitments made by the US in the WTO or regional/bilateral agreements,” explains Charles Finny.

“Without a detailed proposal it is impossible to comment on the trade law implications of such a policy. But if it appears to be in breach of commitments then the US should expect a challenge from a number of trade partners.

“How the Trump Administration reacts to any challenges will be interesting to observe.”

NZ-US FTA: No major impediments

Trump’s “America First” strategy has had an impact on the US involvement in regional and multilateral trade agreements. But Trump has stressed that he is not opposed to all trade agreements, and is in favour of individual deals on the proviso they can be quickly terminated “if somebody misbehaves.”

Early in his presidency, Trump told Fox News “believe me, we’re going to have a lot of trade deals. But they’ll be one-on-one. There won’t be a whole big mash pot.”

Last month, New Zealand Trade Minister Todd McClay visited Washington for talks with Trump’s Administration.

“I’ve welcomed their interest in an FTA as a demonstration of the good shape our trading relationship is in,” McClay later said.

He saw no major impediments to a trade deal with the US.

Whether Trump sees things the same way is anyone’s guess.

Capital Markets: Time for Prospectus NZ? (NZ Herald)

Fran O’Sullivan and Tim McCready

New Zealand is in a sweet spot.

Surely it’s time for our sharpest brains to come up with a major campaign to spruik New Zealand as an investment destination and go hard on capital markets?

“I just think the genie is out of the bottle with New Zealand,” says Nicholas Ross, country head for UBS New Zealand. “People are just going to keep coming and coming and coming.”

“If there was ever a time to be bold and to borrow a bit more this is it,” he adds. “Markets are in very good shape, they are very receptive to good proposals and interest rates are very low.”

It is a stance shared by a growing number of senior NZ capital markets players and business leaders.

New Zealand arguably remains behind the pace when it comes to applying financial leverage to fully fund the growing infrastructure gap sparked by rocketing net migration.

A Government spooked by a series of major earthquakes is wary of accruing too much debt in case it needs to use its balance sheet in the event of another costly natural disaster or recession. But this appears short-sighted when Trump’s America and Brexit have affected international perceptions and this country is increasingly viewed as a safe haven for people and capital.

Auckland Chamber of Commerce CEO Michael Barnett points out there are many options for funding the city’s growth.

But they all require capital.

Commonwealth Bank’s Andrew Woodward says the NZ debt market has shown it has the capacity to complete larger project finance transactions.

Woodward – who is general manager of CBA’s NZ operations – points to Transmission Gully and the Puhoi-to-Warkworth projects, which attracted support from domestic and offshore banks and investors and competitive outcomes for the NZ Government.

He says the continued success of this style of transaction – as well as funding of significant investment by the likes of Auckland Council and Auckland Airport – will continue to rely on domestic and increasingly international debt markets supporting growth projects, with both having targeted international debt markets to meet their growing funding requirements this year.

Says Woodward: “To aid the further development of the NZ debt market there continues to be a strong role for Government in outlining a clear pipeline of projects (across a range of asset classes including toll roads, prisons, hospitals, and rail projects), so foreign capital keeps New Zealand on the radar, as well as ensuring legislation around areas such as interest withholding tax are competitive versus other jurisdictions, and encourage investment in New Zealand.

“While the domestic debt market can meet requirements up to a certain capacity, foreign capital is expected to play an increasing role to meet the planned infrastructure spend.”
Kiwis who have collectively saved more than $40 billion in KiwiSaver – an average of just under $15,000 per person – might also question whether investment allocations are structured to deliver sufficient funding for NZ growth (and the needs of savers).

Australian research firm Strategic Insight has released figures showing total KiwiSaver balances hit $40.651 billion at the end of March; up from $38.416b at the end of December.

With KiwiSaver poised to turn 10 this year, it is worth asking whether more avenues for investment should be provided onshore.

In its report, World awash with Money, Bain & Company looked at capital trends through to 2020.

The consultancy firm predicted that for the balance of the decade, markets will generally continue to grapple with an environment of “super-abundance”.

It says there has been a power shift from the owners of capital to the growers of good ideas. “In this environment, investors’ success will be determined less by how much money they command than by their ability to spot an investment’s true creation potential and act on it nimbly.

Those that can react with speed and adaptability will be best able to identify the winners, steer clear of bubbles and generate superior returns.”

There is an abundance of innovation in New Zealand. Time for that Kiwi prospectus to fund our growth and our ideas.

Asia New Zealand: Generational Division in South Korea

Tim McCready

While participating in the Foundation’s offshore forum in Korea, Leadership Network member Tim McCready gauged the mood of the country following the impeachment of President Park Geun-hye. In this article, he describes a country divided along ideological and generational lines.

We arrived in Seoul for the Asia New Zealand Foundation’s offshore forum at the height of demonstrations over the the impeachment of President Park by the National Assembly. Accused of violating the constitution by helping her long-time friend extort donations from the country’s biggest business empires, Park was subsequently ousted from office in an unprecedented and unanimous ruling by the constitutional court.

The president’s ousting brought to the fore simmering tensions that run along ideological and generational lines, at the heart of which is how to deal with North Korea.

Peaceful protests are not uncommon in South Korea. The first time I visited South Korea was the one-year anniversary of the Sewol Ferry Disaster. The sinking in April 2014 cost the lives of 304 passengers and crew. This resulted in enormous protests, as South Koreans saw their government having failed to hold high-level officials accountable for the disaster.

Prior to Park’s removal, demonstrations and candlelight vigils – representing both sides – took place every Saturday over three months.

A few days after we arrived for the forum, the courts approved an arrest warrant for Park, and she was jailed. Demonstrations broke out again.

I spoke with a group of protestors living together in a tent within the city square. A man in his 70’s translated and explained to me their perspective of the situation.

“There are two distinct groups in South Korea,” he said. “One is the left wing, and the other is right wing.”

“We are the right-wing group. We follow democracy. We are protesting because the president was impeached by the left. We are embarrassed that has happened.

“It is our wish that in the future there will be unification. But it is important not to give in. The left – the younger generation – follows North Korea and China.”

While this is an extreme view, it does exemplify the generational divide in South Korea. On a simple level, the older generation think that North Korea should be dealt to with pressure and isolation. The left would prefer to have an open dialogue with the North.

A lot of this divide stems from South Korean President Park Chung-hee, the father of jailed President Park. He seized power through a military coup in 1961, at a time when South Korea was far less developed economically than the North.

By the time he was assassinated in 1979, South Korea had gone through what is referred to as the “Miracle on the Han River” – a period of rapid economic growth following the Korean War. It is because of this that Park, and his daughter, are looked on fondly by older South Koreans, despite his systematic disregard of human rights.

