Three experts explore how Australia is faring.
One point is increasingly clear as Australian businesses seek to benefit from high growth in the economies of nations such as China, India and Indonesia. Proximity to the region on its own will not guarantee success.
In the Asian Century
, most businesses will need to be innovative and efficient to prosper.
The Australian Government commissioned former Treasury secretary Ken Henry to write a white paper examining Australia’s place in Asia. Released in October, it emphasises the importance of exploring opportunities in agriculture, tourism, banking and financial services, science and technology, sport, education and manufacturing.
It also calls for more government investment to fund Asian language classes in Australian schools and develop an “Asia-capable workforce”. The paper set a target, too, of a third of all ASX 200 directorships being filled by executives with Asian experience to help companies navigate the region.
However, businesses must also take responsibility for preparing their operations and personnel for the challenge of a global economic shift as the Asian juggernaut grows.
INTHEBLACK canvasses the views of three experts on the moves Australia should be making to take full advantage of the Asian Century.
Enright: 'Australian companies need to become more
knowledgeable about Asia and its economies."
University of Hong Kong, www.hku.hk
The rise of Asia is real and sustainable, emphasises Professor Michael Enright. In 2000, he says, Asia accounted for about 20 per cent of global GDP but by 2030 that figure is expected to increase to about 35 per cent.
“Basically the vast majority of growth in the global economy over the next 20 or 30 years is expected to come from Asia,” Enright notes.
That’s welcome news for Australia, as its proximity to Asia overcomes the nation’s traditional disadvantage of distance from markets such as the US and Europe. However, Enright cautions that while Australia’s resources companies understand the region and are well placed to take advantage of its growth, most other Australian businesses are not truly engaged with Asia.
“We see relatively few multinational Australian companies with significant operations around Asia and relatively few Australian companies being able to leverage Asian production systems for global markets,” he says.
Here lies the anomaly, Enright believes, because many individual Australian business leaders and executives are well represented and highly regarded in Asia.
“When I travel around Asia, the senior management ranks of major international companies and of major professional service firms are full of Australians.” One answer is for more Australian companies to bring the country’s international talent back into the domestic fold.
Looking at Australia’s small and medium businesses, might they find it difficult to break into the massive, and massively diverse, Asian market? Small-to-medium enterprises (SMEs) need to overcome scale, technological and cultural obstacles and globalise their operations – and to that end, Enright says government programs that provide the right advice, as well as diplomatic connections and language training in schools, are crucial.
Like-minded small companies might form groups and target Asian markets, with government assistance, as a collective entity, he suggests.
“A single SME going abroad – who cares? But you get a group of 20 or 30 and you develop a strategy for an entire industry or set of companies from an industry to start going abroad … then you’re talking about something that’s potentially more significant.”
Many Australian companies require a mind shift with regard to Asia, Enright says. They need to become more knowledgeable about Asia and its economies, visit the region more regularly and hire employees with Asian experience.
“I don’t detect significant numbers of Australian companies generating knowledge and intellectual property in Australia, and then using the productive resources that are available throughout Asia to leverage their IP into products and or services that then capture global markets.”
The truth is that “Australia is not going to fall off a cliff” even if it does not position itself properly. “Can Australia get the Asian Century wrong and survive? The answer is yes. But to me it’s a matter of opportunity. There’s enormous opportunity – and the stakes for getting it right in terms of realising that opportunity are enormous.”
Michael Enright is a professor in the School of Business at the University of Hong Kong and is regarded as one of the world’s leading business strategists. Professor Enright has conducted major research on Australia’s international competitiveness for CPA Australia. The result is the book Australia's Competitiveness: From Lucky Country to Competitive Country.
Bell: "Building connections within Asia is crucial for business
Robert Bell has no doubt that the Asian Century presents business prospects on an unprecedented scale – and Australia is perfectly positioned to benefit.
“It’s not a case of Australia winning, or the US or Europe winning – the size of the opportunity is there for everyone to leverage,” Bell says.
“Australia is seen as a very stable country. It’s had a relatively strong economy throughout the global financial crisis and we’re very well placed in terms of the home base to succeed in Asia.”
How businesses take advantage of the opportunities is now the challenge, Bell observes. There are clear examples of Australian companies in mining, education, agriculture and the professional services space working successfully in Asia, but there’s significant scope for further growth. Agriculture is “the next big opportunity for Australia given the growing appetite, literally, for product”, he believes.
“At the same time there are obviously big challenges [to be overcome] in agriculture in Australia – capital constraints, skills shortages, inefficient water markets and land use issues, for example.”
Collaboration between government and business is vital in this climate. ANZ, which aims to become a super regional bank, has recently been involved in a Victorian Government trade mission to China promoting 400 businesses. “We’d never have thought of that happening three or four years ago.”
