Malaysian FTA ‘bagus’ for the New Zealand economy

27 October 2009

Malaysian FTA ‘bagus’ for the New Zealand economy

Federated Farmers is welcoming the Government’s signing of a free trade agreement (FTA with Malaysia, although the runaway New Zealand dollar is removing some of the gloss.

"Malaysia is our eighth largest trading partner and represents an incredibly sophisticated consumer market of more than 25 million people. Best of all they know New Zealand and hold us in high regard as we’ve bled for Malaysia’s right to exist,” says Don Nicolson, President of Federated Farmers.

“Clearly, agriculture and particularly dairy, was already a big winner even before the FTA was officially signed. Dairy is an increasing part of the Malaysian diet with the benefits for children’s health seeing impressive growth across the board.

“The challenge is to promote New Zealand products in a sophisticated retail market dominated by major domestic and international retailers, such as France’s Carrefour, Japan’s AEON and Britain’s Tesco.

“Look at it like this - the 2008 estimated per capita income for Malaysians was US$15,300 whereas that for New Zealanders was US$27,900. The Malaysian economy is undergoing a remarkable transformation and bilateral trade will only grow as other barriers are reduced.

“This will be a big challenge to the meat exporters especially. Malaysia represents something of a greenfields market for them and they’ll need to follow Fonterra’s brands-led approach.

“Yet the rapid appreciation of the Kiwi dollar against the Ringgit could kneecap price competitiveness for exporters, tourism and the services sector alike. The Kiwis rollercoaster ride is taking some of the gloss off.

“It’s a genuine concern that since March, we’ve seen the Kiwi go from buying RM$1.85 to RM2.52 today. That’s an increase of almost 37 percent in just the last eight months. It highlights how imbalances in New Zealand’s fiscal policy settings impact exporters.

“Overall the importance of this FTA to New Zealand is underlined by the Prime Minister being in Kuala Lumpur with the Hon Tim Groser to sign it. That is a significant statement in the strength of the relationship as this FTA will most certainly be ‘bagus’ for our respective economies," Mr Nicolson concluded.