Hon Jim Sutton Speech Notes

India-New Zealand Business Council, Wellington

Chairman and members of the India/New Zealand Business Council,

It gives me great pleasure to address you, members of the India/ New Zealand Business Council, this evening.

I visited to India in November last year. I was struck by how well New Zealand is known there, thanks to Richard Hadlee, Ed Hillary, David Lange and John Wright among others. This recognition factor is an inestimable advantage for us when we do business there.

The second thing which had an impact on me was the amount of development which had taken place since my first visit fifteen years earlier. Certainly there are still infrastructural weaknesses, such as in roading standards. But it was impossible to miss the potential for growth reflected, for example, in the IT parks of Bangalore. As the Minister responsible for encouraging New Zealand’s international trading links, I am pleased to see gathered here tonight, New Zealanders who are keen to exploit India’s growth potential.

Last year India was the third fastest-growing economy in Asia. The Asian Development Bank has predicted that India will achieve about a 6 percent growth rate this year. If it manages to sustain this for the rest of the decade- and the ADB seems relatively confident that it will- then India will be able to double its per capita income and reduce the incidence of poverty from about 50 percent to 20 percent.

The world is observing closely the way in which India is managing the transition towards an open, globally integrated economy. This brings me to the two main elements of my address to you this evening:

- First, the structural reforms which will improve the viability of the Indian market; and

- Second, the existing synergies between New Zealand and India which make us natural partners in today’s global market.

Anyone who has worked in the Indian market will agree that it is not easy with high tariffs, prescriptive codes and Himalayan bureaucratic hurdles.

Signals from the Indian government indicate a desire on their part to improve the situation. This year’s Budget provides for a phased reduction in the peak customs duty rate from 35 percent to 20 percent within three years. All remaining quantitative restrictions were removed on 1 April. Dairy and meat products, fresh fruit and vegetables and wine can be imported by India for the first time.

These liberalising moves have been received with grave misgivings by some sectors of the Indian community. After many decades of protectionist policies, there is a widespread fear that India will be flooded with imports. The statistics should reassure them. Last year, there was an overall eight percent decrease in non-oil imports !

At the same time as liberalising the rules for imports, the Government also introduced measures to ensure that imports did not increase rapidly.

There are opportunities for cooperation between New Zealand and India in advancing the multilateral trade agenda. We share vital interests in freeing up trade in agricultural products. Trade distorting subsidies - particularly in developed countries - hamper the development of lucrative export markets. While there is no doubt that the methods and context of agricultural production differ substantially between New Zealand and India, our interests do overlap. Export subsidies deny countries such as India and New Zealand the chance to compete on a level playing field for agricultural exports. A new WTO round presents us with an opportunity to level the field somewhat. We should work together at the WTO in Geneva to realise these common goals.

Let me give you a couple of examples where New Zealand and India have traditionally worked together:

- Around 15 million kilograms of New Zealand wool, together with Indian carpet- making expertise, are combined each year to produce some of the finest hand-knotted carpets in the world. Indian carpets produce annual foreign exchange earnings of US$500 million a year. Our wool exports to India were worth around $65 million last year.

- New Zealand hides and skins are processed in India into quality leather products destined for international markets.

New Zealand is renowned for its quality raw materials, while India has the scale and the ability to add value on a large volume of product.

The potential for our two countries to work together as natural partners to take on international markets is not confined, however, to adding value to New Zealand’s raw materials.

I would like today to highlight four sectors where I believe there is great scope for working together with India, in India:

- First, the food processing sector. We produce our food exports in a land which is remote from major markets. Yet we are able to deliver our exports in superb condition half a world away to the most demanding consumers in Europe, Japan and the United States. The technology and know-how that enable us to do this have been developed in New Zealand , and are as good as any in the world. New Zealand technologies could be used by India to both improve internal distribution and develop entirely new food export industries. New Zealand companies such as Fletcher (Foods) are now working with Indian companies to provide turn-key solutions for the processing of fresh fruit and vegetables.

- The recent delegation led by the Indian Minister of State for Food Processing Industries, Chaoba Singh, was impressed at the level of technological expertise exhibited by our companies and research institutes in the Manawatu and Waikato regions. During the visit, the Indian Minister met with members of the Food Processing and Engineering Network. This group brings together 14 different New Zealand companies interested in undertaking projects in this sector.

