China Business: Changing landscape (NZ Herald)

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Ye Miao, head of the Asia Team at James & Wells talks to Tim McCready about the foreign investment law passed recently in China.

 Herald: What areas will the new foreign investment law address?

The new Foreign Investment Law, passed by the Chinese National Congress on  March 15, 2019, and coming into force on 1 January 2020, seeks to promote foreign investment into China by further easing market access for foreign businesses and encouraging foreign investment on a government administrative and policy level.

The new law addresses specific areas of concern for foreign businesses looking to invest in China, such as forced technology transfers. It also intends to help strengthen intellectual property (IP) protection and level the playing field in terms of market competition between foreign and domestic businesses.

Herald:  Will the new law allay uncertainty about doing business in China?

It’s important to consider the new law as a framework for the Chinese Government to set out its principles and intentions to further ease market access in China and respond to some of the concerns held by foreign businesses and investors in the China market. It is not necessarily a prescriptive set of rules that govern every eventuality. There is an expectation, however, that it will lead to stronger, more efficient compliance and enforcement.

There are some very promising principles in it.  For instance, Article 22 specifically enunciates the principle of protecting the intellectual property rights of foreign investors and enforcing them against infringing parties, consistent with Chinese intellectual property law.

Importantly for foreign investors, Article 22 also affirms that foreign investors will not be forced into technology transfers as part of their investment into China.

Article 23 also seeks to further protect the trade secrets of foreign investors from being disclosed by government officials and employees.

Other principles set out in the new Foreign Investment Law include:

  • Restriction of investment based on a negative list of specific industries/fields. Outside of these, the Chinese Government will afford the same national treatment to foreign investment.
  • In Government procurement processes, foreign businesses will be given equal treatment as local Chinese businesses.
  • Confirmation that capital invested in China, and profits made by foreign investors may freely be transferred in and out of China.
  • Stronger wording that Government will not seek to impose unwarranted actions that interfere with the business activities of foreign enterprises, and that the Government will fulfil policy and contractual commitments with foreign investors and enterprises.
  • Compensation and complaint mechanisms where commitments are broken and/or the where there is any infringement of the foreign business’ lawful rights.

Some commentators have rightfully noted that the new law still lacks substance in a number of areas, due to its breadth and vagueness.

While this is a cause for concern, it is important to remember that it is not uncommon for Chinese law to be set out as a framework of principles and intentions, necessitating further development and interpretation.

Herald:  How will this impact on the business environment for foreign firms?

This will ultimately depend on interpretation of the new law, and related laws and enforcement of these principles by Chinese authorities.  We hope it will drive a change of business and administrative behaviour in specific areas such as those relating to intellectual property theft or the disclosure of trade secrets, but we cannot expect change to happen overnight.

Overall, China has become a much better and often very lucrative place to invest and do business in over the past two decades.  We are cautiously optimistic that the principles and intentions set out in the new law represent further progress.

Herald: What are the challenges New Zealand businesses face when interacting with the China Trademark Office?

One of the significant challenges facing the Chinese Trademark Office (CTMO) and the Trademark Review and Adjudication Board (TRAB) is the rising volume of trademark applications, oppositions and proceedings.  According to the most recent statistics in China, there are over 18  million trademarks registered in China.

In 2018 alone, the CTMO received almost 7.4 million applications and examined over 8 million.

That represents over 20,000 applications and 22,000  examinations per day.

This puts immense pressure on the CTMO to both process the applications quickly and to act by the book, and has resulted in examiners often taking very conservative positions. Very prescriptive interpretations are taken where there are prior marks that include even minor similarities with the applied for trademark, which means an estimated 50 per cent or more of all applications are now rejected in the first instance. Applicants then have just 15 days to respond.

Therefore, it’s important for a business to consider its options in depth and to engage a trademark professional to assess the examination report and respond to it by the deadline. Often, objections can be overcome at the TRAB appeal level where there is more time for examiners to consider the applications and evidence in support, or through other actions.

Where the TRAB issues an unfavourable decision, an appeal can still be made to the Beijing IP Court. Unfortunately, however, these processes can be time-consuming and costly, so it is worthwhile to have back-up plans and an overall strategy in place. Unfortunately, the high volume of applications can mean that your potential brand (words and logos) may already be taken by someone else. As such, it is wise to consider checking the availability of your brand as trademarks in the development stage of your branding, so that you don’t overcommit on a brand that you may not be able to use or register in your chosen markets.

Herald:  How do you see the long-term outlook for IP protection in China?

China has been updating and improving its intellectual property laws and process over the past decade, and it is continually doing so. For instance, it is currently in the process of updating its patent laws, and has recently had high-level discussions as to its trademark laws and processes. These discussions have involved IP professionals as well as businesses.

While there are still frustrating processes and wait times, the overall goals of the IP authorities are admirable.

They have sought to recruit more examiners to help reduce examination times, set up the Beijing IP court to deal with specific IP matters expediently, and taken drastic steps to reduce trademark squatters.

Herald: Are New Zealand businesses ready to take advantage of the changing opportunities in China?

Some are well-prepared, others less so. In addition to a good product or service, it’s important that New Zealand businesses have a good story, and that they properly assess opportunities in key markets.

We strongly recommend carrying out due diligence in advance of entering China, and engaging someone on the ground with knowledge of your industry or sector.

And of course, we recommend taking early and appropriate steps to protect your IP and trade secrets.

And be mindful of the different cultural forces in play — what works in New Zealand does not necessarily work in other markets like China.

China Business: Cyberport seen as key to success (NZ Herald)

Hong Kong’s Cyberport has a vision to “be the hub for digital technology, creating a key economic driver for Hong Kong”.

Wholly owned by the Hong Kong Government, Cyberport works with start-ups and entrepreneurs to help them  grow in the digital tech industry — which the Government has identified as  a key to success for businesses and an essential economic driver.

