SHE’S a very well-known face in a very private industry, but Julia Hartley Moore’s 15 years as a private investigator is only her most recent incarnation. At the age of 16 she was mother to three kids under the age of one. In her 20s and married to a millionaire Waikato horse-stud owner, she, along with many of his friends and family, lost everything after money they put into his finance company was poured into his farm instead of invested.

In her 30s she worked as a “groom” – keeping jumpy young thoroughbred horses calm on the 13-hour flight from Auckland to Hong Kong, before ending up working for Mohamed Al-Fayed at Harrods of London, where she blew the whistle on a multi-million poundstaff theft ring while working on the perfume

Back in New Zealand in 1996, aged 42 and wondering how on earth she was going to make a buck, she decided to set up her own firm after a little extra motivation from none other than Oprah. While watching a show about turning passion into a successful home business, she decided “well, I think I will”.

At age 18, she had been turned away from the New Zealand Police for being “too feminine”, but had always had good instincts. And after the experience in London, Harrods’ head of security told her she’d make a fine private investigator. So “Arbeth and Co” was started with just a telephone and an ad in the Yellow Pages. She runs the business discreetly from her Auckland-fringe home with the help of “a very good accountant”, deliberately shunning the big flash offices, big signage and the fleet of leased cars which was, and still is, so appealing to others.

And therein lies the contrast between keeping a low profile and having a well-known face, but it’s this combination that’s kept her in business. She’s seen many private investigation firms come and go. “You’ve only got to look at the yellow pages now, and see what the advertising is like for us compared to when I started when every other cop had a full-page ad [saying] ’28 years ex police’, ’25 years ex police’ – big massive ads, and now how different it is and how small it’s got and yet I still tick along very nicely.”

Her high media profile, including several books and appearances on Sunday, 20/20, Fair Go, Good Morning and Radio New Zealand, means sacrificing anonymity in an industry where most prefer to remain anonymous. But that allowed her to give up surveillance work – which tends to swing between wildly exciting and excruciatingly boring – to focus on the side of the business she enjoys the most.

The good surprises her every now and then, but it’s the bad and the ugly that keep her in business. “You’ve got fraudsters, like betrayers,” she says. “They will always be there. A lot of people that do this kind of thing, it is just the way they are – they’re opportunists, they’re always looking for an easy way.”

Tracking down and dealing with schemers and scammers takes, she says, a certain kind of person. “To do this job you have to be the eternal optimist.”

YOU’VE got it all: family, friends, a decent job and a house in Remuera or Epsom. You send your children to private schools; you have a taste for European cars and fine wine. Then you land an unlucky roll of the dice – a redundancy, perhaps, or some unexpected bills. You make a bad investment or two; the recession plunges your business into the red. As your debts grow, so does the temptation to break the rules – reroute an invoice or distort a financial statement, just enough to get a new line of credit. You decide to risk it just this once – and maybe once or twice more if you don’t get caught.

“Often with your white collar criminal, they don’t believe – at least initially – that what they’ve done is wrong,” the Serious Fraud Office’s fraud and corruption general manager Nick Paterson says. “They believe themselves to be fundamentally honest individuals who got themselves into a ‘spot’ which they didn’t really want to be in.”

As the economy tightens, so will the chances that people will find themselves in just such tight spots. But is it fair to say that fraud in general in New Zealand is on the rise? “Probably,” Paterson says, though it’s difficult to know whether the rise is actually due to an increased awareness of fraud and better efforts to detect it. “Financial pressures have given people motive for seeking more money, whether honestly or dishonestly.”

Deloitte recovery and forensics partner Barry Jordan agrees. He points to an upsurge in complex fraud in the $100,000 to million dollar range – “the SME of the fraud sector” – over the last year and suggests this can be traced back to the impact of the global financial crisis 12 to 18 months ago. As cash flows tightened, he says, people were probably stealing in order to maintain their accustomed standards of living – but are only now being caught.

Jordan says there’s a perception among some white-collar criminals – however false – that fraud is a victimless crime. “No-one physically gets hurt; no-one’s going to chase you down the street with flashing blue lights and guys with guns,” he says.

Investors who lost collective millions from collapsed finance companies where evidence of fraud has been found would disagree with the “victimless crime assumption” – as would National Fire & Security director Steven Mahoney, left with a $1 million debt after his employee and former neighbour Martyn Scott was jailed for stealing $1.4m from his family business. “I should be able to repay that amount [$1m] in 19 years, so I should be able to retire at 73,” Mahoney told the NZ Herald at Scott’s sentencing last January. “What he stole is my children’s inheritance and our retirement savings. It leaves a very bitter taste in my mouth.”

As well as cold hard debt, staff fraud may leave an organisation with unwelcome media attention, particularly if they operate in the financial or public sector. ASB Bank hit headlines last year after former employee Stephen Versalko was jailed for running what was effectively a $17.7m Ponzi scheme using clients’ money. An ASB spokeswoman declined to speak to IN-Business about the case, as did Versalko himself.

More willing to speak was Ministry of Social Development chief executive Peter Hughes. In June 2003, he faced a public sector boss’ worst nightmare: Lisa Clement, a ministry financial administrator, appeared to have stolen what turned out to be nearly $2m of taxpayer funds.

His first step was to set up a “war room” in his boardroom. For the next few weeks, officials led by Hughes and his deputies literally worked through the night to investigate the offending. During the first week, the media picked up the story. “They just had a small bit of it,” Hughes says, “but we made a decision to put everything that we knew out.”

“One of the things that happens, in government departments in particular, people get sick to death of us ducking and diving and spinning stuff and on this, because it goes to the heart of the integrity of the organisation, it’s really important to be upfront and open and accountable.”

As media coverage ballooned, the full picture gradually emerged. Creating four business entities and using multiple identities, Clement – a 36-year-old married mother of two from Wainuiomata – had filed false invoices, forged signatures and manipulated budgets, forecasts and reports to defraud the ministry of $1.9m over nearly three years. By the time she was caught, just over a million of that had been spent, including $275,000 on cars, $102,000 on travel, $60,000 on jewellery and $86,500 given to friends and family.

“It was in a different league altogether to what we would normally see,” Hughes says. “It was very sophisticated and all internally consistent and you know, gone to great lengths. This is why people are quite shocked, because usually these are very valuable employees. They’re good at their jobs; they know what they’re doing. They’re not the sort of people you suspect.”

There are several basic steps that organisations can take to reduce their exposure to fraud. “It sounds a wee bit like Alcoholics Anonymous,” the SFO’s Nick Paterson says – but the first step is to “acknowledge that there is a problem”.

Second, check what internal controls are in place to prevent fraud, define who has responsibility for looking for fraud, and check what is actually being done to detect it. “If you run through those three or four things and do them well, it probably puts you – and I’ll make the numbers up at this point – but in the top 20-odd per cent of organisations in New Zealand,” Paterson says. “Most people aren’t doing them well enough.”

Since taking on his role, MSD’s Peter Hughes has made tackling staff fraud one of his top priorities – apparently with some success. Ministry data shows that staff fraud cases as a percentage of total staff numbers have declined relatively steadily since 2001, from 0.28 per cent in the 2001–02 financial year to 0.15 per cent in 2009–10.

