Macroeconomics and the Global Economy



Answer to Question (1)

New Zealand is one of the world's richest pastoral areas because the warm temperatures combined with ample rainfall. Therefore increase the development of livestock, there are 45.7 million sheep, 9.3 million head of cattle, and about 355,000 pigs in 2001. Products of animal origin account for more than half the total value of New Zealand's exports, with meat industry products accounting for about 18% of exports. New Zealand is the world's largest exporter of mutton and lamb, second largest exporter of wool, and a leading exporter of cheese. These figures shows that how much potential is there for cattle industries as well as those associated with the cattle farming directly, such as dairy farming industry.

If the Government's approval for the bid by Chinese company is not overturned in the high court, it will have far reaching positive impact on the economy of New Zealand. Given the potential described above which New Zealand's economy possesses in dairy farming industry, foreign investment must be encouraged which will in turn ensure the exchange rate stability in the country and increase investor's confidence, local and foreigners' alike. The proposed law will surely result in the under-recognition of the contribution inward FDI can potentially make in the kiwi economy. If high court do not overturn the bid of Chinese company, the decision will result in capital inflows from other companies (including Chinese company's direct investment), technology transfer and employment generation. This foreign investment will likely to improve the competitiveness of foreign owned but locally based affiliate as compared to local competitors. For instance, access to international markets and foreign resources through the parent company will allow an affiliate company to compete more effectively in the local market. Moreover, the technology that Chinese company will bring will likely to ...