http://nzh.tw/11595558

Cyber attacks becoming new normal, writes Tim McCready

Cyber risk rated as insurers’ top concern over the next two or three years in a survey released last year by PwC and CSFI. That was up from 13th place in 2013, and 11th in 2011.

Among New Zealand insurers, natural catastrophes remain the biggest risk, but cyber risk — at fourth place — rated as a major concern.

The amount of data about clients that insurers keep on their systems — including credit card information, medical details and underwriting information — makes them prime targets for cyber-attack. For that reason, there is a high level of anxiety among insurers towards cyber risk, particularly software failure and data security breaches.

One Australian respondent acknowledged the level of the cyber risk. “We repel more than 20 serious attacks every day. Half of those we suspect are state-sponsored attacks.”

As cyber attacks grow in number, scale and exposure, they are becoming a new normal for companies right across the spectrum. With that comes an increase in the number of cyber insurance policies issued globally. PwC estimates annual gross written premiums will increase from US$2.5 billion ($3.7 billion) today to US$7.5 billion by 2020.

The nature of cyber attacks means the geographical isolation that protects New Zealand’s biodiversity is no barrier to cyber-related crime. Although the uptake of cyber insurance in New Zealand is rising, it is still low by global standards.

PwC’s Global State of Information Security Survey showed that only 37 per cent of New Zealand respondents have cyber insurance, compared with 59 per cent globally, 56 per cent in Australia, and 70 per cent in China. Of those New Zealand organisations with cyber insurance, 25 per cent made a claim in the past year — compared with 50 per cent globally.

It is estimated cyber crime has cost our economy $257 million in the past year, although any figure is likely to be conservative as businesses are often reluctant to disclose a cyber breach, and it is notoriously difficult to assess the true cost of an attack.

In the United States, the Target retail chain reported costs of US$162 million, after insurance payments, from a 2013 attack in which hackers stole data from as many as 40 million credit and debit cards.

To provide protection, insurers need to be confident their clients have appropriate internal defence systems to mitigate the risk of attack. Yet SMEs have traditionally been poorly equipped and lacking the resources and awareness to put the necessary security measures in place to protect their IT infrastructure.

Tim Grafton, chief executive of the Insurance Council of New Zealand, says “the problem in New Zealand is that the vast majority of businesses are SMEs that lack sufficient risk management processes within their governance structures to identify the need for cyber cover. Having said that, brokers are playing and can play more of a role in offering cyber as an add-on to the suite of offerings.”

The Government is trying to address the lack of awareness and strength of cyber security through the Connect Smart partnership, a public-private collaboration launched in 2014, and its new Cyber Security Strategy.

The cost to a business from a cyber-attack can vary enormously depending on the industry and type of data breach. Costs may include a degradation of network performance, theft of physical devices, disruption of business, defacing a company website, forensic investigations, credit monitoring, legal fees, and even penalties for breaches of privacy as a result of not having sufficient protection in place.

Other less tangible costs including reputation and brand damage and the loss of privacy, intellectual property or classified data mean that how to establish the cost of a cyber-attack is still largely unknown.

This uncertainty and the immaturity of insurance offerings mean insurers hold major concerns about underwriting risk for cyber security, and could be exposing themselves to massive losses.

Insurers lack the data required to understand how likely an attack is, or what it will cost when it happens. Attacks are quickly becoming more advanced, and risks increase as companies rely on cloud services to keep their data backed up.

Stroz Friedberg, a global leader in investigations, intelligence and risk management, has predicted that constantly evolving cyber threats, immature risk models, and an underdeveloped reinsurance market will cause premiums to increase over the next year. This is particularly relevant for companies operating in sectors considered high risk, including retailers, healthcare and finance.

This has been seen recently in the US, where an increase in the number of cyber attacks on companies has begun prompting insurers to hike premiums, raise deductibles and cap the amount of coverage available. This is forcing some high-risk firms to scramble for insurance cover.

AIG NZ financial lines manager Katie Young says, “We live and work in a time of constant innovation and increased connectivity, with a resulting increase in the complexity of networks and supply chains.

“At AIG, we’ve seen a growing awareness by businesses in respect of cyber exposures and this has increased demand for our cyber insurance policy. While we’ve been covering cyber risks for more than a decade globally, it is still a relatively new market for insurers overall.

“As claims data develops, adjustments to premiums and coverage could follow.”

Grafton notes that a key point about insurance markets is that “premiums generally rise as the underwriting risk increases”.