“We probably have comparatively quite low levels of internal fraud,” Hughes says. “If we were running this as a commercial enterprise in the private sector, there’s a level at which we’d just say ‘well, we’re going to live with that because the cost of reducing it further is uneconomic’.” But when it comes to taxpayer funds, he says, any level is unacceptable.

Hughes says while good, tight internal controls are essential, there are limits to what can be achieved with internal controls and audit processes alone. “If you just focus on internal controls, it’s impossible to have an internal controlled environment tight enough to prevent all internal fraud, especially if somebody is IT-enabled, IT-literate and colluding with other people.

“You absolutely need to do all that but I’m strongly of the view that one of the primary ways of controlling for this is the cultural stuff that you do in your organisation.”

For Hughes, head of an organisation with 10,000 staff and responsible for handling about $21 billion of taxpayers’ money each year, this means a zero tolerance approach to fraud – every case will lead to dismissal, prosecution and all possible steps will be taken to recover funds. “The zero tolerance policy was one of the turning points,” he says. “From when we started to do that and socialise it within our organisation, our numbers started coming down.”

THOSE spoken to by IN-Business agreed monitoring overseas trends and working closely with sister organisations offshore is an important part of fraud prevention, staff fraud or otherwise.

The SFO works with its counterparts in the UK, Australia, Singapore and Hong Kong to stay informed on trends and activities, and tools used to support investigations – whether that’s legal tools or electronic and IT tools, such as specialist forensic and data analysis software.

For Paterson, the only trend that might be worth a mention is new bribery and corruption legislation in the UK to make it easier to arrest and charge nationals who pay bribes to overseas officials. The SFO is largely unaware of similar bribes being paid by New Zealand nationals offshore but Paterson says he’d “be surprised if it wasn’t happening at all”.

While surveys currently carried out by the “big four” accounting firms are a good start, Paterson says the true levels of fraud in New Zealand remain unknown. “I’m a survey carried out in New Zealand specifically relating to fraud which has got a statistically relevant number of samples – or a statistically meaningful number of respondents.”

The SFO hopes to carry out a national fraud mapping exercise to put some solid numbers around the problem – which can then be used to drive targeted prevention in different industries.

Deloitte’s Barry Jordan says that, at a basic level, fraud in New Zealand will remain the same as it ever was. “Fraud is fraud,” he says. Computers, internet banking and modern complicated accounting systems may have made it easier for fraudsters to hide their tracks in a mire of data but the types of perpetrators, motives and basic business of investigation remain the same.

“It used to be like looking for a needle in a haystack,” he says, “but the needle was red and it was a relatively small pile. Now the haystack is as big as a large building and the needle is no longer red.” The good news? “We’ve now got much better tools for looking for needles.”

How common is fraud in New Zealand

Of the 85 New Zealand organisations in the last PricewaterhouseCoopers global economic crime survey, 42 per cent said they experienced some form of economic crime in the year to November 2009. Types of reported crime included asset misappropriation, financial statement fraud, bribery and corruption, IP infringement, money laundering and tax fraud.

The average cost of fraud to an organisation in that time was $491,596 – a figure skewed by one unlucky unnamed respondent who suffered over $7m worth of fraud that year.

More recently, a KPMG survey of fraud in Australia and New Zealand found that 53 per cent of respondents experienced at least one incident of fraud in the two years to February 2010.

What good is an honest sleuth if he can’t balance the books? New Zealand private investigators are remarkably incorrupt, but sorely lacking in business nous, says top PI Ron McQuilter.
Story by Andrea O’Neil, photograph by Isaac de Reus

SHERLOCK Holmes. Hercule Poirot. Taggart, Barnaby, Morse. The British love for all things sleuth is reflected in their films, television series and novels. New Zealand, however, lacks a cultural fixation on professional and amateur detectives. We don’t make films starring hard-boiled private investigators, and the few detectives to grace our TV channels are invariably foreign.

Where does the Kiwi indifference come from, when a quick glance at the yellow pages reveals the country is full of detectives? One of our top PIs, Ron McQuilter, has a theory. We aren’t fascinated with sleuths because, unlike Britain, we haven’t experienced a history of rogue PI behaviour. “In New Zealand, private investigators are definitely different to anywhere else in the world,” McQuilter says. “When you go to court in New Zealand and you say you’re a private investigator, people tend to think that you’re a credible person. Overseas when you say you’re a private investigator, people still look at you [warily].”

McQuilter should know. He began his career in his native Glasgow as a policeman, but directing traffic wasa far cry from his dreams of being an  where he witnessed what he calls “cowboy” tactics from his peers. “It was the wild west,” he says.

“It was a setup. You would get guys to get divorces, you would be kicking in doors and taking photographs, and doing all sorts of things. It was horrible.”

It wasn’t ethics, however, but rather love that brought McQuilter to New Zealand in 1983. He booked a two-week holiday to visit his Kiwi girlfriend – now wife – and never went home. Within a month he was working for Armourguard, stunning the firm by completing two weeks’ worth of work in two days. “Just because people would talk to me,” he says. “You ask them questions, and they’ll answer you. Whereas in Britain if you ask somebody a question they won’t want to answer you, or they’ll shut a door in your face, or worse.”

But working hard is typical immigrant behaviour, McQuilter says. Prejudice against his “funny accent” and not having a strong personal network only made him strive harder. “I managed to latch a couple of clients who supported me really really well. And I gave them great service.” It wasn’t long before he set up his own business, The Investigation Bureau, renamed Paragon in 2004. The business quickly emerged as an industry leader, handling fraud cases worth millions of dollars and securing top corporate and government contracts. McQuilter has become the public face of private investigation in New Zealand, chairing the New Zealand Institute of Professional Investigators and appearing regularly in the media and on television’s Missing Pieces.

Three cases stand out in McQuilter’s career. He investigated abuse claims made by former Lake Alice psychiatric patients. He nabbed a Lord of the Rings employee trying to sell the film online before its release.

And more recently, he solved a cold case concerning the disappearance in 2003 of UK-based New Zealander Lee Sheppard. Sheppard’s family, frustrated the case remained unsolved by British police, hired McQuilter, who used evidence from Sheppard’s coworkers to prove he had been killed by machinery at his workplace.

Corporate crime makes up a large percentage of McQuilter’s work, and is as serious a problem here as back in the UK, he says. “Our dollar’s worth half the British pound, I know that, but it’s still [costing us] millions, just millions and millions.” His advice to company managers is to call in professional investigators as soon as a problem is identified. Businesses which try to deal with the problem internally can destroy evidence and give fraudsters time to escape, he says. “They’ll try and do it themselves, and all of a sudden it’s like ‘oh shit, we need help’.”

Anticipating fraud and creating a strategy to deal with the inevi- table can save a chief executive from having to take the blame when money disappears. “I dealt with one which was a $500,000 theft in a company, and the CEO fell on his sword, and resigned,” McQuilter says. “The CEO didn’t know about it, but he didn’t know how to deal with it. He knew if he told the shareholders he’d lose his job.”