Bell urges businesses to help increase their employees’ Asian-language capabilities, while hiring executives with Asian experience is a logical, smart move.
“The other thing that’s important in Asia is long-term commitment – one of the worst things you can do is grow rapidly, then suddenly pull out or scale back.”
To continually enhance its own engagement in the region, ANZ recruits heavily among executives and employees with Asian experience. It rotates staff through the Asia-Pacific region to build their business and cultural understanding of the area and educates employees on its Asian operations and customers. Bell recently led a 10-day immersion tour to China where employees learned about everything from catching trains to local food, opening a bank account and how Australian businesses are operating in the country.
Equally, Bell believes building connections within Asia is crucial for business success. He urges taking advantage of the Austrade representatives on the ground and maximising the scope of contacts and advisers.
“For example, if a company was looking to set up in China we’d introduce them to a banker in China, but also connect them with our contacts – the advisers we know and trust, accountants, lawyers and general business,” he says.
In other areas, Bell advises businesses to conduct rigorous reviews of their infrastructure and supply chains, noting that declining performance and increasing costs for major supply chains is putting competitiveness at risk.
They should also assess their trading arrangements, Bell says, noting that many foreign businesses are still trading in US dollars when dealing in China.
“We’re working with customers to look at perhaps trading in renminbi and believe many can achieve better trade terms by doing that. Those sorts of insights can help a huge range of companies either get a better price for the product they sell, or a better price for a product they’re importing.”
Most of all, Bell reminds businesses that a one-size-fits-all approach will rarely work in Asia.
“For example, the provinces within China are vastly different. Getting people comfortable with dealing with Asia as a collection of countries is really important.”
Robert Bell is head of Super Regional Business Development at ANZ, a role that includes responsibility for helping the bank’s clients grow their businesses in Asia.
Australian Centre for Asian Business, www.unisa.edu.au/business/IGSB/ACAB
Competing in the Asian Century will require Australia to work harder and smarter while developing a stronger cultural understanding of the region, according to Professor Ying Zhu.
In the past, Australia has missed out on “so many opportunities” in Asia because of a lack of competitiveness. The imperative now is to respond and re-engage with Asian nations, Zhu argues.
He believes the release of the Australian Government’s white paper on the nation’s role in the Asian Century sends an important signal to the region.
“It provides us with a better image and better reputation in the Asian region because it shows we want to be engaged. The tone has changed from the older concept that we are [America’s] ‘deputy sheriff’ in the Asia-Pacific region,” says Zhu, quoting the term adopted by former Australian prime minister John Howard.
“We now say we are a partner of the region. That is a very good attitude.”
As “grassroots ambassadors” who engage with Asia, Zhu says business people will play a crucial role in forging stronger regional relationships. Institutions such as the Centre for Asian Business are well placed to build bridges between Australian business, government and academic institutions and their Asian counterparts, as well as provide training for those looking to engage with Asia.
“It’s important to have substance rather than just slogans about the fact that we want to learn Asian culture, we want to learn Asian language,” he says. This substance can mean initiatives such as educating Australian children in Asian languages and culture from school through to university, funded by businesses and governments.
“If the Asian Century is our future then the business world benefits from that – and to benefit is to share the cost,” Zhu says.
A focus on Asian studies – and even feng shui, the Chinese philosophy of creating living and working environments in harmony with nature – in degrees such as engineering or architecture will also aid the smooth entry of Australian graduates into Asian countries.
“In Asia they’re building airports, ports, residential, industrial, commercial, shopping malls ... so in the future, urban development or architectural study in Australia should have a flavour of Asia,” Zhu says.
He adds that Australia should learn from its declining car manufacturing industry, refocusing as the sector appreciates it cannot compete with cheap labour or a market the size of Asia. Australia could look to ICT, defence industries or renewable energy technologies as smart manufacturing hot spots for the Asian Century.
Australia has considerable strengths, Zhu points out.
“Our clean image is the most important thing – clean air, water, soil, environment, city, countryside. This gives us cutting-edge advantages when selling wine, food, tourism, education and everything related to that clean image. Asia needs that.”
Professor Ying Zhu is director at the Australian Centre for Asian Business at the University of South Australia. Zhu’s former roles have included research fellow at the Shenzhen Special Economic Zone Development Company in China.
Australia must engage better with Asian governments and businesses.
Stronger networks and greater cultural understanding of Asia is essential for Australian businesses.
Wooing Australian professionals with Asian experience back to domestic operations should be a priority.
Smaller businesses are advised to form cooperatives with like-minded companies to target Asian markets.
This article is from the February 2013 issue of INTHEBLACK magazine.