Cables from Post
From Vietnam: Getting Australian wine on the table
Australian wine exports to Vietnam were valued at $10.6 million last year. While this figure may appear modest, it belies an underlying trend of strong growth: the value of our wine exports has increased four-fold since 2011, and doubled between 2014 and 2015 alone. Like China, strong sales of mid-range Australian red wines are driving much of this growth. Wine is becoming increasingly popular among Vietnam's expanding urban middle and upper classes.
However, at a time when local demand is blossoming, Australia's market share is falling behind market leaders France and Chile, and faces increasingly stiff competition from other producing nations. Understanding which barriers may be impeding Australian market share was the focus of a recent wine roundtable held in Ho Chi Minh City as part of the inaugural Taste of Australia in Vietnam food and beverage promotion.
The discussion drew together Australian wine producers, Vietnamese importers, retailers and distributors and Department of Agriculture and Water Resources and Austrade officials. A key issue identified was a limited local understanding of Australian wine. Price and perceived prestige influenced local purchasing decisions far more than quality, favouring competitors. This was compounded by a perceived lower level of awareness of Australian wine, with ongoing promotional and educational activities being undertaken in-market by other competing wine nations.
Another challenge was the local regulatory system, with import licenses, labelling and food safety requirements adding to the complexity and cost of doing business. Accompanying the roundtable were commercial activities to promote Australian wine. These included wine tastings and business matching for the 11 Australian wine brands promoted at Taste of Australia, and sommelier training on Australian wine for Vietnamese wine professionals and distributors. Both activities sought to boost awareness of Australian wine and drive new business connections.
Having unpacked the issues around impediments to growing Australian wine's market share in Vietnam, our posts will work closely with Australian industry and stakeholders on strategies to overcome some of the barriers identified.
From Singapore: Business to benefit from Strategic Partnership
Improved mobility for business people, better access to government procurement contracts, and enhanced mutual recognition of professional qualifications are just some of the benefits that will flow to Australian business from a new package of initiatives announced by Australia and Singapore in May.
The Comprehensive Strategic Partnership aims to enhance strategic, trade, economic, defence and people to people links with Australia's largest trade and investment partner in Southeast Asia, including by integrating both economies beyond the existing Singapore-Australia Free Trade Agreement.
Trade rules in SAFTA in goods, services and investment will be updated to reflect business needs, reduce red tape and increase bilateral trade. New measures will also provide greater certainty for Australian lawyers and law firms operating in Singapore. Australia has locked in existing opportunities in the legal sector, including the ability to practice Singapore law and to work in international commercial arbitration.
Australia will also benefit from future market reforms in Singapore's legal sector, which will become SAFTA commitments. The announcement of the Partnership has generated an unprecedented level of local media interest and public commentary in Singapore, lifting the profile of the bilateral relationship and highlighting the opportunities.
From New Caledonia: Austmine Mission 2016
Building on the momentum of its inaugural 2015 mission, Austmine, in association with the Australian Consulate-General in Noumea and Austrade, led a delegation of 11 Australian mining equipment, technology and services companies to New Caledonia in March to explore developments and opportunities in the mining sector. Visits to nickel mining and refinery sites and meetings with the key nickel producers offered an insight into the local operating environment and an opportunity to discuss site management, technology, forward planning, and specific service and product offerings with local managers.
Coming at a difficult time for the resources sector locally and globally, participating Australian companies took both a longer-term business development and shorter-term solutions-focused approach to potential partnerships. Reducing the costs of production is the single biggest challenge for nickel mining-metallurgical operators in New Caledonia.
For participating companies whose expertise lies in reducing costs and new technologies for mine management, the visit was an opportunity to showcase what they can bring to industry in New Caledonia. The visit was also an opportunity to establish and build relationships in preparation for a time when the nickel crisis has passed. For both Australian and local participants, the mission underscored that Australian companies can offer New Caledonian mining industries world-class capability.
From Warsaw: Poland's defence modernisation spending offensive
Poland, host of July's NATO Summit, has committed $45 billion over ten years to modernising its armed forces. Motivating factors include growing geopolitical uncertainty in the region and the need to upgrade Poland's ageing military equipment to meet NATO interoperability standards.
The comprehensive procurement program, which covers the army, navy and air force, could provide lucrative opportunities for the Australian defence sector, including in related fields such as aviation, IT and health services. Each September, the Polish town of Kielce hosts MSPO – the largest defence industry expo in Central Europe – at which manufacturers from around the world showcase their newest products. Among the Australian producers present in 2015 were Thales Australia, maker of the Hawkei protected vehicle, which is competing for Poland's multipurpose vehicle tender.