Most PI businesses do not succeed like Paragon has. Investigators, 99 per cent of them former cops, just don’t have the business know-how to strike out on their own, McQuilter says. “The police don’t teach you to run a business.” He recently employed a full-time business mentor to help him expand into security work and improve Paragon’s online presence. “I realised that even though I’d been doing it a long time, I still need business help,” he says. “Probably I’m one of the half a dozen who want to be cops, or private investigators,but we also want to be business people. And that’s kind of the formula for success.”

IN the beginning, staff would symbolically mark every product sale with a pin placed in a map of the world. But eventually, as sales and company growth ballooned, the efficiency of the map system was somewhat diminished: certain countries started getting a bit crowded – the US in particular – and then staff started swiping the pins.

Telemetry Research’s small team of 12 staff, its compact offices at the University of Auckland and its academic beginnings contrast with what it has achieved since it first started doing business in 2004.

The company has had sales throughout the US, Europe, Australia, Asia and South America, and recorded a revenue increase of 403 per cent from 2008 to 2010.

The global market for telemetry technology in animal research – wireless devices implanted into lab animals to monitor vital stats like blood pressure and brain signals for research – is effectively a two-horse race between Auckland-based Telemetry Research and Minnesota-based Data Sciences International (DSI).

DSI is over eight times its Kiwi competitor’s size, over 12,000 kilometres away and has been in business for an extra 20 years.

Unfazed, Telemetry Research co-founder Simon Malpas says innovation in the form of a key technological point of difference has allowed his company to not just enter the global market, but to help expand it.

That key point of difference is the fact that their products’ batteries can be recharged while still inside the animal by placing it on a re-charging pad. DSI’s offerings use a non-rechargeable battery which must be sent away for refurbishment.

“In cutting that step out, we’re reducing both the cost and time of undertaking research,” Malpas says.

The technology is used in a variety of research areas, including cardiovascular disease and heart failure. Because telemetry technology is wireless it eliminates the use of tethers in animals, facilitating stress- free, long-term monitoring.

Explaining the company’s growth and its stability within a duopoly, Malpas emphasises the importance of Telemetry Research’s international partnerships with data acquisitions systems provider ADInstruments and medical technology company Millar Instruments, both of which are renowned in the life sciences industry and have the resources of 120-150 staff each.

Owing to these joint efforts and partners, Telemetry Research has sold to over 30 countries. Malpas estimates his company currently holds “less than 5 per cent” of the market share but that is growing every year.

“We don’t differentiate on price – there’s no point in a two-player market,” he says.

“We differentiate ourselves by offering a technologically different product and committed customer support. Big companies like our competitor often have to ‘tell’ a customer what its product is; the customer is presented with a final piece of technology and left to take it or leave it.

“With a smaller company like ours, however, we’re able to work alongside the customer to under- stand their problems, and develop a solution with them.”

It is this smart partnering, and readiness to “get closer to the customer offshore, get that customer intimacy and empathy for customers” that national head of the Deloitte Fast 50 programme Matt McKendry says has helped Telemetry Research rank in their list of New Zealand’s 50 fastest growing companies for the last two years running.

Telemetry Research was also ranked in both 2009 and 2010 as one of the Deloitte Asia Pacific Technology Fast 500 companies.

“To be really close to the customer, that whole customer intimacy, that’s almost the point where you can reduce the risk of innovation, because you are, dare I say it, co-creating and then you can go, ‘what are the other iterations?’” McKendry says.

At which point he says companies should take what they know and “run like the clappers”.

Sometimes innovation comes in the form of great leaps forward. More often though, it is incremental improvement.

“Like many businesses, we began with a very niche product and went on to realise that the experience it gave could be applied outside of its initial use,” Malpas says.

The initial concept grew when he enlisted the help of colleague David Budgett to help design a telemetry system for his research because what he wanted wasn’t available.

Discovering the next commercial iteration of their idea involves progression between two kingdoms: animal and human.

“While our products have been animal-specific in their settings, our concepts expand for human monitoring purposes as well,” Malpas says.

“We’re currently working with other companies to expand this – but as you can imagine, human research involves a lot more protocol than animal research.”

The most important thing to lead a start-up to success, as Malpas and partners have with Telemetry Research, is to invest in research and development and “good people” early on, for the benefits they will yield later.

“We don’t come from a business or finance background, we come from a technology background, and we know the worst thing to do would be to constrain our staff. They need to be able to share and develop ideas at many different levels – that’s when technology can become commercially feasible.”

Photograph by Kathleen Collins

TODAY, Lech Walesa runs the Lech Walesa Institute, founded in 1995, whose mission is to support democracy and local governments in Poland and throughout the world. The institute is committed to solidarity with pro-democracy movements worldwide. Walesa recently led a delegation to assist with transition of power following the revolution in Tunisia. He plans to visit New Zealand for the first time within the next 12 months.

Walesa’s current offices on the top floor of Gdansk’s historic Green Gate residence are far removed from the docks where he rose to fame. But his commitment to peaceful democratic change is as strong as ever.

He met with IN-Business publisher Tim Collins in Gdansk, Poland, to discuss globalisation, China and New Zealand vodka.

“WE SHOOK GOD ALMIGHTY.
We are not afraid of our neighbours any more. We had to rearrange life and so it happened . Sometimes I’m afraid I awoke the demons, the demons of freedom. Where is the responsibility? So, it’s a huge chance and we have many things to discuss, but also there are threats.

WE STARTED AS THE FIGHT FOR FREEDOM,
with workers against the system, and suddenly it’s turned out that we have the whole of Europe, and now we have the whole world. It is a global world. So here are new programmes, new democracies.

If somebody told me that I would live to see such changes in Poland, I wouldn’t believe it. But now when I think how after all those years, how much better things could have been done, I am not satisfied.

I CHOSE ANOTHER WAY, NOT LIKE LENIN OR CASTRO.
The problem is whether I won or lost. Many say I lost. I’m saying I won. New processes started. Because the revolution was not for me; the revolution was for democracy, freedom.

My fight and the fight of Poland opened the subject of globalisation. I would like to focus on building the programme and structures of globalisation. Everybody sees that. There are a lot of ideas – and everybody sees that in a different way.

The present programmes, political and economical, do not fit globalisation. We have been competing within the countries – continents even – and globalisation does not allow that anymore. It’s a different philosophy.

We have to take a system for globalisation from the “law of the road”. Anybody – the Arab, the black, the white, whoever, can drive on the road, and it is okay. We would like to make such regulations for other subjects and other ways of living so that we can drive like that. Economics, politics, science, healthcare . . .

NOT TOO FAR HOWEVER.
I will never agree that my wife will be globalised! So there are some subjects that we don’t want globalised. That is why we have to choose, definitely, those things that everyone will agree. Everybody has different values… so there is a lot to talk about, to speak about, and to quarrel about too, and this generation will have to do it. I am discussing this during my visits to every continent.

I KNOW NEW ZEALAND ONLY FROM THE MAP.
I would like to see it by being there. Maybe I will find something important which will be good for my fight.

I have been invited as a revolutionary to help transition power in Tunisia, to share my point of view. I have been talking about how technology will focus people on the changes, and force people to change their point of view and way of living. I have spoken to the elites of the nations to get prepared so that there will be no fighting, no shooting, and no aiming at one another – so that the solutions will be less painful. When I go there I will see how possible it is.

