Part of the need to draw attention to its importance comes from NZ’s current low rating as an internationally-engaged country.
“While we certainly have businesses and organisations that are well-connected internationally, overall we’re not performing as well as you might think.
“NZ ranks only 43rd in McKinsey’s Connectedness Index, which measures how connected countries are into the world economy,” Makhlouf said.
The Treasury believes understanding Asia better is central to NZ making improvements on this benchmark.
Much of the focus remains on China, properly understanding its transition out of poverty, and keeping up with fast-changing demands.
Having made the most of a period dominated by a rapid increase in demand for agricultural commodities, Markhlouf said: “NZ’s challenge now is to meet the subsequent growing demand for sophisticated services and food products in an extremely competitive market, requiring greater diversification than in the past.”
The risks of placing too much emphasis on China were rehearsed by Makhlouf, with uncertainty over its economic prospects in the medium term.
However, he said: “Perhaps the greatest risk NZ faces is that it does not make the most of the opportunities posed by Asia.”
To take full advantage, NZ needs to strengthen trade relationships and increase overseas investment.
Marhhlouf suggested for NZ to benefit, “it needs to reorient its thinking from a country of agricultural exporters alone, to a country of innovators and experts who can step-up, in smart ways, to meet global demand”.
NZ must also recognise the opportunities to benefit from overseas investment.
“Investment in NZ from emerging Asia remains at a fairly low level given its relative economic size and the significant two-way trade relationship.
“Asia is the destination for around 40% of NZ exports but represents only 16% of our foreign direct investment stocks,” he said.
“Greater investment from Asia in the productive, value-adding sectors of our economy means that we can grow our businesses and reach markets that most firms here could not reach by themselves.
“Just as we should celebrate Fonterra investing billions of dollars in farms in China, we should be seeking out far greater investment from Asia.”