“In the context of cyber security, that will differ from insured to insured, but the exponential rise in connectivity and devices linked to the internet of Things does raise the overall risk profile.

“Insurers, though, can cap their exposure through the use of limiting the sum insured, deductibles, exclusions etc.”

With something so unpredictable as cyber security, the only certainty is that a proactive approach to protecting against cyber attacks is essential. After all, cyber insurance will only help recoup the costs incurred after an attack. Preventing a security breach — and recovering from one after it occurs — rests squarely on the shoulders of the business.

• US$2.5b
Global cyber insurance premiums today

• US$7.5b
Predicted cyber insurance premiums by the end of the decade

http://nzh.tw/11595565

Cyber risk creates a real opportunity for New Zealand, Kordia chief executive Scott Bartlett tells Tim McCready

New Zealand businesses are starting to show a real mindset shift when it comes to cyber security, agrees Kordia’s chief executive Scott Bartlett.

“It’s in the papers a lot more, there is a real narrative going on in the business community around business obligations, endless surveys where CEOs say it is a top five issue — a real groundswell happening.”

But Bartlett admits that while this increased awareness is something to take notice of, it is just the beginning.

The next question companies must ask themselves is what they can do to make themselves safe. Businesses need to create a strategy — and then monitor it.

Bartlett sees organisations at different stages in addressing cyber security. “We have seen a lot of public sector departments and agencies jump on that maturity curve sooner than some others. And there are some standout examples among the business community.”

The challenge is that the issue, opportunity, and the subject of cyber security is universal — those instigating attacks don’t discriminate. “The reality is that you will get hacked, and you may not know that you have been,” says Bartlett.

“That is the attitude you must go into this with.”

Over the next year, Bartlett sees external threats increasing.

“We are going to see far more automation of attacks, and the tools are only getting better. Over the course of the next couple of years we are going to see the impact of these attacks worsen.”

One of the major challenges for businesses is legacy code that has been iteratively added to over the past 10 years.

“Find an organisation where all the web systems are new — they don’t exist,” Bartlett says.

“You are probably still vulnerable to things that came two years ago.” For external threats, raising the hygiene factor is critical. But they will always exist regardless of what a company does. Internal threats, on the other hand, depend on culture.

“There is a tendency to think of cyber security as a technical problem. But you can have all the policies, procedures, and firewalls in place you want, but if your people don’t understand the risk that comes with picking up a USB stick and throwing it into a computer, or doing commercially sensitive work on public hotel Wi-Fi, then the bad guys will get around your systems.”

Kordia’s mission is to be New Zealand’s leading business-critical technology company — “you can’t be in the business-critical game without cyber security.” In line with this, Kordia announced the expansion of its cyber security offering with the acquisition of Aura Information Security for $10.02 million in November last year.

Before the acquisition, Kordia already provided security products to customers, but Bartlett describes bringing Aura into the portfolio as Kordia’s “secret sauce”.

Fifty per cent of their business is in telecommunications, and roughly half of that in New Zealand is now security services.

Aura has about 300 customers, most of which are New Zealand’s largest organisations, including government departments, banks, and large insurers. They are also increasingly working with medium sized businesses.

Bartlett stresses that the biggest requirement in cyber security is to do a terrific job for customers — “if you drop the ball once, you are done”.

It is that requirement that makes Kordia acutely conscious of responsibly managing the growth of its cyber security consulting services. Although growth can be alluring, Bartlett insists that serving existing customers first is the priority.

“While we have experienced CIOs and technical folk in New Zealand, cyber security is specialist.

New Zealand’s pitch to attract people here isn’t bad, but Bartlett admits that the world is competing for the same talent. We need to have a combination of “grow our own” as well as attracting the best, he says.

For Kordia, this means making sure their cyber security team of 30 spends more than a fifth of their time on R&D — research that interests them. It’s a huge investment for Kordia, but things are changing rapidly — “if you’re not doing research, you’re falling behind.”

As opposed to Aura’s consultancy services, Kordia’s security product is very scalable.

RedShield provides defence for websites and web applications, and is currently shielding most of the Government and large businesses. It has the potential to go truly global, beyond current deployment in Australia and the UK.

It is obvious that Bartlett has a real passion for the opportunity cyber security can offer both Kordia and New Zealand.

“Exporting IP is fantastic and it is definitely part of the plan,” he says. “Products like RedShield will be key for New Zealand’s economic future — weightless and scalable. With fair wind and a lot of smart people it could become a big opportunity for New Zealand.”