There are an estimated 6,700 people from separated families living in South Korea. The tragedy of the situation is most easily seen through those people who are divided from their family, who passionately long for reunification.

Now, 70 years on from the division, those with the closest ties to the North are getting very old. The requirement to seek peaceful unification between the two Korea’s is part of the South Korean constitution, yet speaking with younger South Korean’s, they are often agnostic about the prospect. They are already struggling economically, and point to the enormous economic disaster that will become their responsibility if the border were to collapse.

During a meeting with a senior banker at a major international bank in Seoul, I asked for his take on North Korea.

“I am just a simple banker,” he said, modestly.

“We are always in the shadow of war. But that aside, South Korea is a very safe place to live. That is what I care about. I don’t care what happens with North Korea.”

Younger South Korean’s I spoke with shared the banker’s point of view. They don’t worry about the looming threat of nuclear war. Instead, they are getting on with their lives, and their careers – like the rest of us.

A younger South Korean I spoke to on my flight from Seoul to Europe explained it best:

“We do not spend time worrying about what could happen. That threat has always been there,” he said.

“But we are very nationalistic. We love our country. And now our President has been jailed. We are embarrassed by her. We are embarrassed about what the rest of the world thinks of us.”

That sentiment seems to be something that all generations can agree on.

China Business: Alibaba offers sweet deals (NZ Herald)

Tim McCready chats with Alibaba’s Australia and New Zealand director of business development John O’Loghlen about the new regional office, the work being done with New Zealand businesses, and the future of online shopping.

Moving on from the rules of the WTO and global trade will allow small businesses and developing nations to tell their stories and trade together effectively using e-commerce.

Alibaba last month opened an Australian and New Zealand office in Melbourne, demonstrating the Chinese e-commerce giant’s ambition to expand its global footprint.

“Although it is headquartered in Melbourne, New Zealand is equally important,” said John O’Loghlen, Director of Business Development – Australia and New Zealand at Alibaba Group. “The leadership team in Hangzhou look at both markets together.”

Alibaba also recently appointed Pier Smulders as Director of Business Development in New Zealand, a dedicated in-market resource and experienced client service professional for Alibaba’s key accounts and opportunities in the SME space.

At the Melbourne opening, Alibaba founder Jack Ma acknowledged Australia and New Zealand’s clean environment provides a unique selling point for its businesses and will be a “goldmine” for the region’s economy over the next 15 years.

“In the past 30 years through a lack of experience in China we have a terrible polluted environment. There’s a lot we should have learned from Australia and New Zealand,” he said. With a local office and expert team, Alibaba will help Australian and New Zealand businesses share their world-famous products with billions of customers around the world.

“Whether a large company with existing links to China, or a mum-and-dad run exporter operating out of a garage, Alibaba is here to make it easy to do business,” he said.

The opening of the Australasian office comes after a strategic alliance was established between Alibaba and the New Zealand Government last year. The memorandum of understanding (MOU) signed by New Zealand Trade and Enterprise (NZTE) formalised discussions for strengthening trade between China and New Zealand, with an aim to foster greater trade opportunities for businesses seeking to enter the Chinese consumer market.

At the time of signing, NZTE chief executive Peter Chrisp said: “New Zealand businesses are already using Alibaba’s channels to sell a wide range of products including dairy, meat, seafood, fruit, wine, beverage, cereal, skincare and health supplements. By providing dedicated services for New Zealand products, this new arrangement offers significant opportunities for New Zealand businesses to reach more consumers as well as advocating New Zealand’s reputation as a place of open spaces, open hearts and open minds.”

Since the MOU was signed, Alibaba and NZTE have run workshops across New Zealand, helping exporters to gain insights into doing business with China and Chinese consumers, evaluate their business models and provide education about Alibaba’s various platforms.

Last September, NZTE and New Zealand Winegrowers established a Wine Pavilion on Tmall, dedicated to the sale of about 100 different New Zealand wines, representing all key wine regions and wine varietals.

NZTE’s Trade Commissioner in Shanghai, Damon Paling, says that wine traffic has been growing through organic and paid advertising, with the conversion rate consistent with market expectations at around two per cent, and an average basket value around NZ$120.

In addition to wine, Paling says that Alibaba platforms Tmall and Taobao are “seeing good sales of various consumer dairy products, fruits, and small categories such as manuka honey, wine, breakfast cereals, and snack bars.”

Although New Zealand and Australia is perceived as a regional “sweet spot,” O’Loghlen said it is important for businesses to appreciate that companies in Switzerland, Japan, America, South America and Britain are all looking towards China too.

“There are a lot of great brands around the world. Many countries make good milk, honey, and merino sweaters.

“In order to be successful, you not only need the best-in-class product in New Zealand and Australia, but it has to stand on its own two feet globally.”

Alibaba is spending a lot of time helping clients understand that it is important to tell their own brand story effectively, while at the same time leverage the unique advantage and narrative that comes from being a New Zealand business.

While there are a huge number of opportunities in the region, O’Loghlen said one of the most significant areas of focus over the next three-to-five years would be produce and protein.

“Seafood, beef, lamb, dairy, and really exotic produce like avocados offer an exciting opportunity.

“The fresh food space is going to be fascinating. We are really excited about fresh milk on top of what has been the first round of extended shelf-life milk into China,” he said.

Alibaba’s platforms will allow businesses to sell direct to consumers, avoiding the layers of distributors that have been a hurdle for New Zealand companies in the past.

O’Loghlen said it is really important to recognise the power of the daigou community – especially in Australia and New Zealand.

Daigou is the Chinese term given to buying items overseas on behalf of others. Products are purchased and brought into China by professional personal shoppers – or bought through online channels – with international students often acting as the intermediary.

This grey market is a multibillion-dollar business, and it can be argued that daigou can help put innovative new products on the radar.

Many New Zealand products already have an unofficial presence in-market because an enterprising Chinese New Zealander found it, liked it, and introduced it to their networks in China, said O’Loghlen.

“Chinese in New Zealand are using their mobile phones to tell the story of the region, disseminating that information back to China in real time.

“My colleagues in Europe and North America do not have an equivalent demographic that we do here [in Australia and New Zealand], in terms of percentage of the Chinese population in the large urban centres,” he said.

Chinese consumers looking to buy something from this region are receiving an accelerated experience of the New Zealand and Australian culture, because – more often than not – they know someone here.

“As Chinese authorities tighten up on the grey channels, companies will need to take hold of their own story from that of the daigou community, moving beyond a commodity phase to a more branded presence,” said O’Loghlen.

“This shift will lead to strong brands telling wonderful stories, and that is where Alibaba can help.”

