Five Eyes’ tick for Gallagher

A decision by one of Waikato’s largest and longest established companies not to base its manufacturing in China helped it score security contracts in ‘‘Five Eyes’’ countries.

And a leading academic says Kiwi companies need to be increasingly mindful of the risks associated with manufacturing their products in China.

Speaking at a recent tech forum in Hamilton, Kahl Betham, the newly appointed chief executive of Gallagher Group, said the company was entrusted to protect military sites overseas, and ‘‘all the power and gas in Europe’’.

Five Eyes is an intelligence sharing deal between New Zealand, Australia, the United Kingdom, Canada and the United States. Five Eyes partners have become wary of Chinese technology, including telecommunications giant Huawei.

Aside from the company’s focus on innovation, Betham said one of Gallagher’s strengths was the fact its manufacturing operation was based in Waikato.

‘‘We deliberately decided to invest in automation ... so we could bring home some commodity-based manufacturing from China. In fact, the only reason we are in the US Government right now, and Five Eyes countries, is because we did not manufacture in China like everybody else.

‘‘Even our American competitors went there. So . . . New Zealand is an advantage. Waikato is an advantage.

‘‘So the people who are responsible for Australia, New Zealand, UK, US and Canada’s intelligence and military have stated we are the world’s best offering by buying it from us,’’ Betham said.

Gallagher did a small amount of ‘‘low consequence and low value’’ manufacturing in places such as China and Australia but its Hamilton headquarters was where about 700 staff turned ideas into reality, Betham said.

Waikato University law professor Alexander Gillespie said Kiwi companies had to weigh the risks of manufacturing in China.

Allegations of genocide and human rights abuse in Xinjiang had prompted companies such as H&M and Nike to stop using cotton sourced from the region. This had triggered threats of a consumer boycott in China.

‘‘New Zealand is an advantage. Waikato is an advantage.’’

Kahl Betham

Tech companies opting to manufacture in China could face concerns their software or hardware allowed Chinese officials remote access.

‘‘So two factors: the technology and the labour supply means companies will have to start becoming a little more aware of who they are engaging with,’’ Gillespie said.

‘‘I think it is important for companies that are operating in China to carefully consider their social responsibilities. Because the risk ... is not just a consumer backlash in China, like with Nike and H&M. The risk is . . . a consumer backlash in the Western world.’’

Betham said basing Gallagher’s manufacturing in Hamilton had many benefits: from upskilling Waikato people in technology, to ensuring the highest levels of product quality.

David Hallett, co-founder and director of Hamilton-based software specialist Company X, said the growth of the tech sector was because international customers wanted to work with New Zealand businesses.

Part of the attraction was fluency in English and the time zones aligning well with the west coast of the US. And ethically, ‘‘we are seen as one of the top in the world’’, Hallett added.