I AM TRYING TO HELP CUBA BECAUSE IT IS A WONDERFUL COUNTRY.
We are trying to change so much in Cuba, as much as possible, so that other people can go and cherish what Cuba has to give. It is very dangerous there and too near the United States. Those who are most active are emigrating and therefore they are weakening the fight.

Sooner or later Cuba is going to be free, finally, because mankind is focusing on Cuba. And there are huge businesses that can be done there. At the same time those businesses are giving a lot of health for the people.

WE ARE ALSO TRYING TO FOCUS ON WHAT IS HAPPENING IN CHINA –
but from the other perspective. As I said before, the world has to become globalised and there is no globalisation without China. They have a different way, different road to the future, different structures.

I am for globalisation but I don’t like the Chinese solutions. It should be that all of Europe, together with the United States, should press on China to change. If not, China will press on us. This is the choice we have.

I have connections with revolutionaries in China but have to be very careful because I know what pressures they are under. I don’t want to endanger them. They cannot change so fast in China. Because it is like I always give the example of Poland and the road system – we can drive 200 kilometres per hour. China, on the other hand, is like a huge truck so he can’t do 200 km per hour because there would be accidents. Maybe we should speed that truck up more but maybe not too much… I like them very much, their culture is splendid, and I am thinking of them the best I can but it has to be done slowly.

THE PROBLEM IS THAT WE DON’T SPEAK SERIOUSLY ABOUT GLOBALISATION.
My suggestion is that within the United Nations there could be a very small office established with a small sign: ‘Here we are seeking ideas for globalisation’. Three rooms: in one room, we seek the global parliament; the second room, we seek global ruling; and the third – defence, global defence against terrorism for example. And a few people – not many – should sit, think, and propose.

[PRESENTED WITH A BOTTLE OF 42 BELOW VODKA AS A GIFT FROM NEW ZEALAND] DO YOU THINK THAT IT WILL HELP THINKING?
If it will be good, and I will like it, I will tell you when I come to New Zealand.”

Illustration by Rebecca Walthall

IT’S true the worlds of trade and politics foster an innate, burning desire to create acronyms.  The ‘group of eight’ major world economies, made up of France, Germany, Italy, Japan, the United Kingdom, United States, Canada and Russia are the ‘G8’.

In 2001, commentators would say ‘BRIC’ was better than using ‘emerging economies’ because after all the reform, after seeing the skylines of showcase cities like Sao Paulo, Moscow, Mumbai and Shanghai – bastions of light, energy and freshly-minted money  – it seemed a bit condescending to still refer to them as ‘emerging’.

The next 11 coming up, the supposed inheritors of the BRIC mantle, are the ‘N11’: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and Vietnam.

The acronym BRIC was designed to give an exciting glimpse of where fortunes would be won, lost and built over coming decades. It was originally coined by Goldman Sachs economist Jim O’Neill as a way of grouping high-growth countries together. Early this year the heads of state invited South Africa to join them, turning BRIC into BRICS.

Where New Zealand fits into this crowd of acronyms is around our current trade positioning, and around our need to move from an internal-consumption model of growth towards an export-led one.

One country makes a notable presence across both the G8 and the BRICS: Russia. It is also the country looking set to soon be our second BRIC free trade partner.

For the BRICS countries, who have largely  lifted themselves up in the last decades through export, there is now a need to move to a model where economic growth is fuelled by internal consumption – growing a middle class with purchasing power and disposable income.

The crossover would seem to be the very definition of trade, like an economist’s dream market: we need to sell and they need to buy, but instead we have an impasse on a grand scale.

The World Trade Organisation’s Doha Development Round, kicked off in 2001 to negotiate increased worldwide trade liberalisation, has been limping on, in circles, for a decade.

Senior lecturer in political science and international relations at Victoria University Marc Lanteigne says many of the BRICS countries have been trying, unsuccessfully, to act as intermediaries between the European Union, the US and the lesser developed countries to reach a consensus in the talks.

“You have China, to a lesser degree India, to a degree Brazil, trying to act as mediators back and forth, all of these countries are trying to put themselves as the go-betweens and in the end we haven’t seen much in the way of solid progress,” he says.

Because of the start of electoral cycles, particularly in the US, experts have called for December 2011 to be a deadline for the final make or break of the Doha gridlock. Not many hold out hope of any success.

In the absence of success in WTO trade liberalisation, what many countries will fall back on is the agreements they’ve already negotiated.

“New Zealand is aware of this,” Lanteigne says. “New Zealand is certainly aware of the value of creating as many bilateral and multi-lateral [agreements] as possible.”

New Zealand’s regional, bilateral and multi-lateral trade agreements in force include with Australia, Hong Kong, Malaysia, Thailand and Singapore. Agreements currently being negotiated include with Korea and the Gulf Co-operation Council (Bahrain, Oman, Kuwait, Saudi Arabia, the UAE and Qatar).

In terms of agreements with the high-growth, high-potential BRICS’ countries, the last four years has seen fast movement.

The New Zealand-China free trade agreement (FTA) was signed in 2008. Many credit the huge resultant increase in trade with getting us through the recession.

In May 2011, Indian Minister of Commerce and Industry Anand Sharma said he hoped the New Zealand-India FTA would be in place by the first quarter of 2012.

Negotiations for the Russia-New Zealand FTA were announced in 2010 and are due to be completed late this year.

Lanteigne puts our popularity as a free trade partner down to our experience and the fact that our number of sectors open to preferential trade is small enough that the negotiation process is much shorter compared to European states.

We also have a history of jumping at opportunities to declare things first. In 1997, New Zealand was the first Western country to conclude a bilateral agreement with China on its accession to the WTO and, in 2004, the first developed country to recognise China as a market economy.

“Those other countries wanting a stronger economic role in that region will very likely see New Zealand as a very good way of getting started; it’s almost like training wheels,” Lanteigne says.

Illustration by Rebecca Walthall

THE BRICS have a common story: inflation is a short-term risk across the board, and all of them have a certain amount of political risk, but the long-term fundamentals are there: increasing population, burgeoning consumer consumption, low debt relative to GDP, increasing household saving and increasing spend on infrastructure.

China and India are seen as the stronger two for manufacturing. Russia and Brazil have advantages in the supply of natural resources.

HSBC New Zealand Head of Wealth Glen Tonks says he sees the BRICS countries’ massive investment in infrastructure as particularly exciting for business, typified by construction to host world sporting events.

The BRICS together will spend in the region of US$8 trillion over the next 10 years on infrastructure, which is around about 80 per cent of the world’s infrastructure spend over that period, he says.

“That is a story we are seeing with developing nations hosting the world’s major sporting events – the Beijing Olympics, the Indian Commonwealths and the Russian winter games – it’s really interesting to see how the relative success of those events – what message that sends to the world.”

China is leading the BRICS with respect to moving rapidly from an export-invest model, to an internal-consumption model, with last year 70 per cent of China’s GDP growth coming from consumer consumption.

“Really these four nations that have 40 per cent of the world’s population are the future growth engines,” Tonks says.

“[It] is a shift from West to East, and we see that accelerating out of the financial crisis. Particularly because of the hangover of debt in the developed world, so really it is game on the BRIC nations, really led by China.”

New Zealand’s long-term BRICS strategy has been accelerating in recent years. More than anything, our free trade agreement negotiations with China, India and Russia represent a fundamental shift towards a more long-term, strategic view of our place in the world and our friends in high-growth places.

