

Twenty-five years after Professor Ross Garnaut’s landmark Asia report highlighted the trade and business opportunities of Asia, Australian business is largely ignoring the Asian boom, according to a thought provoking report by PwC titled, Passing Us By.
According to the report, Australian business invested more in New Zealand — a country of less than 4.5 million people and 2.5% GDP growth last year — than we have in both China or Indonesia, which have been growing at around 7-8% and 5-6% respectively for the last five years. In fact at the end of 2013 our total stock of foreign direct investment was more than all ASEAN countries combined.
The report finds less than 10% of Australian companies are actually operating in Asia, and two thirds declaring they had no intention to change.
And while half of the bigger companies surveyed had Asia interests, only a quarter of big companies actually have invested into operations and people in the region.
This poor effective engagement with the booming Asian marketplaces is masked by Australia’s strong trade relationship with the region. Asia accounts for 70% of Australia’s exports and six out of 10 of our largest export markets are in Asia.
“Trade is mostly natural resources and that is the issue. We trade with Asia but we don’t do business with Asia.”Trade is mostly natural resources and that is the issue. We trade with Asia but we don’t do business with Asia.
The report suggests that despite a generation of government programs to deepen relationships with Asian business, Australia Inc. has largely failed to generate effective long term multi-lateral commercial engagement. A survey of 1000 Australian companies commissioned for the report revealed poor knowledge of public agencies established to facilitate these relationships, such as Austrade, and an even worse knowledge of sources of non-government advice.
Other reports on Asian language and education also reveal we have gone backwards. Only about an estimated 1000 students studied Indonesian this year for their final high school exam, levels not seen since the early 1970s. Equally damning is that there were more Latin students (200) than non-native Chinese (150) VCE students in Victoria in 2012 — in a state many think has the best Chinese language program in the country.
The previous government’s Australia in the Asian Century white paper — largely authored by the former Treasury chief Ken Henry — detailed an all-of-government approach. Few of the recommendations were implemented and the associated website was quickly archived by the new government. In its place has been a strong emphasis on free trade agreements and a resurrection of the Columbo plan for undergraduate scholarships in the region.
The recent free trade deals with Japan and China negotiated by Trade Minister Andrew Robb and his department will open up important opportunities, especially in the service sector. Robb has spoken about the asymmetry in our trade profile, with Australian largely a service based economy but with our exports heavily weighted to resources.
The Passing Us By report reveals a familiar anxiety list about Asian commerce: corruption, cultural differences, uneven playing fields, legal barriers and trade barriers.
Interestingly, perceived barriers are the same — in terms of the order of importance — whether or not a business has actual experience in Asia or not.
This suggests there is a consistent “folklore” that circulates in Australian business circles and permeates — and perpetuates — the discourse about the challenges of doing business in Asia.
“If we are to participate in the growing consumer markets in Asia as more than a farm or quarry, we need to actively engage and invest more in Asian countries. But our level of investment in Asia is woeful.”
But the provocative question is why has Australian business been so reluctant to embrace the obvious opportunities and what, if anything, can the government do about it?
The relative strength of the Australian economy has enabled many local businesses to grow off the back of domestic demand but as the mining investment boom fades we are missing a much bigger opportunity to prosper from the rapid increase in Asia’s middle classes.
Our argument is simple: Australian business needs to invest in Asia if we are to going to do business in Asia.
The report details important lessons from businesses wanting to work in Asia laying out a long-term approach to investment in time, culture, relationships and market development. These capabilities are not short term, suggesting the yawning gap around real engagement with Asia — beyond commodities — is going to continue for the foreseeable future.
The playing ground is not static. Many Asian companies are exploiting their advantages and emerging as major participants in intra regional markets. Japan and China companies in particular are learning the nuances and opportunities in the fast growing ASEAN markets.
This suggests the opportunity is not one Australia Inc. can take up at a later stage. Already late to the game, the hard-headed question is, can we catch up and what if any thing can government do that will make a difference?
Passing Us By can be downloaded from the Australian PwC site