Cyberport’s campus — 100,000sq m   of office space  20 minutes from Hong Kong’s centre — is tailor-made for the creative digital community. It is home to over 1000 technology companies and start-ups, consisting of established big names in tech including Microsoft, Lenovo and IBM — as well as fledgling start-ups and aspiring entrepreneurs, and is designed to “foster creativity and innovation,” and provide a platform to connect start-ups and entrepreneurs to investors, academic and industry partners and mentors.

Cyberport says Hong Kong “is well positioned to be a centre of international talent, a gateway for Greater Bay Area cities, and a fintech hub to connect Belt and Road countries to the China mainland and the world”.  With that in mind, it places an emphasis on particular tech sectors — smart living, fintech, and digital entertainment — areas it says are essential for Hong Kong’s digital transformation and new industry development. Alongside these, it focuses on blockchain and AI/big data — platform technologies  applicable across many digital tech areas.

The Hong Kong Government recently allocated HK$100m (NZ$18.7m) to Cyberport, with half to go towards creating a competition venue for large-scale e-sports (video game) tournaments, as Hong Kong plans to become a regional hub for what is expected to be a billion-dollar industry this year and continue to grow rapidly.

“Cyberport was chosen because it has strong network facilities,” said Secretary for Information and Technology Nicholas Yang. “To develop e-sports, to provide live streaming of competitions, we need a strong and stable network — this is something that Cyberport can provide… Our goal is to create a new industry.”

GoGoVan became Cyperport’s — and Hong Kong’s — first unicorn (a term given to privately held start-ups valued at over $1 billion) in 2017. The app-based logistics platform connects van drivers with customers, creating an efficient logistics on demand service for the delivery of freight and goods.

Founded in 2013, in its early days GoGoVan received HK$100,000 (NZ$18,750) in seed funding from the Cyberport Creative Micro Fund, then joined the Cyberport Incubation Programme to develop its business further. It went on to secure funding from Alibaba and other investors, and now has a presence across Hong Kong, Singapore, South Korea, Mainland China, Taiwan and India.

Several New Zealand companies have  made use of Cyberport’s facilities to springboard into Asia. Just Service is one example — a fintech company that provides support applications for independent financial advisers, insurance companies, and banks.

Chief executive Phil Neilson established the business in 2014, starting with a workstation at Cyberport.

He says Cyberport provides a low-cost solution for start-ups with facilities “like you would imagine at Google in the US,” along with access to support services and a network of start-ups and other young, successful companies.

China Business: Improving customer transport choices (NZ Herald)

A smart mobility data platform was recently launched in two Chinese cities — Chengu and Shenzhen.

The platform, known as the “PAIR mobility exchange,” offers the Mobility as a Service (MaaS) promise, of bringing together journey planning, ticketing, and payment for all transport modes into a single application.

The co-founder of the PAIR platform in Australia and New Zealand, Mark Thomas, says Mobility as a Service offers transformational benefits for city residents. These include:

  • Safer, expanded services for passengers
  • More transparent and lower overall transport costs.
  • Reduced traffic congestion with increased transportation efficiency.
  • Lower cost of operation for taxi operators with more frequent trips.
  • Greatly improved data-driven planning and regulation.

Integrated ticketing platforms are not new. Helsinki-based company Whim recently launched last year in Birmingham in the UK and covers all modes of transport — from public transport, taxis, car hire and bikes. It offers a pay-as-you-go option, as well as an unlimited service, which provides locals with unlimited public transport, all taxi rides within a three-mile radius of their location, and car hire for £349 per month (NZ$675). Berlin and Singapore are also proceeding with MaaS trials and the MaaS Alliance has been formed in Europe as a public-private partnership to facilitate its deployment.

The PAIR platform in Shenzhen will allow customers to integrate multiple ride options together for any particular journey.

The platform not only aggregates existing taxi providers into one online platform, it also allows customers to combine public transport and other sharing economy platforms such as e-scooters to get to their destination.

Thomas says he is now looking to Auckland and Sydney, and says he sees it providing a real solution to both cities’ congestion problems as well as improving big event transport planning.

“PAIR creates a way for cities to better utilise their existing transport assets.

“It is a win-win-win for customers, operators and regulators. Transport users get easier access to a greater range of mobility choices,” he says. “Operators can reach a bigger market and get valuable information to better optimise their operations. Regulators gain new transport planning insights.”

Project Auckland 2018 event MC (video)

Project Auckland: 2021 — a city transformed (NZ Herald)

2021 is a chance to set a target for some of the things we can do around the city, Auckland Mayor Phil Goff tells Tim McCready.

Auckland Mayor Phil Goff says the big events of 2021 will not only put Auckland on the world stage, but will provide the impetus to expedite Auckland’s transformation into a truly international city.

He likens the programme of events — including the America’s Cup, Apec, the Women’s Rugby World Cup, the men’s Softball World Cup, the Women’s Cricket World Cup and the kapa haka Te Matatini Festival — to royal visits of the past:

“People would get out and cut their hedges and paint their fences. This is a chance for us to set a target for some of the things we can do around the city — particularly our interface between the city and the waterfront.”

Goff says the events provide an opportunity for Auckland to show itself off to the world.

Apec will receive massive international attention, with global superpowers and representatives of the largest economies expected to attend — including leaders from China, the United States, Russia and Japan. An expected 10,000 visitors will arrive for the Leaders’ meeting over the Friday, Saturday and Sunday (Nov 12-14, 2021).

“We’re probably going to have to encourage a few institutions to close for the day on the Friday to compensate for the congestion that is going to occur,” says Goff.

Echoes of 1999

Goff has been to many Apec meetings in his time as Minister of Foreign Affairs and Trade.

“They are unique opportunities to get key people together in one place, and in 2021 Auckland will be the focal point of extensive media coverage that will go right across the world,” he says.

Reminiscing about the last time Auckland hosted Apec in 1999, Goff acknowledges that while he thought it was a big event then, it was only a fraction of what Apec has become.

