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NZ Taxpayers to subsidise Alibaba?

23 April 2019

Apparently Alibaba are considering setting up a fulfillment centre right here in New Zealand.

Well at least that's what we're being told by the media and Regional Economic Development Minister Shane Jones.

Will it happen?

I don't know.

I was actually "in the loop" when another large international etailer was considering setting up shop in Australasia and had considered a central North Island town (guess which one) as their logistics base. As it turns out, New Zealand just doesn't stack up as a base for Australasian operations of this type.

Unfortunately for us, the Tassie is one of the most expensive (on a $ per Km basis) pieces of water to cross when you're shipping product and, since the Australian population-base is far greater than NZ's, it makes very poor economic sense to base yourself here when the lion's share of the market is "over there".

If the international etailer I was talking with can't make it work I don't see how Alibaba would be able to do any different.

Never the less, Shane Jones is talking this up as if it's already a done deal.

Surely nobody can be that naive?

Hell, the entire NZ market is so small that it would be eclipsed by the city of Sydney and outlying areas alone -- so get a grip on reality Shane!

What is most concerning about the media report linked above is this statement:

"Alibaba representatives from Australia and New Zealand were keen to develop more of a partnership with the Government"

Why is that concerning?

Well there's a very clear implication there that the government (aka "The New Zealand taxpayer") will have to contribute something -- that's how partnerships work.

Something a little more confusing was this statement:

"Jones said Alibaba was trying to expand and tap the logistical dollar associated with the growing number of tourists that are originating from China coming through to Australasia"

Excuse me?

How does this work?

Do Alibaba think that by establishing a logistics centre here they are going to be able to sell to Chinese tourists who are in the country on holiday? What the?

Or perhaps it's that Alibaba want to source goods from NZ and ship them to China where they'll sell them to Chinese residents. But would that even be viable, given the outrageous cost of shipping *out* of NZ?

For those who are unaware, I can order a lot of stuff from Chinese etailers for less than $1 including shipping. However, I can't even send a simple letter from NZ to China for less than $2.40 (NZ Post mailing rates) and the smallest package (a 120x120x20mm bubblewrap bag) is going to cost you almost $15 to the same destination.

"New Zealand Post chief international business officer Sohail Choudhry said Alibaba was working closely with NZ Trade and Enterprise and NZ Post on a number of different initiatives"

Now given that NZ Post is effectively owned by the NZ taxpayer and it is obvious that in order to make any deal with Alibaba even remotely viable, postage rates would have to be slashed enormously, what we're talking about here is a taxpayer subsidy to the world's largest ecommerce vendor.

To be honest, I think that subsidising postage for NZ exporters is not a stupid idea -- given that China have been doing this for many years and it represents a leveling of the playing field. However, I do not think that Alibaba should be singled out for such exclusive treatment. If NZ Post are going to give highly concessionary rates (at taxpayers' expense) then they should be available to *all* exporters.

Right now I'm in the process of creating a "build video" for a small (sub-250g) radio controlled model aircraft that I have designed. This model has created quite significant demand world-wide (people keep screaming "take my money!") and I would actually love to set up a little manufacturing operation here then ship kits out to those who want to buy them. Sadly, given NZ Post's outrageously high charges, this is simply not in the least bit viable.

Whilst the actual retail cost of a kit for this model would be only around NZ$20, the shipping costs would be about the same again -- effectively doubling the price to international purchasers and making it far more cost-effective to farm this out to a Chinese-based company who could ship it for $1 or so. So much for employing Kiwis and boosting our export earnings.

Now you can see that if Alibaba were given super-cheap, exclusive rates for exporting products from NZ, that would be a real kick in the guts for all those Kiwis who (like myself) have a great potential export-earning product that is ankle-tapped by hideously high postage rates.

Why the hell should Kiwi taxpayers be subsidising a Chinese company whilst penalising NZ-owned operations that have great potential to become back-yard exporters to the benefit of the entire nation?

I guess I'm not in a position to offer Mr Jones a nice lunch and a trip away to discuss the options so I'll just have to forget about making NZ a tiny bit richer through my would-be exports. However, I'm sure that Alibaba will be more than happy to take whatever it can get from taxpayers in an effort to boost its own very handsome bottom-line.

Sigh!

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