Executive Summary
The major economies of South-East Asia are in the throes of an Industrial
Revolution. It will enhance national self-confidence in the region, capture
the world's attention, and lead Australians to examine closely their national
interests. It has the potential to change the course of regional economic
development and has profound implications for Australia's long-term
commercial, political and security interests.
The rapid onset of industrialisation in the region of the world closest to
Australia brings with it important challenges for business, as well as for
foreign and trade policy. A more prosperous, outward-looking region presents
Australia with major commercial opportunities. The task is to build on the
assets and strengths which Australia brings to its relationships with members
of the region and to become an important part of the great transformation that
is under way there.
Australia has responded to the changes in South-East Asia at many different
levels. Its exports to South-East Asia are rising more quickly than to any
other part of the world. Significantly, manufactures and service exports are
rising more quickly than standard bulk commodities, indicating that new
complementarities are being created as both Australia and the region undertake
structural change and become more outward-looking. Australia has strengthened
its political and diplomatic ties with states of the region through expanded
dialogue with ASEAN, its contribution to a settlement of the Cambodian
conflict and to the formation of APEC, which has become the major economic
forum for the Asia-Pacific region.
In the 1990s, South-East Asia will continue to be one of the fastest
growing parts of the world economy and that fast growth will translate into
rapidly increasing opportunities for countries dealing with the region,
including Australia. But competition will be substantial.
This study is a part of the response to change in the region and underlines
Australia's commitment to building on the already dense framework of private,
commercial, diplomatic and high-level political links. It is a stocktake of
the recent rapid changes in the region and a look at where the region is going
over this decade. It is also a contribution to the vigorous public discussion
of what this change might mean for Australia and on ways Australia may best
position itself to respond to the business challenges ahead.
The study is divided into four parts. The first deals with growth and
structural change in South-East Asia and includes chapters on growth and
structural change, trade, financial flows, international trade policy
environment, constraints abroad, and the outlook for the 1990s.
The second deals with Australia's capacity to take advantage of
developments in the region and constraints at home. It includes chapters on
Australia's trade and investment performance, Australia's aid relations with
South-East Asia, and Australia's capacity to capture opportunities.
The third deals with commercial opportunities in the region by sector. It
includes chapters on manufacturing, agriculture, minerals and energy, and
services.
The fourth and final part deals with possible ways of responding to the
opportunities the region offers. It includes a chapter on doing business in
South-East Asia, and suggests a framework for an indicative plan of action for
strengthening Australia's commercial presence in the region.
The diversity of South-East Asia's markets, their highly specific
requirements and the extensive range of existing and prospective Australian
business interests in the region precludes any single study providing all the
detail that Australian firms will require to do business with the region. This
study's aims are more modest but still substantial: to present a comprehensive
overview of patterns of change and growth in South-East Asia and to map the
terrain of Australia's business challenge in the region.
The key findings of the study are
- Australia's business challenge is to achieve between A$17 billion and
A$27 billion in exports by the end of the decade; A$17 billion would mean
holding market share, A$27 billion would mean increasing it by 1
percentage point - growth and industrialisation are leading to bigger, more open and more
sophisticated markets for a wider range of goods and services which
Australia can supply - growth and the marked diversity in South-East Asia present Australia
with the opportunity not only to expand exports, but to change the
structure of exports giving greater emphasis to value-added manufactures
and services - Australia has assets of immense importance which it brings to the
business challenge: proximity, natural resources, high levels of education
and training, English language, its citizens of Asian origin, acknowledged
diplomatic achievements in the region, a corps of firms with a track
record of profitable activities in the region, its internationally
advanced R&D base and telecommunications and financial systems, and a
substantial foreign aid program - Australia has made much progress in fixing problems caused by decades of
insularity which had substantially eroded the value of its assets.
Reductions in trade barriers have resulted in a more open and
export-oriented economy: productivity on the waterfront and in transport
has increased, dramatically so in some instances; public enterprises which
dragged down overall productivity growth are in the process of historic
reform; inflation has been cut; diplomatic engagement has been
strengthened through joint activities in areas such as the establishment
of APEC and the search for peace in Cambodia; barriers of culture and
customs have been lowered as more Australians have visited, done business
with, learnt languages of, and married citizens from, the region - more can still be done to build on Australia's assets. Australian direct
investment in the region is a tiny fraction of its global investment so
Australia may not be realising its full commercial potential; the
microeconomic reform agenda is not complete; smaller and medium-sized
firms that could benefit are still reluctant to network and form alliances
to enter regional markets; export of higher-value manufactures and
services are people-to-people intensive and so require greater investment
in developing intimate knowledge and understanding of regional customs and
cultures; in many cases the most senior levels of management need to
understand better and be more personally engaged in markets in the region;
Australia's citizens of Asian origin are an under-utilised resource - Australia's trade performance with the region since the second half of
the 1980s demonstrates that the challenge can be met; exports have risen
faster than to any other part of the world, with manufactures and services
growing faster than the total; and market share has been held - to build on these gains and go forward will not be easy; world growth
has slowed and recovery will be gradual; broad international adherence to
the rules of open and fair trade has weakened; impediments to trade and
investment remain as obstacles to Australian business despite falling
tariffs in many parts of South-East Asia; the rapid industrialisers of the
1980s will have to adjust to the problems of success, including fiscal and
current account deficits, inflation, infrastructure bottlenecks and
shortages of skilled labour - Australia's business challenge is the community's challenge. Nothing is
more important than striving to raise Australia's international
competitiveness and pursuing excellence in all endeavours - all efforts to meet the challenge will come to little without vigorous
pursuit of low-inflation growth, outward-looking policies, and investment
to strengthen the education and training systems at all levels - government - through agencies such as diplomatic missions, Austrade,
state departments of development and trade and their overseas offices - by
opening doors in the region and providing economic analysis and market
intelligence can help to reduce the costs and uncertainty of doing
business in the region - active programs of support are also important, including through EFIC,
DIFF, the Asian Pacific Fellowship Program and EMDG, though business needs
to be more familiar with what is available and how it might be used
effectively - but in view of the diversity of markets, industries and individual
business interests there can be no single action plan by which to enhance
Australia's overall performance, or which can provide a formula for
success - detailed industry level approaches can contribute and industry
associations have a potentially important role to play in this - although a common refrain, greater government and business cooperation
in seeking to penetrate export markets seems sensible. At the end of the
day it is business that must export and invest, but government can make an
invaluable contribution by opening doors and actively seeking enhanced
access to regional markets
the National Trade Strategy forum provides a means of coordinating
activity, increasing the clarity of the voice of business in government trade
policy and development activities, and improving the circulation of
information between government and business.