His standout memory from 1999 was meeting with then-US President Bill Clinton. Goff briefed him on what was happening in East Timor, where he had been an international observer of the vote for freedom, where the so-called referendum disintegrated into violence throughout the country, with anti-independence militants creating chaos.

“It was a chance — even as an opposition MP at that time — to meet some of the key world leaders, because of the unique role I had in relation to East Timor which was at the forefront of that particular gathering,” says Goff.

He notes the world has changed a lot since 1999 — and so has New Zealand. “Auckland is now projecting New Zealand onto the international scene as a really global city. One that is high-tech, moving ahead, one that people want to do business in.”

A packed schedule

Goff says that 2021 will provide a platform for Auckland to impress the people that are visiting — and all those watching from afar — that New Zealand is a small but highly competent, efficient country with high-tech innovation and a high quality of life.

“The America’s Cup will showcase the beauty of our environment with the broadcasting of the harbour, as well as our sporting skills and cutting-edge technology in yachting,” he says.

And while the Men’s Softball World Cup and the Women’s Rugby World Cup won’t be as big as the America’s Cup in terms of audience numbers, he says they are international events that will play to different markets: “Different people will pay attention to different aspects of what Auckland is doing that year. The Te Matatini Festival will be a great chance to showcase Auckland as the world’s largest city for Māori and Pasifika people — something that gives Auckland its identify.

“Our ability to leverage off the events in 2021 for investment, tourism and human capital is very important.”

One of Goff’s slogans for Auckland is ‘the place where talent wants to live’.

“That means retaining and attracting talent, and to do that, you’ve got to look like an international city humming with action.

“The centre of the city will epitomise that for Auckland — but with impacts across the whole city.”

According to the Rider Levett Bucknall Crane Index, there are 90 cranes in Auckland — an increase of 8.4 per cent over the past six months. Construction of new apartment towers, hotels, and shopping centres are contributing to the count.

“We’ll see a transformation of our skyline in Auckland, and we’ll start to look much more like a global city than a traditional New Zealand city,” says Goff.

He is looking forward to that growth, and seeing the city merge with the waterfront precinct.

“For most of this city’s history, we’ve had the red fence along the waterfront. The public have been separated from it, there is no public access.”

Goff’s eyes light up as he talks about his vision for downtown Auckland, as it begins its transition into a place where people want to go, relax and enjoy the surroundings.

Quay Street will be reduced to two lanes of traffic — with plans for wide footpaths, trees and plazas — connecting to a car-free lower Queen Street, the first part of Auckland’s “golden mile” to be pedestrianised.

The tanks at Wynyard Point, which have held a variety of hazardous substances and been a longstanding feature of Auckland’s skyline since the 1980s are being removed.

“The America’s Cup will use this area for bases in the first instance, and start to open that area up.

“You’ll see further developments of Wynyard Quarter and Britomart that will make them fantastic places to be,” says Goff.

“These are all places that will make our city a destination, not just a place to pass through.”

Smart cities

Goff sees technological solutions as a key component of Auckland’s transformation into an international city.

He points to the Safeswim programme as an example, which earlier this year won the Smart Water category of the IDC Smart Cities Asia/Pacific Awards 2018. A joint initiative between Auckland Council, Surf Lifesaving Northern Region and Auckland Regional Public Health Service, Safeswim provides up to date information to the public about Auckland’s beaches — including water quality, safety, and long-term health warnings.

“We’re the first city in New Zealand that can tell you — in real time — what the water quality is in beaches this morning, this afternoon, and tomorrow morning,” says Goff.

“We’re world-leading in that area, and we’re using it for the benefit of the people in Auckland.”

Other smart technologies are quickly — and dramatically — revolutionising transport in Auckland, including electronic scooters and the dynamic lane trial in Whangaparāoa.

“Twelve months ago, if you had asked me whether scooters could be a form of transport around Auckland I’d have said ‘I don’t think so’, but you see how quickly that technology changes.”

The Whangaparāoa Road Dynamic Lane project uses LED lights embedded into the road surface to mark traffic lanes instead of painted lines.

Changing the lights, along with traffic control gantries that display lanes, creates temporary lanes during heavy congestion to ensure free-flowing traffic. The project won Best Technical Solution at the Association of Local Government Information Management Awards.

Similar systems are used in Auckland along the Panmure Bridge and Auckland Harbour Bridge. The system is quick to build and around one-tenth the cost of alternative solutions.

“Auckland Transport is going to use that same technology in probably another half a dozen sites around the city,” says Goff.

“We can use technology to improve our transport systems. We can predict when something is going to happen or is starting to happen, and make changes that make it easier to get around the city.”

Goff says technology can be used to make every aspect of life better for Aucklanders:

from biological nutrient removal plants for more environmentally friendly wastewater treatment, to automatically resettable possum traps, to online resource consent filing, dog registration and rates payments.

“Council is tapping into innovations which enable us to do more for less — providing better services at a lower cost,” he says.

“It means we’ve been able to have a city that is growing by 30,000 — 40,000 a year, but we haven’t had the growth in staffing that is proportionate to the growth in population.

“Our per capita staffing levels are actually dropping — we’re providing better services at a lower cost to our rate payers.”

Goff drops hints on Mayoral race

“I am thinking seriously of running for the mayoralty again,” says Auckland Mayor Phil Goff. “I don’t want to go into a job and leave it partly completed.”

Goff says he will make a formal decision on whether to run again for mayor early next year. But he adds that three years is a very short space of time to change a city in the way he’d like to see it happen.

“Particularly with our 10-year budget, it has been transformational, with the biggest ever level of capital investment in our infrastructure. But that’s time-lagged.

“To actually see things you have put in place develop, takes longer than a three-year term.”

Goff talks about the significant progress that is being made towards Auckland infrastructure: the City Rail Link, Skypath along the Harbour Bridge, Seapath between Takapuna and Northcote Point and cycleways.