Deputy chief executive of New Zealand Institute of Economic Research (NZIER) John Ballingall says the developments show a movement away from focusing on tariff reduction alone towards building long term political and economic relationships, as well as freeing up the way for enhanced services and investment trade, or put simply:

“We curry them some favour and as a consequence we hopefully get to be alongside them when they really start to grow rapidly.”

Because of the focus on high-quality agreements, New Zealand now finds itself well-placed to act as a go-between country with others who want to trade with our free trade partners.

“We’ve got these great links to China and Russia and soon India and South-East Asia and lots of other countries,” he says.

“[International companies can] invest in us and use us as a base from which to export or invest into these countries so it’s about getting this first-mover advantage really.”

In terms of the agreement we have most recently started to negotiate, Russia occupies a strategically important geographic position as a bridge between Europe and Asia, he says.

“[Russia has] got the extremely fast-growing Asia Pacific region on one side and a much more muted growth profile of mainland Europe on the other side and therefore potentially Russia could play a really important role of acting as a link between the two.

“If we’re then tapped into that supply chain as well, then that allows us to try and benefit from the growth that might happen in that supply chain as well.”

FOR grouping and vernacular purposes the BRICS are lumped together under one acronym – but they are also closely watching the success of each other’s state-guided economics, which has profound impacts for foreign businesses working under complex political, bureaucratic, financial and regulatory environments.

Perceptions of the Chinese model of state-guided economics, also called the ‘Beijing consensus’, have gone from abstract concept to “they may have something here” among other BRIC countries, Lanteigne says.

“Russia has definitely adapted that [Chinese] model, the state is now hyper present in so many parts of the country’s economy, especially in the energy sector.

“You’ve got the same thing in Brazil, you’ve got the same thing in South Africa, India; they’ve been oscillating back and forth a bit towards greater free market, but there’s still a huge amount of state dominance in several sectors and still a lot of bureaucracy involved in setting up any kind of business in the country.”

Lessons learnt from doing business within China’s state-guided economic sphere could help us do business in Russia, Lanteigne says, but the Sanlu scandal with Fonterra in 2008 will continue to be a cautionary tale.

A common communist government history in both China and Russia, countries where private property laws have traditionally been weak, will also have some relevance, as we’ve seen with New Zealand company Pacific Hovercraft NZ’s continuing fight over intellectual property with Chinese company Lianyungang Supreme Hovercraft.

“I think New Zealand’s experiences with China will help [in Russia] quite a bit, but there’s still a lot of caution that’s needed. When you’re in a country where the state has such a strong advisory role in so many sectors, including raw materials and agriculture and so forth, keeping that in mind is very important.”

With increased trade liberalisation brokered by the World Trade Organisation looking increasingly like a pipe dream, a ‘hub and spoke’ model of free trade agreements with BRICS countries in particular looks set to be what takes New Zealand through.

And if there happens to be some progress in the Doha talks, New Zealand will be in a much stronger position, and much better informed, to play an active role in the negotiations.

“Because a lot of it is also about information,” Lanteigne says. “In order to successfully complete a deal you really have to understand the concerns of the state, what the other states wants out of various deals, their economic situation.

“Setting up bilateral [agreements] is in some cases not a perfect method, but it does create a lot of windows into what your potential trade partners are thinking.”

Photograph by Martin Luff

IT is the sort of boost any population-conscious provincial town or city can normally only dream of; an influx of thousands of people virtually overnight. No marketing campaign required, no complex district council plan or ratepayer-funded economic strategy. Just the tragic consequence of a major natural disaster in your nearest city.

In the hours and days after the February earthquake in Christchurch, thousands of people were suddenly looking for refuge. The earthquake in September last year did not send people fleeing in the same way. But for a variety of reasons, not least being the knowledge that people had died in the central city, many Christchurch residents grabbed essential possessions, climbed into their cars and drove to somewhere that felt safe. The South Island town of Timaru, a two-hour drive from Christchurch, saw its usual population of about 27,000 rise by an estimated 7000 to 8000 in the days after the earthquake.

There were suggestions that as many as 60,000 to 70,000 people left Christchurch in the days after the earthquake – about 17 per cent of the population – and the impact on Timaru and other smaller centres in Canterbury and elsewhere in the South Island was obvious. Janie Annear, the mayor of Timaru, told a radio interviewer shortly after the Christchurch earthquake that the town was “absolutely buzzing” with the influx of people from Christchurch. She also speculated that Timaru might have regained its status as a city had the government not cancelled the 2011 Census as a result of the earthquake.

Displaced Christchurch businesses also looked for new homes. In an interview with Radio New Zealand last month, Canterbury Employers’ Chamber of Commerce chief executive Peter Townsend said that about 200 businesses in the central city had left for other towns. The question for these centres now – especially those that have been struggling to maintain their populations – is whether the newcomers become permanent residents.

Planners and economists have already started researching the likely population movements to flow from the Christchurch disaster, looking to experiences overseas for clues. Researchers are concluding there will indeed be a change but that the permanent flow will be only a fraction of the numbers estimated to have left the city in the immediate aftermath of the earthquake. Many, it seems, have already returned and there is a campaign underway in Christchurch to encourage people to stay; a local lawyer launched The Pledge, a project inviting people to put their signatures to a commitment to stay and rebuild.

Nevertheless, economists at ANZ Bank predicted in a report published in March that Christchurch could lose 4 per cent of its population permanently in the first year after the earthquake as a result of emigration to other parts of New Zealand and overseas and a reduction in immigration. ANZ looked at longer-term population changes in cities and areas affected by natural disasters in several other countries including Kobe in Japan where 2.5 per cent of the population left permanently after the earthquake in 1995. “We think it is possible that Christchurch city could see a loss of around 15,000 residents in the first year, equivalent to almost 4 per cent of the population,” the ANZ report said. “This consists of around 9500 residents deciding to leave permanently, 4000 fewer migrants from overseas than otherwise would be the case, and 1500 fewer internal migrants.”

However, ANZ cautioned its estimates might fall short of what actually happens, noting that the extended period of shaking in Christchurch has “changed the situation completely, relative to offshore norms”.

The Canterbury District Health Board commissioned a report by consultancy Sapere Research Group on possible population trends post-earthquake. This concluded that about 8000 people might leave in the year after the disaster, the equivalent of 2 per cent of the pre-earthquake population.

ANZ said given past migration patterns, Christchurch residents would move to Wellington and Auckland. “However, relocating from one quake-prone area to another does not feel right, so we suspect you can rule out Wellington as a major beneficiary. On a net basis, the largest gains are likely to be in Dunedin, followed by Invercargill. Areas on the Christchurch periphery – Timaru, Ashburton, Blenheim, Greymouth and part of the wider Canterbury area – have also seen a large big city drift in the past. We will likely see this drift reverse sharply.”

Even if the de-population of Christchurch is on a much lower scale, long term, than the figures suggested in the immediate aftermath, the ANZ and health board research shows there will still be a significant number of people looking to relocate.

Two months after the earthquake when IN-Business spoke to community leaders and business advocates in Timaru and other centres, they were indeed aware that they might gain from Christchurch’s loss. Some have been working on strategies for years to maintain their populations, particularly young people, and to attract businesses.

