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Engaging with Asia – Australia’s Risks and Opportunities

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Engaging with AsiaBy Martin Conboy. As the powerhouse economies of India and China continue to move ahead and impact the economic development of the rest of Asia and indeed the world, what will it mean for Australia’s long-term future? There’s plenty of talk about trade opportunities, but what goods and services can Australia sell into these complex, fast moving markets? And how hard will that be?

We’re supposedly in the Asian Century. Two years ago the Labour government under Prime Minister Julia Gillard launched the Asian Century White Paper as a starting point for discussions on how Australia should engage with our neighbours to the North. With the election of the new conservative government that material appears to have been archived. Does that mean the opportunities and risks raised in the document are now forgotten? Let’s hope not!

If Australia ignores or is complacent about what’s happening to our north, we do so at our peril, as the Asian Century whitepaper explains:

“Within only a few years, Asia will not only be the world’s largest producer of goods and services, it will also be the world’s largest consumer of them. It is already the most populous region in the world. In the future, it will also be home to the majority of the world’s middle class.”

The rise of the Asian middle-class

The governments of India, China, The Philippines, Malaysia etc. are investing heavily in the education and development of their professional and middle class workforces.  How will this continuing rise of highly educated professionals and middle class Asian workers compete with Australia’s? Numerous IT and technology hubs are emerging all over Asia, (e.g. CyberJaya in Malaysia) where many more jobs in technology, research and science are likely to be offshored in the near future.

Economically, Australia is still strong, with many key strengths, particularly in the resources and mining sector as well as agriculture, education and tourism. But that’s part of the problem. Our economy is skewed with over 80% of Australia’s wealth actually generated in the CBDs of our major metropolitan areas from largely service-based industries, such as finance, education, technology, travel, hospitality etc.

If our service based industries are to survive, we need to engage with Asia in a more sophisticated way than merely selling raw materials and commodity products to fuel their factories. We need to think about how we value add. There is no point selling cotton to Asia only to but it back in manufactured clothing.

Building an economy based on innovation

Like Asia, we need to invest in our people and become more innovative in the way we design, produce and deliver goods and services across a range of industry sectors, identifying areas to specialise in and develop. This also means planning and developing the infrastructure necessary to drive innovation and raise the value of the goods and services provided by the Australian economy.

It also means taking risks. We can’t rely exclusively on our mineral resources and agricultural products to see us through the good as well as bad times. An entrepreneurial and can do culture needs to be fostered across organisations, that will drive the development of new products and services in areas such as finance, human resources, IT, design and especially health.

The emerging middle class of Asia will have many of the same needs, wants and desires as those in the West. They will want access to more entertainment and leisure activities, finance and insurance products, travel, medical, professional childcare, etc. There are plenty of opportunities emerging for Australian individuals, firms and institutions to leverage their existing skills, knowledge and expertise to deliver and develop services in these areas for Asian markets.

Engaging with Asia

Our future not only depends on Asia we need Asia. Yes it is true, our current trade with Asia is robust and Australians are taking more holidays there but our fundamental understanding of its widely different cultures remains limited. We often tend to look at Asia as one large homogenous market. We need workforces and management teams that have a better understanding of Asian cultures and how business to the North of us is conducted. Greater cultural understanding of our Northern neighbours is required to enable greater engagement with their fast growing economies.

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October 6, 2014
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