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High Commission of India Wellington

No. Wel/201/1/2014 29th January 2014

Monthly Economic and Commercial Report-November & December 2014

According to a government press release issued on 20th November 2014,

the NZ economy continues to perform well but return to surplus this year

poses a challenge. NZ Finance Minister Bill English (NZFM) said that while New

Zealand remains on track for solid economic growth and for rise in number of

jobs and incomes over the next few years, returning to surplus this year will be

a challenge due to falling dairy prices and low inflation. NZFM added that the

NZ Government is continuing with its economic plan – through the Business

Growth Agenda and other micro-economic reform initiatives – to build a

stronger economy that supports more jobs and higher incomes. NZFM felt that

the strength of the economy and constrained government spending can still

help in delivering a surplus when the final accounts are published late next

year.

2. 2014 Legatum Prosperity Index™ has rated New Zealand as the third

most prosperous country in the world. Remarkably, New Zealand has reached

its highest level of prosperity ever recorded in the Legatum Prosperity Index

(which covers the last six years), climbing two places since 2013 when it was

ranked fifth. According to the results of the 2014 Prosperity Index, New

Zealand ranks in the top 20 in all eight categories, and among the top 10 in

five, namely, Personal Freedom, Governance, Social Capital, Education, and

Safety & Security. New Zealand is rated as the most prosperous nation in the

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Asia-Pacific region, and ranks ahead of Canada (5th), Australia (7th), the US

(10th) and the UK (13th).

3. Auckland city is home to more than a third of New Zealand's population

which includes 760,000 workers. Last year, Auckland generated about NZ$75

billion through economic activity which accounted for 37 per cent of New

Zealand's total GDP. According to a report released on 28th November 2014,

Auckland Council’s ambitious Auckland Innovation Plan seeking to expand

Auckland's economy by NZ$8 billion through increased innovation, faces plenty

of challenges. The report identifies several cultural and economic factors that

could come in the way of further innovation in Auckland. The report cites

another challenge to innovation initiatives, the culture of "lifestyle" businesses

in New Zealand, which has little scope for innovation. However, the report also

takes note of "clusters" which are emerging within key NZ sectors including

food processing and manufacturing in the south of Auckland, and ICT in central

Auckland and on the North Shore. The report says that sectors which represent

broad innovative technology platforms such as biotechnology, advanced

materials, cloud computing, and screen and creative content may provide

further opportunities for specilization, supporting the growth of such sectors

and building better capabilities, a strong skills base and supply chain could be a

key driver for economic growth.

4. New Zealand (NZ) has posted its largest monthly trade deficit for the

month of October in six years resulting mainly from fall in the volume of dairy

exports to China. NZ's trade deficit stood at NZ$908 million last month to

become the biggest deficit for the month of October in the last six years Dairy

prices have nearly halved since the start of 2014 due to low demand from

China which is the biggest destination for New Zealand's dairy exports. Latest

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figures released by Statistics NZ show that the exports to China fell by around

40 percent in October as compared to a year earlier, while imports from the

country's largest trading partner rose by 18 percent led by fertiliser and mobile

phones. The country has posted a trade deficit of NZ$2.77 billion in the three

months ended 31st October 2014 as exports fell by 1.8 percent to NZ$11.1

billion while imports rose by 7.2 percent to NZ$13.9 billion.

5. NZ branch of Orion Health, a global, independently owned e-Health

software company, became New Zealand’s second billion-dollar software stock

after debuting at a 13 % premium on the NZ share market (NZX) this morning.

Orion Health is now second only to Xero among NZX-listed software stocks.

6. UAE airlines Emirates has unveiled details of investment worth more

than half a billion dollar in New Zealand’s wine sector under its “liquor

investment” programme. According to the airlines sources, many NZ wines are

served on their flights in first, business and economy classes. Emirates flies

four times a week from NZ to Dubai via Australia.

7. As per local media reports, the NZ horticulture industry has considerably

benefitted from the FTAs with various countries. As a prominent example, NZ

apple exports have tripled from NZ$13 Million to NZ$39 million since the

signing of FTA with Taiwan one year ago. About 60% of NZ’s total horticultural

produce of fruit and vegetables valued at around NZ$2.4 Billion is exported.

According to the Chief Executive of Horticulture NZ, FTAs lead to tariff

reduction thereby enhancing opportunities for developing trade in Asian

countries with normally high tariffs.

8. New Zealand has been named as the top country for tourism for the

third year in a row by the 2014 Telegraph Travel Awards. About 90,000 people

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participated in the survey making it the biggest survey of its kind. In a press

release issued by the NZ government, Prime Minister John Key (PMJK) said that

tourism forms a significant part of the NZ economy and that the real strength

of NZ tourism is that it lives up to its reputation. PMJK went on to add that the

NZ government has invested an unprecedented NZ$600 Million in tourism

promotion since 2008 and around 2.8 million tourists visited NZ during the last

year. Tourism directly employs 4.7% of the NZ workforce.