- Second, there is a role for the consultancy sector, particularly in infrastructure development. New Zealand’s disinvestment process, which began almost twenty years ago, has honed our consultancy capabilities in fields as diverse as roading, management of water and energy resources, restructuring of public sector units and the design of tourist facilities. New Zealand’s major consultancy companies are now active in India, working in a range of sectors from improving airspace management to assisting with the upgrading of the postal system. Just last month we heard that Beca Carter Hollings and Ferner had been awarded a major contract, along with their Indian partners, to supervise some major highway construction.

- In the wake of this year’s disastrous earthquake in Gujarat New Zealand intends to provide technical assistance in the reconstruction effort. Two Indian engineers will visit New Zealand in early July to familiarise themselves with our “base isolation” techniques for protecting large buildings against earthquake damage. They will work with our engineers to prepare some working drawings for the reconstruction of the Bhuj hospital using New Zealand base isolation techniques.

- Third, the forestry sector. A very large volume of softwood pine, ideal for furniture, construction and finishing applications, will soon be coming to maturity in New Zealand. India has a shortage of timber. Already New Zealand accounts for more than half of all India’s softwood imports. New Zealand pine and associated technology could combine with Indian manufacturing capacity to produce quality furniture and wood products for exports to other markets.

- At present India’s prescriptive standards discriminate against the use of softwoods for construction of public buildings. Recognition of the huge potential in this market has prompted efforts by the New Zealand government and a group of our forestry companies to persuade the Indian government that performance-based standards should be adopted in this area. These would recognise the many different uses for which pinus radiata is applicable. The Ministry of Foreign Affairs and Trade arranged for the Director-General of the Indian Forest Research Institute to visit New Zealand in February to learn more about our own practices. A number of forestry companies are funding further testing of the properties of New Zealand pine by the Indian FRI.

- Fourth, the information technology sector. Once again, India has enormous capacity in terms of IT professionals and skills. In contrast, New Zealand has made a name for itself in the development of niche software and applications. Our sports broadcasting (in cricket, sailing) and weather forecasting software are examples of our capabilities in this sector. Six Indian IT firms have a presence in New Zealand and we are actively seeking to attract more IT capital and professionals to New Zealand. The Indian Minister for Information Technology, Pramod Mahajan, visited New Zealand earlier this year, enabling he and his New Zealand counterpart, Paul Swain to gain a greater awareness of each country’s capabilities in this sector. The idea of New Zealand and India entering into a Memorandum of Cooperation on IT was discussed. Such an arrangement would raise the profile of New Zealand’s capabilities in this sector in India, and vice-versa. Paul Swain hopes to take Minister Mahajan up on his invitation to visit India in December this year, so that this initiative can be carried forward.

The areas of interest I have mentioned are not an exhaustive list. There are other sectors where natural partnerships exist between India and New Zealand.

To conclude:

New Zealand is serious about expanding links with India. We may be far apart geographically but we enjoy the natural foundations of people-to-people links on which to build a profitable partnership for both countries.

These developments have prompted us to appoint two more Honorary Consuls in India - in Mumbai and Bangalore, to provide an on-the-ground presence to promote all that New Zealand has to offer India, whether it be business links, tourism, education or migration opportunities.

Bilateral relations are growing in importance. This can be seen in the increasing levels of Ministerial and official contact. Two highly ranked Ministers in the Indian Cabinet have visited this year - the ministers of IT Industries and Parliamentary Affairs and the Minister of External Affairs and Defence. And of course the Minister of State for Food Processing Industries.

In the other direction, Phil Goff visited in March, the first visit by a New Zealand Foreign Minister to India in nine years. In November last year I led a trade delegation to several cities. There is a possible visit by Paul Swain later in the year. The Prime Minister has also been invited to visit and may go next year.

The most important visit of them all, in terms of the development of business linkages between New Zealand and India, could be the next meeting of the Indian and New Zealand branches of the Joint Business Council. I am told that this is scheduled to be held in December in India. The benefits of meeting business contacts face-to-face should not be underestimated. I am sorry that I will not be able to join you. I well remember welcoming the participants at the last JBC in Auckland. I encourage as many of you as possible to participate in the next meeting.

Your Council has played a major part in promoting closer business links between the two countries. It has been doing pioneering work for ten years now, and the results are showing strongly. I wish you all the best for a successful mission to Delhi in December.

Thank you.

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