Council relationships with China frequently get bogged down in controversy amid accusations that they fail to deliver tangible benefits to Kiwi communities. In the lead up to the New Zealand China Mayoral Forum in December, Ruth Le Pla looks at progress to date and better ways to build both relationships and business.
When Invercargill deputy mayor Rebecca Amundsen returned from a recent trip to Suqian, in the northern part of China’s Jiangsu Province, the Invercargill Ratepayers Advocacy Group quickly questioned the value of the trip. Amundsen’s council / business delegation had signed a memorandum of understanding with its Chinese sister city. Not unreasonably, since ratepayers’ money had been spent, the advocacy group wanted to know what that was worth.
More to the point, the group’s spokesman Nobby Clark suggested Invercargill’s relationship with its other sister city, Kumagaya in Japan, had already failed to provide much value even after 23 years.
Rebecca listed the numerous opportunities that had been opened up on the visit to China. She noted that this was just the start and, among other initiatives, cited doors being opened for future exports of beef and sheep meat, dairy products, seafood, wood, wool and high-quality wool fashion products.
The exchange was undoubtedly clouded by memories of the embarrassing stuff-up in 2015 when Invercargill councillors on a $21,000 ratepayer-funded trip to Suqian had bought cut-price Christmas lights that didn’t meet New Zealand safety standards.
Councillors were accused of going on a junket. Mayor Tim Shadbolt apologised. The $5500 lights were replaced a year later with a $250,000 set of LED lights and decorations.
At the other end of the country, Far North District Council deputy mayor Tania McInnes earlier this year questioned the order of events leading up to Chinese company Tus-Holdings signing a memorandum of intent with council.
The usual democratic process would be for council to debate the idea first. In this case, it was reported that a delay could have put the offer at risk. As the NZ Herald reported, the deal on offer was significant: up to $1 billion investment in everything from cultural tourism to geothermal energy.
Are trade delegations, sister city relationships and commercial agreements beyond the scope, and even abilities, of councils, as ratepayers’ groups often assert? Or do councils need to define and communicate their benefits more clearly?
Part of the problem may be that it’s sometimes hard to pin exact dollars and benefits to high-level strategic get-togethers.
Two years ago 12 New Zealand mayors went to Xiamen, China, to discuss opportunities for trade and investment at the inaugural New Zealand China Mayoral Forum. In December this year, Chinese mayors will make a reciprocal visit to Wellington to continue the conversation.
In a video on the LGNZ website, principal policy advisor Philip Shackleton says some 15 mayors from medium to large Chinese cities are expected to make the trip to Wellington. At the time the video was recorded, around 29 New Zealand councils had registered interest in attending.
Philip is also LGNZ’s project manager for the 2017 NZ China Mayoral Forum. In the video, he said that, when surveyed, all the Kiwi mayors confirmed they got value from the investment in attending the earlier forum.
No dollars are provided. But the video shows ‘tangible outcomes’ from the 2015 visit. These include high-level actions such as a commitment to the second forum in 2017. More specific outcomes include the launch of a New Zealand corner at the Xiamen Seashine Group supermarket promoting New Zealand wine and food products – which opens up a new distribution channel for our country.
China watchers will know such gains are significant. But without actual dollars attached, councils remain open to criticism for spending ratepayers’ money.
LGNZ president and Dunedin mayor Dave Cull says Chinese formalities can make it difficult to immediately put a specific value on some deals. An MOU may be signed, then a more detailed follow-up agreement. The dollars gained by the multiple parties involved may not be tracked and captured as a whole.
“A few years ago…the Law Faculty [at Otago University] ran a course and for several years a number of people from the justice system in Shanghai would come across, do the course and pay for it.”
Those sorts of things are “really easy” to quantify, he says. “Other kinds are not… It goes also to the issue of how the relationships are expressed.”
Dave also says ratepayer group criticism may touch on something even more fundamental. “I don’t think you will ever address the entrenched attitude of some people that councils should provide roads and pipes and keep out of everything else,” he says. “It’s a prejudice that ignores where councils can offer the most value – and I’m going way beyond discussing the China relationship now.”
Dave posits that councils’ much wider role is about placemaking. “Everyone can put roads and pipes down. If you want to differentiate your town or region, and attract investors, residents and visitors, you have to make the place attractive to them. And part of that is building relationships.”
BEING CHINA CAPABLE
Alicia McKay is the director of Wellington-based boutique consultancy Structured Conversations. For the past eight years she has worked in local government policy and strategic planning: initially with Ashburton District Council and, for the past three years consulting with councils everywhere from Auckland all the way down to Gore.
Alicia argues that many councils are already investing time and resources into relationships with China and numerous other countries, but the focus is primarily ceremonial.
“They’re not able to transition those relationships from ceremonial, cultural exchanges into strategic, potentially economically-beneficial ones.”