9. According to local media reports, NZ Superannuation Fund has decided

to invest US$60 Million in the US-based biogas start-up company Lanzatech to

help it start commercial production. With this, NZ public has now become

Lanzatech’s second biggest owner with 17.08% stake behind Khosla Ventures

which owns a 22.68% holding. The company was founded in NZ in 2005 with a

government grant but moved its head office and R&D to Chicago earlier this

year on the lure of substantial tax credits. Reportedly, Lanzatech is expected

to start its first commercial unit in China by 2016. Lanzatech has also signed up

Virgin Atlantic airlines as the first customer for its green jet-fuel under

development. Lanzatech is also supposed to be considering an IPO to jointly

list on the NZ and North American stock exchanges in the second half of 2016

after commencing commercial production.

10. According to local media reports, the global investor Fidelity

Investments (FI) of the US has built up a 5.4% stake in the leading NZ

accounting software firm Xero making it the fifth biggest shareholder in the

company. FI now holds 6.9 million shares in the Wellington-based company

acquired through its FMR LLC unit.

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11. As per local media reports, NZ Ministry for Primary Industries (MPI) has

been forced to cut its forecast for primary sector exports in the year 2015 by

3.6% in view of the weaker demand for NZ dairy products. According to MPI

sources, the drop in dairy export earnings has mainly occurred due to the

impact of Russian trade sanctions and high inventory levels in China. Prices of

dairy products are said to have dropped to the lowest since 2009 last week.

The dimmed outlook for dairy exports has reportedly offset the improved

export earnings from meat and wool.

12. New Zealand manufacturing activity eased from a 15-month high in

November, while remaining in expansion for the 26th consecutive month, as

production and new orders declined in the month. The BNZ-Business NZ

performance of manufacturing index declined 3.7 points to a seasonally

adjusted 55.2 in November, slipping from October's reading which was the

highest level since July 2013. The index, where a reading above 50 indicates

growing activity, has been in expansion for the past 26 months.

13. According to figures released by the NZ Electricity Authority for the year

ended 30th October 2014, geothermal generation has overtaken gas

generation for the first time as it accounted for 16.3% of the total as compared

to 15.8% in case of gas generation. Welcoming this news, Energy Minister

Simon Bridges (NZEM) has said that this shows that good progress is being

made towards the target of 90% renewable generation by 2025. NZEM added

that the percentage of renewable energy generation has grown from 65% in

2008 to 79% in the year ended June 2014. The Chief Executive of Mighty River

which generates around 55% of geothermal power has described the rise of

geothermal power as a significant development for New Zealand.

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14. New trans-Tasman telecommunications cable plan confirmed: On 18th

December 2014, the three telecommunications companies planning to build a

new 2,300km submarine cable, Tasman Global Access (TGA) Cable, between

New Zealand and Australia, namely, Spark New Zealand, Vodafone and Telstra,

confirmed their investment of approximately USD $70 million and

commencement of the project in early 2015. The new undersea cable is

expected to significantly improve New Zealand’s international broadband

connectivity and resilience. With New Zealand’s international capacity

requirements growing 60 percent year-on-year, the TGA Cable is supposed to

support the future needs of consumers and the growth aspirations of New

Zealand businesses. The project will begin early in 2015. Alcatel-Lucent has

been selected as the cable laying contractor after a competitive tender

process, and the TGA Cable is expected to be built and providing data traffic by

mid-2016.

15. According to a NZ government press release issued on 18th December

2014, NZ Transport Minister Simon Bridges (NZTM) has confirmed that NZ

Government will invest NZ$38.7 billion in New Zealand’s land transport system

over the next ten years for upgrading regional networks, public transport,

cycle-ways and road maintenance facilities. Details of the investment

programme have been set out in the Government Policy Statement on Land

Transport (GPS 2015) released by NZTM on the occasion. NZTM said that GPS

2015 reaffirms the Government’s focus on economic growth and productivity,

road safety and value for money investments. Under GPS 2015, more than

NZ$3 billion will be allocated each year for the next 10 years to improve the

land transport infrastructure. While the money for this purpose will be

collected primarily from road users through petrol excise duty and road user

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charges, an additional NZ$1 billion will be contributed annually by local

government.

16. As per local media reports, New Zealand Oil & Gas (NZOG) has acquired

a 19.99 per cent stake in the ASX-listed Cue Energy at a cost of A$13.96 million.