Interviewed a few weeks later by IN-Business, Timaru mayor Annear says many businesses have relocated to the Timaru district and others have contacted the district council’s economic development arm for support.

“It is impossible to know if they will stay permanently. However we believe it is vital for the economic well being of Canterbury that we support those businesses to get up and running quickly and not lose them to the North Island.”

Annear’s comment about the economic well being of Canterbury as a whole is echoed by other provincial civic leaders. They are cautious about appearing to want to cash in on Christchurch’s misfortune. They do not think it would be in their interests, or the region’s, to suck businesses out of Christchurch.

Wendy Smith, chief executive of South Canterbury Chamber of Commerce, says:  “The key is to keep Canterbury strong. What we are doing is, rather than wooing businesses away [from Christchurch], is to say ‘if you are going to move, consider South Canterbury rather than the North Island or offshore’.” It is vital to Timaru, she argues, that Christchurch remains a strong economic centre for the region.

Smith believes, however, that the earthquake has underlined the risks inherent in policies that encourage too much centralisation of resources. Her message is that the risk of disruption is increased if key services and resources are too heavily concentrated in a few areas.

New Zealand, known to be at risk from earthquakes, needs to look at the Christchurch experience to consider the consequences if vital infrastructure such as ports are disabled. “As a district and a country we are hoping this is a key message.”

Smith says she has fought against centralisation of resources, particularly in education, which is now seen as a key factor pulling young people away from provincial towns.

The earthquake appears to have provided Timaru’s Aoraki Polytechnic with an unexpected opportunity to show how smaller educational organisations can work together to provide competitive alternatives to large education providers in main centres.

Organisations like Aoraki see themselves as vital contributors to the economic health of the towns and regions they serve, not just because they help attract and retain young people, but because they tend to be closely linked to the agricultural sector and other core local industries.

Photograph by Ron Lindsay

AFTER the earthquake, Aoraki and Christchurch polytechnics moved some of their courses to the Southern Institute of Technology (SIT) campus in the western Christchurch suburb of Hei Hei, which was relatively untouched by the earthquake.

Alex Cabrera, deputy chief executive at Aoraki Polytechnic, believes this is a living, working example of a new model for how regional-based educational institutions could develop. Normally it might take years to achieve agreement to share resources in this way, Cabrera says, but the earthquake proved constructive in bringing institutions together to maintain services.

Cabrera sees many advantages in the co-operative effort, not least the influx of new students from a variety of disciplines to the site.

“I strongly believe this will give these students a much better student experience. And, from a governance point of view, you get a better utilisation of assets.”

He believes this could be a model for an education “hub” where a variety of courses from different institutions are available from one location. Taking the idea further, he foresees students being able, with assistance from modern technology and co-operation agreements between institutions, to access courses from institutes and universities overseas. The aim would be to allow young people to take advantage of a wide variety of courses without leaving their home towns. Cabrera, who has worked in education management in several countries, argues a young person in Twizel should have the same opportunities as a young person in Auckland – which would remove at least one driver of centralisation in the main centres.

In another earthquake-response initiative for Aoraki, Cabrera has also been working on the development of short courses for unemployed people to train them to work in construction and other industries that will require labour for the rebuilding of Christchurch.

David Ayers. Photograph supplied.

THE Waimakariri region to the north of Christchurch has had mixed experiences in the earthquakes. The town of Kaiapoi was badly damaged in the September earthquake but became something of a refuge after the February event. Waimakariri District Mayor David Ayers jokes he had heard that McDonald’s in Kaiapoi was the closest branch of the burger chain for residents of eastern Christchurch after all local branches were put out of action by the earthquake. The town of Rangiora meanwhile started to experience traffic jams.

Ayers says the region’s population had been growing before the earthquake and he expects that growth to accelerate. “We are certainly able to accommodate any increase in business.”

Rangiora may not spring to mind as a centre for high fashion but Ayers notes that designer Annah Stretton has opened a shop in the town.

Paul Davey, chief executive of Selwyn District Council thinks his region, to the south west of Christchurch, which was experiencing a rapid growth in population before the earthquake, may become even more popular given that it was relatively unaffected by the earthquakes. There has been some discussion, he says, about the possibility that the gravel and stone ground structure of Selwyn may be preferable for building than the sandy geography of parts of Christchurch.

The Izone industrial park in the town of Rolleston has attracted business interest since the February earthquake. But Davey sees Selwyn as being in a partnership with Christchurch. “We all have a role to play in the rebuild.”

Further down the coast between Christchurch and Timaru is the town of Ashburton, about an hour’s drive from its city neighbour.

Rob Brawley, chief executive of local economic development agency Grow Mid Canterbury says that woodworkers, photographers and jewellery manufacturers are among the businesses that have moved to Ashburton since the Christchurch earthquake. “Also, employers have been inundated with skilled staff looking for work.”

Located in an area at the centre of the dairy boom, Ashburton employers had been experiencing some skill shortages and the influx of workers is welcome, Brawley says. Tourism and conference-related businesses have also done well as visitors and organisations have been forced out of Christchurch for accommodation and venues.

But Brawley says while Ashburton is pleased to welcome workers, businesses and visitors, “at the end of the day we are part of the Canterbury dynamic”.

“We don’t for ethical reasons want to be playing on [Christchurch’s] misfortune. We want a major city on our doorstep.”

Photograph by Kathleen Collins

STUART Prior is well-read and well-informed, quick to counsel and even quicker to quip. “A fool and his money are easily parted” is his advice to New Zealand companies considering doing business in Russia. It’s frank advice from a man who’s served his equivalent of “two life terms” – a total of 30 years in the New Zealand diplomatic service, including four as Russian Ambassador.

At 61, he speaks English, French and Russian and now runs his own company, Prior Group, specialising in promoting business between New Zealand and Russia.

Prior’s life has been influenced by Russia from the outset. His family moved from London to New Zealand after his father, discharged from the British army in 1945, received a letter summoning him for duty in response to Stalin’s World War Three scare in the early 1950s. What started as a boyhood interest sparked by the exoticness of the Russian alphabet grew into a degree in Russian language and literature and has been Prior’s livelihood through his diverse career.

From 1976 until 1991 he took part in New Zealand diplomatic missions to Canberra, London and Moscow. When the Cold War ended, his occupation as a Soviet expert was no longer needed and he was moved “from one cold war to another” and put in charge of New Zealand’s Antarctic policy throughout the 1990s. From 1999 until 2002 he worked as deputy manager of New Zealand’s international aid programme, before returning to Moscow as the New Zealand Ambassador from 2003 to 2006. He married his Russian wife in 2004 and they have recently welcomed their first child. His father came to New Zealand to give him opportunities, he says. “And I think I’ve had a pretty good series of opportunities.”

Prior is irked by the fact names like Lenin and Stalin dominate most people’s lists of Russian thinkers and politicians. During his studies at Otago University he discovered Russian writers such as Tolstoy, Pushkin and Gogol, who influence his business practices to this day. “I use them when I am, if you like, screening Russian business people . . . because Russian society has been late to develop, these 19th century writings are a very good guide.”

