The ASEAN-Australia Business Summit’s CEO Forum on 17 March, which I attended, provided a fantastic dialogue on the opportunities lying right on our doorstep.
The key takeaway for me was a reminder of the opportunity the ASEAN region presents for Australian businesses. In less than two decades, ASEAN’s combined GDP has more than doubled, accompanied by rapid growth in consumer spending, urbanisation and Internet penetration.
PwC’s economic modelling predicts that four of the world’s five largest economies measured in Purchasing Power Parity (PPP) terms will be in our region by 2030, just a decade and a half from now. Those economies – China, Japan, India and ASEAN member Indonesia – will produce half of the world’s economic output and will be home to a staggering 3.5 billion middle class consumers.
These consumers will have an enormous impact on the living standards of Australians. The next 25 years should be a story of consumption and services, but our economic relationships in the region are still built around our exports of bulk commodities.
This is because Australia still seems to be asleep at the wheel when it comes to growth opportunities in our region.
While six of our top 10 trading partners are in Asia, and ASEAN as a group is our second largest trading partner ($93 billion), Australian businesses have invested more in New Zealand ($67 billion at the end of 2016) than they have in all 10 ASEAN countries combined ($38 billion).
Incredibly, Indonesia, with a GDP of $US 932 billion or three quarters of an Australian economy, doesn’t make it into our top 10 two-way trading partners.
To turn this around we will have to change the way we do business and take some calculated risks in the region. The operating environment is not straightforward, and the opportunities are not risk-free, but growth is never a risk-free proposition.
A number of infrastructure announcements were made off the back of the Summit which lay the foundation for deeper engagement with the region:
- the ASEAN-Australia Infrastructure Cooperation initiative to develop a pipeline of high-quality infrastructure projects, to attract private and public investment and improve regional connectivity;
- an ASEAN linkage to the Sydney-based G20 Global Infrastructure Hub to increase collaboration between the public sector and private investors towards funding ASEAN infrastructure projects; and
- $30 million investment to support the development of "smart cities" across Southeast Asia.
These announcements hold a lot of promise, but Australian businesses have a lot of groundwork to do before they can reap the benefits.
Firstly, we need to understand the nuances of ASEAN member countries. The recent report titled Match Fit, produced by AsiaLink, PWC and the Institute of Managers and Leaders, is the latest report card to say Australian businesses do not understand Asia. The report found that a staggering nine out of 10 ASX200 companies were not “Asia capable”.
We also need to operate where the consumers are, which means putting more boots on the ground in the region.
The next 25 years could be spectacular for Australia, but the Asia Century won’t wait for us to wake up and move into the fast lane.