Kiwi firm gets Five Eyes’ tick by avoiding China
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, 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 arrangement between New Zealand, Australia, 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, a Gallagher strength is the fact its manufacturing operation is based in Waikato. ‘‘We actually deliberately decided to invest in automation ... so we could bring home some commodity-based manufacturing from China,’’ Betham said. ‘‘In fact the only reason we are in the US Government right now, and Five Eyes countries, is because we did not go and 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 does 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 up the risks of manufacturing in China and be mindful of their social responsibilities.
Allegations of genocide and human rights abuse in Xinjiang, in China, had prompted international 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. Tech companies opting to manufacture in China could be subject to concerns their software or hardware had ‘‘back doors’’ that 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, especially around concerns like human rights. 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 people in the Waikato in technology, to ensuring the highest levels of product quality. Despite its global reputation, Gallagher had only three-quarters of a per cent of the security sector worldwide, so the opportunity to grow was significant.
Minister for the Digital Economy and Communications David Clark said the pandemic had highlighted the importance of technology. He said New Zealand was trusted on the world stage and often found itself at the international trade table because it was regarded as an honest broker. ‘‘I think some of the work Gallagher is doing is a real illustration of the trust we have around the world.’’
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 – the language of international business – 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 said.