How New Zealand is securing its future through digital trade
A business-friendly environment allows the geographically remote country to tap into the huge potential of trading digitally across borders
As companies across the world pivoted towards remote work during the pandemic, one country had already grasped the importance of providing digital services from afar. New Zealand has been a quiet innovator when it comes to digital trade and implementing a digital economy that reaches across the globe. Whether this is the creation of the Digital Economy Partnership Agreement (DEPA) last year between Chile, New Zealand, and Singapore, or the fact that tech giants like Amazon and Google are expanding into the country, it’s slowly being noticed as a technological innovator.
Although the nation has tended to favour its agriculture sector in the past, New Zealand is now trying to pivot this market focus towards technology as it underlines the importance of this industry in building its future.
Open for business
Out of the 22 APAC countries analysed in the upcoming Digital Trade Integration Index, a soon to be released report from the United Nations Economic and Social Commission for Asia and the Pacific (UN-ESCAP), New Zealand is the most open country when it comes to digital trade, followed by Hong Kong and Singapore. More dated analysis from the European Centre for International Political Economy, examining digital trade restrictiveness, also puts New Zealand at the top of the ranking across 64 countries, says Martina Francesca Ferracane, a Max Weber Fellow at the European University Institute.
Google has expanded into New Zealand with an office in Auckland
Ferracane underlines that New Zealand shows open policies in all components of digital trade. She says that there are virtually no restrictions for trading ICT goods and online services can be provided freely across borders with no restrictions, except for some minor barriers relating to local storage of specific types of data.
Investment in sectors relevant for digital trade is liberalised, and the country has strong data protection and consumer protection frameworks, which Ferracane says are crucial to supporting digital trade. The country also implements safe harbour for intermediaries, ensuring legal certainty for platforms.
“This open approach enables companies to engage in digital trade, both in the country and across the globe, without extra costs or impediments,” adds Ferracane. “Therefore, companies can be more efficient and grow faster, exploiting the opportunities offered by the digital transformation.”
Ferracane highlights that a country like New Zealand is an ideal location for companies that want to have the freedom and space to innovate, but at the same time want to get quick access to customers from all over the world. She underlines the country has also developed innovative partnerships in the form of DEPA to promote interoperability between different regimes and address the new issues brought about by digitalisation. This, in turn, supports companies to export their services from New Zealand to the rest of the world, she says.
In the weightless economy, distance becomes no object
The tech sector is the fastest-growing sector in New Zealand, bringing in over $7 billion in export revenue and employing more than 40,000 people, says Michael Murphy, head of tech at New Zealand Trade and Enterprise (NZTE), a government agency charged with helping New Zealand companies to grow internationally.
He says the growing success of the sector is helping to overcome some of the more traditional challenges the country has faced in terms of its perceived distance from critical markets. In the weightless economy, distance becomes no object, underlines Murphy.
“As the world continues to evolve, our size and distance become increasingly moot points,” says Murphy. “If the last 18 months have taught us anything, it’s that business remains resilient even when the ability to be physically close is impacted.”
New Zealand is attractive to global tech companies due to its size, he says. Although the country may appear “small” by some measures, it's because of its size, and the scale of its firms, that the country is able to pivot quickly and is highly adaptable, which is a huge advantage in the technology space, adds Murphy.
“Our isolation has driven us to become innovators, and we’ve had to be creative, practical, and ready to challenge convention,” he says. Murphy highlights that New Zealand is home to a number of world-leading companies and their products, including small business software from Xero, carbon recycling technology from LanzaTech, and aerospace manufacturer and small satellite launch service provider Rocket Lab.
Small business software company, Xero, is one of many companies New Zealand is home to
The country is also connected with most major global economies and has a highly advantageous time zone for international business. Murphy says it has an open, stable, and trusted economy that’s easy to do business with, which is one of the key reasons why the country is consistently ranked either first, second, or third in the World Bank’s ‘ease of doing business’ index.
Additionally, the government has a particularly strong commitment to its technology sector, while its workforce is well educated, creative, affordable, diverse, and cost-competitive by developed country standards, according to Murphy.
The need to digitise
Forbury, a commercial property market software company, embraces the concept of weightless export and digital trade, especially since over 90% of its customers are offshore, says Peter Rose, chief revenue officer at the company.
He says the fact that it has never stopped to consider the concept of New Zealand being open to digital trade speaks volumes, as the company has never faced any particular obstacles as a result of not having digital trading processes.
“We’ve never recognised the ‘digital economy’ as being any different from ‘the economy’,” says Rose. He underlines that New Zealand recognises the need to digitise, to promote the latest digital technology, and enhance the competitive advantage that comes from developing digital business and trade.
Considering the country sits at the bottom of the world and is geographically isolated from global markets, says Rose, weightless exports are an attractive and viable business proposition. The removal of geography in the digital arena is imperative for an isolated country like New Zealand to compete, and digital trade is not so much a nice to have but an absolute necessity.
Rose says that as countries are constantly competing for intellectual talent, New Zealand offers a range of attributes and advantages to attract such talent. This includes some of the easiest company setup processes in the world, a simple tax system that’s advantageous for entrepreneurs with no capital gains tax, and mature seed and venture capital industries that offer a pool of capital. New Zealand also consistently ranks in the top one or two for its anti-corruption environment, has top local tech talent, and offers a lifestyle that is difficult to replicate elsewhere. What’s more, tech companies are recognised as high-quality employers and welcomed in the country with numerous government and non-government support services.
Although DEPA has not directly affected Murphy’s business, he says the trade agreement recognises that New Zealand has to get ahead of the game and collaborate with other forward-thinking nations to create a competitive advantage.
New Zealand's legislators have cultivated one of the easiest company setup processes in the world
“Along with trade agreements, New Zealand is trying to create relationships that oil the wheels of commerce for a country with some natural geographic obstacles that are rapidly becoming potential advantages as the digital revolution overtakes and geographic distance becomes irrelevant,” he explains.
The country seems to be positioning itself as a leader when it comes to digital trade, and this could be an advantage as more nations around the world realise the importance of this industry and look to enter DEPA. New Zealand has understood the need for digital transformation in order to survive, enabling it to act first and get ahead of competitors, although it’s too early to tell whether it’ll hold onto this lead.
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