International logistics and building back NZ: ASEAN Forum 2021

The annual ASEAN (Association of Southeast Asian Nations) Forum was hosted by the ASEAN New Zealand Business Council. Held virtually on 2 September 2021, Asia New Zealand's Ethan Jones writes how we will build international partnerships back through logistics. 

The Forum covered a broad range of areas from environmental, social and corporate governance (ESG) and climate-friendly building in Singapore, to international education recovery, and even the high vaccination rates being achieved in several ASEAN member countries. For example, 91 percent of the adult population in Cambodia has already received at least one vaccination.  

The first keynote speech was delivered by Hon Phil Twyford, the Minister of State for Trade and Export Growth, who highlighted the importance of the ASEAN region for New Zealand. ASEAN is our fourth-largest trading partner, as a block, and makes up roughly 10 percent of our goods exports. 

“Building back from Covid-19 is going to take strong and enduring international partnerships and ASEAN for New Zealand is clearly one of those. We are so often of one mind with ASEAN when it comes to key regional and generational challenges," Twyford said. 

One challenge the Minister of State alluded to is the disruption to international shipping and supply chains now affecting international trade. This matters for New Zealand. We are a small trading nation, with more than half of our economic activity based on trade. Consequently, our economic wellbeing as a country is dependent on being able to get products to market.  

To understand the extent of the challenge facing New Zealand exporters, we heard from both Blair Hamil, commercial manager at Ports of Tauranga, and James Kuperus, the CEO at Onion New Zealand Inc. 

I, like many others, had heard anecdotes about price increases in shipping but had not previously realised the extent of the challenges facing our exporters. This provides the perfect storm for global shipping: from increased global goods demand, to pandemic-response port closures, and a global container shortage, ships are running behind schedule (and everyone is having to pay for it).  

In New Zealand, direct shipping costs have increased to around four to five times where they were a year ago. Unfortunately, that’s only one of the problems. As a small country at the end of the world, and often at the end of shipping routes, it is all too easy for shipping companies to drop New Zealand off their regular shipping routes to gain back lost time.  

Shipping-schedule reliability in New Zealand has fallen from around 80 percent pre-Covid-19 to between 30 -40 percent now. As a result, global inventory policies are shifting from a JIT (just in time) policy to a holding excess stock policy. This will only increase pressure on global logistics in the short-to-medium term. Moral of this story? Buy your Christmas presents early this year. 

This isn’t ideal for any trading nation, but for New Zealand where primary produce (e.g. dairy, lamb, beef, fruit, and vegetables) are a key part of our exports, the delays and inconsistency that invariably come with such low reliability are concerning. 

In the case of onions, where in 2019 New Zealand exported around $172 million (and last year we had almost $50 million worth of onion of exports to ASEAN alone), a key advantage is our counter-seasonal supply. However, this year, shipping reliability-induced delays resulted in missing some of these most valuable counter-seasonal windows. This caused issues of inconsistent supply into markets. 
 
In one of the worst examples, Kuperus from Onion New Zealand Inc shared a story: after being unable to get stock on ships that had dropped New Zealand from their schedules, they finally had product loaded on a ship in Timaru - only to have it unloaded by an exporter in Lyttleton. This was done to make space for something else. The company then had to send trucks to collect their product in Lyttleton, had to reorganise it to get on yet another ship, and incurred a further two-week delay. 

New Zealand’s logistics recovery is ultimately going to depend on global logistics recovery. This does not mean we should sit on our laurels and wait for the world to fix itself. We have a core role to play in directing the world’s recovery. AJ Smith, CEO and Founder of Trade Window, spoke about the importance of global cooperation and government-to-government initiatives to spur forward progress on reducing logistics barriers. This includes system interoperability and consistent data standards, to allow the main pillars of global trade (government, finance, commercial and logistics) to all communicate.  

Agreements such as DEPA (Digital Economy Partnership Agreement), ratified by the New Zealand and Singapore Governments, now lead the way in facilitating this greater connectivity by creating a model for the world to follow.  

More broadly, Covid-19 has presented the world with a chance to shift to more digitally connected operating models. If governments and industries acted on these, this digital shift could lead to a reduction in the 1.5 million export documents generated every year in the Asia-Pacific region alone and facilitate more seamless regional trade. 

Just as the future of logistics is increasingly digital, these logistics challenges serve as a reminder to New Zealand to also consider the rise of tech throughout Asia. From gaming to fintech, the digital economy presents New Zealand with new weightless opportunities in ASEAN and beyond. We’ve just got to make sure we don’t miss the boat.  

- Asia Media Centre