Bartlett notes that the Government plays a leading role in informing and educating. The establishment of a CERT — a computer emergency response team — provides businesses a first port of call for advice, and allows knowledge sharing from the global community and within New Zealand.

This will ultimately help to lift awareness.

But the Government can’t do it alone.

Bartlett has been surprised at how much desire there has been across the spectrum to make the country safer, and how willing people are to contribute to it.

“We are a small country, and should be able to become a cyber security paradise,” he says. “If we can make New Zealand a cyber safe country — the world’s first — that would give New Zealand an enormous competitive advantage.”

http://nzh.tw/11481422

Tim McCready

Sheep milk products may become a Holy Grail as the agricultural industry continues to diversify, writes Tim McCready.
Dairy diversification is a very New Zealand preoccupation, and with good reason. Dairy prices are not becoming any more predictable, an uncertainty that feeds constant rhetoric about the need to diversify away from dairy.

It is true that diversification into technology and intellectual property exports offers New Zealand an exciting future, but it overlooks the potential for diversification within dairy. This can offer New Zealand significant opportunity, new markets and potentially less environmental damage.

Though dairy is still dominated by industry giants, this has not crowded out smaller innovative players. The “alternative dairy” industry has already had success in New Zealand.

Hamilton-based Dairy Goat Cooperative developed the world’s first goat milk-based infant products in 1988. Focusing only on the premium market, Dairy Goat’s turnover in 2014 exceeded $150 million. They show no signs of slowing, with a $70 million spray dryer opening last year.

Auckland-based health product provider New Image Group has partnered with Oete Farms, and plans to increase goat milk products, particularly due to a strong response from China, Southeast Asia and the Middle East. Even Hawke’s Bay’s regional economic development agency is spearheading a project to capture the value chain for the region’s goat industry — from breeding through to processing and exporting.

Yet it is New Zealand’s sheep that may provide the next exciting opportunity for diversification within the dairy industry.

The global market for sheep dairy is large and growing, driven largely by health, tradition, and fashion. Sheep milk has considerably more milk solids than cow’s milk, almost double the protein, more calcium, high levels of key vitamins, and a creamier texture. It is also reported to be more easily digested than cow’s milk, making it attractive to the Asian market.

The New Zealand government has recognised this potential. The Ministry of Business, Innovation & Employment, tasked with helping businesses to become more productive and internationally competitive, is running a six-year programme to boost exports of New Zealand’s emerging dairy sheep industry.

Their research, involving AgResearch scientists from across New Zealand, aims to grow our dairy sheep industry to become an international leader by better understanding sheep milk composition and function, boosting production and value, and ensuring the environmental footprint of the industry is sustainable.

New Zealand’s dairy sheep industry is already reasonably established, with five commercial operations, but there are signs it can expand and innovate further still.

AntaraAg, New Zealand’s largest producer, has around 20,000 stock units and produces cheese and milk powder, mostly for export. Earlier this year AntaraAg’s predecessor, Blue River Dairy, sold its processing plant and brand to Chinese company Blueriver Nutrition HK — a necessary step for expansion into Asia after a year of unsuccessful negotiation to have Blue River Dairy’s infant formula certified in China.

On top of this, New Zealand’s sixth commercial sheep dairy operation was announced last month. Spring Sheep Dairy is a 50/50 partnership of SLC Group and State-owned enterprise Landcorp, and has ambitions to lead this field.

The partners aim to make Spring Sheep a leading dairy operation in terms of innovation, on-farm best practice, sustainability, product safety and quality, and product and brand development.

Landcorp is one of New Zealand’s leading agribusiness organisations and aims to improve the productivity, profitability, and sustainability of farming. Besides holding New Zealand’s largest dairy cow herd, it is also considered a world leader in sheep farming, genetics and research.

SLC Group is a boutique investment company that provides strategic support to turn New Zealand’s small and medium enterprises into brands that are attractive to a global market and to multinationals, with particular expertise in selling high quality New Zealand products into Asia.

Spring Sheep’s initial operation will be based on 400ha of farmland at Reporoa in the Bay of Plenty. They are converting the farm to milk 3000 East Friesian ewes and ultimately expect to milk 3500 sheep and produce one million litres of milk annually.

Though sheep milk is typically associated with feta, Spring Sheep sees this as a European dominated product and not maximising New Zealand’s added value potential. Spring Sheep is also steering clear of infant formula, which has historically been difficult to capture value from. Instead, they expect to start with ice cream, with the aim to expand their product range into senior and sport nutrition products. They will initially target Taiwan and Korea.

