Institute of Directors: Think China, but think AEC as well

The 10 countries of the new AEC are responsible for $5 billion worth of New Zealand exports. Photo / ASEAN.org

Do you know the name Stephanie Lee? If your business has a global focus you probably should. Lee holds one of our critical diplomatic postings. In 2014 she was appointed as New Zealand's first ambassador to the Association of South East Asian Nations (ASEAN).

December 2015 will see a major step change in international trade as the ASEAN group formally establishes the Asian Economic Community (AEC). We don't hear enough about it.

The 10 countries of the new AEC are responsible for $5 billion worth of New Zealand exports. Demand and opportunity from the region grows by the year. Real GDP in Asia is estimated to be more than $67 trillion by 2030.

Speaking in Kuala Lumpur recently, David Landers, General Manager of Austrade observed that the AEC has phenomenal capacity for growth. It will add approximately 20 million people into the consuming classes every year for the foreseeable future. That's demand growth the size of Australia each and every year. And China is not a member of the AEC. Nor is India.

The AEC will not be an integrated unit like the European Union but its influence will loom large in New Zealand. Until recently the region was characterised by historic differences and disparity. A powerful impetus for change now exists as the drivers for economic integration shift into high gear. The aspiration for the AEC is in four lofty but achievable long terms goals: A single market base, a highly competitive economic region, equitable development and full integration into the global community.

Asian economies are investing on an unprecedented scale in infrastructure, housing, industry and human capital. This is complemented by increasing consumer sophistication supported by improving wages. Indonesia is likely to be the jewel in the crown of the AEC, accounting for 40 per cent of the growth. A much quoted 2012 McKinsey report estimated the consuming class in Indonesia alone may growth from the current 45 million members to 135 million by 2030. This represents powerful spending firepower and aspiration.

Landers advances a view that the long term architects of the New Zealand economy should take notice of. He suggests that the long term growth prospects for the AEC means the demand for our primary products will remain enviably strong. Like any market it will be subject to cyclical cost cycles and fluctuations in returns. But if we are to make the most of AEC we need to think differently and the key to maximising the value of New Zealand's involvement in the AEC is not only in ensuring our primary produce gets to market in Asia.

New Zealanders have skills and experience in adding value to everything from wool, grain and dairy to the services sector. Harnessing our considerable talent in sectors such as healthcare, financial services, media, transport and utilities will be the key to taking New Zealand forward and making the most of a huge new opportunity on our doorstep.

Simon Arcus is Acting CEO of the Institute of Directors. He recently attended a conference in Kuala Lumpur which considered the ASEAN century.