Cue Energy holds a 5 per cent interest in the Maari oil field off Taranaki which,

according to NZOG chief executive Andrew Knight, is regarded as a quality

asset. NZOG also has interests in the offshore Taranaki Tui oil field and the

Kupe gas/oil field. In the past year, NZOG's overall revenue has been up by 4.7

per cent, from NZ$99 million to NZ$104 million. While production from Tui has

reportedly been in decline, NZOG has increased its share in the field from 12.5

per cent to 27.5 per cent by buying some of Mitsui's interest.

17. According to figures released by Statistics NZ, NZ trade deficit narrowed

to NZ$213 million in November 2014 which was the smallest deficit in the

month of November since 2010. This was mainly due to a rise in meat exports

which offset the falling dairy prices. NZ benefitted from strong terms of trade

in the first half of 2014 owing to its exports being boosted by the high demand

for NZ dairy products and logs from China and a historically high NZ dollar.

Since then dairy prices have nearly halved due to weakened demand from

China and there has also been a fall in log prices. However, this decline has

been offset by the rise in meat exports which rose 20%, led by a 65% jump in

the export of frozen meat. On an annual basis, NZ trade balance was a deficit

of NZ$453 million while exports rose by 6.3% to NZ$50.4 billion during the year

ended November 2014.

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New Zealand-China

18. Prime Minister John Key (PMJK) visited China to attend the APEC summit

in Beijing in 2nd week of November 2014. He opened New Zealand’s Consulate

in Chengdu, which is fourth Post of New Zealand in China. An agreement was

signed in the presence of PMJK on the sidelines of the APEC summit in Beijing

between China’s largest agricultural and food products supplier COFCO, and

AssureQuality of New Zealand to improve food safety in China. The NZ

company which provides food safety and bio-security services to the food and

primary production sectors is 100% owned by the New Zealand government. It

has a staff of 1700 located across Australia, New Zealand and Singapore and

provides products and services to more than 40 countries. In pursuance of the

agreement signed in April 2013 between Pacific Aerospace Limited (PAL) and

Shanghai General Aviation Services (SDGA), PAL delivered the first two of the

53 aircraft to China at the Zhuhai Air Show in the presence of NZ Trade

Minister Tim Groser. At the event, PAL also announced signing of sales

agreements with three other companies bringing the total volume of such

deals to NZ$ 120 million.

19. Chinese President Mr. Xi Jinping made a state visit to New Zealand in

November 2014. Both President Xi and Prime Minister John Key referred their

countries relationship as “strategic partnership”. As part of the visit, the first

New Zealand China Mayoral Forum took place which includes the signing of a

MOU which provides the platform for New Zealand regions, towns and cities to

establish better connections with the more than 600 cities and provinces in

China, creating potential for significant economic benefits for regions across all

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of New Zealand. It will also help facilitate the bilateral trade goal of $ 30 billion

by 2020, set by two leaders.

20. A Chinese garden is planned for Frank Kitts Park with hopes that it will

open in 2016-20 years after the idea was first raised. The garden will feature a

tea house, pavilion, terraces, ponds and a courtyard stone carving –Xiamen

(sister city of Wellington) will provide materials and ship them to Wellington

and send Chinese technicians to assist in construction. The Chinese

community in Wellington will raise money to build the garden, while

Wellington City Council will provide the land and deal with resource consents.

21. As reported in the local media, Shanghai Pengxin (SP), the private

Chinese conglomerate which has been the subject of controversy due to its

purchase (Crafar farms), is slated to increase its investments in New Zealand.

Reportedly, two agreements were signed in this regard on 21st November 2014

in ceremonies held in Auckland during the visit of Chinese President Xi Jinping

(CP). SP’s first partnership will be with the NZ dairy processing manufacturer

Miraka and the leading Chinese dairy company Mengniu which is expected to

result in accelerated development of Miraka’s ultra-high temperature (UHT)

milk processing plant in Taupo. The second pertains to collaboration with

KuangChi Science, a Hong Kong-listed company which specialises in innovative

space services, and involves refinement and launch of a “near-space balloon”

in New Zealand in the first half of 2015.

22. On 18th November 2014, the Reserve Bank of New Zealand granted

registration to the Bank of China to operate in New Zealand, making it the

country's 25th bank. Two other state-owned Chinese banks, namely, Industrial

and Commercial Bank of China (ICBC) and China Construction Bank (CCB) have

already been registered in 2013. Reportedly, some former National Party

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politicians have played a pivotal role in getting approval for the Bank’s

operations in New Zealand. Former National MPs Ruth Richardson and Chris

Tremain are both listed as directors of the new bank and will be joining ex-

National Party leader Don Brash and former Prime Minister Dame Jenny

Shipley, who chair Industrial and Commercial Bank of China (ICBC), New

Zealand and China Construction Bank (CCB), New Zealand respectively. Brash

and Richardson have previously also held senior positions in the Reserve Bank.