Lucy Griffiths, a 2014 New Zealand Nuffield scholar, spent a significant amount of time last year travelling to meet and work with sheep milk farmers around the world, and has arguably become one of New Zealand’s leaders in the industry.

Her report provides a business plan for New Zealand sheep dairy to become a billion dollar industry in 10 years’ time.

Griffiths can see the sheep industry offering New Zealand massive opportunity. “When I met with leading industry experts in the Middle East, Afimilk, they pointed out that the return on investment for sheep dairy is five years on average, versus 20 years for dairy cows. Sheep dairy could also provide a more viable return for the land and reduce the environmental impact at the same time.”

But Griffiths noted: “If New Zealand wants to position itself as a leader, we must be market-led and offer a point of difference from other large global producers.”

From Soju to Sauvignon blanc – Korean FTA (NZ INC)

Tim McCready

When the New Zealand – Korea free trade agreement signed in March enters into force, tariffs will be eliminated on 48% of current goods. New Zealand’s exports to Korea current attract $229 million every year in duties.

In the first year alone the free trade agreement will save an estimated $65 million in duties, and within 15 years of establishment the remaining tariffs will be largely eliminated. The industries that will see the most benefit are those exporting dairy, red meat, kiwifruit and wine.

The current tariff on wine exports to Korea is 15%, and this will be wiped immediately as the agreement enters into force. This tariff concession will provide a good boost to exporters, but despite the removal of tariffs, exporting wine to Korea remains a challenge for New Zealand.

This is largely due to the tax and distribution system. When wine arrives in Korea, a liquor tax of 30% is applied, along with an education tax of 10%. This is even before it hits the distribution networks, a value-added tax of 10%, and retailer markups.

Korea produces and consumes a large amount of liquor locally. Beer and Soju make up 86% of locally produced alcohol. Wine makes up approximately 20% of imported alcohol. Wine is considered to be a luxury product and is consumed by only a small fraction of the population. Red wine is dominating wine imports at 71%, but white wine is beginning to gain more traction.

With the removal of tariffs, New Zealand wine producers will now be placed on an equal playing field with major international competitors in the market including the US, EU, Chile and Australia. However, the rest of the taxes that make up the total cost of wine are payable whether a free trade agreement is in place or not.

The combination of taxes, high distribution costs and mark-ups can make New Zealand wine significantly more expensive in Korea than in many other countries. And because New Zealand wine is typically sold as a premium product, and tax is applied as a percentage of price rather than a cost per unit, this can increase the markup on a bottle of New Zealand wine significantly when compared to budget brands of wine. This differs to Japan where tax is applied per bottle, and education tax doesn’t exist.

In the year ending June 2014, South Korea accounted for just $2 million of New Zealand’s $1.3 billion wine export business globally. That said, New Zealand wine is increasingly becoming of more interest to South Korea. Until 2001, only one New Zealand winery had a presence in the Korean market. The number grew to 38 in just six years. Demand for New Zealand wine is growing as consumers become more aware and curious to try white wine.

But we still have a way to go.

I visited three cities during my visit to Korea, and one thing that surprised me is that I was frequently asked if New Zealand produced any alcohol. High-end restaurants had New Zealand wine on their wine list, but my experience demonstrated that the average consumer was largely unaware of our ranking in the wine world.

The free trade agreement will undoubtedly be great for New Zealand’s dairy, meat and horticultural industries. But the wine industry will be one to watch. Chile had a noticeable boost in wine exports after their free trade agreement was signed with Korea, and it is likely that New Zealand will see a similar lift.

But it could be that the free trade agreement gives New Zealand the impetus it needs to boost the recognition and acceptance of our wine brands in Korea. And if that occurs, the benefit of the free trade agreement would vastly exceed any reduction in tariffs.

http://nzh.tw/11447897

Tim McCready

Silicon Valley investment an art, not a science says expert.

A leading American venture capitalist, Bill Reichert, believes entrepreneurs and investors have a huge opportunity in New Zealand, particularly in the areas of graphics, animation and agriculture.

Reichert, managing director of Garage Technology Ventures which is based in California’s Silicon Valley, says New Zealand has a unique and compelling advantage across a variety of sectors and is ripe for disruptive innovation.

He says New Zealand now has strong angel groups that have made good investments, and some have graduated to small venture-style funds. However, he feels angel resources could be more aggressively pooled so that capital is set aside for follow-on investment when companies go global. A beachhead adviser for New Zealand Trade and Enterprise (NZTE) Reichert travelled with SVForum chief executive officer Adiba Barney to Auckland and the other main centres, making presentations and meeting entrepreneurs, investors and business leaders.

