Silicon Valley of the South Seas

A new bridge is being built towards the West.

It will modernise the Kiwi market and a new era of globalisation.

It could hold the potential to make New Zealand a worldwide hub of trade and innovation.

And this bridge opens its gates in only a few days.

I’ll tell you all about it in a moment, but first — the backstory.

 

Distant Corner of the World

From the 1850s until the 1970s, New Zealand’s economy was reliant on a few major goods — namely, wool, meat, and dairy.

These few core exports helped drive New Zealand to an era of prosperity, which peaked in the early 1950s with the NZ Wool Boom of 1951.

For most Kiwis, the standard of living was great. People lived comfortably. Products made in New Zealand were held in high esteem around the world.

Around 1970, the local market took a turn for the worse. New Zealand’s main trading partner, the UK, turned its import eye towards its new European buddies. Kiwi exports tumbled. GDP (gross domestic product) was in a free fall.

And it continued to decline for over a decade. Bankruptcy was a real concern. The future of New Zealand appeared hopeless.

Then in 1984, we entered into the era of ‘Rogernomics’. As the Minister of Finance, Roger Douglas led a radical transformation of restructuring, deregulation, tight monetary policy, and a floating exchange rate.

It was a painful, but relatively successful operation.

The tides began to turn and by the end of the 1990s, New Zealand was considered one of the most free, most business-friendly countries in the world.

But while that was true, we remained the runt of the litter… sitting in the shadows of the major trade powers in America and Europe.

Most folks figured it was distance that was holding us back. That we’d never tap into most markets because we were simply too far away.

Well, that’s changing….

Thanks to the new bridge to the West.

I’m not talking about an actual bridge, of course (although that would be cool).

No, I’m talking about a bridge of light.

A 27mm-wide bridge of light-speed fibre optics called the Hawaiki cable.

This new cable connects New Zealand to the west coast of the United States, near Portland, Oregon.

It crosses the Pacific, connecting Hawaii, American Samoa, Fiji, New Caledonia, Tonga, Australia, and New Zealand.

It’s the latest and greatest cable to ever cross the Pacific Ocean’s floor.

The half billion-dollar cable is capable of 43 terabit-per-second data transfers. That is eight times better than the current Southern Cross cable (Which was laid in 2000).

Why does it matter?

Because now, for the first time since the dotcom boom, New Zealand has a real chance at competing with the major trade players.

Not with dairy or wool.

Rather, with technology and services.

You see, New Zealand is one of the last remaining developed nations with an agricultural economy.

Sure other countries produce a lot more, but it’s rarely a significant percentage of their exports.

New Zealand has been the exception…until now.

 

A Technological Revolution Is Coming

In the near future, maybe even this winter, you’ll start to experience the positive effects of the Hawaiki cable.

It not only offers us a much better way to connect to the internet, it gives us our second connection.

Why is that important?

Tech companies can be hesitant to set up shop here because, up until now, there’s only been one halfway decent cable connecting us to the rest of the world.

If it goes down, which does happen, there hasn’t been a great back up.

So obviously if you run an internet-reliant business, that sort of vulnerability could be a deal-breaker.

Now, we have two: a more powerful Hawaiki cable and a secondary, older Southern Cross cable.

This is the sort of infrastructure that can make New Zealand an attractive locale for budding tech startups and major tech campuses alike.

It means that Kiwis can compete with tech hubs like California, Ireland, and India to provide modern services.

And one of our unique selling points can be our location.

Yes, our weakness has become our strength indeed.

Who better to say it than the man who built New Zealand’s first connection to the internet in 1989, John Houlker:

My pitch has long been that New Zealand could export computing – green, safe and trusted… Computing powered by renewable energy sources. We’re politically safe and a very long way from the world’s trouble centres. We have good laws on data privacy and protection.

The point is that we’re safe, isolated, and have favourable laws.

A true haven in the internet era.

 

The Benefit for Investors

For Kiwi investors, this mega-trend could be the next gold rush.

My guess is that it will start in Auckland since it’s near the connection point for the new transoceanic cable.

You’ll probably see new infrastructure go up in the area…followed by new businesses.

Data, support, software development, and more.

The whole tech industry is primed to explode…and to me, it looks like this Hawaiki cable could be the spark that sets it all off.

We’ll keep an eye on it for you.

Look out for your next issues of Money Morning New Zealand for future updates.

 

Cheers,

Taylor Kee
Editor, Money Morning New Zealand


Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.


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