The Australian Embassy and Austrade in Warsaw, with the support of Australian Defence officials in London, will be at MSPO again this year to support Australian businesses seeking to take advantage of the opportunities presented.
From Lima: Promising Peru
Blessed by a resource rich environment and an open and stable economic model, Peru has become a promising market for Australian business. The local economy has enjoyed more than 15 years of consistent growth, particularly in the mining, minerals and hydrocarbon sectors. The number of Australian entities operating or investing in Peru has grown steadily over the past decade to nearly 90 in total. Australian investment in Peru is valued at around $5 billion; and Australia is Peru's fifth largest foreign investor in the mining industry. While Australian commercial interests are mainly focused around mining, important opportunities exist in agriculture, education, tourism and energy.
The Australian Embassy in Lima is also encouraging Australian investors to look further afield to sectors such as transport, water, and infrastructure for major sporting events and services, including in the context of the Trans-Pacific Partnership. The Australia brand, our record of economic success and reform, and our expertise in a range of key sectors is highly valued in Peru and holds Australian commercial interests in good stead.
From China: Australia Week in China 2016
Australia Week in China 2016, held in April across 12 cities in greater China, was Australia's largest ever business promotion event consisting of almost 1000 delegates from around 750 companies. AWIC focused on forging business linkages, building the bilateral relationship with our largest trading partners and demonstrating Australia as a trusted trade, investment, education and tourism partner with China.
Led by the Minister for Trade and Investment, AWIC comprised over 140 events across eight industry streams, showcasing Australian capability and highlighting opportunities flowing from the China-Australia Free Trade Agreement. At least 27 commercial deals and memoranda of understanding were signed during the week, spanning a wide range of sectors and confirming that Australian businesses are increasingly capitalising on the opportunities arising from China's growing middle class and demand for products and services.
The event, attended by Prime Minister Malcolm Turnbull and other federal, state and territory ministers sent a clear message about Australia's commitment to strengthening the bilateral economic relationship. Delegate feedback from the event has been overwhelmingly positive, with 96 per cent of those surveyed reporting that participation was advantageous for their business. More than half are expecting to achieve a commercial outcome in the next 12 months, either through commencing or increasing exports to China, or entering into an agreement, strategic alliance or joint venture with a Chinese partner. The event was managed by Austrade with support from DFAT, Tourism Australia and other federal and state government departments.
Austrade will be delivering Australia Week activities in China, ASEAN, India and the America's over the next two years. To register your interest in joining future Australia Week events, visit http://www.austrade.gov.au/Events/federal-government-led-business-missions
From Los Angeles: The Big Dry
As California enters its sixth year of severe drought, the state continues to look to Australian water management expertise for solutions. A State of Emergency was declared in California in early 2015, with the State Legislature subsequently approving USD7.545 billion in water bonds to assist in the emergency response. This includes measures to improve water storage and recycling, groundwater sustainability and flood management.
Over the last year, two delegations of influential Californian legislators and water industry experts have visited Australia to learn from our drought-management experience and meet with leading organisations in emergency management, information and communication technologies, and environmental sustainability.
The scale of California's drought response continues to provide potential trade and investment opportunities for Australian companies with expertise in drought and water management. The Australian Consulate-General in Los Angeles is working closely with California's key water policy legislators, State Water Resources Control Board, municipal water districts and water experts to showcase Australian best practice and assist in moving California's drought response forward.
From New Delhi: New bankruptcy law to improve business environment
India has replaced its century-old bankruptcy law with a more modern legal code, in an important step towards improving the local business environment. The new code is expected to dramatically speed up the process of winding-up failing companies and recovering monies from defaulters, from the existing average of 4.3 years to less than one year. The new code should also provide lenders with greater security and help them deal with non-performing loans, which are a serious challenge for the banking system.
The Australian High Commission in New Delhi and Consulate-General in Mumbai report that local contacts are cautiously optimistic that the new bankruptcy code will increase ease of doing business and boost confidence in capital markets. Nonetheless, the creation of an entire ecosystem of institutions in support of the new regime, from a regulator to insolvency professionals to information utilities, will take time.
From China: Partial suspension of new cross-border e-commerce arrangements
China's Ministry of Finance has announced a twelve-month suspension of new documentation and customs clearance requirements introduced under China's new cross-border e-commerce (CBEC) arrangements. Effective immediately and until 11 May 2017, goods entering bonded warehouses in ten pilot zones, including Shanghai, Guangzhou and Shenzhen, will not be required to meet the beefed-up requirements announced in April 2016. Instead, goods will be allowed into China through CBEC channels with the same minimal documentation that was required prior to April.