They were supporting Callaghan Innovation’s incubator programme and providing local technology businesses with a connection in Silicon Valley. Barney believes New Zealand should leverage the success of technology companies like Xero — just as Sweden, her home country, has done with the likes of Skype, Spotify, Minecraft and Candy Crush. They have strengthened the Swedish innovation ecosytem.

She says Xero is a trailblazer and the network it has created will make the path easier for future companies to follow.

Reichert outlined his 10 investment myths New Zealand angel investors and innovators could learn from (below):

His parting advice was that the water separating New Zealand and Silicon Valley shouldn’t matter – there is also a lot of space between Silicon Valley and New York. New Zealand should recognise its strengths and successes, feel the pride and not be afraid to brag about it.

Myth 1: Invest in what you know.

If you have become an angel investor, what you used to know is unlikely to be relevant. Instead, you should be technology agnostic and consider all opportunities. Most winners are black swans – random opportunities where success seems obvious with the benefit of hindsight.

Myth 2: Focus on making money

You can’t look at a start-up company the way you look at the stock market. The margins and projections an inventor or CEO provide are almost always wrong. Focus on whether they are creating value, and in turn, a valuable company.

Myth 3: The key is good due diligence.

Investors often feel a robust due diligence process will result in a good decision. But you cannot capture the data required to show if there is inherent value in a start-up. Instead, you have to develop good intuition and use your heart to make decisions. This is not something that fits into a standard due diligence checklist.

Myth 4: Don’t let emotions cloud your decision.

Since start-ups can’t give you reliable data, you have to pay attention to your emotions. If, for whatever reason, you don’t like the founders, it doesn’t matter how amazing their business model is.

Myth 5: Build a consensus among a syndicate of investors.

Most investors look for consensus. But historical data shows the best investments are controversial. If an idea is obvious it is unlikely any particular company will dominate the industry.

Myth 6: Success comes from adding value.

Everyone working in investment likes to think they add value. The harder you have to work for an investment the less likely it is to succeed. Instead, invest in a team that has the technology and understands the market. Investors don’t build companies, entrepreneurs build companies.

Myth 7: Protect yourself from follow-on investment.

By including protective provisions for yourself, you will likely poison the company. If you think you need them because you don’t trust the entrepreneur, don’t invest in the company.

Myth 8: Valuation is important.

You can focus so much on valuation that you lose sight of what is important. So often after signing a deal investors go through a surprise at the first board meeting. They were buried in term sheets and negotiated from a presentation that is now long out of date.

Myth 9: It is cheap to start a company now.

This is true, but it is more expensive than ever to build a successful company. Anyone can start a company, which means there is a lot of competition. Growth costs money, and a flat open world doesn’t necessarily make things cheap.

Myth 10: Diversify your portfolio.

There is no point diversifying into arbitrary categories. Diversify your entire portfolio, but not your angel investments. Instead of chasing hot sectors, invest in ideas that are exciting and have an edge – things that could be the next black swan.

http://nzh.tw/11422189

Tim McCready looks at financing trends for innovators and entrepreneurs.

What does it take to turn a dream into a reality? The answer inevitably involves money, and usually quite a lot of it.

Many New Zealand businesses choose to grow organically, either by bootstrapping, where revenue is reinvested into the business for growth, or through small amounts of funding obtained from the bank, family, or friends.

However, a business built on innovation nearly always requires a significant injection of capital from a third party, and traditionally through venture capital or angel investment.

Aside from money, these sources of investment can bring additional spillover benefits to advance a business.

Angels and venture capitalists will typically invest in opportunities where they can add value using their networks, bring knowledge and a new perspective, or impart first-hand experience. When it comes to innovation, you cannot have enough of any of these.

New Zealand’s ‘no. 8 wire’ mantra is not just rhetoric. Over the last few years I’ve seen an increase in international funds and multinational organisations taking an interest in New Zealand.

They recognise us as a pool of largely untapped potential and are coming to see what we have to offer.

There is plenty of exciting innovation happening here, but it is probably fair to say that many businesses are not ‘investment ready’, and don’t present themselves in the best light to make an attractive funding proposition. There is some truth that money is hard to get. Not just from New Zealand, but anywhere.

Venture capitalists and angel investors hear about opportunities to spend their money continuously – it’s their job.

They want to see solid business opportunities and investment pitches that are professional, polished, and concise.