Other initiatives he wants to see progress further include cleaning up Auckland’s harbours, making Waiheke predator-free and saving the kauri from dieback in the Waitakere Ranges.

“When you come into a job like this — depending on the electorate’s willingness to re-elect you — you don’t want to say ‘I’ve done a stint there, that was nice, now I’ll move on.’

“You want to say: ‘this transformation is critical — not just for me, but for my kids’ generation, for my grandkids’ generation’.

“You want to see that through so you feel that you have been part of something that has made Auckland a better place to be in.

“So that gives you a bit of a hint of the way I’m thinking,” he says.

Based on previous years, Goff expects there to be around 12 other people vying for the mayoralty.

So far only John Palino — a two-time mayoral candidate — has formally announced his candidacy. National MP for Tāmaki Simon O’Connor is contemplating running, and has said he will make a formal decision in the New Year. Property developer and brothel owner John Chow as well as Waipareira Trust chief executive John Tamihere are also considering a tilt for the mayoral chains.

Project Auckland: Auckland in the spotlight (NZ Herald)

2021 is shaping up to be a major year on the Auckland calendar, with major political, business, sporting and cultural events taking place.

The annual Asia-Pacific Economic Co-operation (Apec) will be held in Auckland for the first time in 22 years. Hosting Apec involves a 12-month period from December 2020 to November 2021, culminating in the leaders’ meeting where political leaders, their ministers of trade and foreign affairs, CEOs, youth leaders, business leaders and international media from 21 Asia-Pacific economies will descend on the City of Sails.

Apec was last held in Auckland in 1999, and saw US President Bill Clinton arrive to a ‘rock star’ welcome and also marked the first visit to New Zealand by a Head of State from China — then-President Jiang Zemin.

While in Auckland in 1999, the world’s two biggest powers — China and the United States — resumed talks during an hour-long meeting, after heightened tensions following the accidental bombing of the Chinese Embassy in Belgrade during the NATO bombing of Yugoslavia.

This time around will no doubt prove just as political, with President Donald Trump potentially in his second term in office, and the status of the relationship between the US, China, and Russia anyone’s guess.

Apec 2021 is being planned, organised and delivered by an All-of-Government Apec 2021 Programme, led by the Ministry of Foreign Affairs and Trade (Mfat) in collaboration with a wide range of stakeholders and partners.

Mfat says Apec will be the biggest event ever hosted by the Government.

“With that comes an enormous amount of logistics and co-ordination that we are actively working on. We are working closely with a range of partners, including central and local government agencies, iwi, commercial partners and business interests to showcase New Zealand to the world,” says Andrea Smith, Mfat deputy secretary for Apec 2021.

Earlier the same year, Auckland will host its first America’s Cup in almost two decades, after Emirates Team New Zealand won the Cup in Bermuda in 2017.

Along with the defence of the oldest trophy in international sport, Auckland hopes to stage a successful event in March.

According to a report prepared for the Ministry of Business, Innovation and Employment by Market Economics, the America’s Cup is expected to deliver between $600m-$1b in value-add to the New Zealand economy over the 2018-2021 period and an employment boost of between 4700 and 8300 jobs.

The race will showcase New Zealand on a global stage, forge new business links and be the catalyst behind the development of better waterfront infrastructure.

The previous America’s Cup regattas held in Auckland in 2000 and 2003 each generated around half a billion dollars of economic activity.

Auckland Tourism, Events & Economic Development (Ateed) says collaboration will be critical for both major events: “2021 will certainly be a bumper year with major events spread throughout the year and Auckland will be ready to welcome these events,” says Steve Armitage, General Manager Destination.

“A collaborative programme between the Auckland Council Group, the Ministry of Business, Innovation and Employment, Mana Whenua and America’s Cup Event Ltd is already well established and working diligently to prepare for the 36th America’s Cup, while Ateed and Mfat have signed a Memorandum of Understanding and are working together with other government agencies to prepare for Apec 2021.”

Auckland will also host three other major sporting events in 2021: the Men’s Softball World Cup in July, the Women’s Rugby World Cup in July and August, and the Women’s Cricket World Cup in November.

The Te Matatini Kapa Haka performing arts festival is held every two years at different locations in New Zealand. In February 2021 it will also take place in Auckland, and is expected to draw in around 30,000 participants and spectators.

Says Armitage: “We see 2021 as a significant opportunity to advance the outcomes of the city’s destination strategy — Destination AKL2025 — which has an increased focus on destination management and sustainability that will add value for Aucklanders and our visitors.

“Over the past decade Auckland has built an enviable reputation for hosting a diverse range of global major events, showcasing the city, delivering an outstanding experience for visitors and leaving a favourable, lasting impression.”

New Zealand certainly left an impression on President Clinton. Before departing in 1999, he said: “This has been a magical trip.

“I think every person, when he or she is young, dreams of finding some enchanted place, of beautiful mountains and breathtaking coastline, clear lakes and amazing wildlife.

“Most people give up on it because they never get to New Zealand.”

Preparation under way

Auckland’s hotel market is expected to be in better shape in 2021 for the 36th America’s Cup compared to the 2000 or 2003 Cup defences in Auckland.

The city’s newest hotel, the five-star SO Sofitel, opened last month offering a volcanic theme throughout the hotel’s 130 rooms that range from $469 to $4500 a night.

Other hotels under way include the five-star Park Hyatt (195 rooms, opening 2019), SKYCITY Horizon (300 rooms, opening 2019), the Cordis extension (additional 250 rooms, opening 2020), Novotel (310 rooms, opening 2020).

But there are still concerns from some in the tourism industry that a shortage of hotel accommodation is likely.

Research from commercial real estate firm CBRE has found, based on the current pipeline of hotels planned or under construction, that there will be an additional 2200 rooms in the city by January 2021 — just before the scheduled America’s Cup race — on top of the current supply of 10,000 rooms.