This means the new licensing, registration and filing requirements announced in April for cosmetics, baby formula, medical devices and special foods, including health supplements and formulae for medical purposes, have been suspended. Australian manufacturers selling online in China have welcomed news of the grace period, which gives them more time to comply with the same product standards that apply to domestic manufacturers and conventional imports.
Meanwhile, the new tax arrangements announced by China on 8 April will remain in force. Products on a combined positive list of 1293 goods and sold via approved bonded warehouses will be exempt from import duties, but must pay 70 per cent of the applicable VAT and consumption tax. Separate taxes on merchandise directly shipped from overseas have also been introduced.
These rules only apply to merchandise sold directly to online consumers. Commercially exported Australian merchandise is not affected by these changes, and continues to benefit from reduced tariffs under the China-Australia Free Trade Agreement. While these developments are unlikely to disrupt the pattern of strong growth in China's e-ecommerce sector throughout 2016-17, the manner in which these changes were announced caught many Australian businesses off guard.
The Australian Embassy in Beijing and our network of Australian consulates in China are working closely with Austrade to support and advise Australian business on implementation of China's CBEC arrangements. Austrade has commenced hosting webinars for exporters to explain how to be prepared for the new regime in 2017.
From Tel Aviv: Landing pad takes off
Australian entrepreneurs are a step closer to bringing their ideas to market, with the official launch in June of the Australian Government's 'landing pad' in Tel Aviv. The landing pad, delivered in partnership with local innovation community SOSA and administered by Austrade, will provide a range of services to Australian startups, entrepreneurs, researchers, corporates, policy makers and innovation service providers. Services on offer will include tailored business development, facilitated access to more than 275 multinational R&D centres in Israel, and intensive 'boot camps' designed to enhance the innovation skill-set of Australian participants.
Initial interest in the Tel Aviv landing pad has been strong, with the NSW Government announcing it will sponsor a visit by NSW FinTech companies in coming months. Tel Aviv is one of five landing pads announced under the Government's National Innovation and Science Agenda, joining San Francisco, Shanghai, Singapore and Berlin. The locations selected are all global innovation hubs, with established innovation and startup ecosystems and accessible networks of entrepreneurial talent, mentors and investors.
For more information about the landing pad program, including how to apply, please see the Australia Unlimited website.
From Port Moresby: The sweet taste of opportunity for local cocoa
The cocoa industry has significant growth potential for Papua New Guinea's Autonomous Region of Bougainville, including as a provider of sustainable rural employment, a generator of government revenue, and a contributor to household income and improved livelihoods. As part of Australia's development assistance in Bougainville, which is approaching $50 million, the Australian High Commission in Port Moresby (the Department of Foreign Affairs and Trade and the Australian Centre for International Agricultural Research) supported the inaugural Bougainville Chocolate Festival from 5 to 6 July 2016.
The festival showcased Bougainville to the international chocolate community and created opportunities for export market links. Cocoa buyers from Australia and across the region participated in the event, which also raised farmer awareness about available agriculture extension services and encouraged good cocoa farming and processing practices. Festival activities included a series of business and development project showcases focusing on agriculture and trade links, and culminated in a chocolate competition, in which a panel of international judges appraised chocolate made from local Bougainville cocoa.
From Jakarta: Revised foreign investment limits
The Indonesian Government has revised its negative investment list, which details sectors of the local economy that are fully or partially closed to foreign investment. The revised list increases foreign investment limits in several sectors, including toll roads, warehousing, job training, telecommunication network services and data communication services. Limits were also increased for investment in e-commerce and downstream fish processing albeit with conditions requiring partnership with local small or medium-sized enterprises.
Of interest to the Australian food and beverage industry will be the decision to permit 100 per cent foreign investment in restaurants and catering services, although minimum investment limits still apply. The increase in foreign investment limits for warehouses and cold storage is also welcome and may help to improve the distribution of food and agricultural commodities across Indonesia.
Some sectors were granted higher investment limits – such as some construction businesses – but the minimum value above which investments must take place was also significantly increased. Other sectors of interest to Australian investors – including banking, insurance, formal education, healthcare, and onshore and offshore oil and gas drilling – remain unchanged. Investors need to stay alert to the complexities of investing in Indonesia and consult the list and other experts prior to investing. The next revision to Indonesia's negative investment list is expected in 2018.