It is arguably for this latter point that many businesses unwittingly make the challenge more difficult than is necessary and struggle to get their foot in the door.

New Zealand Trade & Enterprise’s Better by Capital programme addresses this by explaining the capital raising process, allowing a business to identify and access the investment required to expand and internationalise.

Better by Capital partner with private sector specialists who have capital raising experience to help businesses get ‘investment ready’ and prepare a capital plan. NZTE’s capital team can then assist with their global investor networks to identify and access domestic and international sources of funding.

Callaghan Innovation, the government-backed innovation hub, provides more than $140 million in funding a year to businesses to use for their R&D projects to encourage innovation.

R&D Growth Grants provide 20 per cent public co-funding for R&D expenditure, capped at $5 million per annum. R&D Project Grants are targeted at businesses who are new to R&D where Callaghan provides funding for 30-50 per cent of R&D costs.

R&D Student Grants provide funding to cover the salary of a university student or graduate to work on an R&D project within a business for up to six months.

For early stage, high-growth businesses, Callaghan Innovation has an Incubator Support programme.

The incubators are privately owned businesses that can assist with all areas of innovation, including access to networks, market and technology validation, intellectual property assessment, access to capital, and advice on strategy and governance.

The introduction of this programme last year is the result of a push from the Government to get more innovation off the ground in high-tech sectors, which they rightly recognise as crucial to growing New Zealand’s economy beyond commodities.

Aside from the time required for the application process, government grants have few drawbacks and are a useful way for a business to make their cash go further.

R&D grants from Callaghan are non-dilutive, meaning that they don’t affect the ownership structure of the company. If your business is eligible, this funding should be at the top of your list.

Technology entrepreneur Sam Morgan has been known to criticise the government’s overzealousness when awarding grants, however he concedes that “it would be irresponsible not to try to get some”.

Not only does this help the balance sheet, but showing support from the New Zealand government and having access to extra cash for projects will undoubtedly help when talking to third parties about further investment.

It would be remiss to talk about capital raising and not mention crowdfunding. Equity crowdfunding is a relatively new method of raising capital, and is becoming an increasingly popular buzzword since a change in New Zealand’s securities legislation last year allowed it.

The Financial Markets Conduct Act allows a business to efficiently crowdfund up to $2 million without having to put together a costly and time consuming prospectus, prompting the launch of equity funding from PledgeMe, Equitise, and Snowball Effect. Donors pledge their support online, where their investment level can be of almost any size.

Crowdfunding relies on an opportunity reaching a large audience, which means it tends to work best if the project is something the mass public can get behind exciting technology or niche healthcare innovations have done particularly well on these platforms internationally.

As crowdfunding becomes more mainstream, having an opportunity that stands out and entices investors will inevitably become more challenging.

Finding funding for innovation is notoriously difficult and takes a significant amount of time.

But like so many things in business, funding is about networks, and you can’t do it alone. There are tools and services in place to help make it easier – you just need to know where to look.

APEC 2012 CEO Summit – Vladivostok, Russia

In 2012 I was asked to represent New Zealand at the APEC (Asia-Pacific Economic Cooperation) summit in Vladivostok, Russia.

The summit is the Asia Pacific’s premier business event, with the Asia-Pacific’s political leaders and the regions leading CEOs in attendance. The theme this year was “addressing challenges, expanding possibilities”, and with it being held in the Russian Far East, delegates were shown an impressive country with bold ambitions – many embedded in the Asia-Pacific, that dispelled myths and stereotypes.

Video 1: APEC 2012 Overview

Video 2: Behind the scenes in Vladivostok

Political Leaders
One of the biggest highlights of attending APEC was the opportunity to attend the plenary addresses from global leaders, as they outlined their visions, experiences and perspectives on issues of discussion. Leaders included:

  • His Excellency Mr. Hu Jintao, President of the People’s Republic of China, who spoke about the challenges and opportunities China has in their relations with Russia. He also outlined the measures and leadership China is aspiring to take on intellectual property, and inward and outward foreign direct investment throughout the APEC economies.
  • The Honorable Hillary Rodham Clinton, Secretary of State of the United States of America, addressed the importance APEC plays with members accounting for 54% of world GDP. She spoke about the potential of the platform for economic growth, and the responsibility we have in areas such as security, and assistance for women and minorities in small business in developing countries, so they can also reap these benefits.
  • His Excellency Mr. Vladimir Putin, President of the Russian Federation, spoke of opportunities in Russia and outlined measures being taken to ease logistics through upgrades to the Trans-Siberian railway. He fielded questions into Chinese investment in Russia and the on-going negotiations into a New Zealand – Russia/Belarus/Kazakhstan Free Trade Agreement. President Putin acknowledged that developing regions will continue to grow far more quickly than traditional markets, and that the former Soviet-era port of Vladivostok is poised to become a gateway for Russian trade and investment with Asia. Russia has finally joined the World Trade Organisation after an 18 year wait, and having Vladivostok chosen as the APEC venue marked an exciting time as Russia becomes more integrated into the global economy.

