NZD25m Trade Bond Boost For New Zealand's Exporters

by Mary Swire, Tax-News.com, Hong Kong

06 July 2009

New Zealand's government has extended a key trade guarantee paving the way for more New Zealand exporters to sell their goods and services to United States authorities, Finance Minister Bill English has announced.

Currently, companies selling their products to US government bodies must provide a bond issued by a registered US company to pay for shortfalls in the event their product does not measure up as promised - however, US surety bond companies are reluctant to guarantee New Zealand firms.

From this week the Export Credit Office's United States Surety Bond programme will be increased from NZD75m (USD48m) to NZD100m (USD64m).

"Without the Export Credit Office underwrite firms like Auckland baggage-handling systems operator Glidepath and Christchurch real-time public transport information company Connexionz would have been unable to tender and win multi-million dollar contracts," Mr English explained, adding:

"This NZD25m (USD16m) increase provides a lifeline to several more exporters who want to enter into a contract with US authorities, but lack a bond. That will help them increase earnings and keep New Zealanders in jobs."

"This government has made it clear that one of the best ways to support jobs and ensure New Zealand grows strongly out of the recession is to reduce borrowing and consumption and increase exports and investment. Supporting our exporters in the face of the global credit crunch will help achieve that," he finished.

The initiative is part of a suite of measures aimed at supporting small and medium-sized firms during the recession. They include:

• The establishment of a NZD50m (USD32m) Short-term Export Trade Credit Guarantee in February;
• The extension of that guarantee last week to NZD150m (USD96m) due to high demand;
• The government's NZD480m (USD307m) small business assistance package aimed at making it simpler and less expensive for firms to pay their tax; and
• Reviews of major regulatory legislation to minimize red tape.

Both the surety bond programme and the short-term trade credit guarantee incur a cost to the Crown only in the event of a default. The NZD25m (USD16m) increase is being managed through a reallocation from two of the Export Credit Office's less utilized guarantee products.

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