Having just spent five weeks in Asia and Australia I was interested in the widely held view that Australia is very much a part of the Asian scene and that is where the country’s future is located.
My instinct was to probe a bit further, not least of all to gain more knowledge about the driving forces that are underlying the views being taken and forming an opinion about investment in the leasing and asset finance business in the region.
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My first port of call was the Australian prime minister Julia Gillard’s recently released white paper Australia in the Asian Century. The white paper clearly affirms that Australia’s future lies with Asia, and predicates that there are huge economic opportunities for Australia for the taking.
However it seems by no means certain that the existing government will be re-elected; the prime minister has gone for the ‘long game’ and announced an election for September 2013, a seemingly brave move as much can happen in that timescale.
The white paper links the nation’s strategy of becoming a competitive force within the region through skills development, innovation, infrastructure, the tax system, regulatory reform, and sustainability. However, before a nation, or indeed a company, can become a competitive force, it must have an accepted place in the region, and Asia is a huge mixture of cultures not all of which sit easily with those of Australia.
On this key strategy of integrating into Asia, the white paper does very little more than provide a rallying call for Australians to come out and make it happen.
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By GlobalDataThe paper also relies on ‘faith’, where most of the points made are written with the expectation that Australia will win out of closer ties with Asia without necessarily giving much back in exchange – such as Australia having closer ties with Asian universities in order to attract students and skilled workers. That seems rather one-way and perhaps over-optimistic.
Continuing the theme of culture, there do seem to be some political divisions emerging which might have been avoided. China is now so important to Australian trade, investment, and tourism, yet Australia is to some extent still niggling China with its staunch loyalty to the US.
Local perception is that China saved Australia from a deep recession with demand for minerals whereas the US brought the Australian government anguish over the involvement in Iraq and Afghanistan. My reading of the situation would be that China would prefer to deal with an Australia with a mature and independent foreign policy rather than an enthusiastic supporter of US foreign policy.
After decades of successive changes in government foreign and trade policy, it seems that Australia still does not have any embedded position within the Asian region. The influence of Australian business and financial institutions in the region is minor, and nowhere near the critical mass needed to become a competitive force in the region.
The only exception is in the mining sector, which for all intents and purposes has made the Australian economy very dependent upon demand in Asia, particularly China.
In the 1990s the government pushed hard and made a concerted effort to embed Australia within the region. This had some positive effect with Indonesia and a few others in the region, but had setbacks over relations with Malaysia’s former premier Mahathir Mohamad which soured relations with that country for a number of years. However perceptively, all these gains were lost when John Howard came to power in 1996 reaffirming the Canberra-Washington link, earning the label for Australia as the US’s deputy sheriff in Asia.
The Australian relationship with the region is one where Australia needs the region more than the region needs Australia. The Australian market is small compared to other markets and of little interest to regional exporters who prefer to put their efforts into the larger markets of China, Japan, the EU and the US.
It will take much more than a massive investment in skills and education to be able to engage the Asian region, let alone to be competitive.
One of the major barriers Australia has to overcome is its belief that its own cultural values are in some way more advanced than those of its Asian neighbours. It’s not about learning Asian languages but about understanding and respecting different points of view, approaches, and mindsets. Care needs to be taken that the white paper is not seen as only a means for Australia to use Asia to become a ‘top 10’ country.
When Hong Kong was handed back to China in 1997 it was interesting to see some global companies moving their regional headquarters away to Singapore, Shanghai and Sydney. Most have now moved back to Hong Kong, and whereas Singapore and Shanghai are still popular for regional HQs, Sydney is not.
Derek Soper is chairman of IAA-Advisory