But as international and domestic tourism markets continue to grow, hotel room demand will increase over the next three years. Even with the new builds taking place, demand will likely exceed supply by the time Team New Zealand set sail.

However, Peter Hamilton, director hotels, valuation and advisory services at CBRE New Zealand said other accommodation providers — such as private rooms through the likes of Airbnb — would ease accommodation pressures while the Cup is contested.

Over leaders’ week, Apec will see an estimated 10,000-13,500 attendees arrive. It is likely that the US, China and Russia will each take over entire hotels with officials, business delegations, and security.

With events spread throughout the year, Ateed is confident that the accommodation sector can meet demand during 2021.

“Apec Leaders’ Week takes place for a short time during the off-peak period in early November,” says Ateed’s GM Destination Steve Armitage. “There are a number of infrastructure projects underway to support Auckland’s growth and improve the visitor experience, many of which are in the CBD and waterfront area and will be complete or well advanced by 2021.

“An important legacy of the major events the city has successfully hosted is that we have significantly increased our capacity and capability. The city is better placed to ensure the success of 2021.

“The most important message is to plan ahead for Leaders’ Week. We are working closely with Mfat and our partners in the tourism and accommodation sector to help people do exactly that.”

What’s in it for business?

Tim McCready asks the Ministry of Foreign Affairs and Trade’s Andrea Smith why Apec 2021 matters for NZ business.

Mfat Deputy Secretary Andrea Smith is leading the All-of-Government planning and delivery for Apec 2021, working closely with local bodies including Auckland Tourism, Events & Economic Development (Ateed).

“Trade matters. One in every four New Zealanders in work today depends on exports for their livelihoods,” she says.

“The Asia-Pacific region is the fastest-growing economic region in the world and most of our two-way trade is with Apec economies. Apec is also the only international forum where we have the opportunity to host 21 leaders at the same time. In 2021 we have a huge opportunity to showcase New Zealand and Auckland to the world that only comes along once every 20 years.”

So what’s in this for business?

“Apec 2021 offers opportunities to connect New Zealand businesses with international visitors and help drive economic growth,” says Smith.

“We’re working with business to run a successful CEO Summit, to develop policy initiatives and theme, on leveraging and legacy activities, and on sponsorship.

“A range of businesses will also be involved in the event delivery itself by supplying goods and services. Overall, it’s a fantastic opportunity for New Zealand businesses, and a chance to tell the story to the world about who we are as a country and what we have to offer.

“At the Apec Leaders Meeting in Port Moresby last month, economies failed to reach consensus on their declaration, so business may be wondering about the future of such meetings. In these ‘turbulent times for trade,’ institutions like Apec — that have served us so well — are more important than ever to bring leaders together and discuss meaningfully their vision for the rules-based trading system.”

Newshub Nation Panel: December 12, 2018

Dynamic Business: A ‘Kodak’ moment for banks (NZ Herald)

bit.ly/2BGpw7D

If the companies within the financial services industry are to survive the fourth industrial revolution, they must embrace emerging technologies.

That was the message from Likhit Wagle, IBM Asia Pacific’s general manager financial services, at the 2018 INFINZ conference this month.

“If the financial services industry continues at its current rate and pace — and doesn’t respond to disruption from the changing environment — the average return on equity globally for the industry will collapse by 2025 from about 10 per cent to about 5.5 per cent,” says Wagle, referencing data from McKinsey.

One of the reasons for this, he explains, is that after the financial crisis there were massive increases in the level of capital that banks have had to put aside, but the level of profit growth has not kept pace with the level of capital increases that needed to come about.

However, the threat the financial services industry face isn’t coming from fintech companies.

Like the pharmaceutical sector — where smaller biotechnology companies are providing the innovation for the pharmaceutical industry’s distribution channels — banks around the world have recognised that fintech companies can provide an engine for innovation and growth.

Banks are starting to collaborate with fintech companies so that the latest technology innovation can be channelled through the much larger distribution networks the banks can provide.

Instead, it is the platform companies — like the Chinese behemoths Alibaba and Tencent — that is placing the pressure on the industry.

Though these companies might have started life as a trading platform, they have moved into asset management and the provision of substantial financial services — satisfying multiple needs of the customer through a single platform.

When Ant Financial (the financial services subsidiary of Alibaba) lists, the expectation is that the “super unicorn” will be valued at US$150b — a similar size to Citigroup and twice the size of Wall Street titan Goldman Sachs.

The risk for financial services firms is that the more that can be done on a single platform, the greater the risk that people don’t step off that platform and do business through their bank. The risk banks now face isn’t just the possibility of marginal reductions in market share and the squeezing of margins, but rather the potential for “Kodak” moments — where huge chunks of a business completely disappear overnight.

Wagle is optimistic about the future, so long as banks begin implementing changes that will allow them to compete head on with the threat of disruption.

1. Implementing the new generation business architecture to provide extreme convenience

There is an architecture — which Wagle calls the “new generation business architecture” — that will enable banks to be more efficient, productive and informed than they currently are.

The four key technologies of this architecture are artificial intelligence (AI), cloud, blockchain and the Internet of Things (IoT).

“If banks do not introduce these technologies on an enterprise-wide basis, then they are going to be in some trouble,” says Wagle.

He says that aside from very mundane, routine tasks that are very low level, “we are a long way away from replacing people with AI”. However, one benefit that these technologies will provide is their ability to analyse research and data, augmenting and enhancing the capabilities of people.

“Where in the past you might have spent several days preparing for a meeting, you can now prep for that meeting within minutes,” says Wagle.

“In one of the engagements IBM did with relationship managers in wealth management, their productivity was enhanced eight times because they used technology to help with the research.”

The new generation business architecture will help banks to provide the level of convenience and immediacy that has become increasingly commonplace with technologies like Uber.

When someone makes an application for a loan, they do not want to be waiting days — let alone weeks — for the money to hit their account.