I formed part of the Small and Medium Enterprises working group at APEC, and was elected by my working group to present the declaration back to the wider APEC community – which included Russian media and APEC officials.

Tim_McCready_APEC

Meeting with New Zealand Prime Minister John Key

The New Zealand Voices of the Future delegates were fortunate to have twenty minutes with New Zealand Prime Minister John Key. Meeting their leader wasn’t possible for every Voices of the Future delegate, and spoke volumes to the accessibility and transparency of the New Zealand government. The meeting offered a great opportunity to hear more personally about New Zealand’s priorities at the APEC Summit, and openly discuss topics ranging from:

  • New Zealand’s place at the APEC table and what is being done to ensure the voices of smaller developing nations are being heard at forums like APEC and at trade agreement negotiations such as the TPP
  • recent calls for the strengthening of the Waitangi Tribunal, and where the government thinks the Treaty of Waitangi stands in New Zealand’s future.
  • how to best harness business opportunities in Russia, given New Zealand’s limited capacity of SMEs and the current focus on opportunities in China, India and other parts of Asia
  • the Prime Ministers upcoming meeting with Russian Federation President Vladimir Putin, and the status of the New Zealand – Russia free trade agreement.

Tim_McCready_John_KeyNew Zealand Prime Minister John Key, Tim McCready

Business Leaders
As well as leaders from the APEC economies, the Summit had addresses and panel discussions into many critical areas of focus for the Asia-Pacific from prominent CEOs and business leaders throughout the region. These sessions included:

  • Food: Feeding seven billion people. Speakers including Sergey Polyakov (General Director of United Grain company) and Samuel Allen (Chairman, John Deere & Co), who discussed the challenges we have with a growing global population and depleting resources.
  • Health is wealth. Panelists included the CFO of Johnson & Johnson, the Chief Research and Strategy Officer of Microsoft, as well as New Zealander Ian McCrae (CEO, Orion Health). The changing landscape of healthcare was discussed, and it was noted that we have reached a time where medical knowledge has surpassed what healthcare practitioners can know, which creates a discontinuity in how medicine is practised around the world. One of the most inspiring moments was when the panel discussed how investment in health can provide a significant social and economic return to economies. The panel agreed that people should be thought of as an investment, not as a cost – because without people, you won’t have a company.

Tim_McCready_working_group

Concluding thoughts
The theme of APEC this year was “addressing challenges, expanding possibilities”, and the summit did a great job of covering these topics. On a more personal level, having the opportunity to attend APEC as a Voices of the Future delegate has encouraged me to reflect on my own challenges and possibilities within the Asia-Pacific region. I have previously done business with major Asian markets, but my eyes have truly been opened to the opportunities within emerging APEC economies. Business and political leaders from those regions are excited about their potential – and they have good reason to be. That excitement has been infectious, and the experience and insights I have left Russia with will stay with me always.

Tim_McCready_debate

 

Overcoming barriers to a trade deal with Japan (University of Auckland)

The recent visit to Japan by a group of young New Zealand farmers is exactly the sort of initiative needed to lay the groundwork for a trade deal between the two countries, says the director of the New Zealand Asia Institute, Professor Hugh Whittaker.

The trip, organised by the Japan East Network of Exchange for Students and Youths (JENESYS), followed bilateral talks between the New Zealand Foreign Affairs Minister, Murray McCully, and his counterpart Hirofumi Nakasone, and included official briefings and visits to dairy factories and livestock centres.

Among the 50-strong group was University of Auckland alumnus Tim McCready, a business development consultant at New Zealand Trade and Enterprise.

“Japan will always play an important role in the global economy. The things I have learned about the country and culture will change the way I think about, and conduct business with Japan forever,” McCready says.

It is the third such visit aimed at introducing a new generation of New Zealanders to the Japanese way of doing business and along with meetings in 2008 and 2009 of the Japan New Zealand Business Partnership Forum is evidence of a reawakening interest in Japan, which in recent years has been overshadowed by the spectacular economic rise of China. Professor Whittaker says the visits are also an effective way of overcoming obstacles to a bilateral trade deal with our third-largest trading partner.