O’Loghlen has spent considerable time living and working in China, and has noticed the pace of change recently has been more rapid than ever.

“Opportunities are emerging that didn’t exist previously. A lot of new platforms are geared towards small businesses and newer brands.”

Alibaba’s Australasian presence will help to ensure Australian and New Zealand businesses have the information and support necessary to succeed in China and the rest of the world.

“The office here will help businesses in the region understand that the pace of change in China is very different to that of New Zealand – or even Hong Kong or Singapore,” O’Loghlen said.

“I think if you had spoken to people in e-commerce in China several years to premium Kiwi producers

“Now we have a number of bonded warehouse opportunities. For example, Alibaba’s Taobao Global taps into a network of daigou, who ship their products through a bonded warehouse, and are as far away from a grey channel as you can imagine.”

With people in-market, Alibaba can not only help companies in Australia and New Zealand stay on top of the emerging sales channels, but also bridge the cultural chasms and language barriers that come with doing business in China.

Alibaba has made a number of investments in offline department stores over the past 18 months, in a push to merge its online platforms Tmall and Taobao with bricks-and-mortar (offline) shopping.

A surge in mobile internet usage and the growth of big data capabilities is driving this new “omnichannel” shopping experience as a way to better meet consumer demand.

The most recent move by Alibaba was a strategic partnership with Bailian Group, one of China’s largest retail conglomerates with 4700 stores across 200 cities and autonomous regions.

The two companies plan to leverage their respective consumer data to “explore new forms of retail opportunities across each other’s ecosystem,” integrating offline stores, merchandise, logistics, and payment tools to deliver a better overall shopping experience.

By combining membership data, they will be able to introduce technologies including geo-location, facial recognition, and big-data driven sales and customer management systems.

“When we talk with people here, a lot of people ask us if this is like Amazon, or what the analogy is,” said O’Loghlen. “But it is actually something very unique to China.

“These investments in offline allow consumers to experience brands. There will be a blurring of the lines in promotion online and offline.

“People [in China] are used to scanning QR codes or buying things offline and then receiving a promotion online, or vice versa,” he said.

“We have to be able to educate people very quickly about these things, because by the time it gets reported, your competitors may be up and running on the platform.

“It doesn’t require huge marketing dollars. A huge number of these promotions rely on livestreaming, which is the communication channel of choice at the moment in China.”

Marketing via livestreaming maintains a degree of exclusivity for the consumer — if they don’t tune in, they will miss out. Companies can tell their story in a more authentic way, better connecting with buyers and consumers.

“For Singles’ Day (November 11) there were 60,000 live streams between October 21 and November 11 featuring celebrities from China and overseas.”

O’Loghlen explained that if he and I were to have this same conversation in another 12 months, China will likely have moved on from livestreaming – perhaps to augmented reality or virtual reality goggles. That is not as a far-fetched as it seems. Last year the augmented reality game Pokemon Go took the world by storm.

Alibaba’s Buy+ virtual store also made its public debut in July last year at the Taobao Maker Festival in Shanghai. Buy+ – although still in beta – allows consumers to shop and browse products in a virtual environment using a headset with 360-degree views and two hand controllers. Shoppers can even have virtual models showcase apparel and accessories on a catwalk.

Ma has spoken about his aspirations for a frictionless, borderless future for e-commerce. Central to that is the establishment of an “electronic world trade platform” (eWTP), that will use the internet to remove trade barriers and allow all manufacturers and brands – regardless of their size – to have the same opportunity to enter a consumer market.

“Australia and New Zealand are both in the driving seat to take a leadership role in the eWTP rollout,” said O’Loghlen. “Moving on from the rules of the WTO and the rules of global trade will allow small businesses and developing nations to tell their stories and trade together effectively using e-commerce.

“We want to democratise the playing field for trade. A lot of people are really excited by that vision.”

A long lasting connection
Alibaba founder Jack Ma was one of the first foreign business heavyweights to meet with Donald Trump following his election victory.

In contrast to President Trump, Ma is an advocate for global trade, and says the best advertisement for globalisation is the success of one company trading with another, and hiring more people in the process.

By expanding into Australasia, Ma said Alibaba was making it easy for our businesses “to do business anywhere”.

At the opening of Alibaba’s Australasian office, Ma described the region as one he holds a long connection with.

“Australia will always have a special place in my heart and that’s why I’m so pleased to come back to contribute to supporting Australian businesses and create opportunities and jobs in a country that has meant so much for me.”

China’s richest man electrified a luncheon for former Prime Minister John Key in Beijing last April when he thanked New Zealand “for your benefit to the whole planet”.

He revealed then that 20 of Ma’s former colleagues at China’s e-commerce giant loved New Zealand so much they have retired here.

In the 1980s when Ma was 12 years old, he introduced himself to Australian Ken Morley — who was visiting China on a family holiday — in an effort to improve his English.

Ma befriended Morley’s son, who subsequently brought him to Newcastle in Australia on his first international trip.

Ma has said the time spent in Australia when he was young changed his view of China and its relationship with the world. “I am very thankful for Australia and the time I spent there in my youth. The culture, the landscape and most importantly its people had a profound positive impact on my view of the world at that time,” he said.

Last month Ma, who according to Forbes is worth US$28.2 billion and is the second wealthiest man in China, gave A$26.4 million to establish a scholarship at the University of Newcastle.

The Ma & Morley Scholarship Programme will help establish networks between the two countries, as well as provide practical training to equip beneficiaries for leadership in the global environment.

China Business: Chinese brands make their mark (NZ Herald)

Tim McCready

A decade ago, the most respected domestic brands in China were those attached to clothing, shoes and other small items.

Nowadays, Chinese appliance brand Haier, e-commerce platform Alibaba, and personal computer manufacturer Lenovo are well recognised, and showcase China’s rapid growth and aspiration for dominance in innovation and technology.

Perhaps nothing better demonstrates this change than low-cost Chinese smartphone manufacturers. Recent surveys have shown the good quality and low prices of domestic high-tech smartphones have dramatically increased in reputation to become among the most trusted brands in China.

China is the world’s largest market for smartphones, and one that is growing rapidly. Global technology analyst firm Canalys recently reported that for the full year 2016, China reached 476.5 million unit shipments of smartphones, growing year-on-year at 11.4 per cent — vastly up on 2015’s growth rate of 1.9 per cent.

The last quarter of 2016 saw smartphone shipments in China reach 131.6 million units — the highest single quarter total in history and accounting for nearly a third of worldwide shipments.

Leading the charge in the Chinese smartphone market are Huawei, Oppo and Vivo. Their rankings jump around depending on how the data you use is captured (shipments to resellers, reported sales, phone activations), but all have experienced strong growth in sales numbers over the past year.