Wagle says that banks have done a very good job of creating customer apps, but the processes behind the apps and the technology that supports those processes is still often in the dark ages.

“There is still a lot of manual activity,” he says. “Banks should make use of technology and APIs [the software that essentially connects various entities’ systems together] to ensure the vast majority of banking processes can work together, so that they are able to provide an end-to-end digital experience.”

2. Offering services that go beyond banking

“If all you’re going to provide a customer is a loan then it is very fast going to become a commodity exercise, because they’re going to go from you to someone else to someone else and find the cheapest offer.

“We have gone past that era where you can schmooze an individual, form a relationship, and say that they are going to stay with you forever.”

Instead, banks should start thinking beyond banking, and create ecosystems.

As an example, Wagle explains that some banks are already able to provide a range of services when you ask for a mortgage.

Alongside the loan they can provide advice on where you should buy, what the community and schools are like, and what the valuation of the house should be.

They have an ecosystem around the house buying decision because they are helping the customer to buy a house — not only selling a mortgage.

“This provides a much stickier experience,” he says.

“Customers will make their decision on the quality of services they are receiving, instead of solely on what a bank is charging for the mortgage.”

3. Reducing costs with efficiency-boosting technology

When benchmarked against the global banking industry, the cost-to-income ratio for New Zealand banks is very low.

But, Wagle explains, that is not because New Zealand has a highly efficient banking industry, but rather because New Zealand’s margins are very high.

“Your margins are spectacular compared to other parts of the world,” he says.

He warns that if we get competition here it will start to compete the banking margin away.

“You are probably about 5-7 percentage points in cost-to-income ratio higher than where you need to be. What that then means is you’ve got to get somewhere between 22-25 per cent of your operational and IT costs out of the business — and the way to do that is through cloud.”

Cloud computing can cut as much as 40 per cent of information technology costs for banks, while also improving security and efficiency.

Though there is very little you can put in the public cloud in the financial services industry due to regulations and requirements on data privacy, banks can put their middle and back office workloads on to a hybrid cloud platform — something Westpac has done in Australia.

That is now driving 25 per cent out of their cost and has also given them real agility.

“Things that were taking 20-25 days to do before, they can now do in three or four days.

“It’s giving that speed that you need to have in order to really satisfy the customers in that kind of instantaneous way that has become so important,” he says.

Opportunity knocks
New Zealand banks have a massive benefit that the likes of Alibaba don’t — yet — have. Most of the data that is required to service the requirements of customers exists within the bank, and it will take new entrants a long time to get that information and to build trust.

There is only a limited window of opportunity. As open banking becomes a requirement around the world, banks will have to make their data available to any customer that wants the data to be provided to external providers and will lose their monopoly.

By addressing issues around customer services and convenience, thinking beyond banking, and operating at costs that are substantially lower (and therefore offering more competitive pricing), the financial services industry will be much more secure in the face of competition.

Dynamic Business: Zespri takes top honours among stellar cast (NZ Herald)

Zespri has taken out top honours as Deloitte Digital/Marsh Company of the Year in the 2018 Top 200 Awards — partly due to an impressive 38 per cent lift in net profit and record payments to its growers.

The highly anticipated awards, held annually to recognise and honour outstanding performance among New Zealand’s largest companies and trading organisations, were unveiled at a glittering dinner held at Spark Arena in Auckland last night.

Zespri has been a frequent sight at the awards in recent years — the kiwifruit exporter was a finalist for Most Improved Performance in 2015, and took out the awards for Most Improved Performance and Best Growth Strategy in 2016 and 2017, respectively.

This year, the judges said Zespri was a deserving winner of Company of the Year, recognising that its superb returns represent the culmination of its long-term premium brand-led strategy. Thanks to the company’s turnaround since the Psa outbreak in 2010, they say the kiwifruit industry is now a great success story for New Zealand innovation.
“When you look at the volumes, the tray returns, the growth in China, the share price – all those measures — the company looks very successful,” the judges added.

Given Zespri’s success, it is plain to see why Peter McBride was awarded New Zealand Herald Chairperson of the Year. In the role since 2013, he was recognised by judges for his understated style as a consultative chair, running a highly cohesive, functional board.

In his time as chair, McBride has presided over a CEO change, addressed compliance issues, seen the SFO investigation conclude satisfactorily, rolled out a new fruit variety, and pushed through greater transparency in the way Zespri allocates fruit.

McBride recently announced his intention to step down as Zespri chair early next year, but the board say the changes he shepherded through will provide long-term sustainability for Zespri, and are a testament to how strong the co-operative is.

Restaurant Brands chief executive Russel Creedy was named Deloitte/ServiceNow Chief Executive Officer of the Year.

The judges said outstanding returns for investors that the food franchiser has delivered are recognition of Creedy’s leadership style, particularly given constant industry disruption, which Restaurant Brands is not spared from. Shares in Restaurant Brands are worth around 900 per cent more than they were when Creedy took over as chief executive in 2007 — a key reason for Restaurant Brands being included as a finalist this year for Company of the Year.

The Sheffield Visionary Leader for 2018 was Marilyn Waring. The judges say this prestigious award not only recognises a person important in New Zealand’s political history but also someone who has shown original, visionary thinking and application in the economic sphere.

ASB bank’s Jon Raby was awarded Chief Financial Officer of the Year. The judges say Raby fulfils the core strengths of highly successful CFO’s by leading a finance function that produces highly accurate financial statements, and using his financial knowledge to partner with the CEO and business to drive shareholder value.

In his six and a half years in the job, the bank’s financial results have gone from strength to strength – from a net profit in 2012 of $685m to a net profit this year of $1.177b – the second consecutive year the bank has made more than a billion dollars.

After being a finalist in the category last year, Sanford took out the MinterEllisonRuddWatts Excellence in Governance award.

