Living in interesting times.

• Author: Shipley, Jenny
• Position: New Zealand's foreign policy - New Zealand Foreign Policy

Prime Minister Jenny Shipley outlines her government's approach to international affairs and foresees many opportunities for New Zealand in the next eighteen months.

The old Chinese saying `May you live in interesting times' has recurred to me several times since I became Prime Minister six months ago. Within weeks of taking office the so-called `Asian economic crisis' and escalating tension over Iraq required significant decisions by my government. So, too, did the growing momentum of the peace process on Bougainville, where New Zealand's role has been a catalyst for progress.

The Coalition agreement has a well-defined set of principles which underlie our approach to New Zealand's international relations. Our international policies are genuinely outward-looking. Our interests in open markets and international stability are too large for us simply to be a spectator. We must work hard for New Zealand's interests. New Zealand needs the world more than the world needs New Zealand. Our approach to international relations also reflects the values we share as New Zealanders.

New Zealand is active in international peacekeeping, in climate change negotiations, in United Nations work for increased rights for women, children and indigenous peoples; and in the continued pursuit of disarmament, because we care deeply about these matters and we believe we can make a difference. Our international relations, in short, involve the pursuit of New Zealand's interests in the interlocking areas of economics, security and international citizenship. My initial period in office has required a heavy focus on economic questions. The shock in Asia -- I do not use the word crisis for I do not believe it to be one -- will affect New Zealand's interests for several years to come.

Compared with the 7-10 per cent growth rates experienced in Southeast Asia in the last decade, we are looking at nil to low growth for the next few years. Similar low rates of growth are likely in Korea and Japan. On a brighter note, the fiscal and deregulatory measures announced by Prime Minister Hashimoto in late April should, as they are implemented, help Japan return to a positive growth path.

It is still too early to draw any firm conclusions from what remains an evolving situation in Asia. Several points, however, are already clear:

* the sudden and largely unexpected loss of confidence in a number of Asia's economies was no accident, nor was it a conspiracy;

* underlying structural weaknesses in any economy, once they are exposed, can both trigger and amplify a loss of confidence by both domestic and international investors;

* but confidence lost can also be regained through a process of successful policy reform. New Zealand's experience, and those of Mexico and Argentina, prove the point;

* international co-operation, by means of bilateral and multilateral programmes, is important, but sound domestic policies are also crucial if economies are to regain sustainable low-inflationary growth.

* New Zealand learnt these lessons the hard way. We know that there are no shortcuts to success and that complacency is the enemy of competitiveness.

Limited ability

As we look now to our north all of our Asian partners have each, in their own way, firmly embarked on addressing the structural weaknesses which contributed to the loss of investor confidence. New Zealand's small size means our ability to assist materially is limited. We will, nevertheless, continue to offer such support and encouragement as we are able.

The government's decision, last December, to offer up to $US100 million in a supplementary loan, on commercial terms to Korea, reflected both regional solidarity and sensible self-interest. So, too, has our involvement in offering technical assistance and advice on restructuring to countries such as Thailand and Indonesia. We remain ready to consider further such initiatives, bilaterally, through the IMF and World Bank and through APEC.

If a nation as small as New Zealand could turn its economy around in the space of a decade, then we should have confidence that our larger Asian neighbours will be able to do the same. In the longer term New Zealand should benefit from the economic liberalisation and deregulation which are a part of the recovery plan for the affected Asian economies.

Other baskets

While Asia's growth is likely to be flat for the next few years, strong economic performance in our other trading partners, particularly the Americas and Europe, mean we do not have all our eggs in one basket. Meanwhile, New Zealand's ability to ride through the downturn is much the better for the reforms we have undertaken over the last decade. The government will play its part by continuing to scrutinise the level and quality of its...