In a recent blog, she says the way forward lies in councils becoming “China capable”. That means having a clear idea of how to secure a share of the expected $30 billion two-way trade in goods, services and investment by 2020.
According to Alicia’s colleague Kerry Boyle, current exports to China are worth about $8.5 billion a year. We earn some $1.5 billion from Chinese tourism. That figure is expected to double over the next five to six years. As is the approximately $800 million we earn annually from Chinese students studying here.
Before joining Structured Conversations, Kerry spent the past three years working out of the Ministry of Foreign Affairs and Trade on its China Capable Public Sector Programme. This “whole of government” initiative aims to develop a China-savvy public sector armed with China awareness, knowledge, experience and leadership.
Alicia suggests that, in similar vein, councils develop their own China Capability Statements that will provide a steer to transition existing relationships.
She says most councils are currently engaging at some level, through trade visits, sister city partnerships or involvement in the upcoming New Zealand China Mayoral Forum in Wellington.
But, as she tells Local Government Magazine, much of this work is not effective.
“There are councils that have an international relations or sister city strategy… and there are work streams specific to China capability, often found within regional economic development strategy rather than council strategy. But I’ve yet to see a China capability strategy from a district or city council in New Zealand.”
Dave Cull says such capability statements could work but the process of doing business in China takes a long time.
“One of the difficulties is you don’t know what you don’t know until you get there… We [Dunedin City Council] usually take people from the university, the polytechnic and the Chambers of Commerce. They have meetings and set things up, and some time later we go back. You can’t make the case for what you’re going to gain until you know what the potential is.”
Alicia says the second crucial step is developing, and being able to explain to the wider community, a clear business case for a specific partnership.
“Councils need to have objectives for these relationships and be able to demonstrate at a specific opportunity level a clear business case for moving forward.
“Ashburton District Council springs to mind with the recent controversy about selling a piece of council land for a water bottling plant,” she says. “They needed to be able to say ‘this aligns with our objective for the community and here is the tangible benefit that we expect to be able to produce from this partnership’.
In the case of the Far North District Council, she says there was a “knee jerk reaction” to an impending Chinese delegation. That happened because there wasn’t already a plan in place defining the objectives of the relationship and any actions that might support them.
“If the council had gone into the conversation with a very clear intention that would have completely changed how that situation played out.”
She also says councils have to work with other stakeholders. Successful partnerships with China – the $180 million particle board plant in Kawerau or the $100 million Mataura Valley milk processing plant in Gore District – are “without fail” due to widening conversations and collaboration between council, iwi, regional economic development agencies, government departments and the local community.
Such joined-up thinking is second nature to Eastern Bridge founder and CEO Simon Appleton. His consulting company specialises in international relations focusing on East Asia in particular. Simon is the resident China expert in a series of six half-hour development videos produced by LGNZ’s commercial arm EquiP in advance of the December New Zealand China Mayoral Forum.
He points out that many local governments in China also own large industries in areas such as agritech, food or infrastructure. They are responsible for their area’s education policy, handle international investment portfolios and are the very people who can issue permits and other official documents.
So it is vital to build relationships with Chinese local governments at the very highest mayoral level and through each connected level of Kiwi communities: be that iwi, business or the tertiary sector. For Kiwi councils this is a relationship-building exercise on a massive scale.
“But I think a lot of ratepayer groups, when they see the mayor going to China or Korea or wherever, automatically think ‘junket’,” he says.
Structured Conversations’ Kerry Boyle says the same accusation is frequently aimed at central government agencies.
“The ex Finance Minister of China, for example, travels with an entourage of 18 people wherever he goes. We have ministries who will send over one person to do entire negotiations.”
Kerry says ministries don’t send over an entourage of five or six other people due to concerns about taxpayers’ accusations of the visit being a junket.
“In fact, we’re missing an opportunity for these people to build their relationship at that next layer down that extends it to an organisation level. And at the same time the Chinese are thinking we can’t be serious by only sending over one person.”
SISTER, WIFE, MISTRESS
Simon is not particularly impressed by how few Kiwi councils have leveraged their sister city agreements with their Chinese counterparts. He says many such longstanding relationships are dormant, or ceremonial at best, while New Zealand mayors are off chasing business in other parts of China.
This can be seen as a bit “disloyal” in Chinese eyes, he says. “It’s like having a wife and a whole load of mistresses.”
He suggests there is “absolutely” more room for growth in many of these agreements. Councils should investigate how they can work more strategically with existing partner cities.
Councils should sit down with their Chinese sister city counterparts to see if there is a willingness to look at more mutually-beneficial commercial opportunities.
“They can probably reinvigorate the relationship. If they can’t, go through the process of divorce and set up a new partnership.”
This article was first published in the October 2017 issue of NZ Local Government Magazine.