“New Zealand’s position on the proposed free trade deal with Japan is that we are complementary not competitors, and that we are too small to upset things in Japan. If you want to try out the process for FTAs with developed countries and de-bug it, you are best to do that with a country the size of New Zealand. Japan sees it somewhat differently. If it gives ground to New Zealand, there will be pressure to do the same to bigger countries,” Whittaker says.

Nevertheless, with China and South Korea aggressively signing FTAs, pressure is growing for Japan to do the same to avoid becoming more isolated.

“That would necessitate a willingness within Japan to start implementing measures in the agricultural sector which would introduce market forces,” Whittaker says.

“The issue is not merely opening Japan to foreign agricultural goods, but increasing the marketisation of agricultural activity in the country.”

That process has been slowed by the strong presence of agricultural cooperatives, which are useful in upgrading agriculture and redistributing wealth, but which have become less innovative.

Distribution of wealth is a key issue, says Whittaker.

“Electoral boundaries don’t reflect the country’s urbanisation, so the rural vote is overweighted. The political structures have served to redistribute the results of urban activity to rural areas. Japanese politics is often portrayed as ‘immobilist’, and there is structural misallocation of funds, but there is also a legitimate debate about what is a just society and how much (urban-rural) inequality should be tolerated or encouraged through increased marketisation.”

Actually, Japan’s agricultural sector has great potential for reinvigoration without destroying the fabric of rural society, says Whittaker.

“As a ‘grassroots’ exchange, New Zealand’s agricultural mission is an astute move. If we can demonstrate through these visits that the two countries can complement each other rather than being caught up in a zero-sum game, then it can produce a groundswell for change.”

Bioscience Enterprise: Mixing business with science (University of Auckland)

A programme that fuses business and science is showing business-savvy scientists how to commercialise bioscience innovations and create opportunities in the international market.

One of these business-science professionals is Tim McCready, an alumnus of The University of Auckland who now works for New Zealand Trade and Enterprise (NZTE) as a business development consultant.

“I’ve always enjoyed science and seeing the transformative effect it can have on people’s lives. At the same time, a lot of exciting research falls by the wayside because of a lack of business acumen in the industry,” he says.

Deciding to do something about this gap after finishing his Bachelor of Science, McCready joined the inaugural year of the Master of Bioscience Enterprise (MBioEnt) programme in 2006. The bioscience commercialisation degree is taught conjointly by the Business School, the School of Biological Sciences and the Law School.

“I chose a masters degree focused on business because I wanted to have an impact on the innovative science coming from New Zealand, the financial contribution it can give to the New Zealand economy and the difference it makes to lives worldwide,” McCready says.

He did papers on research commercialisation, finance, accounting, marketing, law and intellectual property, followed by a thesis project in the final year.

“I learned that scientists often have little understanding of the steps involved in commercialisation because their interest, understandably, is in research. At the same time, business people with no understanding of science can’t appreciate the length of time, the amount of risk, and the enormous cost involved in commercialising human therapeutics.”

McCready’s comments are echoed by Geoff Whitcher, director of the Business School’s Centre for Entrepreneurial Learning, who believes the MBioEnt is producing scientists with a strong business sense that will be a great help to New Zealand.

“Having an understanding of the science and commercial realities means they can help New Zealand companies to expand their international activities by taking new biotech products into export markets, thus helping New Zealand earn much-needed overseas funds,” Whitcher says.

While working on his thesis, McCready did an internship in the biotechnology team at NZTE. After finishing with first class honours he stayed with the organisation and recently shifted to Investment New Zealand, a division of NZTE focused on attracting investment to New Zealand and helping companies make strategic investments offshore.

This work has taken him to the United States three times in the past year to help New Zealand biotechnology and natural health product companies access the North American market.

Now McCready is working on a project with Living Cell Technologies (LCT), a company that breeds pathogen-free pigs from remote sub-Antarctic islands for its cell-based products to treat insulin-dependent diabetes and neurodegenerative diseases.

The LCT-Investment New Zealand project is looking into global market opportunities for high quality by-products taken from unused pig tissue, which could be used for other medical applications.

“LCT’s pig herds are uniquely free from viruses, bacteria and parasites so they are effectively the cleanest pigs in the world,” says McCready.

“This project is particularly exciting because LCT is one of New Zealand’s premier biotechnology companies making use of the country’s competitive advantage in animal health status.”