Traditionally, Huawei has focused on China’s larger tier-1 and tier-2 cities, with Oppo and Vivo targeting rural areas and medium cities — although that is changing as all three look to aggressively expand their market share.

The Chinese smartphone market is not without its challenges. Xiaomi was once considered by many to be the “Apple of China”. Xiaomi’s CEO, Lei Jun, has been on a mission to “change the world’s view of Chinese products”.

Yet Xiaomi has slipped to fourth place in the Chinese smartphone war, and is the only one of the top brands to decrease its shipments in smartphones over the last year.

The company sold enough to keep comparatively expensive Apple at fifth place, but has struggled with poor reviews and hasn’t been able to keep pace with the innovation, marketing, and investment into distribution channels of its domestic competitors.

Globally, Chinese brands are making big strides into international markets. Earlier this year at the Consumer Electronics Show (CES), an annual tradeshow for consumer electronics held in Las Vegas, many analysts reported that China’s presence marked a big change. Chinese companies were present in record numbers — 1575 exhibitors compared with 1755 from the United States, showcasing strong innovation and technologies including smartphones with high specifications and advanced cameras.

Huawei was one of the early smartphone entrants into Western markets, and has become the first Chinese company to chip away at what has been South Korea’s and the United States’ stronghold on the industry, claiming third place in the fiercely competitive global smartphone market just behind Samsung and Apple.

Richard Yu, CEO of Huawei Consumer Business Group, said at CES that Samsung’s woes over the past year with the Note 7 catching on fire provided more fuel to the company to push ahead as a serious player in the market.

Yu believes China deserved its previous reputation for being an imitator.

“Chinese vendors are getting strong and stronger at innovation,” he said, expecting Huawei to spend US$10 billion on research and development this year — about the same figure as Apple spends.

Huawei continues to push its brand in New Zealand — it is a regular on television adverts and billboards around the country. Last year Huawei and the Wellington Phoenix signed the largest sponsorship deal in New Zealand football history, extending their initial three-year partnership for at least another three seasons.

At the time, Huawei global rotating CEO Guo Ping said connecting with football fans through the Phoenix had been a huge part of growing the brand in New Zealand.

“This partnership has been outstanding for Huawei, building our profile in Australasia, and providing amazing experiences for our customers and friends in New Zealand.”

It seems to be working. Huawei has grown to third position in terms of share of total shipments to New Zealand, growing to 21 per cent in the fourth quarter of 2016. That compared with 31 per cent of the market for Apple and 26 per cent for Samsung.

Other Chinese brands are yet to crack the New Zealand market to the same degree. Oppo is one would-be player, having signed exclusive agreements with 2Degrees and JB Hi-Fi to sell their handsets. This represents a natural next step for the Chinese producer, having enjoyed 700 per cent year-on-year growth in its Australian market share in the fourth quarter of 2016 (reaching 2.9 per cent of the market).

Global producers of smartphones have struggled to expand into China, and yet Chinese producers are rapidly accelerating into other parts of the world.

In the 2000s, Finland was the epicentre of phone manufacturing, with Nokia a ubiquitous staple in everyone’s hands. Whether or not Nokia’s recent relaunch will shake the industry up remains to be seen, but in the first quarter of 2016 Huawei sold 10 times as many phones as Apple did in Finland. Last October Huawei passed Samsung to claim the top spot of the smartphone market there.

High specifications and low prices might just be a winning formula for Huawei and others to take on Apple and Samsung — the top players in the industry since 2011 — and expand their dominance in China and Finland to the world.

China Business: UniServices goes global from Hangzhou (NZ Herald)

Tim McCready

Auckland UniServices, the commercial arm of the University of Auckland dedicated to connecting its capabilities to business, investors and the community, has recently established an innovation institute in Hangzhou, the “Silicon Valley of China”.

Hangzhou, capital of Zhejiang province and fourth-largest metropolitan area in China, is just an hour by bullet train from Shanghai and showcases China’s rapid transition from a low-cost manufacturer to technology-focused innovation centre.

E-commerce giant Alibaba was founded in Hangzhou, and companies such as Siemens, Motorola, Nokia and an increasing number of start-ups have set up there.

Dr Lisbeth Jacobs, General Manager International at UniServices, says “Chinese officials in Hangzhou are well aware of the University of Auckland’s success in commercialisation.”

She is responsible for all contract research and services activity outside New Zealand, Australia, and the Pacific.

In 2014, the MIT Skoltech Initiative identified UniServices and Auckland University as one of the top five “emerging leaders in entrepreneurship”, one expected to become a major international powerhouse in the coming decades.

Last year, the university was ranked 27 in a Reuters report on the 75 most innovative universities in Asia, a list that identifies the educational institutions doing the most to advance science, invent new technologies, and help drive the global economy.

“While China is very entrepreneurial and pours a lot of money into innovation, it can still be a struggle to bring new ideas to market,” says Jacobs. “China is a large market that offers a ton of opportunities but at the same time is extremely competitive.

“In order to be successful it is important to have a strong local base,” she says.

“Successful innovation depends on many different factors, but it must be process driven.

“New ventures are typically more likely to succeed when we put experienced people next to young entrepreneurs.”

Jacobs sees Hangzhou as the perfect location for UniServices, matching the type of technology being undertaken at the University.

“Hangzhou has a lot of biotech, e-commerce, logistics, precision manufacturing, pharmaceuticals and nutrition companies, and is attracting top-tier science and technology companies and researchers.”

The Government of the Hangzhou Economic and Technological Development Area (HEDA) helped UniServices find a suitable location for the innovation institute, and assisted with administrative processes and other local requirements.

UniServices will initially use the institute to gain traction in China in several areas where the university’s internationally-recognised expertise is relevant for the Chinese market, including robotics, high value nutrition, light metals research, water, clinical trials and drug development, particularly in oncology.

The University will also look to offer executive education in specific areas, including tailoring their post-graduate qualification in commercialisation and entrepreneurship, for which it is well known internationally.

While UniServices has already had several contracts with Chinese companies, Jacobs says managing them from New Zealand is not always easy.

“On previous projects we have wanted to hire staff close to the project.

“Without a Chinese entity, it is very difficult to do that. Enforcing contract terms and payment has also been challenging at times.”

The institute has been set up as a wholly foreign owned limited liability company under Chinese law.

A local entity and a base in China will make it a lot easier to hire staff, enforce existing contracts and be closer to Chinese customers.

Jacobs explains it is not possible for UniServices to hire generic staff — an engineer might be suitable for a programme in light metals but is not interchangeable to work on a drug development project.

