Cover Story: LINK OR SWIM NZ's Asian Choice; Recent Ructions in the Eurozone Could Give New Zealand the Hurry-Up It Needs to Strengthen Links in the Asian Region. If So, We'd Better Jump to. Asian Economies Are Locking in Trade with Each Other as the European and US Economies Falter

Article excerpt

Byline: Ruth Le Pla

In five packed conference days in Seoul's summer heat, a New Zealand speaker fronts the stage just once. Victoria University's Dr Stephen Epstein is the sole Kiwi voice among over 150 international presenters. The only other formal mention of New Zealand comes in a single table flashed momentarily on a screen. It features during a talk on clean energy investment in a carbon-constrained economy. There at the bottom of the list is New Zealand's emissions trading scheme. The speaker barely mentions it. Even Australia gets scant attention.

There's nothing like spending time in Asia to drive home the truth that, in world terms, our economy is the size of a pea and frustrated by distance. Private conversations about New Zealand evoke instant-smile responses about our beautiful country, a desire to visit, and enquiries about sheep. Yet many of the 500 conference delegates seem genuinely puzzled as to why someone from New Zealand would be interested in Asia.

The recent Harvard Project for Asian and International Relations (HPAIR) in Seoul, Republic of Korea, played out against a backdrop of economic disintegration in Europe and financial stress in the US.

Debt-laden Greece was inching closer to detonating the Eurozone. The US had stepped back from the brink of defaulting on its debt. Investment bank Morgan Stanley unleashes a scathing report saying the US and Eurozone economies are "dangerously close to recession". The bank cuts its 2011 global growth estimate from 4.2 percent to 3.9 percent, and its 2012 forecast from 4.5 percent to 3.8 percent.

The combined ructions in both zones trigger new waves of fear of a looming global recession.

While the US and Europe will continue to drive global economic agendas for a long time to come, heightened levels of direct investment, financial transactions and trade within Asia are leading to the rise of increasingly integrated Asian economies.

At HPAIR, Khee-Hong Song, managing partner at Deloitte Consulting Korea, points to Asia's intra-regional trade as the world's new economic powerhouse in the making. Business leaders, he says, must shift their gaze away from Asia's relations with other regions and pay more attention to the dynamics within Asia itself.

The timing of Song's message adds extra urgency to what many have been saying for some time. In a speech earlier this year, Singapore's Deputy Prime Minister Tharman Shanmugaratnam said that while there are few straight lines in economic growth, by the end of the decade Asia's trade is expected to form 60 percent of global trade flows. Importantly, intra-Asian trade will form at least half of all Asian trade.

So, as a tiny island nation on the edge of the Pacific, what does this mean for New Zealand? Are we destined to remain on the outside looking in? And how can we best handle integration into the economies of Asia?

For decades, New Zealand business leaders have studied charts showing Asian countries clambering up our list of trading partners while traditional 'western' ones slither further down the scale.

Last year our merchandise trade with Asia represented 40 percent of our total exports and just over 44 percent of our imports. Not surprisingly, most of the action took place with northeast Asia which absorbed just over a quarter of total exports and, in return, sent us just under 29 percent of our imports.

(Confusingly, definitions of which countries are included in which subregion can vary according to context. The above Statistics New Zealand figures place China firmly in northeast Asia. The Asian Development Bank's regional classification, on the other hand, places China in East Asia, has no such place as North, or northeast, Asia and no listing at all for Japan.)

Southeast Asia was our next largest trading partner in the region, comprising 10 percent of our exports and 14.5 percent of our imports. …