New Zealand’s biggest and oldest seafood company aspires to be the best seafood company in the world, and is acutely aware that the company’s future depends on its long-term sustainability.

Sanford places a strong emphasis on the sustainable growth of its business and on being a good corporate citizen — actions that are well-documented in their strong integrated reporting which has been recognised as a leader in the market.

Iconic New Zealand brand Skellerup took out the OneRoof.co.nz award for Most Improved Performance this year, ahead of finalists Kathmandu and Kordia.

Skellerup impressed the judges with continued growth in international markets and they described the diversified business as a healthy New Zealand story.

Fulton Hogan picked up the 2Degrees award for Best Growth Strategy. The judges say the infrastructure construction and road maintenance firm has a standout growth strategy and has been a great performer in an industry where others have not succeeded.

SKYCITY’s group-wide policy for the board of directors to set measurable objectives to promote diversity, along with clear programmes and initiatives in place, saw it recognised with a win in the Ministry of Business, Innovation and Employment Diversity and Inclusion Leadership category.

Caroline Rawlinson was recognised as the Eagle Technology Young Executive of the Year for her humility, self-awareness and strong commercial acumen. The judges said the chief financial officer at Trade Me “showed an impressive ability to adapt her leadership style to different sectors, including building products and consulting, as well as different parts of the world.”

The Deloitte Top 200 list includes publicly-listed and private companies, NZ subsidiaries of multinational companies, co-operatives, societies and state-owned enterprises.

The primary financial figures for the Top 200 as well as New Zealand’s Top 30 finance companies have been produced in full toward the back of this Dynamic Business 2018 report — showing revenue, profitability, efficiency and more.

These numbers offer an insight into how the biggest companies in New Zealand operate and are accompanied by explanations and insight from the Herald’s team of business reporters.

The high-level story for the Top 200 this year is growth.

Total revenues rose by 7.7 per cent compared with the 2017 figure, underlying earnings (EBITDA) rose by 6.9 per cent. This indicates that Top 200 companies have done an impressive job of reducing costs by a far greater degree than the fall in revenue.

Fourteen companies made their debut on the Top 200 this year. Most notable was poultry producer Inghams, which debuted at 109th place with revenue of $396 million.

Year-on-year asset growth for the Top 30 finance companies outpaced last year’s figures, up 2.5 per cent — but a smaller increase than the 7 per cent seen last year. Cumulative profits also increased by 15.4 per cent.

Of the big four banks, ANZ continues to lead the way with $154.0 billion in assets, outranking its closest competitor Westpac by $58.3b. This year is the first time in several years where there has been a change in rankings between the biggest banks. ASB has beaten BNZ to take third place, increasing total assets by 7.7 per cent.

Dynamic Business: Excellence in Governance (NZ Herald)

Sanford – Keeping it fresh

Sanford — a finalist for the category in last year’s awards — has taken the MinterEllisonRuddWatts Excellence in Governance award in 2018, in recognition of the company’s strong focus on being a good corporate citizen, with broader considerations beyond its commercial activity.

Sanford, New Zealand’s biggest and oldest seafood company, has been using the internationally recognised “Integrated Reporting” framework since 2014. This has been recognised by the market, for providing a balanced picture of their economic, environmental, and social performance, facilitating comparability, benchmarking and assessing performance; and addressing issues of concern to stakeholders.

The Deloitte Top 200 judges recognise the hard work that has gone into Sanford’s impressive integrative reporting, and say the effort being made to be a good corporate citizen stands out in terms of their overall governance.

The Sanford board chaired by independent director Paul Norling, includes Abby Foote, Bruce Goodfellow, Peter Goodfellow, Peter Kean and Rob McLeod.

Sanford embarked on a significant culture change a few years ago.

As part of this, Sanford has placed a strong emphasis on offering meaningful opportunities for continual learning and development, setting a goal to maximise the prospects of all its people.

In line with this, Sanford introduced its ‘Keeping it Fresh’ numeracy and literacy initiative three years ago, a programme that puts participants together into groups of around eight people for a 10-week course which takes them out of their regular roles for four hours a week. Participants are given a group project to work on, and many have produced a result that has helped them and the business.

Recent examples include work on reducing plastic in Sanford’s day to day operations, a project on how to respectfully demonstrate the company’s values across a multi-cultural work environment and one on how to impart technical knowledge to new staff through storytelling and mentoring.

In the last year, Sanford has run Keeping it Fresh across four sites and graduated 88 of its employees. The company says participation in the programme has extended beyond the workplace, with one of the standout changes being in people’s confidence to manage their money through numeracy skills training.

“We are delighted with the results we are seeing from our Keeping it Fresh programme, for us as a business and for the Sanford people who are taking part,” says Sanford’s chairman Paul Norling. “It has become clear that they are deriving real benefits in both their working lives and their personal lives, which is excellent.”

In Sanford’s sustainability policy, the company acknowledges that sustainability sits at the heart of its business: “It is fundamental to our connection with New Zealand and the growth of our business. We understand our environment, economic and social choices have an impact, now and in the future.”

Sanford recognises that climate change is a key risk for its business, with the potential to change the distribution and abundance of fish stocks, increase the number of biosecurity incursions, and increase the ocean’s acidity, affecting marine ecosystems and causing a loss of income to the industry.

“We believe that the right to fish our precious marine resources under New Zealand’s Quota Management System and the right to utilise New Zealand’s beautiful marine space for farming has to be fundamentally and continuously acknowledged through the commitment by Sanford to doing the right thing,” says Norling.

“This goes well beyond fishing and farming in a sustainable and environmentally responsible fashion and includes activities ranging from community involvement to reducing plastic waste. Our business sets high standards for itself in this regard and many of those are laid out in our annual report.”

The Deloitte Top 200 judges commended the leadership role Sanford has taken alongside other organisations to initiate climate change and carbon emission discussions, and actively engage in collaborative, multi-stakeholder initiatives to support climate change action.

