South East Asia is a business opportunity that should not be overlooked

Petronas Towers at Dusk

Petronas Towers at Dusk

In mid June 2014 the Victorian Government once again undertook a super trade mission to South East Asia, encompassing key growth markets of Singapore, Malaysia, Indonesia, Vietnam and Myanmar. The 2013 super mission brought together 600 Victorian business delegates across multiple industry sectors including; automotive, aviation, agribusiness, health and aged care, education and vocational training. As a consequence of the success of this mission, the Victorian government recently opened a new Victorian government business office (VGBO) in Indonesia to work alongside the VGBO in Malaysia. This renewed interest in South East Asia has been matched by the Western Australian and Queensland Governments who have both opened trade offices in the region to develop targeted business opportunities.

South East Asia has undergone a remarkable transformation over the past 15 years since the East Asian Financial Crisis crippled many of the economies in the region in 1997/98. Economic growth has been sustainable, strong, and consistently high for most of the economies experiencing GDP growth of around 5% annually for much of the post EAFC period. South East Asia is home to more than 600 million people, and most of the economies are longstanding members of the WTO and earlier global trading agreements of yesteryear. Many cities in South East Asia have historical relationships with many Australian cities through sister city agreements (Adelaide and Georgetown, Malaysia is a good example). And yet Australian business and governments (commonwealth and state) have largely overlooked this region in the past decade in favour of the mega markets of China and India. The extraordinary economic growth experienced in these two mega markets can hardly be ignored, however, at what cost to our own economic, and social prosperity.

The Association of South East Asian Nations (ASEAN), the political and economic grouping of 10 South East Asian countries celebrates it’s 40th anniversary this year, with much of the economic gains since the EAFC a result of increased trade and investment throughout the region. The ASEAN grouping has matured as a political and economic grouping, embracing many of the successful economic integration policies of Europe, without sacrificing political stability and autonomy. In 2009 ASEAN commenced a process to harmonise the regulatory environment across the region, and to encourage and facilitate freer movement of capital, labour, business, and trade in goods and services. This process of economic and regulatory integration will ultimately lead to a regional economic community with much in common with the European Economic Community (EEC) of the early 1990’s. Crucially there is no appetite for a political or monetary union and the myriad problems that might arise trying to accommodate the vastly different religious, ethnic, governmental and cultural backgrounds of Asia.

ASEAN and it’s member states (Indonesia, Singapore, Malaysia, Brunei, Thailand, Vietnam, Philippines, Myanmar, Cambodia and Laos), have quietly gone about modernising their economies and encouraging sustainable trade and investment in key industry sectors such as finance and banking, agribusiness, manufacturing, education, and mining and energy. Regional free trade agreements have been ratified with neighbouring countries to ASEAN; including China, Japan, South Korea, India, Australia and New Zealand. These agreements have sought to consolidate South East Asia’s position as the nexus between South and East Asia, and formally integrating Australia into Asia. The ASEAN – Australia New Zealand Free Trade Agreement (AANZFTA), provides preferential trade access for Australian companies into South East Asia, building upon the bi-lateral trade agreements Australia has with Singapore, Thailand and Malaysia. This preferential access is unique for advanced western economies, and provides an effective competitive advantage for Australian companies in Asia over European and North American competitors.

South East Asia is now a region which has once more returned to prominence, due in no small part to the rapidly emerging consumer class across much of South East Asia. Malaysia has developed into an upper-middle income economy, driven through development of tourism, advanced manufacturing, new technologies and Fortune 500 company Petronas, who has invested not just in the reducing oil and gas reserves, but into education and training of the next generation of engineers and geosciences. The Petronas towers are a symbol of Malaysia’s modernity and economic success, however, a visit to the Norman Foster designed University Technology Petronas (UTP), and Institute of Technology Petronas (INSTEP) showcase how far Malaysia has come in the past decade. Petronas have invested heavily into geosciences, engineering and sustainability research and training, garnering collaboration and support from some of the worlds largest energy companies (Shell, Haliburton, ExxonMobil), and recently built a full scale oil and gas offshore platform, and onshore processing facility model to train graduate engineers and scientists. Investments in facilities like this are becoming the norm, encouraging international collaboration and improving productivity. This experience is replicated in Indonesia, where more than half the 250 million population of Indonesia is under the age of 30, and conservative economic forecasts predict the country will rise to become the 7th largest economy in the world by 2030. If this is to occur, Indonesia will have a middle class population of 100-150 million. There are many industries expanding across the country at the moment, however the growth in the automotive manufacturing sector is one of the best examples of the rapid expansion of opportunities in the Indonesian economy. Greater Jakarta is now home to Suzuki, Nissan, BMW, Mercedes, GM, and two Toyota manufacturing plants, while other global car companies are building strategies for entering the market in the years ahead. It could be said that the loss of the Australian automotive manufacturing industry is Indonesia’s gain. Yet there are still good opportunities for Australian component manufacturers and manufacturing services companies to build partnerships and actively assist Indonesian companies to improve productivity and quality.

The countries of South East Asia continue to provide a great opportunity for Australian companies from large corporates through to SME’s, and Australia competitive advantage in this region it’s time for Australian CEO’s to get into the market and explore the real and tangible opportunities. South East Asia provides the synergistic opportunities in Asia linking India to China and beyond, and Australian future prosperity will depend upon our successful engagement with this region – our region in Asia.