THE NEXT BIG IDEA – THE SOUTHERN LINK

If New Zealand is serious about doubling export value in the next ten years then we need some really big, new ideas.  Doing more of the same, not that there is anything wrong with that, is just going to deliver the same result.  Enter an idea whose time has come – the Southern Link – a bold vision to place New Zealand in the middle of a new supply chain linking Asia and Latin America.

Big idea, long gestation

Air transit times from parts of Asia to Latin America are shorter (and more economical for fuel burn) across New Zealand than alternative routes via Europe or North America. In June 2019 a conference to explore the Southern Link brought together participants from New Zealand, China, Chile and Argentina. The conference stimulated interest, including from the then Government, and some momentum, but further progress was stymied by the Covid pandemic.

In November 2021 an economic analysis by NZIER concluded that Southern Link could benefit New Zealand through stronger air connectivity to and between both regions (especially from New Zealand to Latin America), increased e-commerce and other air freight infrastructure and business, tourism and education traffic, as well as related trade-facilitating business services.  Cumulative economic benefit could potentially total up to NZ$1.87 billion over 10 years. 

Overcoming supply chain risk

The pandemic revealed New Zealand’s vulnerability to supply chain disruptions.  As well as vastly reduced air connectivity, “blank sailings” were the result of shipping lines making operational decisions not to send their vessels to New Zealand.  Establishing New Zealand as an ‘indispensable’ trans-shipment hub for freight owners including e-commerce companies would reduce the risk of this kind of treatment in future.  Stockpiling larger volumes of essential and consumer products in New Zealand which can cross borders over time in response to fulfilment orders could help avoid shortages during future shocks and crises.

Barriers and challenges

The single, biggest inhibitor to realising the Southern Link is the poor air connectivity between New Zealand and Latin America.  Ironically during the pandemic several flights took place carrying PPE and other equipment between Buenos Aires and Shanghai, via Auckland.

There are also some regulatory and policy issues relating to an air freight hub that could emerge around GST, border control services and other compliance costs.  Some disincentivising policies such as the continuing requirement for some Asian travellers to apply for costly New Zealand transit visas will also need to be addressed.

For now there have been no solid proposals from New Zealand, Asian or Latin American airlines, airports, e-commerce companies or cargo owners to start using New Zealand as a Southern Link hub. 

What do we want – leadership!

A recent Southern Link seminar held in Auckland identified three critical actions required to move Southern Link from grand vision to achievable plan.

First, we need greater government advocacy -sending a strong signal that New Zealand is ‘open for business’ as a logistics hub for companies seeking cheaper and faster links between Asia and Latin America.  Including Southern Link talking points in Ministerial and diplomatic meetings and highlighting steps New Zealand is taking to create a conducive hubbing environment, will drive greater awareness amongst our partners

Second, expanding the list of transit visa waiver countries, or at least allowing transit travellers needing visas to apply for a New Zealand Electronic Travel Authority (NZeTA) when transiting New  Zealand airports, would remove or reduce transit disincentives.  Transit visa applications are time-consuming, inconvenient and costly, creating a significant disincentive for passengers to use routes through New Zealand to travel from home to/from Latin America. 

And third, adopting policies to support warehousing and distribution of goods in transit.  Goods need to be allowed to enter New Zealand physically and remain here for longer than the current 90-day limit before crossing the  New Zealand border or being re-exported.  They also want scope for a single consignment of this nature to be split into smaller consignments for import or re-export, with an equitable and flexible revenue collection system applied.

There are signs that the Southern Link is attracting renewed interest offshore with a Chinese think tank recently concluding its own feasibility study.  The Southern Link represents an opportunity to overcome the tyranny of distance and put New Zealand in the centre of a new supply chain linking Asia to Latin America, thereby helping to deliver on the “export double” goal.

This post was prepared by Stephen Jacobi, ED of the NZ International Business Forum and Alistair Crozier, ED of the NZ China Council.  NZIBF is working with the NZ China Council, the Latin America NZ Business Council and interested companies.  The Southern Link seminar was held on 24 September.