For many years now we have spoken as a country about the Asia opportunity; beginning with the release of the Asian Century White Paper in 2012 by the Gillard Government, followed by ongoing and regular dialogue in the business community about the benefits of doing business in Asia. It is not a new concept or phenomenon, however, there has been much lip service to the Australia and Asia relationship over the years which hasn’t necessarily translated into action.
According to ANZ’s 2018 Asia Opportunity Report, Australian businesses could gain close to $400 billion in additional revenue to flow into their Australian operations if they make plans to operate in Asia.
The ASEAN region on its own presents even greater opportunities. ASEAN, defined as the group of countries that consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, The Philippines, Singapore, Thailand and Vietnam has a combined population of approximately 660 million. And has a combined GDP of $2.4 trillion. It is the 3rd fastest growing major Asian economy after China and India and the 5th
largest in the world. It is growing significantly faster than our own economy and with rapidly growing middle classes and a burgeoning young population, these countries are hungry for many of the services, innovations and products that Australia produces and can provide.
Yet despite the opportunities that ASEAN in particular presents, less than 10% of Australian SMEs are exporting or operating anywhere offshore. You can expect that percentage to be even smaller when you just look at Asia and ASEAN on their own.
So what’s going on?
Lack of awareness is one key problem and lack of expertise is another. Many companies are unaware of the size of the opportunities on offer and many others know that opportunities exist, but don’t know what they look like or how to capitalise on them.
But, our time is running out. Although Australia is perfectly poised to seize the ASEAN opportunity, we have been slow on the uptake and other economic powerhouses are taking notice of the region. Needless to say, competition is more fierce and ASEAN has more trade and investment partners to consider now other than Australia. Australia still boasts old views and perceptions of the region – outdated opinions where in fact the region has moved on. It is a dynamic and vibrant region with growing sophistication and international appeal.
How can we change this and seize the opportunity?
Many things have to change for us to move forward as a nation, and as a business community and adequately seize the Asia opportunity that has been in front of us for at least a decade. And we don’t have time on our side. We need to act quickly.
We need to think differently and shift our thinking. Firstly, Government needs to change its mindset and policy direction. This involves moving away from a short-termism view, because succeeding in Asia takes time, it doesn’t happen overnight. Short-termism is not naturally aligned with what it really takes to build closer Asian ties.
I have to say it is wonderful to see the WA State Government appoint an Asian Engagement Minister, in fact WA is the only state in Australia that has created such a role, however this is only a start - there is still a long way to go.
While governments across Australia talk about more SMEs growing into ASEAN, the challenge that we see and that we come up against regularly, is that businesses don’t have the funds to explore international growth. This is evident with less than 10 per cent of SMEs exporting offshore. The problem is that you have the Big 4 consultancies who charge exhorbant fees for advice on how to move into markets like Asia that are out of reach for most companies. Companies often don’t know how to go about international expansion especially into foreign markets with culture differences and tend to throw it into the too hard basket if it doesn’t pay off immediately.
There appears to be a disconnect. On the one hand, we want out businesses to go out and start prioritising Asia and seize the opportunity and we know we haven’t been successful at it in the past and we need to act. However to be successful in doing business in Asia, it takes time, commitment, energy and financial resources. For the majority of businesses (and start-ups) they either don’t see the value of the opportunities or are not prepared to invest the time and money that they simply don’t have in the first place to get a ROI from an Asia strategy. There is also a lack of understanding of the importance of adding value to the region too – just as much as taking the opportunities.
A shift in mindset is critical – we need to think differently
Education is everything and sometimes it is the lack of education and awareness of the region that prohibits successful business expansion. It is important to make the region more attainable and accessible to begin with and not so foreign and unfamiliar. Greater Asian literacy and deeper cultural intelligence is critical.
The biggest challenge we have seen from the start-up and business community is that there is a lack of funds to enter the market. Bridging loans or other incentives would help address this. Perhaps an Asian expansion grant to help companies get the kick-start that they need for ASEAN expansion is something for governments and even the banks to consider.
As part of a mindset shift, we also need to ensure that Australia shows up and is genuinely open for regional business. For this, you need new players and new perspectives. Some cities might be more equipped for this such as major metropolitans like Sydney and Melbourne, however regional cities in Australia also have the opportunity to be involved in seizing the Asian opportunity, however education, knowledge and support is key to achieve this.
Businesses also need to step-up and change their mind-set. We find many Australian businesses lack the culture awareness and intelligence to do business in the region in the first place. They approach expansion into ASEAN with an Australia lens, often without empathy and acknowledgement of local business practices.
Doing business in Asia is vastly different than doing business in Australia, and it also changes depending on what Asian country you are dealing with. Across the board though deals aren’t done in 3 meetings. It is all about peer-to-peer and people-to-people relationships, respect and commitment to the local market. They want to know that you have done your due diligence and research, and are committed to doing business in a way that fits with them. If you think you can be an overnight success in Asia, then think again.
And underpinning all of this, is the need to create a more collaborative and inclusive ecosystem that creates value for both markets. One that promotes co-creation, adds value to supply chains, promotes partnerships and has local knowledge front and centre.
In summary, Australia need Asia more than Asia need us for our future survival. The questions we need to ask ourselves: are we really serious about doing more business in Asia? Is government prepared to put long-term policies in place to foster greater Asian engagement? Are businesses prepared to learn how to do business in the region and adapt their ways to make it happen?
I certainly hope so.
Join us as we discuss these challenges and appropriate solutions on Tuesday 5th
February in a discussion led by Professor Gordon Flake of Perth USAsia at Gemstar’s Innovation Centre. Please click here
Disclaimer: All opinions are the authors own and are cmpletely independent of the Perth USAsia Centre.