A Unified Approach
Despite appearances, Australian businesses are failing to adequately engage with Asia and greater focus must be placed on the adoption of a national approach to building Asian relationships, writes Angela Faherty.
Australian businesses need to forge greater ties with Asia as current relationships are not strong enough, particularly in light of growing competition from other countries around the world, claims IAG’s chief executive officer, Mike Wilkins. Speaking at a Trans-Tasman Business Circle Luncheon in Sydney last month, the insurance leader told delegates that while political and media agendas suggest that Australia and Asia have an unbreakable tie, the truth is very different. “The average Australian could be forgiven for thinking that as a nation, Australia is incredibly engaged with Asia; all we need to do is climb on board the gravy train and wait to cash the cheque from its newfound and insatiable demand for goods and services,” he said.
“As CEO of a company that has been in Asia for 15 years, I can assure everyone it is somewhat more complex than that. “While it is impossible to open a newspaper without reference to the new Asian powerhouse economies, one would assume Australian business has heeded the call from the Asian Century White Paper that they must become fully part of the region.” “Indeed, with The Asian Development Bank estimating that by 2030 Asia’s annual consumption will reach $32 trillion – almost half of all global consumption – it is difficult to see business doing otherwise,” he added.
Reality v hype
Despite this, Wilkins was keen to point out that the reality doesn’t match the hype and that Australian businesses are in fact less engaged with Asia than many may think. To illustrate his point, Wilkins quoted figures that show that Australian companies poured more money into Britain last year than they did across the whole of Asia. “Almost $8 billion was invested in Britain while the combined total across Asia was a little over $6 billion,” he said. “If you look at it country by country the results are similarly surprising. If we highlight China, new Australian investment totalled $780 million – Aussie spending was higher in Finland, Norway, Mexico and Luxembourg. India received less again – around $450 million.” Wilkins said the same holds true with investment into Australia. He said US companies sent around $13 billion into the country, while British companies invested $10.5 billion. “China totalled almost $4 billion – considerably down from its 2009 peak,” he added. Equally important, said Wilkins, is the types of companies that are making Asia fundamental to their operations. He said the top 50 Australian companies by Asian revenue are unsurprisingly dominated by resources and steel companies. Nineteen are in resources, a further eight are in construction and 15 are service providers.
While Wilkins was quick to praise “the good work of Australian mining and resources companies that are helping to build the necessary infrastructure to underpin our Asian neighbour’s new economic status”, he stressed that after the roads, railways, housing, airports and everything else that comes with a rapidly expanding economy are built, the country is yet to cultivate meaningful across economy engagement in a sustainable way that drives long-term value for both parties. “Drilling, mining and resources require getting the asset out of the ground here and shipping it away.
Unlike other industries, such as financial services, they don’t require a large on-the-ground presence, local management, distribution footprint and, most importantly, the large scale employment of a local workforce. “This is certainly not an attempt to criticise the good work of Australian mining and resources companies, but it does mean that real relationship building that comes from being integrated in the community is not taking place in the way newspaper headlines imply,” he said.
Wilkins stressed that while many business conversations are based on what and how much to sell, he said Australia needs to develop a strategy that focuses more on the longer term. “The time to get in and build relationships and networks is now – or more realistically yesterday. The window won’t be open forever. We have to remember that yes, geographically we have a natural advantage, but when the prize is this big it is worth fighting for and countries around the world have the same idea as us. “Unfortunately, I think the work that we still have to do in shifting a mindset was demonstrated most obviously when fewer than 10 Australian businesses made a submission on to the government’s Asian Century White Paper; an unfortunate response,” he added. Wilkins was quick to add that it is not just Australian business that has work to do if it is to truly engage with Asia. Citing the education sector as an example, he said the relationships Australia has with Asia are imbalanced with only around 500 Australians studying in Indonesia today, compared to the 20,000 Indonesians studying here. “Fewer students study the Indonesian language today than in the 70s as successive governments have found Asian languages a vexed and costly issue for our educators. And this is not something you can flick a switch to fix. Finding and funding teachers and putting a generation of Australians through an Asian focused curriculum is a twenty year prospect, and by then the realities of both our countries will have irrevocably changed,” he said.
A national vision
Wilkins warned that despite the figures, he remains incredibly optimistic about the potential of the Asian Century for both IAG and Australia generally, but said there is a need for a national vision for Asia and a clear agenda on how it will be achieved. “My fear is that right now Asia is seen by many as a convenient buffer for Australia against the global financial issues affecting many other countries – a fortunate coincidence,” he said. Referring to IAG’s experience in Asia, Wilkins said setting the agenda for success was imperative, but warned that businesses must not become complacent. Having a strategy is vital while a clear vision on how this will be achieved it critical.
“Just like entering any new market you need to have a well thought out strategy and ask yourself why you are there. IAG has had a very slow and deliberate strategy with a view to driving long term value – success is built around patience and realistic expectations,” he said. Similarly, Wilkins said, businesses need to do some honest self-assessment and consider what existing Asia capabilities they hold, what the gaps are and how they can be filled. “Are your employees “Asia capable” – sophisticated in cross-cultural communication skills, comfortable with new ways of working and with a mindset that is open and empathetic? You and your employees will need to go in with an open mind and leave at home your pre-conceived ideas about the way things be done.
“For a number of reasons – including foreign ownership restrictions and wanting to take advantage of local knowledge and established distribution networks – we have largely established our presence in Asia through joint ventures. Capabilities are best leveraged when shared,” he said. Closing the discussion, Wilkins reiterated his beliefs that Australia is not truly engaged with Asia and stressed the importance of acting on the opportunities that are available now before it is too late. “Our country’s future success in Asia requires relationships at every level. All groups should be engaging – business, governments, educational institutions, cultural organisations, tourism bodies, sporting groups and even social groups. At its simplest, the Asian Century is about setting up our young people for their best possible life – and we all have a role to play in making that a reality,” he said.
- Asian Markets,
- IAG, Mike Wilkins, Trans-Tasman Business Circle Luncheon, Asian relationships, Asian powerhouse economies
- Angela Faherty
- Article Posted:
- July 01, 2013
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