Teams will be built around projects and research entities as is done at UniServices in Auckland.

“Our people will travel more, and as projects and research centres grow we will build teams up locally to expand beyond ad hoc projects,” says Jacobs.

“We will be able to access more work, and ensure any contracting is more effective, efficient, and enforced.

“If UniServices can contract from their own entity in China to another in China — and backed by local government — it is a lot harder to be ignored.”

UniServices has previously had an offshore presence, including a large multi-year programme to introduce an English language foundation programme at Princess Nourah Bint Abdulrahman University in Riyadh, and it has staff in Oman to deliver a schooling improvement project alongside the government.

But establishing an office that will do everything UniServices does from New Zealand, rather than project-based work, is a first for Auckland University.

Jacobs’ vision for the institute is to be actively engaged in contract research, deliver consulting services, spin out companies from the university and incubate start-ups.

“One of UniServices’ criteria for investing in spin-outs is that they have the potential to become global players. It is easier to become global on day one from China than from New Zealand.

“We will be able to offer our start-ups the ability to go global and really test their ideas in an international market.”

Jacobs says the institute aims to bring together people from all facets of the innovation ecosystem to use the facilities and share their experience and expertise with each other.

“It is my hope that the institute will ultimately provide a link between the innovation and commercialisation in New Zealand and China.

“We want to create impact, a vibe, and a hub for innovation,” the UniServices manager says.

Dynamic Business: Is NZ having a Trump moment? (NZ Herald)

Tim McCready

Issues of social mobility rather than inequality may be to blame for the current rise in anti-establishment politics

As anti-establishment politics continues its seemingly unassailable rise, the concept of ‘inequality’ is often invoked to explain it.

While there is no doubt inequality has driven many to the polling booths in support of Donald Trump, Brexit, Pauline Hanson and others, arguably what is at stake is more an issue of social mobility.

People will tolerate inequality. Many accept it as a natural by-product of an economy that encourages entrepreneurship and growth. Indeed, Americans have voted in as their president a man who embodies that inequality.

But that tolerance comes with hope; a hope that they, or their children or grandchildren, can reach the upper echelons of the economy if they continue to work hard, make prudent long-term decisions, and have a little bit of luck.

Circuit breaker
Increasingly, Western economies have represented a closed circuit of economic enrichment.

Alan Krueger coined the term ‘The Great Gatsby Curve’ to describe the way inequality affects social mobility.

As Krueger summarised in a Brookings Institution blog, “greater income inequality in one generation amplifies the consequences of having rich or poor parents for the economic status of the next generation”.

Once the working class gets the sense that their prospects of upward mobility are waning, they are willing to turn to a circuit breaker.

The left
For decades, the left have adopted the rhetoric and policy that implies the economy is a ‘zero-sum game’.

Specifically, the consistent premise of their arguments has been that something that benefits the rich must automatically, and equally, cost the poor. A gain to one is a loss to another, they argue.

This is simply not the case when it comes to economic growth. But that is beside the point in relation to the present climate. The bigger problem is that such a paradigm becomes easily transported to the flow of people. Priming voters to see the economy as a zero-sum game makes it very easy for the nationalist right to argue that immigration is likewise a zero-sum game. It becomes difficult for the left to then argue that immigration is the one area where a benefit to one (the migrant) is not a cost to the other (the destination economy).

Immigration
Perhaps that is why we are beginning to see some New Zealand’s political parties tentatively embracing anti-immigration policy.

The Greens recently released a new, population-based immigration policy, stating they would cap overall net migration at one per cent of the population — including returning New Zealanders. “We know that immigration is becoming more of a concern for people and in my experience the vast majority of people aren’t concerned about immigrants, they’re concerned about the impact on house prices, and infrastructure,” says James Shaw, Green Party co-leader.

“Others around the world think as New Zealand First does,” said New Zealand First leader Winston Peters this year, at the party’s 23rd anniversary. “They were tired of being fobbed off about issues like immigration.”

Much has been made of a potential ‘Trump moment’ occurring in New Zealand in the future. Already, we may be falling into the same trap of the establishment in the US: being paralysed, fascinated even, by the phenomenon; musing over, sometimes analysing with impressive depth, its causes; but in doing so, failing to consider its remedies.

Inequality
But viewing inequality through a predominantly economic lens — incomes — fails to account for all the other things that make for an upwardly mobile life.

Anxieties do not only stem from income levels, but from not being able to get your child into a good state school, poor health, intolerance, a lack of social support, or few opportunities to progress.

Income is not everything. Indeed, it is everything aside from income that matters most for social mobility. From upward mobility, higher incomes follow.

Flawed measures
This is partly the reason why existing measures of inequality are flawed.

The Gini coefficient is the most used measure of inequality and looks through the lens of wealth at the income distribution of a nation’s residents. The number ranges from zero to one, where zero represents perfect equality — where everyone has the same income, and one represents perfect inequality. A higher Gini coefficient means greater inequality.

New Zealand’s Gini coefficient of 0.33 ranks New Zealand at 22nd — below the Netherlands but ahead of Norway.

However, aside from the fact that the measure cannot tell the difference between a society where everyone is equally poor and a society where everyone is richer, but incomes are more unequal, it is also deeply flawed as it fails to reflect the fact that inequality is about far more than simply income.

If the measure cannot reflect differences in health and social support and education outcome and opportunity and job quality, it means that you miss the root malaise that is behind Brexit, and to a certain extent Trump.

Prosperity
The Legatum Institute released its 10th annual global Prosperity Index last month — a huge study that measures the prosperity of 149 countries based not only on their wealth but also on a series of other factors including education, personal freedoms, how safe people feel and how strong community networks are.

This year, New Zealand topped the world for prosperity, and ranked first in the Index’s measure of economic quality, first for social capital, second for business environment, second for governance and third for personal freedom.

Harriet Maltby, head of policy research at the London-based Institute’s Prosperity Index team says that it is important to look at all inequalities combined, through one measure (prosperity), otherwise you miss the very reinforcing nature of deprivation.

“The problem is that traditionally, national success and related issues such as poverty and inequality, have been looked at from a purely economic perspective. While we recognise that wealth matters, so too does wellbeing.

“Income measures miss so much about what makes for a good life. That’s why the Prosperity Index looks at wealth and wellbeing combined.

“It is opportunity — real life chances — that drives prosperity, not money,” says Maltby. “This all feeds in ultimately to a country’s long-term success, which matters to business.”

Maltby, who is visiting New Zealand over January, explains that we need to shift our perceptions of what inequality looks like. “Making people richer in itself is not the answer”, she says. “We need a measure like prosperity that can look at wealth alongside all the other things that matter in life, and make policy decisions based on that. The New Zealand Government is already thinking like this, and other countries should do the same.”