23. NZX, New Zealand's stock market operator, has signed a memorandum

of understanding with the Bank of China to develop financial products with a

focus on the agricultural sector and capital markets. The signing of the MOU

which took place in Auckland, was witnessed by PMJK and CP. Bank of China's

clients include COSCO, Bright Dairy, Huawei and the Haier Group all of which

are doing business in New Zealand.

New Zealand-Australia

24. Recently concluded FTA between Australia and China has been generally

welcomed in New Zealand. Australia’s reported trumping of New Zealand over

trade access to China is not bad news, Kiwi politicians and commentators say.

Australia and China have approved a free trade deal that will provide AS$630

million in savings of dairy products from 2016 to 2025. Red meat exporters

have also won out with complete elimination of tariffs over nine years. NZ

Trade Minister Tim Groser said under the deal New Zealand signed with China

six years ago, if China made a better agreement with another country, it had to

match that with New Zealand. He could not say when this would happen.

Finance Minister Bill English said New Zealand supported high-quality trade

agreements by any country because they set a bench-mark for other countries.

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New Zealand will also benefit indirectly from this deal because Fonterra owns

about 20% of Australian milk pool-the largest outside New Zealand.

An Australian insurance firm has created NZ’s largest insurance cluster network

in acquisitions worth more than $20 million. Australian stock exchange-listed

Austbrokers, which has more than 450,000 clients representing $2.5 billion of

premiums, has purchased two New Zealand insurance firms. Austbrokers has

acquired 100% of Brokerweb Management, which is NZ’s largest broking

cluster group, and 50% of Broker Web Risk Services which is country’s largest

independent broking operation with $80m of revenue.

25. Australian dollar may hit a historic low against the New Zealand dollar

and could even go below parity next year, according to media reports.

Currently one AS dollar buys NZ$ 1.049 which just above the $1.042 low

reached in 2006. There has been a rapid rise in the kiwi dollar from less than

A90c to A95c since November 2014. The main reason is because the Reserve

Bank in New Zealand is expected to raise interest rates, with a growing

economy, while Australia may cut interest rates because of their relatively

weak economy. Australia has become New Zealand’s top export market,

overtaking China in recent months. Exports to Australia have slipped about 4%

to 2.3 billion in the past three months, while exports to China have crashed

40% to 1.8 billion in the same period with a year ago. Getting closer to parity

with the Australia dollar will make it cheaper for New Zealanders to visit

Australia but will make the return trip more expensive for Australians.

India - New Zealand: Bilateral Economic & Commercial relations:

26. ONGC Videsh Limited wins oil block in New Zealand (NZ) for

exploration: In a significant development, ONGC Videsh Limited was awarded

an oil and gas exploration permit for prospecting for hydrocarbons in an

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offshore block comprising 2121 sq. Km in the Taranaki basin off NZ’s North

island on 9th December 2014.

27. Bilateral trade figures in NZ$ (millions) for the last five

years are as under:

Year 2009 2010 2011 201

2

2013 2014

NZ Exports to

India

630 900 938 786 669 622

NZ Imports

from India

355 368 387 419 423 508

India figured at number 15 so far as New Zealand’s exports are

concerned and at number 24 for imports purposes during the year

2013.

Trade enquiries received from India in November-December 2014:

K.K. intex, Tamilnadu Home textiles, sarees etc

Shivri Export India ,TN Handmade sarees, silk cloths

Liengam Exports, TN Cotton sarees, cotton lungis

Grade Engineering, Chennai Engineering products

Indrasen Shamlal pvt ltd Jute and cotton bags

Velam Impex, Chennai Castor Oil related products

Poonam houseware, Maharstra Miscellaneous products

Shri Venue Export, Mumbai Indian herbs and spices

Aethesian Info Jaipur Service provider & outsourcing

Dasrath Int Jaipur Gemstone etc

Stone n Tiles, Jaipur Stones & tiles

Dev Int, Ahmedabad China clay, Mica etc

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Orbit Exim Vadodara Engineering products

Surraysia Pvt ltd Organic agro products

Bia & Metals, Ahmedabad Electrical items

Sonachi Group, Mumbai Cosmetic Items

Shree Hans Rice Mills Export of Rice

Sohan Textiles Group, Surat Polyster and Nylone fabrics

Solace Int. Delhi Export of rice and sugar

GKB optic pvt ltd Laborarory items etc

Sathanhana Ispat Ltd Ductile Iron Pipes

Sai Electricals Electrical manufacturing etc

Mera Libas, jaipur Export of Fabrics

Aligan Marketing Madurai Wax candles

Shree Ram Packing India PET Strap, PP Straps etc

Avighna Exim Organic rice, honey etc

Annm Caibar Impex, Erode Textiles products etc

Radharam Sohanlal, Kolkatta Herbs and Medicines etc

(Sandeep Sood)

Second Secretary