'Find opportunities in uncertainty,' economist tells NZ buyers

29 February 2016

While China is now the centre of gravity for procurement operations in New Zealand and Australia there are still numerous challenges for a small, open economy in today's uncertain global market, according to a senior economist.

Addressing the CIPS New Zealand Conference in Wellington last week, Chris Nixon, senior economist at the New Zealand Institute of Economic Research, acknowledged there are still opportunities to be found among this uncertainty if procurement systems adjust to such fluctuating situations.

“The challenge for New Zealand is how we integrate, particularly in the Asia Pacific region, in these changing times. Businesses need to plan and adapt but the opening up of Asia, with its scale and the fact that they are richer, is exciting for NZ”, he said.

Nixon raised the uncertainty being created by movers and shakers from “the old world order”, complicating the current turmoil of globalisation.

“A major contributing factor to the uncertainty in the global picture is how the US deals with its position in the new world order. The question is: What is going to happen in the US?”

Nixon referred to the rhetoric coming out during the current election campaign. “American voters are very angry, but what are they angry about and how is that going to play out? Will it mean more protectionism? There is a feeling that things will become more chaotic.”

 Nixon said procurement systems must be able to adapt to cope with risk and uncertainty.

He encouraged taking opportunities to establish contacts in the marketplace over a period of time and to seek out possibilities to reduce costs.

“This doesn’t necessarily mean the cheapest supplier – but find one who is reliable or who is nearly the cheapest supplier. Check out their reliability, will they still be there next year?”

The senior economist recommended planning for all three outcomes; good, bad and middling. “There is a lot of uncertainty out there and procurement systems need to address how they’re going to cope with that. They need to factor country-specific issues into their procurement plan. More resources need to go into planning and into thinking ahead before they purchase stuff, as well as taking account of specific markets’ issues and thinking outside the negotiated deal.”

Nixon also pointed out that because New Zealand companies can trust who they do business with in the country, it doesn’t automatically mean that approach can be transferred to other markets.

“There is a high level of trust in the New Zealand economy which results in lower risk and lower costs. But when you move into Asia, there is a lower level of trust, higher risk and higher costs. We need to develop procurement systems which acknowledge that.”

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