“Britain is achieving what it achieves with a significant proportion of its population totally left behind in a whole load of dimensions. Imagine the potential and prospects for a nation if it could use and develop the talents of all?”

Globalisation
While it is useful to analyse the impact of globalisation on America’s rust belt, too much time spent examining the causes of those anxieties allows the establishment to feign intellectual interest in the winds of change, while making little or no progress in harnessing them for the good.

At last month’s Apec leaders’ summit in Lima, the leaders of the Pacific Rim pushed back against the creeping global protectionism, promising to continue to strengthen economic ties.

“If the United States doesn’t want to participate in free trade, [president-elect] Trump needs to know that other countries will,” said John Key at Apec.

“We hope he is part of the programme.

“But if not, we are going to continue doing things.”

Meanwhile, Australian Prime Minister Malcolm Turnbull warned that protectionism is the way to poverty. “We have seen this film before, the world did this in the 1930s after the Great Depression and made it much worse,” he said. “It’s not only missing out on a positive but risking a very big negative in terms of destabilising the global trading and strategic system.”

What is often overlooked is that businesses, particularly those that benefit most from a globalised world, can play an important role in helping to find the solutions, and will benefit from operating in a country that offers up the talents of all its people.

Dynamic Business: No ordinary disruption (NZ Herald)

Tim McCready

A handful of forces are shaping the future of what global business will look like

Four global forces are breaking all the trends and shaping the future of what global business will look like: greater global interconnections, industrialisation and urbanisation in emerging economies, an ageing world and disruptive technologies.

These disruptive forces will clearly have an impact on the business environment and will have an impact on investing for the future.

Consulting firm McKinsey & Company outlines the four global forces in its presentation: ‘No Ordinary Disruption’.

Greater global interconnections
The world is becoming increasingly connected through trade and cross-border flows of capital, people and information. Since 1990, cross-border flows have increased five-fold. Data flows are surging and connecting more countries — in 2005, 4.7 terabits per second were transferred globally, growing 45 times larger by 2014 to 211.3 terabits per second.

Australia and New Zealand are noted as two particularly well-connected economies in all five types of cross-border flow (goods, services, finance, people and data).

Relative to the size of the economies, Australia and New Zealand have more exchanges than most pairs of countries — people and data are rated particularly high, with 27 and 25 per cent share of total flows between the countries, respectively.

However, Australia and New Zealand rank lower in global connectedness — Australia is ranked 27th (down 10 places from last year) and New Zealand is ranked 48th (down five). This is in contrast to Singapore, the Netherlands and the United States who take out the top spots.

McKinsey & Company notes that the current slowdown masks digital transformation, but creates opportunities for smaller firms to participate. While Australia and New Zealand are strong together, it is important to acknowledge there is much more that can be done.

Industrialisation and urbanisation emerging
The rise of China, India and other emerging economies over the past 10 years has seen the global economic “centre of gravity” shift at an unprecedented pace. Emerging markets are going through simultaneous industrial and urban revolutions. The acceleration of output per person is occurring at roughly 10 times the pace of that following Britain’s Industrial Revolution and 300 times the scale — creating an economic force 3000 times as large.

McKinsey projects that by 2025, 46 of the global top 200 cities will be Chinese (in terms of 2025 GDP) and emerging regions of the world will be home to almost half of all Fortune Global 500 companies.

This massive scale and momentum means big shifts in economic power, but it is the mid-tier cities that are driving growth — not the megacities. Nearly three billion people will join the consuming class by 2025, bringing new consumers and competitors for businesses to consider.

An ageing world
The population of advanced economies is ageing rapidly. There are currently three countries where one-fifth of the population has passed the age of 65 — Germany, Italy and Japan. By 2020, 13 countries will fit this profile. By 2040, about one in four people in advanced economies and China will be 65 years old, or older.

Productivity, which is needed to meet the demands of an ageing population — and therefore becoming increasingly critical — is going the wrong way. This has implications for skill gaps and successions, and without an increase, a smaller workforce will constrain consumption and slow the overall rate of economic growth by up to 40 per cent over the next 50 years.

Disruptive technologies
Mobile internet and advanced robotics have seen massive increases in development pace. It took 115 years to advance from the first phone call to the launch of the first website — and then 16 years until the first iPhone was launched in 2007.

We have all seen the statistics demonstrating how quickly the adoption of new technologies is accelerating. The amount of time taken to reach 50 million users has decreased from 38 years for the radio, 13 years for television, three years for the internet, nine months for Twitter, to an incredible 19 days for the 2016 mobile game phenomenon of Pokemon Go.

Despite these advances, McKinsey reports that digitisation is still in its early days, with advanced economies capturing only a fraction of their true digital potential.

Smaller firms and large sectors (such as agriculture, construction, hospitality, government and healthcare) remain laggards in technology adoption, and are still a long way away from achieving potential benefits.

Both New Zealand and Australia are currently lagging behind the OECD average in terms of STEM qualifications.

Of all graduates, 18 per cent in Australia graduate from across science, technology, engineering and mathematics. New Zealand is slightly higher at 21 per cent (up five per cent from last year), yet talent across these subjects will be critical in shaping the future of our economies.

From East to West – Crossing the Siberian Heartland (Sunday Star Times)

Tim McCready

The day I arrived in Vladivostok, I was taken to an open day held by the Russian military. As they searched the bags of visitors at the entrance, my friend Igor warned me to not raise unnecessary suspicion by speaking to the soldiers.

I watched hundreds of Russians run the gauntlet through mud and a series of extreme obstacles – presumably designed to showcase the fun that can be had in the military (but resulting in multiple broken bones), and was then let loose with all kinds of guns, artillery, grenade launchers, tanks, and surface-to-air missiles. It was a rapid immersion into Russia, and I suddenly felt a world away from life in Auckland.

Kiwis are known to have a sense of adventure, but I’d been looking for something that would take me far from the typical tourist destinations, and truly challenge my comfort zone. So when Igor suggested a five week road trip over the summer across the largest country in the world – from Vladivostok to St Petersburg – I was game.

In the Russian Far East, near the borders of North Korea and China, Vladivostok is only one hour from Tokyo or two hours from Seoul, with a time zone just two hours behind New Zealand.

The city was closed to the outside world between World War II and 1992, and it remains the home of the Russian Navy’s Pacific Fleet. It is often compared to San Francisco because of the ornate buildings that line its steep streets, and the striking hills that offer sweeping views over the city, the harbour, and the Pacific Ocean. Putin recently invested US$20 billion to upgrade the city, which included construction of the world’s longest cable-stayed bridge, an opera house, and an aquarium.