In 2016, Sanford was a signatory on an open letter to the New Zealand Government, calling for ambitious targets to reduce emissions, a long-term plan to achieve them, the implementation of strong policies, and the necessary information to be provided to empower New Zealanders to make low carbon choices.

Sanford’s vision is to be the best seafood company in the world through the sustainable growth of its business, and is embracing the contribution it will make towards achieving the United Nations Sustainable Development Goals (UN SDGs).

“The Sanford board’s commitment to transforming the company towards rigorous management of environmental performance and sustainability across all areas of the business will help generate outcomes that will bring Sanford closer to its vision to become the best seafood company in the world,” the judges said.

Sanford has also formed relationships with community organisations including Paralympics New Zealand and the Graeme Dingle Foundation. Sanford’s staff across New Zealand have been able to partner with these groups to work on community projects such as beach clean ups, and produce and give presentations for schools on sustainable fishing and caring for the marine environment.

Says Norling: “Sanford management have been focused on weaving those relationships into the fabric of what we do. For example, this year we worked with Paralympics New Zealand to produce a Sanford health and safety video, presented by Paralympian Cameron Leslie. This was a daring and eye-catching way to share the message that we want our people to think safe, be safe and get home safe.

“We have shared this video around the company and it has had a profound impact on our staff, stirring real emotion and provoking some serious thought about how we can all do more to ensure we have a safety-focused workplace.”

Finalist: Trade Me

Trade Me continued to grow over the past year, with net operating profit up 39 per cent on last year to $96.6 million, and revenue up 6.6 per cent to a record $250.4m. Trade Me’s Classified businesses continued to grow strongly, with all three verticals — Trade Me Property, Trade Me Motors, and Trade Me Jobs — delivering double-digit revenue growth in the 2018 financial year.

But it was the responsible approach in how Trade Me works with the community to build trust in its platform that the Deloitte Top 200 judges were particularly impressed with when selecting Trade Me as a finalist for the Excellence in Governance category.

“Maintaining trust is critical to the success of Trade Me — without it no one is going to use the platform,” says judge Jonathan Mason.

“They have to be transparent, and to do that, they must show excellence in governance.”

Trade Me’s board is led by independent chairman David Kirk, alongside directors Joanna Perry, Paul McCarney, Katrina Johnson, and Simon West.

The popular buy-and-sell platform releases a transparency report each year, which details how and why New Zealanders data has been shared.

The transparency report notes that “we want to make sure our customers’ personal information is only released to government agencies and the New Zealand Police when it’s legally requested of us and we’re satisfied it’s appropriate”.

This year’s report shows data was requested by police and other Government agencies 1795 times in the past year — for reasons that include stolen goods, drugs, non-delivery of goods, and even homicide or missing persons.

Trade Me chairman David Kirk says: “We think Kiwis have a right to know when, how often and for what reasons government agencies are requesting their information from companies like Trade Me. The Trust & Safety team’s keenness to be open to members inspired the production of the inaugural Trade Me Transparency Report in 2013, and the board has wholeheartedly supported the initiative ever since.

“Telling our members how their data is used helps them feel confident that we do the right thing by them, and that we take our responsibility for protecting their data very seriously. In New Zealand, regular transparency reporting by public companies is still unique to Trade Me, despite calls from the Privacy Commissioner and Internet NZ for others to report the same way.”

Trade Me was one of two inaugural recipients of the Privacy Trust Mark this year, a new initiative released by the Office of the Privacy Commissioner to recognise excellence in privacy-friendly products or services, and in this instance acknowledged the work of the company in its transparency reporting.

Trade Me was named the eighth most influential brand in NZ by Ipsos in July 2017, and the sixth most trusted NZ brand by Colmar Brunton in September 2017.

The judges say it is a testament to the actions of the board and the company’s focus on trust that have helped cement Trade Me as a strong, trusted, well-known and much-loved brand.

Finalist: Ports of Auckland

Ports of Auckland received high praise from the Top 200 judges for its shift towards transparency, and the subsequent improvement in its public profile — acknowledging the challenges that come with the management of such a publicly visible council-owned entity.

The Ports of Auckland board is led by Liz Coutts, who became the first woman to chair Ports of Auckland in 2015, and oversaw a strong result over the past year with revenue and profit both up.

Coutts is joined on the board by Rodger Fisher (deputy chair), Andrew Bonner, Patrick Snedden, Sarah Haydon, Karl Smith, Bill Osborne and Jonathan Mayson.

Last year, Ports released a 30-year master plan, in response to community concerns about ongoing port expansion into the Waitematā Harbour.

This was the first time Ports developed such a detailed plan, including all projects that will be needed in the next 30 years in order to keep up with Auckland’s growing freight demand. The master plan was endorsed by Auckland Council earlier this year, and Ports of Auckland has now begun to implement it with a mandate for the next three decades.

Coutts says providing this high level of detail to the public is in line with a commitment to be more open and transparent.

Coutts recognises in her most recent chair’s statement that “businesses — even lifeline utilities like ports — can’t take their positions in the community for granted. We have to earn our place in the city, something we haven’t always done well in the past.”

The judges credit the board for its progress in moving toward the International Integrated Reporting Framework. This extends beyond financial reporting to include social and environmental performance, and reflects Ports’ integrated thinking culture and goal to become a zero-emission port by 2040.

The board say this ambitious goal for emissions has helped to spark conversations with manufacturers, and is acting as a catalyst for innovation and new thinking for the industry.

Ports of Auckland is progressing towards becoming New Zealand’s first automated container terminal, due to go live in the second half of the 2019 calendar year. While this automation will provide a significant capacity and productivity boost — and help them work towards sustainability goals — it will also mean the loss of around 50 straddle-driving roles.

To mitigate against these losses, the board has helped put in place a comprehensive “Future of Work” programme of education and retraining, helping people through changes, and preparing them for the radically different world of the future, which impressed the judges.