Gogol’s Dead Souls is described by Prior as his “business bible” because of its descriptions of some of the earliest examples of leveraged debt and mortgages. In 19th century Russia, peasants, termed “souls”, were counted as part of a landowner’s wealth. The book’s main character, Chichikov, bought the names of dead peasants and used his list of souls to secure mortgages from banks by appearing to be a substantial land owner. Throughout this tale, Prior says, Gogol describes a business mentality that is highly contemporary; Chichikov represents an archetypal snake oil salesman that could easily be encountered today. “Essentially it’s a very practical business deal . . . It was super modern. It would not be looked at sideways by many of our modern businessmen or financiers.”

Prior’s diplomatic presence in Russia allowed him to witness many historical events, including the New Zealand boycott of the 1980 Moscow Olympics and political demonstrations in the early 1990s. While his first trips to Russia left him with the impression of a “dour and grey” country, he was also a bystander for “Very seldom, wherever you are, are you in a place where you see history being made. Being on the sidewalk, watching a demonstration of half a million people walking towards the Kremlin in absolute silence, was just stunning.”

When he returned for his final stint as a New Zealand representative to Russia in 2003, he found himself gobsmacked at the changes: cafes and shops lined the streets, and the Russian orthodox church had reappeared.

Yet this radical transformation is what he says can fool New Zealand business people – while Russia is often imagined as a place of “vodka, oligarchs and mafia”, people arrive to find slick and modern cities. He says the difference can lead people to throw their defences out the window, which is foolish in any business scenario. Taking the time to understand Russia and how its culture and people work is what Prior advises to parties interested in the New Zealand–Russia Free Trade Agreement currently being negotiated.

“If we take the same look that we’ve taken at China, where it’s a long-term project, then we say ‘right, as in China, we have to start building relationships, getting to know each other’. And you have to be careful, because at the end of the day we’re 4.4 million people and there is an opportunity for some rich guy in Russia to come andbuy us in ways we might not like.”

Prior points out that the FTA with China has revealed difficulties that businesses cannot respond to alone. Because New Zealand is dominated by small family companies, he warns that foreign capital is not always a friendly giant – but still brings opportunities. Businesses and politicians should prepare, and have plans in place for situations such as the recent Crafar farms controversy.

“How are we going to react if under the FTA some rich Russian madly comes to New Zealand and says ‘I want to buy lots of dairy farms’? You need to be thinking through what it’s going to mean in practice.”

He says an FTA between New Zealand and Russia is only the starting point of a relationship between the two countries. Russian interest is particularly directed at using New Zealand to help them approach the modern, global trading world. “So that’s what you’re trying to do in this, you’re trying to elevate New Zealand from a little, isolated, irrelevant country to somebody who’s worth talking to,” he says. “And then you translate that into money.”

Illustration by Rebecca Walthall

MY experience of working with Russia has been that it is most easily consigned to the “too hard basket”. To make trade with Russia work we have to look ahead and be bold and strategic in our thinking: not qualities which have necessarily distinguished New Zealand over the past few years of bureaucratic socialism.

If we look at the Russian version of “Russia”, “Rossiya”, the first two letters sum it all up: “Risk” comes before “Opportunity”. See through and manage risk and you have unique opportunity. I work around the idea of “OURS for the taking”: Opportunity, Understanding, Relationships, and Step-by-Step.

The starting point with Russia is: what is the opportunity, what’s in it for us? Can we use Russia to help us achieve our national goals as “New Zealand Incorporated”?

Business is not a one-way street. Why on earth would big bear Russia want to work with little kiwi New Zealand? Isn’t this just a recipe for kiwi-feathers-in-bear’s-mouth stuff? To interest Russia, we have to envisage some sort of partnership, at every level of business, to show that both of us can benefit from paying some time and attention to the other.

My view is that yes, Russia can help New Zealand – in major ways. First, it can help us become an agricultural player in the northern hemisphere and overcome the tyranny of distance which has plagued us for 130 years. Russia, compared to New Zealand, has land in abundance. Animal farming can be revived based on pasture and no subsidisation.

What’s in it for Russia? The world needs Russia to become a major food exporter. Products from its animal farming could feed Russia’s impoverished rural regions, increase national security and make a major contribution to global food supplies.

As the Russians and their economy catch up with the world, Russia will become a value-added market for New Zealand – wine, food, clothing, wool, interior design, container- and cargo- handling equipment, abattoirs, meat plants, jet boat engines, luxury yachts, engineering goods and services, IT solutions, medical technologies, education services, tourism – the list goes on. The Moscow-St Petersburg corridor has a population bigger than Australia’s. Its consumers are sophisticated, ambitious, aspirational and have greater disposable incomes than most New Zealanders and Aussies. There are niche opportunities for New Zealand pretty well everywhere I look.

We just don’t seem to get how much Russia has advanced in so short a space of time. Not only is the average middle-class Russian wealthier than we give them credit for, they are not shackled by mortgage debt, by and large. The people with money to spend in Russia today are the young rather than the old. Get consumers used to New Zealand products, goods and services today – and you can build a lifetime of loyalty to Brand New Zealand.

Why are we missing out? We were starting to show some “get up and go” with the New Zealand Dairy Board and entrepreneurial business activities in Russia in the 1990s, at a time of stress and change. Then we corporatised our thinking, put on suits and mental straitjackets and ran away. It’s a market going begging. It’s great to find our meat and seafood on sale in Moscow but not so great to find that it’s Aussies selling them because we haven’t bothered to, our view of Moscow being dull grey  with lines of poor people queuing up for cabbage.

What we lack at the moment are insight and ambition and, perhaps most of all, the means of connecting small, clever but underfunded and risk-averse New Zealand companies with their Russian smallish (by Russian standards) clever, underfunded, but ambitious and rapidly growing counterparts.

The human factor cannot be ignored. Russia has ambitious people, brilliant minds and original thinking (as well as gorgeous women). Russians are extraordinary reverse engineers. If we in New Zealand are serious about adding value within its economy, then science and technology-based connections with Russia could prove invaluable.

Equally, New Zealand, with our open economy and attitudes and network of links with the Asia-Pacific region, can help Russia enter the Asia-Pacific mainstream as a true Asia-Pacific power.

In many areas of social activity – sport, the arts, culture – we can learn from Russia and also contribute, in some way, to Russia. We have no need to be bashful about our contribution. After all, our Ernest Rutherford launched the global nuclear age, changing the prospects of humankind forever and incidentally helped the USSR become a twin super power. In return, we got ballet and the pavlova, helping make us cute and soft-centred as a country.

Remembering OURS, understanding comes before relationships. A little fellow-feeling and humility on our part will not go amiss.

The good thing is that if you think about how successful business relationships are built in New Zealand, you have some of the keys to what is required to working successfully in Russia.

So, just as you need to be clear about what you are looking for as a business and do your homework on Russia, you need to be prepared to invest the necessary time and effort to find Russians with whom you can work and build up links which bring fair benefit to you and them. Russians have their genetic equivalent of ground-penetrating radar – they can work out quicker than you can believe just who you are and what is behind your façade. They work with head and heart. They will do business because they like you, and will have a vested interest in success once they decide to go with you.

You do have to be fair, and determined, patient and persistent, of course, and trust is essential. Break that trust and you will rapidly find yourself in a “win-lose” or “lose-lose” game, and you will be the loser.