I was invited by Igor’s parents to their rural dacha. They live in the small two-level brick house an hour out of Vladivostok over the summer, surrounded by shrubs laden with berries, fruit trees, and a vegetable garden stretching out in all directions.

The ongoing Russian sanctions have caused meat and fish prices to increase, and some foods are just not available.

The most noticeable was cheese – traditionally sourced European varieties have been replaced with Russian equivalents that could be generously described as bland. But despite that, summertime in Russia has no shortage of delicious food.
Highlights of the dacha banquet were okroshka (cold sour cream-based soup) and Russian barbecue – chunks of marinated pork cooked on metal skewers over hot coals. Both are extremely popular in summer.

We left the relative comfort of Vladivostok and set off for our destination some 14,000 kilometres away. Igor, Darren (another Kiwi), and I took turns behind the wheel.

While one of us slept in the back, one drove, and the other kept an eye out for hazards – we needed all the help we could get. On the road we saw it all. Pristine highways suddenly became consumed with potholes. Roads decayed into rubble – or disappeared into mud. More often than not we would be met with hundreds of kilometres of roadworks.

We attempted a shortcut only once. We’d gone too far along a perilous 70km path (unknown by our GPS) to turn back. Just as our fuel was running precariously low, we arrived at a river and a questionable floating bridge with an outrageously high toll to get across. We gladly paid it.

I underestimated the amount of driving we would do until the day we needed to cover 1600 kilometres in a single day. We had no choice – that was the distance between the neighbouring cities Blagoveshchensk and Chita.

Between them was nothing but (very infrequent) gas stations. No cafes, no shops, no villages. It took 18 hours, and with an outside temperature above 35 degrees, we found ourselves driving through Siberian forest fires for most of the journey.

Of the total 14,000km we covered, we passed through seven time zones, 27 cities and towns, and seemingly hundreds of villages. Equivalent to driving from Auckland to Wellington over 21 times. Or from Auckland to New York City.

Before the trip I assumed Russia was roughly homogeneous, but I soon discovered that once you look past the Soviet-era buildings, Russian cities and villages have their own unique history, sights, culture, and people.

We closely followed the trans-Siberian railway route that skirts the borders of China, Mongolia, and Kazakhstan. But along the way, we explored:

Ulan-Ude
Close to Mongolia, the city feels distinctly Asian. It is home to an enormous bronze head of Vladimir Lenin, which at 42 tonnes is the largest in the world, and casts intimidating shadows across the city square.

Ulan-Ude’s population is made up of a relatively large number of Buryats – an indigenous group descended from Siberian and Mongolian people. In stark contrast to the imposing Lenin head, we were given a warm welcome and assistance everywhere we went from the locals.

Driving out of the city, we were pulled over for speeding.

I was nervous as the policeman approached the car, but the officer was more interested in chatting to Igor about our journey and asking about our Toyota Prius – he had been looking to buy one. Russia was full of surprises.

Lake Baikal
The largest, oldest, deepest freshwater lake in the world, containing 20 per cent of the world’s fresh water. It’s also an extremely popular summer destination – Russia’s Coromandel. The plan had been to take a short car ferry trip to an island in the lake, but we were confronted with a 25-hour long queue. It wasn’t going to happen.

Instead, we found accommodation in a lakefront yurt. With three very comfortable beds and a central fireplace, I fell asleep to the sound of waves lapping the shore, and had one of my best sleeps in Russia. Our change in plans gave us time to spare, and after days on the road, the water was irresistible.

Tinskoy
Deep within the Siberian forest, I felt honoured to be invited to stay with Igor’s aunt and uncle in a remote village – they hadn’t had any foreign visitors before.

Although they knew only one word in English (pencil, bizarrely), they welcomed us with open arms, piling far more food and homemade vodka onto their small kitchen table than it was ever made to hold, and offered us their beds. I immediately felt like family.

Before leaving their home, we were herded together to sit down for a minute in silence – a Russian custom before a long journey that helps to collect your thoughts and ensure you remember anything you may have forgotten before you set off.
It is a habit that has stuck with me, and worked in my favour several times.

Tobolsk
Aside from St Petersburg, (arguably the most beautiful city in the world), Tobolsk really stood out. The historic capital of Siberia has an impeccably maintained stone Kremlin, perfectly manicured grassed squares, and streets and footpaths completely free of potholes and rubble. This was noteworthy because it was such a rare sight. It felt as though we had stumbled upon Disneyland.

Yekaterinburg
Next to a riverbank on the Ural plains stands a giant computer keyboard monument. Rumour has it if you jump out a wish on the oversized keys, it will come true.

The city had a bizarre collection of monuments and statues, including immortalisations of Michael Jackson, The Beatles and, for no obvious reason, one of a giant credit card.

By the end of our journey I came to realise that monuments are especially important in Russia. My favourite was a huge lab rat in Novosibirsk. The giant rodent stands knitting a DNA double helix, and is dedicated to all animals that have had their lives sacrificed to advance science.

Perhaps most fascinating of all was the Fallen Monument Park in Moscow, which houses those statues that were hauled there after the collapse of the Soviet Union. The park was full of decrepit marble heads, and Lenins in various states of disrepair.

Kazan
As Asia gives way to Europe, the “third capital of Russia” has a noticeable blend of Muslim and Christian architecture.
The Kazan Kremlin, once a Tatar fortress and now a UNESCO heritage site, contains a cathedral and vibrantly colourful mosque side-by-side.

Kazan is well set up for tourists with a variety of restaurants. Russian staples like blini (pancakes), borscht (beetroot soup), and pelmeni (dumplings), are a common feature on menus across the country. Even so, locals would often order pizza, or Russian-style sushi (which usually contained cream cheese or mayonnaise, served warm with a topping of melted mozzarella).

Perm
Some places were memorable for all the wrong reasons.

Not everything in Russia was impressive, and even when I ignored the graffiti and piles of rubbish, it was difficult to see past the decrepit Soviet architecture of this industrial city. The less said the better.

Volgograd
This was the furthest south we travelled in Western Russia, and without a doubt it provided the most spectacular sight of the trip.

The Motherland Calls statue stands atop a hill with 200 steps to the base – each step representing a day of World War II’s Battle of Stalingrad.

At twice the height of the Statue of Liberty (excluding the pedestal) the Motherland Calls is the world’s tallest statue of a woman, and is considered a remarkable feat of engineering due to her characteristic posture – a sword raised high in her right hand, her left arm extended in a summoning gesture, and her mouth screaming triumphantly. It truly dominates the skyline, and yet it’s another Russian landmark most people have never heard of.