This is pretty well the exact advice I would give to Russians wanting to work with New Zealand. There is a surprising similarity about the way business works in both our countries: ratbags and snake oil merchants are found in both places, as are people of the highest professional standardsand integrity. Discovering who is who is a commonplace challenge. Somebody who can act as a bridge or referee or personal  guarantor can be helpful in a match-makingsense.

Finally, you need to take a step- by-step approach. Start slowly. A small deal is a test for both sides – if you cannot honour every detail of a small deal, how can you be trusted with a big deal?

The human element is a major potential advantage for us as New Zealanders. Don’t underestimate the quality of personal experience we can offer to a Russian partner in New Zealand – such as down-to- earth decency, genuine and warm personal relations. Recreational activities such as trout fishing can cement a business relationship.

It works the other way too. Once you get to know Russians, they can offer you experiences in their own country about which you can only dream.

Parallel development

THERE are as many myths about Russia as there are about New Zealand. Only, the New Zealand myths tend to be bright, warm, cuddly and friendly, while the Russian myths are dark, cold, scary and unfriendly. Literally and figuratively we are polar opposites. But there are broad similarities.

Our recent histories move in parallel: New Zealand’s “crash-bang” Chicago-style revolution produced wonderful examples of privatisation and not-so-wonderful examples. Russia’s revolution produced the collapse of the USSR in 1991 and “smash-and-grab” capitalism, followed by wholesale pillage of state assets.

We are susceptible to foreign ideologies: we both had revolutions at more or less the same time: New Zealand in 1984–85, Russia in 1985.

In both countries public assets suddenly transferred to the ownership of wide-boys who proved adept atprivatising profits and socialising losses.

Both of us came to love public servants: the more liberal both our economies became, the greater the number of public servants and the role of the state.

Both our empires fought back in the sense that public servants came to rule the roost, increasing the burden on taxpayers and business. In Russia we refer to this as “blatant corruption”. In New Zealand we refer to it as “increased transaction costs”.

Both countries have remained overly dependent on the export of commodities. Value-adding jobs and products are thin on the ground. Investment capital comes knocking at neither door (unless we really tart ourselves up), and oursiren calls to capital are rather thin and reedy.

It is SMEs which will be the saviour of each economy but only if they can be nurtured, supported and encouraged to grow.

In both countries today there is evidence that governments are taking a leadership role again. Of course, the Russians get the bad press. The Kremlin’s reassertion of central authority is taken as a return to the Soviet past. The same is true for New Zealand. The idea of active government is a shock and a novelty – but it is now the new reality, for the next generation at least.

Both Russia and New Zealand are young countries, and it is brilliant young people who will be taking charge in this next generation.

Photograph by flickr user backpackphotography

RUSSIA is a country where money talks louder than words. What could this mean for the New Zealand-Russia Free Trade Agreement currently being negotiated?

In 2010, Russia ranked near bottom in the “Corruption Perceptions Index” compiled annually by Transparency International, coming 154th out of 178. At the honest end of the scale, New Zealand ranked second, pipped only by Denmark for the top spot.

Corruption is a part of everyday life for Russians, says Andrey Rozanov, general director of Fonterra Russia. Rozanov was born in St Petersburg but is now based in Moscow, heading up the Kiwi dairy giant’s Russian trade operations. “Corruption is a fundamental part of Russia and will not change in the short or medium term. To change it needs to be from the very top, to the very down below.”

In terms of the FTA, Rozanov is sceptical about the likelihood of it being signed at all. “There is no economic benefit for Russia whatsoever,” he says. “Russia does not export anything – except oil and gas – it doesn’t need international markets.”

He doubts the political will exists in Russia to complete an FTA with New Zealand. With a national population of 143 million and capital city population of over 14 million, it’s hard to dispute the insignificance to Russians of our small and far-removed market.

New Zealand, of course, has more to gain from an agreement. Exports to Russia last year were worth less than $200 million. I can see an agreement being a case of history repeating – within two years of signing the Chinese Free Trade Agreement, our exports to China increased by $70m.

But if the FTA does go ahead, according to Rozanov, Fonterra doesn’t have plans to leverage it. He says they are focused on growing premium Asian markets expected to generate a greater return to New Zealand farmers.

Russia houses the third highest number of billionaires in the world, alongside a growing middle class prepared to pay top dollar for quality. According to PricewaterhouseCoopers’ Doing Business in Russia report published in April 2011, strong growth in Russians’ consumption is expected to increase in coming years.

PwC partner Michael Hurle explains that following mass privatisation after the collapse of the Soviet Union, the large majority of Russians now own their own homes. “Seventy-five per cent of them [are] without mortgages and as a result they have high disposable incomes, which is driving demand across sectors such as retail, fast moving consumer goods and automotive,” he says.

Photograph by Kathleen Collins

NEW Zealand’s ambassador to Russia, Ian Hill, is upbeat about the FTA’s prospects, insisting not only that negotiations are well underway, but that both governments are equally keen. “It’s under way now. Both governments have said that they would like to get the negotiations done as expeditiously as possible.”

New Zealand may have to wait longer than expected for signatures on paper, however. “We are hoping that it can be done over the course of the next year or so, but sometimes issues come up and it can take a little bit longer,” Hill says. “But at the moment it’s going as well as can be expected.”

While optimistic about the FTA, Hill is also realistic about the potential drawbacks to increased trade with Russia. “Corruption is a problem here. I think Russian authorities would admit that.

“I’d say Russia is similar to other developing nations. Yes, it needs to continue to tackle corruption, but the same is true in countries like Brazil and China,” he says.

This comparison may be a little tough on Brazil and China, ranking 69th and 76th respectively in the Corruption Perceptions Index, well above Russia.

Ambassador Hill hopes the FTA will help improve the situation. “It seems to me that as Russian companies become globalised and international, if they are going to secure outside investment, which is what they really need – they desperately need foreign investment – people are only going to put their money in if they’re satisfied it’s going to be put into a safe depository, so to speak.”

Former Wellingtonian Simon Liddell believes you have to take Russia as it comes. A geologist and engineer with international consulting company AECOM, Liddell has moved away from wanting to change this aspect of his adopted home. “I learnt to simply let Russia be Russia. It will deal with this in its own time.”

When we later mentioned the number of corruption-related stories we had heard to Andrey Ivanov, a lecturer at Moscow State University, he was not surprised, saying there’s little political incentive to change the status quo. “It is here to stay, for years and years, for good. “Police are particularly prone to bribery. The corruption is 100 per cent there. It’s the road police, the police, the court system.”

That said, a Moscow-based Kiwi business consultant insists change is happening, especially in larger businesses. Matthew Cook of KPMG estimates 75 per cent of Russian corporates are now audited by the “big four” firms. “The other 25 per cent don’t want to be and probably wouldn’t be invited to be,” he says.

All parties I spoke to agree having a local business partner is essential – not necessarily to avoid corruption, but rather to help understand and deal with Russia’s unique bureaucratic complexities. It is a matter of knowing when to argue, when to go to court and when to pay up.

New Zealand products are valued for their high quality. Quality is closely related to integrity and honesty. Let’s hope our new friends improve theirs and avoid damaging ours.