We visited the statue during the day, but were drawn back in the evening to watch as her profile was lit up under the setting sun.

It is probably the most magnificent sight I have ever seen. It was also one of Igor’s highlights.

Russians don’t tend to travel far from their own city – Igor told us that without having a couple of Kiwis to travel with, he wasn’t sure he would have ever found the opportunity to visit the historic city he was taught so much about in school.

Moscow and St Petersburg
Without a doubt, Russia’s largest cities are the jewels in its crown, with an unmistakable presence of grandeur laced with authority.

The familiar tourist sights are more beautiful and majestic than I imagined, but by the time we reached them I realised the privilege of spending weeks visiting sights and attractions devoid of tourists. Suddenly having to queue among hundreds to view Lenin’s body and the Hermitage didn’t feel right.

If you are short on time, the Golden Ring (a ring of historic cities including Yaroslavl and Vladimir) is just outside Moscow, and offers an easily accessible taste of the Russian heartland, and a welcome escape from tourists.

On reflection, travelling without a Russian would have made the journey infinitely more challenging. Even with Igor, it seemed as though everything – no matter how trivial – could rapidly become a headache. More often than not, when we needed fuel the gas station had either run out, wasn’t accepting credit cards, was out of order, or was closed.

We tried to stay in apartments rather than hotels. They were generally more spacious, cleaner, cheaper, and gave us access to laundry and a kitchen. Booking accommodation on the fly worked well, until we discovered the apartment had been double booked, destroyed by the previous occupants, or was missing beds. We frequently found ourselves scrambling to find alternate accommodation, and stung with late night check-in fees.

Driving an average of 10 hours a day meant we needed a lot of fuel – sometimes up to four top-ups along a single drive. But thanks to the weak rouble, after we sold our car the total cost per person for five weeks on the road was $2200– including accommodation, food, entertainment, $225 worth of fuel, and one police fine ($12).

We reached the end of our journey unscathed – miraculously the only damage our 2011 Prius suffered was a dislodged mudguard.

Igor threw down one final challenge before leaving Russia – to take the lead and show him around Moscow. Thankfully we’d picked up enough Russian and Cyrillic to easily navigate the city, and one of the world’s busiest and most extensive metro systems with virtually no English signage. We passed the test.

Veni, vidi, vici.

Asia New Zealand: Myanmar Matters

Leadership Network member Tim McCready discusses being part of an Asia New Zealand Foundation delegation that travelled to Myanmar in September to learn about the rapidly changing Southeast Asian country and explore business opportunities.

The ‘Myanmar Matters’ trip was part of the Foundation’s ASEAN Young Business Leaders Initiative (YBLI), which builds networks between entrepreneurs and business leaders in Southeast Asia and New Zealand.

“Things are moving quickly in Myanmar,” says His Excellence Steve Marshall, New Zealand’s ambassador to Myanmar. “For some, not quickly enough, and for others too quickly.”

Marshall didn’t follow the traditional MFAT route to an ambassador position, but instead spent eight years heading the International Labour Organisation’s Myanmar office. As a result, he was able to offer the delegation of business leaders and entrepreneurs from Myanmar and New Zealand profound insights into the country.

Myanmar is part of ASEAN and the country has huge potential within the global economy. But more importantly, says Marshall, Myanmar matters because it is a country made up of over fifty million people, each deserving the opportunity to live their life without constant fear, and with the income, affordable education, and healthcare required to improve their situation.

“Myanmar has experienced decades of repression, with citizens living in a nation that essentially ran on fear.

“There are ethnic groups in the country voicing what they need and what they want, which will be important to build a unified and peaceful Myanmar.”

The country is going through a major transition. From over sixty years of military rule, to some form of democratic governance; years of fighting to – hopefully – some peace; and severe poverty to a time of inclusive growth.

“The military still plays a major role in the country in terms of control of the economy, and they will continue to have a big impact on the environmental and social fabric of the country – but the country has shifted from an arrogant government, to one that listens and is responsive to new ideas,” Marshall says.

Marshall reiterated that business can – and should – assist the government in making changes. While business must achieve a return on investment, to be truly successful they should also contribute to the environment in which they operate. “We shouldn’t hide until the government puts standards in place – we should be proactive,” he says.

Debbie Aung Din Taylor was born in Myanmar but her family left when the military took over. She grew up in Thailand, Nepal, Italy and the West Indies, before studying and working in the United States.

Taylor returned to Myanmar in 1994 and co-founded Proximity Design – a non-profit social enterprise that produces and sells clever agritech devices, and offers financial and farm advisory services.

The Myanmar Matters delegates visited Proximity Design’s factory in Yangon’s industrial zone and saw how it is providing a path out of poverty for rural families. Taylor agrees with Marshall that it is important for business to lead the charge as the country changes.

“Farming needs to be lucrative to attract young people, and it needs to have less drudgery,” Taylor explains.

“If you give things away for free, then you have no appreciation of whether something is valued or even used. It’s also difficult to distribute things fairly. You have to be able to scale, and run like a business.”

Taylor vehemently disagrees with the statement frequently made that Myanmar is ‘the new Vietnam’.

“It is not a new Vietnam,” she says. “Vietnam has a socialist foundation of healthcare and education that Myanmar doesn’t have.

“Myanmar is starting from feudalism – it’s pretty severe. We’re in a deep hole and don’t even have the basics to get the economy going yet.”

Thuta Aung, managing director of business consulting firm Hamsahub – a YBLI delegate and one of Myanmar’s strongest advocates for social entrepreneurship – argues that despite the challenges, there are exciting opportunities emerging in Myanmar.

“Myanmar is a country in transition. But it needs to be fixed further,” says Aung. “Myanmar’s transition brings with it significant opportunities.”

Myanmar’s place in the world – sandwiched between India and China, Bangladesh and Thailand provides connections that can be taken advantage of.

“Myanmar can be a useful partner to access neighbouring markets”, says Aung – “Myanmar can be an ideal launch pad for entering China.”

As the country is rapidly pushed into the 21st century, the people of Myanmar talk about ‘leapfrogging’. The Burmese didn’t grow up with computers, and had never used the internet. Just a few years ago mobile phone sim cards cost around NZ$2,500 each.

Upon arrival at Yangon airport, I picked up a sim card with 1GB of data for NZ$6. Now the country has one of the fastest growing mobile markets – more than 45 percent of the population uses mobile phones, bringing with it significant opportunity.

Although ranked the 167th country in the world for ease of doing business by the World Bank this year – ten places higher than last year – Myanmar still has a way to go in terms of enforcing contracts, facilitating trade across borders, protecting investors, construction standards. The list goes on.